The Fallacy Of Saving For Traditional Retirement

uncaptionedRetirement is a relatively new concept in the overall history of human beings.  Before the industrial revolution, people worked until they dropped.  If a person’s physical condition resulted in the inability to work, quality medical care wasn't available to keep them alive very long in their dilapidated state of retirement.

The idea of real “retirement” began in the early 1900’s and culminated in a new human life phase with the passage of The Social Security Act in 1935.  The age they picked for retirement at that time? Age 65.  What was the average life expectancy back then?  Age 62.  And if you lived to age 65, you did not have many years of retired bliss.

With the young age of the population at that time (the US was still an emerging market,) and additional culling of the population by World War II, not many people tapped into the social security system.  With the advent of the baby boom, the numbers changed. As health care improved, people lived longer.  Adding to the golden times were years of unprecedented economic growth. People expected more from their later years and they were living longer.

By the time I came into financial awareness in the 1990’s, I was under the impression that everyone should retire in their 50’s. We learn what we see. You just had to be smart enough to make the right choices so that your money quadrupled overnight, then you quit. My goal was to retire when I was 50, which gave me until 2014 to do it.  I was in my thirties then, and 50 seemed very old.

A number of mishaps happened on the way to my plan. First, the markets proved they couldn’t be counted on to take care of people for forty years in retirement. People who want to privatize social security should keep that in mind. The tech bubble taught many a great lesson. I was still practicing medicine at that time and am grateful for that early investing experience.

Second, I learned when you turn 50 years old, you are not old. Through my experience as a financial planner and a doctor, the people who stop being engaged get old quickly and their brains seem to slip away into uselessness much faster than those who keep working.  The healthiest and happiest people stay engaged, and the smartest people stay engaged in meaningful work. Your ability to work is your safest and most reliable asset. The world and markets cannot guarantee your financial stability for forty to fifty years of retirement.

Finally, I realized there are no promises on health or work. You can die any moment, and do you really want to work insane hours just so you can save to quit early? What happens when a tree almost strikes you dead at age 34 (actual life experience) and you haven’t enjoyed life? What happens the day your heart throws a clot to your brain at age 45 and you can’t work? (That was the life experience of someone else and thankfully not me.)

Through my decade in the financial planning field, I’ve morphed in my thinking about this topic. My final conclusion – the focus on saving for retirement is a fallacy that needs to go the way of the rotary phone, but we still need to save and plan for the future because we have no clue what will happen in our life or the world. Embrace the fact that uncertainty is the only certainty. Basically, we need to enjoy life today and save for the day we become disabled and can no longer work.

Here are my recommendations:

  1. Divide spending into “needs” and “wants” - seriously focus on saving a nest egg for the “needs” in the event you lose the ability to work. A financial planner can help determine the lump sum cost required for your “needs.”
  2. Obtain disability insurance to insure your income – realize that disability payments stop somewhere between age 65 and 67, so the plan for financial independence of your “needs” should occur by that time.
  3. Find work you love – now and later. Realize that love comes and goes, so constantly reevaluate and update your skills. Stay resilient, flexible, and plan on working until you no longer have the ability to work. I once had a 94 year old patient who continued to run his own construction company. He loved it, and joked he was not ready to give it up because his 70 year old son was not mature enough to handle it on his own.
  4. Evaluate your “wants” – “stuff” does not bring long term happiness. However, “experiences” with people we love do create happiness. “Stuff” costs more to own and makes our life more complicated which takes away the time we have for “experiences” with important people in our life.
  5. Save for the “wants” of the future but make certain to balance saving with enjoying life now. If you are running yourself in the ground too long for a future payoff, you will end up in the ground before you get it.
  6. And the most important suggestion of all – take care of your health. Once that is gone, it is hard to get health back, and not much else really matters. Health maintenance should be a regular part of every day. Three easy steps are all it takes – eat a healthy diet, exercise regularly, and get plenty of rest. Minimize toxic substances and people in your life too.

I look forward to the day where financial planners and the financial planning press spend the majority of time and space discussing how to create a great life now and prepare for the uncertainty of the future. Let's retire the focus on the end game of retirement and have a party to celebrate.

For my health care followers – I’ll get back to that soon. I had a bone to pick today.  Questions, comments, suggestions? Post here, reach me on Twitter @CarolynMcC, or email at Thanks for making the world a better place.


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