Oran Hall | The traditional concept of retirement is retiring

Traditional retirement, marked by people leaving the workforce permanently to relax and enjoy the fruits of their labour after working for many years, is itself retiring as people live longer, work longer, and must make their money last longer while ensuring their financial security in a world marked by changing social and economic trends.

Traditional retirement is traced back to the German chancellor, Otto Von Bismarck, who is credited with proposing in the late 1890s that the state give financial support to people too old to work any longer because of old age. This was approved by the German parliament. The applicable age then was 70 years, the average life expectancy of Germans, but it was reduced to 65 in 1916. Nonetheless, many continued to work out of financial necessity.

The traditional view of retirement persists today even as the nature of work is shifting from more physical occupations to office-based occupations linked to information and technology. But change is occurring.

A job is now largely being seen as more than just a source of income, but as a source of social and intellectual stimulation to people who are living longer, healthier and more useful lives because of improvement in diet, preventative medicine, greater focus on physical fitness, for example, and are better able to extend their working lives because of their enhanced physical and cognitive ability.

There are several reasons why the nature of retirement is changing. The growing preference of employers for defined contribution pension plans over defined benefit plans is shifting the investment risk to employees and reducing the certainty of employees getting a liveable pension. It is becoming more evident that workers must take more responsibility for providing for life after work. Continuing to work beyond the normal retirement age is one option for filling any likely financial shortfall in retirement.

Some people are retiring later, out of financial necessity. Even people at normal retirement age are sometimes responsible for providing for older family members. Change in economic conditions, including rising inflation, often makes it challenging to amass enough to fund a good, sustainable retirement. The financial markets also contribute to the evolving situation, as interest rates have tended to be low compared to the past, and the stock market has also tended to be in the doldrums for extended periods, thereby slowing down the accumulation of funds for retirement.

Still, there are people who retire late because they are late starters, meaning that they marry late, have children late, for example, and thus fall behind others their age in their readiness for an affordable and sustainable retirement.

Working beyond the normal retirement age comes in several forms, including changing careers, starting businesses, offering consulting services, and working part-time. While old skills and competencies often come in handy, it may become necessary to learn new skills to make the transition to the new engagements.

Importantly though, people are seeing retirement as a time of opportunity to re-invent themselves, so they take on new challenges, learn new skills, explore the world by travelling more, and sometimes move to new locations for different experiences and opportunities. For some, retirement is not a time to slow down, so they continue to work and give themselves the added benefit of maintaining social connections from which they can derive health benefits as well as boost their opportunities to advance their new ventures.

Nonetheless, some retirees still get left behind. They cannot extend their working lives even if it would be beneficial to do so. Some have health challenges such as chronic conditions, which are on the rise, and obesity. Others are not equipped with the required digital skills to make the level of contribution required in the changing workplace.

How people live their retirement lifestyle, and how they prepare for it, should reflect the increasing sophistication of the world in which we live. Technology is changing how we communicate, learn, work, do financial transactions, access medical services, travel and live. The new retirement paradigm makes it imperative to keep learning and sharing, for new knowledge can soon become old.

While technology does bring know-how about many things, there are gaps, but there are professionals available to give guidance and support. It is prudent to seek help when necessary but it is also necessary to be sufficiently knowledgeable about the needs to be addressed to be able to determine appropriate courses of actions from the counsel and advice of those presenting themselves as experts.

Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.finviser.jm@gmail.com