Retirement, as we have known it, is dying in the United States because a growing number of people do not have sufficient financial resources to retire and because traditional sources of retirement income such as pensions, social security, and Medicare are increasingly being eliminated or threatened. However, many people that have the financial resources to retire, do not. And that brings me to ask: why do people retire?
Some of the reasons people continue to work at a job even though they have more than sufficient resources for a comfortable retirement include: 1) They love their job and there is nothing else they would rather do, 2) They like the security of knowing what they are going to do every day, 3) They need a job to feel relevant, important, useful, or needed, 4) They use their job as a means to socialize, 5) They believe that they are contributing to society or to a purpose larger than themselves, 6) They see it as their opportunity to accumulate additional wealth. This list is only a sample of possible reasons people continue to work and I am sure that there are very many more reasons people can come up with.
Anyone that has contemplated retirement soon comes to the realization that there is a lot more to a job than just the paycheck. We must next look at a few reasons why people decide to pull the plug and retire, provided that they are the ones making the choice.
In my opinion, most companies that pay you believe in their hearts that they own you. This means that you must subordinate your personal life to the needs and wants of the job. This is what leads to 60 hour work weeks, missed vacations and holidays and working weekends. Failure to do what it takes to complete assignments on time distinguishes you as a non-team player. For some people, breaking this voluntary bondage is their primary motivation to retire.
For most people approaching retirement, if they look closely at the numbers, they will realize that they are really continuing to work for a fraction of what they are getting paid. By continuing to work, they can not start collecting a pension and other benefits that they have earned and they keep paying wage related taxes such as FICA and Medicare as well as incur work related expenses such as commuting costs. While it is true that for most people, total wealth continues to accumulate when they keep working, the accumulation attributable to actually working slows down significantly as retirement benefits are truncated or as retirement benefits are already earned.
No one, even highly compensated executives, can be sure that they can live long enough to enjoy their wealth or whether any additional wealth will result in an improved life. It may take some external catalyst for some people, such as a health scare, to illuminate this longevity issue. For me, this issue was illuminated by a simple analogy of a 72 inch carpenters rule. The number may not be exactly correct, but the concept is powerful. Imagine your healthy life span is the length of the carpenters rule. Ask yourself where you are on this rule, and how many inches you have left? Of course, today's rule may be longer as our lifespans continues to increase.
Early retirement sweeteners have been effective at nudging some people into retirement and they certainly force those who get an offer to confront the possibility of retirement. A good economy with the possibility of getting another job easily and securing retiree health care benefits are important factors to acceptance.
All life is valuable, however, it's a lot more enjoyable if you are healthy. Generally, as we age our health deteriorates. We can not do as much when we are 80 as we can when we are 60. This, of course, argues for an earlier retirement rather than a later retirement, or at least discounting the value of accumulating more wealth by delaying retirement.
For the majority of people in America, there is no choice but to keep working as long as they possibly can because it is the only way to make ends meet. For others that ended up with enough resources to retire, their decision to retire will turn on many factors in addition to economics.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.