With earlier generations, retirement was a luxury. With the Silent Generation, it somewhat became a ‘right’. Now we are back to it being more of a ‘luxury’.
There’s no employer who is going to provide for us once we retire.
Those generations were a blip in time: The social contract between an employee and employer post WW2 all but guaranteed that the employee could trust that they could retire and start tapping their employer’s pension plan.
Investments
They didn’t have to learn about investments. Nor did they have to learn about asset allocations, risk tolerance, and asset classes. No thought needed to increase their contribution to their 401(k) by 1% every time they got a pay raise.
Their pension plan was on the hook for adjusting the payout, not them.
While I don’t disparage the generous benefits bestowed by their employers, it did set up unrealistic expectations for future generations.
Companies can declare bankruptcy and walk away from their commitment for their employees’ pension plan and retiree health benefits.
There’s a safety net in the form of PBGC, but the payout is rarely $ for $ what the old plan was.
It also does not provide inflation adjusted benefits.
How Things Have Changed
Whatever funds we put aside are ours and ours only. They can’t be taken away no matter what happens to our employer (one caveat: make sure you limit the amount in your retirement accounts comprised of your employer’s stock).
The social contract between employer and employee post WW2 was a blip in time: We had never seen it before and we likely will never see it again.
But, if you prioritize your retirement planning and contribute to the accounts available to your through your employer (401(k) but also HSA for some) and/or individually (IRA for all of us and SEP-IRA for self-employed), you have a good chance to retire with peace of mind.
Who knows, with the right combination of lifestyle and investment choices you may even be able to retire early.
Compared to the choices available to the generations preceding WW2 (work until you drop), we are in a better position.
Just as long as we make informed choices, spend less than we earn, and seek wisdom in our relationship with our money.
Next Step
Ready to take the next step and work with a fee-only CFP? Reach out to schedule a Discovery Meeting to learn more.