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The Whole Idea of Retirement is Now in Flux

by on March 02, 2014 7:30 AM

Retirement as we know it is a fairly recent idea, spawned by politicians, the insurance and financial planning industry.

The basic idea is to get old folks (over 65, I guess) out of the workplace to make space for younger workers.

These are the golden years, after raising the kids and completing the career, but before physical disabilities set in which require outside living assistance of some form.

Those who no longer trade their time for money (what we call work) are now living on their investments and savings and spending their time with their families, donating their time to charities and going on trips seeing the sights at home and abroad that were not possible when they had work and family commitments.

I remember delivering the New York Times on my Sunday paper route and reading the advertisements for those guaranteed annuities that would provide one or two hundred dollars a month for life so you could retire and live in Florida. In the 1950's, few folks thought about inflation or how little those dollar amounts would buy in later years.

If we fast forward to today, interest rates are abysmally low and even people who have accumulated up to a million dollars are finding that the so-called "safe" returns historically offered by banks and treasury bonds do not offer sufficient retirement income.

At two percent, a million dollars generates just $20,000 a year or $1,667 per month, hardly a living income for those with seven figure aspirations. I wonder how many financial planners told folks in the 1980s and 1990s that they could retire with confidence with their nest egg generating five to six percent forever.

Nobody considered the possibility of quantitative easing and ultra-low interest rates going on for half a decade. Senior citizens are a resourceful bunch, though. We vote and we adapt our lifestyle to fit our income. The voting doesn't seem to help much lately, so we are rapidly adjusting our standards of living to match the income we can depend upon.

One of the options is to delay or cancel retirement and just keep on working. As long as we are physically able, it seems financially prudent to continue working and stashing more money away for when we no longer work because we are not able to do so.

Longer lifespans and the realization that doing productive things is an important part of being a contributing member of society have also changed the "golden years". Sitting and doing nothing in retirement isn't very appealing to me nor is it, I suspect, to a number my contemporaries.

So forget retirement. Manage your life so that your body can continue to make contributions to others through work or giving of your time and continue to grow your investment portfolio because you will likely live into your late eighties or nineties.

As I mention to all who will listen, there is only one thing worse than growing old: being old, disabled and broke.

At least the broke part is something you have the power to control.

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Dan Nestlerode is the Director of Research and Portfolio Management at Nestlerode & Loy Investment Advisors in State College. A graduate of Penn State University, Nestlerode has been an investment advisor since 1965. He can be reached at danielj@nestlerode.com.
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