When it comes to retirement, there seems to be no middle ground.
Younger generations, studies have shown, are behind in wealth accumulation compared to previous generations and have paltry retirement savings. It’s made some realize they may never be able to afford to retire, experts say. On the other hand, others have saved enough to embark on an early retirement in their 20s, 30s, and 40s.
But the trend seems to be distinctly moving away from the notion of retiring at age 65, the standard retirement age when Social Security goes into effect. So are people retiring later in life or earlier in life?
Turns out, both are true, but we shouldn’t be looking at money as the only factor fueling that decision. Instead, we should also be examining what younger generations look for in the workforce and how they ultimately want to live their lives.
People are retiring later because they want to
Generations entering the workforce today might be facing 50-year careers versus 25- to 30-year careers, economist Olivia Mitchell, professor at the University of Pennsylvania’s Wharton School of Business, told John D. Stoll for The Wall Street Journal.
More than 3,000 workers polled in a 2018 Transamerica Center for Retirement Studies survey don’t expect to retire by 65, reported Stoll. And 9% of millennials in an Insider and Morning Consult survey said they expect to never retire at all. That’s 5 percentage points more than boomer respondents.
At the surface, a quick look at finances explains a lot: Half of Gen X doesn’t have a 401(k) or retirement account and neither do 54% of millennials, according to a second Insider and Morning Consult survey. The majority of each generation said it was because they didn’t have enough money to save.
Social Security deficiencies and increased health-care costs aren’t helping, Stoll wrote, but it’s not primarily about the money. People are choosing to work longer for several reasons, he said: Work involves less physical labor than it used to and more rewards; it fills the loss of community created by declining birth rates and religious participation rates; and it’s easier to establish one’s own terms thanks to the rise of the gig economy.
We’re also looking at age differently thanks to increased life expectancy, he said. More baby boomers today are working than ever before, reported Business Insider’s Tanza Loudenback, citing an analysis of US Census data by financial-planning firm United Income. It’s largely because retirement-age Americans are healthier than they’ve ever been – and it’s shaping the perspectives of younger generations.
People Stoll spoke with said they envision working part-time or returning to school later on, and one millennial said he plans to work in 20-year segments of different interests and take a sabbatical. It helps explain the popularity of mini-retirements, a series of meaningful respites away from the job.
“It has never made sense to me to work your whole life and save all of the fun and enjoyment for the end, when you might not have the health or energy to do the things you want,” Kyle Stimpson, who took a six-month mini-retirement to travel in Asia and Europe, previously told Business Insider.People are retiring early for financial freedom
On the flip side of people preparing for a long life of work that extends well past the typical retirement age is the FIRE (Financial Independence/Retire Early) movement. It was first popularized 20 years ago by the best-selling book “Your Money or Your Life.”
Since then, more people have set out to join the growing community of people pursuing early retirement. Consider J.P. Livingston, who built a nest egg of more than $2 million before retiring at 28; Grant Sabatier, who retired at age 30 with $1.25 million; or John, a former business executive, who retired at 52 with $3 million.
A slew of early retirement blogs and books by early retirees have popped up in the past decade detailing just how to achieve early retirement – and younger generations are biting. Nearly 5% of millennials expect to retire by age 45 and 6% expect to retire by age 55, according to the original Insider and Morning Consult survey. And a 2019 T.Rowe Price survey found that 43% of millennials expect to retire before the age of 65.
With the aforementioned lack of retirement savings among Gen X and millennials, early retirement can seem an impossible feat. Again, though, retirement choices don’t all boil down to money. The early retirement community is still a niche one, but its growth indicates that people are willing to make financial sacrifices in some areas if it means achieving financial independence earlier on in life.
One 36-year-old New York lawyer earning $270,000 told the New York Post he lives off rice and beans so he can save 70% of his salary. Joe and Ali Olson, retired 30-something schoolteachers, told Business Insider they made strategically frugal choices, like driving the same cars for years and rarely eating out, to live on just $20,000 a year.
“Even without the ‘retire early’ life, being financially independent provides a tremendous amount of inner peace,” Jeremy Jacobson, who retired in his 30s a self-made millionaire, previously told Business Insider.Younger generations are defining retirement on their own terms
Whether people prefer to retire early or retire later, both choices are eradicating the concept of retirement being universally tied to one specific age. Younger generations are largely coming to define and modernize retirement on their own terms, rather than government logistics.
For some, that might mean extending a fulfilling a career, perhaps turning it into part-time work or scattering it with periods to recharge. For others, that might be ending a career early so they can enjoy traveling, spending time with their family, or working on projects they didn’t previously have time for.
Some may argue that the passive income yielded by some of these projects, such as blogs and books, makes the latter cohort not early retirees but self-employed individuals. Perhaps this means these early retirees are actually part of the group who never plans to retire at all.
Regardless, the point is this: The decision to retire early or late enables people to live their days as they please. And the benefits are plenty on both ends. Those who want to keep working make it easier to remain “sharp and productive,” a workforce expert told Stoll. Many early retirees, on the other hand, have told Business Insider early retirement helped them cultivate and discover new passions.
It’s not surprising, considering that millennials are already kicking to the curb other parts of a timeline imposed by society, like the typical age of marriage and homeownership. These decisions may be rooted in financial struggles, but it remains that younger generations are creating lives based on their own personal goals and purposes, not on the expectations laid out for them.