By Thomas Koulopoulos Founder, Delphi Group
"We get old when the weight of our memories and regrets starts to exceed that of our dreams"
When it to comes to the topic of retirement, the old rules no longer apply.
In 1935, when the Social Security act was passed, the age of retirement was set at 65. At the time, the average life expectancy was 61! Today, average life expectancy is just under 80 years. That one fact speaks volumes to how outdated our views and mechanisms for retirement are.
In fact, the percentage of the workforce representing workers over 65 has doubled since 1992. And that trend is expected to continue unabated. If you plot the increase in life expectancy along with the increase in work-life expectancy (that's the average age at which people stop working), the two actually merge in 2100. I often joke that if the work-life trend line continues on its trajectory after 2100, we'll all be working after we're dead.
Yet we are heading for an economic disaster by ignoring the implications of increased life and work-life expectancy.
The numbers are startling: Thirty-four percent of workers have no savings whatsoever; another 35 percent have less than $1,000; of the remaining 31 percent, less than half have more than $10,000. Among older workers between 50 and 55, the median savings is $8,000. And this is total savings, including retirement accounts.
Contrast that with the fact that experts say you should have eight times your preretirement annual salary saved in order to retire by 65 and continue a reasonable quality of life, commensurate with what you have become accustomed to.
The Retirement Myth
The truth is that we are doing an enormous disservice to society by setting retirement as an end goal to a long career. Advances in longevity are making supporting retirement for another 20 to 30 years impossible for 90 percent of all U.S. workers, whose only source of income is Social Security, which only pays from an average of just over $1,300 per month to a max of just over $2,600 per month.
While paid media ads that talk about retirement planning seem to be everywhere, the reality is that very few people are actually benefiting from retirement savings or planning. Although Boomers have an astounding $50-plus trillion in wealth that they will be transferring to Millennials and Gen Z (that includes all assets, not just retirement accounts), 80 percent of that wealth is concentrated among less than 20 percent of Boomers.
Even if you're lucky enough to be among the 20 percent, who have a $1 million-plus net worth and enough saved up to retire, there is some evidence that the classic notion of retirement may actually be harmful to your health.
The answer is absurd, and it's at the core of every failed strategy to paint the future with the same worn-out brush we used to paint the past.
A recent Guardian article about research on aging and retirement cast an interesting light on the topic. According to the article, "[Research conducted on] 2,956 people who were part of the Healthy Retirement Study funded by the National Institute on Aging in America ... found that healthy retirees who worked a year longer (over the age of 65) had an 11 percent lower all-cause mortality risk. Even the unhealthy group reduced their likelihood of dying by 9 percent if they delayed retirement." An analysis on the study was also published in the Harvard Business Review.
While it's hard to draw broad-based conclusions about the link of retirement to health, from this or other research, there is certainly growing evidence that working longer, especially at something you love to do, contributes to a sense of well-being and purpose that may increase longevity and certainly the quality of your life.
So, is there any good new in all of this? Only if we use it as a wake-up call to change the way we look at retirement.
Your Third Act
What amazes me is that every financial institution's white paper, study, or promotional piece about retirement planning is missing one critical thing: any mention of continuing to work! We need to wake up. Rather than perpetuate the mythology of work as penance and retirement as a time to be liberated from it, what if you replaced the concept of retirement with that of a third act in which you can continue to create value and receive value for those things that you truly love to do, while you also establish a balance with other personally fulfilling activities you may want to do more of?
In other words, why are we stuck on the zero-sum proposition of work is bad and retirement is good? The answer is absurd, and it's at the core of every failed strategy to paint the future with the same worn-out brush we used to paint the past. We desperately need to innovate the notion of retirement to catch up with the rest of the world.
While planning for a third act is something that everyone should seriously consider, whatever his or her economic situation, as an entrepreneur you have that luxury in a way few people do. You get what it means to build a business and a brand. You are the ultimate authority on where and how to invest your time and energy. In the same way that you would invest in a new product or service, why not invest regularly in preparing for your third act?
If you want details on how to do that, here's a previous article I've written on Inc.com about the specific tactics for constructing a third act. But my point here is to start doing it any which way you can and as soon as possible. It takes as long to build a successful third act as it does a successful business, about five to 10 years. However, I've yet to find anyone who cannot pull it off with a sincere and committed effort. You likely have a good 30 to 50 years for your third act--perhaps even more! So, isn't that worth a five-year investment of time?
If You Love It, Why Leave it?
In a prior Inc.com survey of 560 people, I asked respondents if they agreed with the statement, "I love what I'm doing so much that I can't imagine doing anything else." Fifteen percent absolutely agreed, 50 percent strongly agreed, and more than 75 percent at least somewhat agreed. So, if you're lucky enough to be in that majority, why not keep doing it?
Your third act will not only create an ongoing revenue stream, which you can modulate up or down as needed for the rest of your life, it will also allow you to use the knowledge, wisdom, connections, and perspective that you've gained over a lifetime in a meaningful way.
The bottom line is that the old rules were built for an economy and a society in which retirement was seen as a release from bondage--the liberating act from a lifetime of work. They were built for time when most work was manual and labor intensive, when brains were less valuable than brawn.
The new rules are for a world in which knowledge is the universal currency for creating value, a world in which you can use the experience of a lifetime to create what may well be the greatest experience of your life.