For generations, the idea of retirement has been something people aspire to. While many aspects have changed over the years, from the average age people are retiring to the suggested age to start saving, the overall premise of the goal has remained the same – work now to relax in later years.
According to Scott Lepa, senior investment analyst at MGO Inc. in Beachwood, and Amanda Lisachenko, principal and COO at Reed Financial Services in Mayfield Heights, the modern idea of retirement has changed due to both workplace and overall societal culture.
“The modern era of retirement has been evolving over many years, but I don’t think that we can define exactly when retirement started to look like it does today,” Lepa said. “Today, I think the concept of retirement is defined by people living longer and contributing to society throughout their lifetimes whether that be working, volunteering, mentoring and/or spending time with grandkids.”
Lisachenko said it’s been an evolution over time – beginning in the 1970s and 1980s – especially with how retirement is funded.
“It was a transition of who is going to help pay for your retirement time,” she noted. “Before the late ’60s and ’70s, it was more on companies to take care of employees. But then you started to see vehicles like 401ks being introduced and it put more onus on the employee. Companies could shift some of that responsibility to the employee. They are still helping, but employers are not shouldering the whole responsibility.”
Talking further about the longevity of current retirees, Lepa said retirement continues to develop because longer lives are being lived, which leads to a longer retirement.
“The current generation of retirees are more active than ever before,” he explained. “Baby boomers are redefining what retirement means. I think because people are healthier, living longer and understand retirement isn’t the end, they see it as an opportunity to define or redefine their lives.”
From a financial standpoint, Lepa said retirement is being redefined.
“The adage that as you get older, your investment portfolio should get more conservative, which typically means more fixed income/bond investments, doesn’t work like it did in the ’80s and ’90s when interest rates were high single or even double digits,” he said. “Unfortunately for retirees today, we are in an area of historically low interest rates that truly penalize savers.”
Lisachenko noted these changes can even be found on a societal level.
“If you go back to generations before us, the jobs they had were much more physically demanding,” she explained. “While there are still careers that are more physically demanding, a large portion of the population is sitting at a desk. It has come from retiring and hanging up the boots, to retiring and seeing where your boots now take you. There is always the when – but now there is the what, as in what you’re going to do.”
As everything develops due to technology, Lisachenko said the internet has also allowed retirees to learn more about their financial future.
“There is an enhancement of information for people in terms of understanding retirement resources, what their benefits look like and how to use saving vehicles,” she said. “Also, the way that retirement is portrayed in marketing and on the internet has changed.”
But as younger generations prepare to save for retirement, the professionals said there are a few things to keep in mind.
“Retirement will continue to evolve, and millennials, who are defined by their desire for flexibility and work/life balance may never have to retire, as the work environment that they are creating is one that lends itself to contributing to society in a variety of different ways throughout a lifetime,” Lepa said.
Lisachenko said, “Retirement is always a state of mind in how you define it. The good thing is younger generations today have time on their side. Starting early is always a benefit, and a hurdle for all of us now is we’re going to live longer. You’ll have to pay for retirement longer.”