Retirement is no longer the short spell between work and death. Americans are living longer and retiring earlier. In 1950, the average life expectancy was 69 years. By 1998, it was up to 78. In 1950, men's median retirement age was 67, and the Bureau of Labor Statistics expects it to drop below 62 by the end of 2005.
Our life expectancy, and expectations for life, improve in every generation -- thus, the nature of retirement is changing. It no longer implies ill health, poverty or dependence -- in fact, most Americans plan to remain highly active in retirement (see "Retirees Turn Hobbies Into Profit"). That's a lot to think about -- a January 2002 Gallup poll* shows that most Americans, 76%, say they have thought "a great deal" or "a moderate amount" about what they might be doing when they reach retirement age.
That forethought is not limited to people approaching retirement age. "I think about retirement all the time," said Shanie Deepe, a 30-year-old marketing manager. "My husband and I like the idea of being able to spend more time together." Dr. Edward Fisher, a 66-year-old retired business science professor, also began thinking about retirement at a relatively young age. "Twenty years ago I started building toward my ‘second' retirement and putting my house in order. I was in the Air Force long enough to warrant retirement benefits. I took smaller payments, and purchased life insurance to ensure money for my wife, should I predecease her."
Financially Secure Daydreaming
Asking Americans whether they have "thought about" what they will do in retirement is very different from asking how much they "worry" about whether they will have enough money in retirement. While those in lower income brackets are naturally more likely to worry about retirement, they are also less likely to say they have thought about its possibilities. People with current incomes of less than $40,000 are the least likely to think about retirement moderately or greatly -- 73% -- compared to 82% of people who earn $100,000 or more and spend a lot of time considering retirement.
Retirement savings increase the likelihood of retirement reveries. "We've been saving for five years," said Deepe. "I use retirement calculators several times a year to make sure we're saving and contributing enough to our retirement plans to reach our goals." By the time she reaches her intended retirement age, Deepe will have been saving money for 35 years, putting her, hopefully, in the highest echelon of savers. It's likely she'll think about retirement more than most, too. Eighty-one percent of people with $200,000 or more socked away think about retirement a great deal or a moderate amount. So do 74% of those with $100,000 to $200,000 saved, and 73% of those with less than $100,000 saved.
Just 40 More Years
There are no statistical differences among those contemplating retirement based on education, party affiliation or gender. But it's a safe bet that the alphabet generations (Generation X, Y and presumably Z) will start thinking about retirement earlier than their parents did. As Social Security is raided to pay today's debts, younger people know that saving for retirement is a survival skill. "In the last class I taught, I directed my students to begin their retirement funds and insurance programs as soon as they get their first jobs," Fisher said. "The future looks bleak for the unprepared."
*These results are based on telephone interviews with a randomly selected national sample of 1,001 U.S. investors not retired, aged 18 and older, conducted January 4-13, 2002. For results based on this sample, one can say with 95% confidence that the maximum error attributable to sampling and other random effects is ±3%.