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You might be thinking about planning for retirement.
Or you are coming soon to an age that you should be retiring.
Either which, you will have many things you ponder when we suggest the word “retirement”.
Some things that might cross your mind:
- How much money do I need for retirement?
- Why is the retirement age 65 years old?
- Am I ready for retirement?
- Do I really need to retire?
- What is the best age to retire?
- How do I manage my money during retirement?
- How do I build up my wealth to have sufficient funds for retirement?
These are important questions.
However, before we answer them, have you wonder how retirement comes about?
If you are going to spend 20-40 years accumulating a bunch of money, so that you can hit that milestone and cross over, you better know what you are getting into.
Because if that is not what you want, then is it worthwhile to spend so much time, and accumulate so much money for it?
In the very Early Days, We simply do not Retire
In the early days as hunter gatherers, our job is mainly to hunt for food, find lodging and take care of our family.
No one pays us to do that.
That is the job tat we were inevitably tasked with by the environment and what we worked on.
There is no concept of retirement, because, we simply do not say that I reached 30 years old, I have enough food for today and therefore I take a break.
Food is perishable and you always need to replenish it.
And we do not tell the lions and leopards that we are in retirement and please do not eat us.
We work till we are dead.
Older People grew their Wealth but still do not Retire
Prior to 1883, our survival rates have inched up as we are able to get better shelter, modern medicine starts solving some of our illnesses.
People take on jobs in the society and they start earning money from it.
But as people get older, we still do not retire.
The older men just became irritating folks who get into people’s way. They advise people what to do, how they should do things, and complain about a lot of things.
Most of all, they people that the young should have their working attitude and make their next generation work for it.
It is not uncommon to see the children committing crimes to kill off the older folks.
The older folks hang on to their wealth and are irritating.
That is not a good combination.
Even in this early days, a guy by the name of Cotton Mather, who was a lead instigator of “witch trials”, talked a lot of ”Be so wise as to disappear of your own Accord” or ‘Be glad of dismission. . . . Be pleased with the Retirement which you are dismissed into.”
However, no body paid any heed.
It is also interesting that, if you were able to accumulate wealth till this point, you remain rich.
Once Upon a Time in Old Germany….. Retirement was Created
In 1883, the Chancellor of Old Germany, Otto Von Bismarck was under pressure.
He as pressured by Marxist Socialists who challenged him to do better for the society.
So he came up with the idea of a government run financial support for older people.
In their words: “those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.”
It would take eight years, but by the end of the decade, the German government would create a retirement system, which provided for citizens over the age of 70—if they lived that long.
The government back then would pay a pension to any non-working German aged over 65.
The interesting thing is…. hardly anyone lived to be more than 65 years old back then.
Penicillin would not be available until 50 years later.
So he is not expecting this system to cost the government a lot of money.
Bismarck have set the world standard of how the world standard about the exact year in which old age begins and established the precedent that government should pay people to grow old.
The conclusion here is:
- the retirement system comes about due to a political challenge
- the age was set to be higher than the average longevity of human beings back then
- the money is meant more as a reward for living
- the money distributed feels more like our modern day Disability Income insurance which protects you in case you cannot earn your last drawn salary in a job you are trained in (read my disability income insurance article here)
William Osler… the first Ageist?
Ageist is the act of discriminating against people of a particular age group.
And William Osler a world renown physician may be the first to coin the term.
In his 1905 Valedictory address at John’s Hopkins Hospital, he characterize human beings:
- 25 to 40 years as the golden years of human being. This is the period where we are anabolic and constructive
- 40 to 60 years as merely uncreative and therefore tolerable
- 60 years and above as useless and should be put out of the pasture
He may have frame the whole society into thinking that once they reached this age group, they became worse and worse (when they might not have been after all)
There were too many workers… an Unemployment Problem
The concept of retirement became very handy to the USA during the industrial revolution.
The period was dominated by factories and assembly lines.
Just like what Osler have said, the older works made more mistakes, take longer to produce things and take up more sick days.
The worse repercussion is that when the older folks do not retire, the newer folks have an unemployment issue.
Retirement became necessary but this is not easy.
The older folks just refused to quit or leave the assembly plants.
The Creation of Social Security
It looks like the best way is to provide an incentive for the older folks to quit.
