Increasing life expectancy and shifting career expectations.

Work and save until you’re 65, then retire.

That used to be the goal of most people, and when the life expectancy is 72-74, it was viable. Inflation wouldn’t be a big problem over the years you were retired if the economy stayed “normal.”

However, life expectancy has been increasing. I did the math during some retirement planning a year or two back, and if the increases hold steady, and I live to the average life expectancy during that time, I’ll kick the bucket at a ripe old 113 years!

Look at the mathematical side of this. Using 22, the age after a 4 year degree, as a baseline of working age, by 65 most people have worked around 43 years. Then they retire for on average 7-10 years. That means retirement is less than 25% of the career length, fairly easy to save and budget for that when you have worked four years for every one retired. Even saving 10-15%, with a little growth in investments, and a little cost-cutting in retirement, it can be made to work nicely for those who don’t encounter too many obstacles along the way.

Contrast that with retirement in my scenario, if I retire at 65, I’ll have 48 years of retirement to fund. That’s saving over a year of retirement costs for every year working. Add in future inflation, and without other shifts in the world, retirement at 65 isn’t possible.

That means that a different outlook is needed. Let’s discuss that:

1. To have a similar retirement to current retirees, a 4:1 ratio of working years to retirement for an expected life span of 113 would require me to work until 95. This assumes I work a typical job, and the calculation doesn’t include the compounding of investments growing to a point where they make more than working for a salary, which could happen earlier as 50 years of investment growth is a long time.
2. Looking through an alternate option, it might be that the new model of retirement means spending decades working and saving until opening some sort of business that can run and generate income in perpetuity. Then and only then, can someone retire.

For many, retirement decisions influence their career choices. These two thoughts are just something to think about.