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The Evolution of Retirement

Perspective Matters


I believe it's time to redefine what we mean by planning for retirement. Today I want to provide a brief history on how we got to the attitude towards retirement that we hold today and how I think it needs to change for the future. I'm going to talk about pre 20th century history in a few short paragraphs, then describe how medical developments in the 20th century completely upended everything we knew before. I will close by talking about where I think we're headed and what we need to do to get there successfully.



FROM DAWN TO DUSK: THE STRUGGLE FOR SURVIVAL


Throughout human history, our existence revolved around fundamental necessities: sustenance, shelter, and clothing. Before the advent of electricity, our daily activities were bound by daylight hours. From dawn to dusk, people toiled to meet these basic needs. Agrarian societies cultivated crops and raised livestock, relying on what they could grow or hunt. As technological innovations emerged, specialization allowed us to produce goods more efficiently, leading to trade and economic growth.


The unchanging thread across centuries was the expectation that everyone contributed to survival. Whether due to illness or varying levels of effort, some individuals contributed less than others. Children were valued for their potential contributions, and societies often prioritized those who could actively work. Survival was a daily struggle, and hard work meant the difference between life and hardship.


Consider Romeo and Juliet, star-crossed lovers from Shakespeare’s play. Their early discussions of marriage might surprise us today. But in their era, life expectancy was shorter, and the specter of mortality loomed. Antibiotics and medical breakthroughs were distant dreams. Retirement? Not even a consideration.


THE BIRTH OF PENSIONS: FROM ROMAN SOLDIERS TO MUNICIPAL EMPLOYEES


While retirement wasn’t a common topic, the Roman Empire laid the groundwork for pensions. Caesar Augustus promised soldiers who served for 20 years not only a regular salary but also post-military income. But do you think many soldiers likely lived long enough to collect such pensions?


Throughout history longevity has been a mixed blessing. Those who lived beyond their productive years faced a paradox: they were revered as elders yet deemed less useful to society. Work remained a duty even as age crept up. The sentiment that those beyond their productive years were useless persisted, driving people to work throughout their lives.


We started to see attitudes shift in the 19th century. Pensions emerged driven both by politics and competition for workers. In the United States, municipalities seeking to hire teachers, firefighters, and police officers, for example, offered delayed benefits (pensions) in order to satisfy taxpayer demands to keep taxes low. The promise of lifetime income after a certain number of years in municipal jobs attracted talent without putting an immediate financial strain on local governments.


In Europe, Otto von Bismarck, Germany’s Chancellor, faced political challenges so he proposed a retirement system that included disability benefits and lifetime income benefits following mandatory retirement at age 70.


The Social Security website – www.ssa.gov – is a treasure trove of historical information. HERE you can read a brief history of how people have faced economic uncertainty. You can a read more about the German’s retirement system HERE. For lots more history about the Social Security system in the US, click HERE.


ANTIBIOTICS: A SEISMIC SHIFT CREATING RETIRMENT AS WE KNOW IT TODAY


Before the 20th century, life was precarious. Childhood illnesses claimed countless lives, and bacterial infections ran rampant. Penicillin, discovered in 1928 and widely available by the late 1940s, changed everything. Suddenly, we had a weapon against infections that once seemed insurmountable.


Consider this: Prior to antibiotics, one in 20 children succumbed to various childhood illnesses. But with penicillin, that grim statistic shifted dramatically. Less than one in 200 faced the same fate. The average life expectancy at birth hovered around 47 globally, even in industrialized nations. Antibiotics extended life, allowing more children to reach adulthood. As with most things, there was an unintended consequence; more people living beyond their productive years and often ending their lives in poverty.


Enter Social Security—a safety net for those who outlived their productive years. It aimed to prevent seniors from plunging into poverty once their working days were behind them.


The notion of retirement as pure leisure emerged post-World War II. Antibiotics and other medical innovations extended our lifespans, prompting us to rethink our golden years. Suddenly, decades stretched ahead—time to explore passions, travel, and savor life beyond work.


For those who grew up after World War II, retirement meant leisure after decades of labor. But as life expectancy increased, so did the need to financially support ourselves for much longer. Financial planning became essential. The math told us that 50% of Americans born after the war might live to age 90. This created new challenges and society is grappling with these today: clinical depression, dementia, and physical ailments in our 80s. 


CHANGING THE PARADIGM: REPLACING RETIREMENT WITH FINANCIAL INDEPENDENCE


The word retirement conjures different images based on age. Decades ago, it meant a few years of rest after a lifetime of labor - a handful of years filled with leisure. Usually there was some sort of financial safety net in place to provide for those years. Most people had pensions and Social Security and did very little planning for their own financial security.


Today's pre-retirees are facing a different landscape. They have often found their identity through their work and the prospect of stepping away from that can be daunting. They have two challenges to face: maintaining themselves financially and continuing to have a purpose. Financially, it will take accumulated savings of about 25 times one's salary to ensure financial stability over the next two to three decades. But finding purpose for one's life is equally important. We see increasing levels of clinical depression in those over 80 as hobbies and postponed adventures have not been enough to create a lasting sense of purpose.


It's time to rethink this binary mindset between productive work and leisure. We need to imagine a continuum - a life where purpose transcends age. Younger generations understand this as they know they must provide for their own financial well-being throughout life. We must remember that we will thrive when we live lives in which we contribute to our communities and provide for ourselves. By changing our focus from retirement to financial independence, we can now talk about the goal of choice. Financial independence is not about quitting work, it is about doing what fulfills us regardless of the income.


The path to financial independence and a lifetime of purpose requires focusing not just on our finances but on cultivating interests that will serve us for decades. The world imposes arbitrary age milestones, but we can resist them. Anticipate your own changing needs and wants over each decade of your life. Be conscious of the difference between today's needs and wants and what they will be in 10, 20 and 30 years. Be conscious of living a life today that is rich in meaning, contribution and fulfillment. Adapt and evolve your interests so they will serve you well in your 70s, 80s and even 90s.


Consider working with a Certified Financial Planner® professional to help you navigate this journey. A CFP® professional can help you cultivate a mindset that combines financial wisdom with emotional resilience.


Neither Prism Planning and Solutions Group nor Insight Advisors provide tax advice, and nothing in this communication should be treated as such. This communication should not be interpreted as a recommendation for a specific investment or tax-

planning strategy. We are providing this material for informational purposes only. We have made every attempt to verify that information contained in this communication is accurate as of the date published but make no warranties. Before making any decisions related to your own tax and/or investment situation you should consult the appropriate professionals.   


Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.




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