In 1935, Francis Townsend proposed a mandatory retirement age of 60 years old, where the government will pay a full salary up to $200/mth. This is equivalent to the salary of a working adult.
President Franklin Roosevelt proposed the Social Security Act, such that Amercians pool their taxes to pay for this pension themselves.
Eleanor Roosevelt seems to think that people would love the leisure that comes about by having nothing to do, where they can enjoy their possessions.
The reality proved somewhat different.
In reality, most retired folks are more compelled to work.
The Creation of Retirement Villages
It is only in the 1920s to 1930s that community started building up where the older people spend time away from the people that work.
During these period, many leisure activities was invented.
When we have more time on our hands, we have to “do something” during this period and therefore jobs that weren’t paid were created for these older folks.
This is called leisure activities.
Increasing Life Expectancy and Falling Birth Rates
When social security (the USA retirement pension system) was first created, the retirement age was above the average life expectancy.
Since then, the life expectancy have been shifting up. Today, we live beyond 65 years old on average.
At the same time, birth rates in developed countries have been falling due to cultural changes and birth control.
Here are some of the great improvements since the concept of retirement came about:
- X-rays and PET Scans
- Penicillin, Chemotherapy and Vaccinations
- Germ Theory leading to better processes such as hand washing and sterilizations
- Broad base government health care system
The result of these 2 factors together is that, you have more people on the retirement system, but less working people to support it.
Companies who still have the old pension system were unable to have sufficient funds for their pension system (also due to low interest rates recently).
This prompted the governments to shift the goal post, by increasing the retirement age, or encourage people to work longer.
This is difficult as there is age discrimination in hiring policies.
What we can Conclude from a Peek through History
By reviewing the history of retirement we can draw some conclusions about the concept of retirement in the past and in the future.
Our Retirement didn’t start off as something as a Reward
Someone wanted to create a system where they can ensure the proper write off of workers.
This would allow replacement by younger able bodied men.
If retirement is meant as a reward, it would have been setup in such a way that the age would be lower than the average mortality rate.
Our Retirement can be Political
The origin of retirement looks to be a political response to an opposing political narrative. In the absence of such a challenge, I wonder how long in the future would retirement be implemented.
The official age of retirement is a subject of contention. It is also determined by the amount of resources that are available to the government.
When there is a shortfall, the goal posts might be shifted.
The impact is larger if majority of the cash flow we depend upon is on this stream of cash flow or sum of money from the government.
Our Retirement Leisure fills a Void of Inactivity and Lack of Purpose
As the life expectancy improves, the people are more able bodied and can work longer, but they spend a large part of their time disturbing the younger workers.
Work provides a purpose. When you lose that direction, you need to fill it up with stuff.
This brings about the rise of retirement villages where they are kept away for the younger people.
Leisure have become a job as a result of rising life expectancy.
Our Retirement always Evolve
The idea that retirement is seen now as a reward rather than a write off of a human being means that how we see retirement in the future will continue to change.
The age we retire is the most obvious change. As medical science improves, retirement age might be 90 in the future (wishful thinking at this point)
The main tools to accumulate wealth and to de-accumulate wealth will change as the finance sector improves.
Most of all, our concept of work and retirement will continue to change.
What this means to you
Why do we want to know about the history of retirement since it doesn’t concern us?
We should be concern about how we define retirement ourselves isn’t it?
If you are thinking like that, then its good.
However, majority of the people do not have a good concept of why do we grow up, get educated, work for 30-40 years to build up a sum of money to retire.
Majority of how most of us view of retirement are dictated by government and society.
Knowing history has a way for you to challenge you pre-existing beliefs about how things work.
It will also enable you to better separate what you want out of the future and what you don’t want out of the future.
Here are some points about retirement to think about:
- Your concept about work
- Your idea about the intensity of work
- The notion that you are too old to work
- Where will you get the cash flow you need for retirement?
- What would you be doing in retirement if retirement duration can be 30 years
- How much do you like what you are doing now?
In subsequent articles, we will explore more into retirement, the financial aspects but also the philosophy of retirement so as to be better prepare and plan for it.
For you who are interested in the topic of retirement, my best work on this subject is consolidated in Planning your Retirement Now >>
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