It's time to rethink "retirement"
We should take our retirement like we take our vacation days—whenever we want.
What if you could take your retirement the way you take your vacation days? With the ability to get paid for the months or years off of your choosing, rather than just the last ones?
Instead of getting 15 years off at the end of your life, you could take a year or two off in your 30s, another year or two off in your 40s or 50s, and so on.
Don’t get me wrong—retirement programs are definitely a good idea. If work is how we are able to support ourselves, then what happens when we are medically unable to do that? That’s why industrialized nations across the world established pension programs. The US was one of the last industrialized countries to put one into place when Franklin D. Roosevelt passed the Social Security Act in 1935.
At the time, he said: “I see no reason why every child, from the day he is born, shouldn’t be a member of the social security system. When he begins to grow up, he should know he will have old-age benefits direct from the insurance system to which he will belong all his life. If he is out of work, he gets a benefit. If he is sick or crippled, he gets a benefit… from the cradle to the grave they ought to be in a social insurance system.”
It was a utopian ideal of the highest order. All of us were to be cared for by the state at times when we were unable to work because of sickness, unemployment, or old age. There have been expansions and amendments to the program over time, but today the US government taxes 12.4% of every worker’s income (6.2% from the employee and 6.2% from the employer),and uses that money to fund the Social Security Trust. The trust then pays out to retirees as needed.
But in 1935, when social security was established, life expectancy was only 61. If they made it to the age of 20, workers could only expect to live to 65. If a worker did make it to 65, the state was likely to pay for only a couple of years of their lives, if that. As of 2020, life expectancy has expanded to 79, which means the state has gone from paying for 0-2 years of our lives to 14. And those years aren’t spent sick in bed, unable to work; they’re spent watching TV (4.5 hours/day), eating, sleeping, and socializing.
I am generally pro-welfare state—I think we should be financially protected during periods when we cannot work. But Americans are having fewer children and living longer, so there are fewer people contributing to the trust and several more decades that people are pulling from it. Now that the baby boomers are retiring—officially the largest generation—we have a smaller number of people working and paying for a much larger amount of people taking from it, and for a longer time. At this rate, social security is predicted to run out by 2041.
Countries around the world are facing this same conundrum. Riots have been rampant in France where the pension age was recently raised from the age of 62 to 64, and I get the upset: if you’ve been told your whole life that you only have to work until you are a certain age and then you can retire, moving that age back by a few years feels brutal. Especially if you’re in your early 60s right now and you’ve been banking on the fact that you’re “almost done.”
But the math doesn’t work out. And it’s not working out in many countries around the world.
The solutions are essentially these: raise the retirement age, reduce the payout each retiree receives, or increase taxes. None of these ideas make people happy.
But what if we look at retirement a different way? What if we acknowledge that we want people to be able to work for about 40 years and retire for about 15 years—just as they do today—but we allow citizens to take those years whenever they want? Either now, or later, or some combination of the two. Just like an employee has a certain number of days they can take off in a year and still get paid, all of us have a certain number of years we can take off and still get paid.
The only reason we can’t fund that right now is that the current workforce is funding the retiring workforce and those two groups aren’t the same size. But what if we all contributed to our own funds, accruing retirement months and years just like we accrue vacation days at work? After all, Singapore’s Central Provident Fund (CPF) already works this way. And we could very easily adapt the US 401k system to match.