2022 Update: Alot has changed since I wrote this in 2010. One thing that hasn’t changed though is that waves of Baby Boomers have retired in the last 10 years.Many got it right and won’t outlive their money. Some though are sadly finding out that they retired too early before they had planned for how not to run out of money. Anyway, here is the original writing:
Baby Boomers delaying retirement? It makes sense given the volatility of this last decade, most significantly the last 3 years (current recession started December 2007): Baby Boomers are sitting tight.
It’s not hard to understand why. Many of us, not just Baby Boomers, can expect to live into our 80s, maybe even 90s, so it’s a bit daunting to consider retiring at 65, let alone younger, and realize you have to support yourself for another 20, maybe 30 years, on what you managed to save.
And if you rely on a pension plan for those years, you could be in even a more precarious situation, relying on it being around for decades after your last day at work.
Also, the nature of work has dramatically changed. Many jobs are ‘thinking’ jobs, as opposed to ‘doing’ jobs, so we aren’t going to be as reliant on physical strength to keep working (although we may be very exhausted if still going full time).
This trend likely will continue for generations that follow.
Gen X and Echo Boomers took longer to get their degrees, establish themselves in their career paths, and begin their financial lives.
Milestones like purchasing a home, setting up savings accounts and retirement accounts, are happening in the late 20s or early 30s, and that’s for the lucky ones that plan and prioritize their financial life.
It’s hard to know what age you will retire until you get closer and closer to that time in your life. Until then you are acquiring (e.g. homes and cars) and accumulating net worth, and while it’s admirable to say you want to retire at ‘x’ age, the reality is that you won’t know for sure until you get within 5 years of your goal, sometimes less.
I suspect retirement will continue to be the most significant goal for most of us. None of us want to envision a future where we are required to work in our advanced years. We may find that we want to continue working because we enjoy it, but that is worlds apart from having to out of financial necessity.
The Baby Boomers have always established new trends as they move through different life stages, and this is no different.
The best financial life any of us can have is still true to the basics: Find work you enjoy (you will be working a long long time, better to find something you like), live below your means, get (and stay) out of debt, and save then save a little more.
(Disclosure: I am a Fee-Only Financial Planner. Here’s my website.)