Podcast – Episode 72 – How Retirement Was Invented


Podcast Transcript

I am willing to bet that you did not know that retirement as we know it today is a pretty new concept. And by pretty new I mean about 60 years old? And if you are like me, you probably never even thought about it.

See in the past, most people lived on farms or in little villages and you worked the land or did your craft. Basically you kept working until you died.

That started to change in Germany in 1883. That is when the Chancellor Otto von Bismark first came up with a plan to give a government-supplied income to those who were disabled from work by age and invalidity.

And after much political fighting they passed a law to create a retirement system for citizens over the age of 65.

Life expectancy was way lower than 65 at the time.

In the US it was not until 1935 that FDR created the Social Security Act that gave benefits to workers over the age of 65. Life expectancy was around 58 at the time. So again, very few were expected to collect from social security.

But by 1960, life expectancy jumped up to almost 70 years.

That is when the first lucky ones were able to actually live long enough to stop working and collect retirement benefits.

That is when leisure became a pursuit. That’s when retirement communities became a thing and gold became available to the masses.

So it has only been a few short decades that Americans have looked forward to a rewarding life of fun after a life spent working.

Currently the SS administration estimates that there are about 47 million retired people in the country.

But how are those people doing?

Not too well.

The #1 fear of those over 50 years of age is running out of money in retirement while at the same time,

More than half of all American families have less than $4,000 set aside for retirement.

Thanks to advances in science and healthcare, life expectancy continues to advance. I myself am planning to live to at least 100.

But that is a problem that is getting worse.

  1. Most retirees expect Social security to be there. But the average retiree only get about $14,000 a year from SS. That’s living below the poverty line.
  2. The SS fund is in series trouble and unless the government fixes it soon, the administration might have to cut payments to beneficiaries.
  3. Those that expect to keep working past 65 and often unable to do so.

 

Why? 3 main reasons.

  1. Poor health. This is the primary reason for workers retiring early.
  2. No jobs. Age discrimination is a thing. And companies would prefer to hire younger, cheaper employees than older ones.
  3. Family issues. You might end up having to care for a loved one, like a spouse, child or grandchild.

 

But again it wasn’t always this way.

Families used to take care of their own. But thanks to the industrial revolution that went away.

To keep workers happy, companies started pension plans. The idea was that you work for one company, stay loyal, and they will take care of you in your old age.

It worked great, until companies decided that they would rather not do that anymore.

So new laws and regulations were passed.

Retirement plans like IRA and 401ks were created.

And the age of Wall Street was born.

Now it’s not the family’s job to take care of the elderly. It’s not the company’s job and the government is not up to the challenge. So we are told to rely on Wall Street and our friendly financial planner.

Except that he isn’t so friendly like we discussed in episode 71.

So what do we do?

Is there anyone we can trust?

In a word, yes.

You trust yourself.

You take responsibility and you invest the time to educate yourself.

You manage your own money and use Wall Street’s tools to do so. But don’t get suckered by their marketing and psychological tricks.

I am so happy to be able to take the Passive Trading philosophy and methodology and put it in book form to take it to the masses.

The Great American Retirement Experiment has failed us.

Time to put the odds in our favor.

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