I think we tend to forget that retirement is kind of a recent invention. Before the 1930s, there was n0 Social Security. Until then, you worked until you were no longer capable of labor. At that point, you were either dead or your family supported you. Cheery, eh?
For a relatively new idea, retirement sure caught on quickly. In under 80 years, it’s become accepted that just about everyone will retire and live on savings and/or Social Security.
But is that idea changing again?
This recession shook a lot of people to their financial cores. Houses and jobs were lost; investment values went subterranean. Some people raided retirement accounts — either before or during the bubble — and have to face those consequences. Others just decreased/stopped their retirement contributions. Even people who kept everything together suffered: When your portfolio plummets for several quarters, compound interest isn’t doing you a whole lot of good.
All this is on top of the fact that Americans were woefully under-preparing for retirement — even when times were good.
With all the financial carnage that’s occurred, will retirement even be plausible for current generations? Can people really make up for all this lost time?
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I think its possible, but for many people it will take such a drastic change in their lifestyle, that for many it's not plausible.
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Before the 1930s, the U.S. was a largely agrarian economy. Much of the population lived on farms or in small towns. Farms would support (often barely) extended families. People worked on the farm into their old age because that was just what one did in life — just as one keeps one's house clean into one's old age today — and also because if you didn't work the farm you'd starve. But when you got too old to work, you were likely to live with the family of one of your children. People didn't go to nursing homes, and they didn't try to take care of themselves alone in their dotage. Also, they didn't live into their 70s, 80s, and 90s. In the decade from 1920 to 1929, the life expectancy of an American man was 53.6 years, and of a woman, 54.6 years.
As a population grows more urban, new amenities replace those old customs. And young people move to urban areas far from where their parents live. An urban population can't easily feed itself by working the land — how much can you grow in those pots on your apartment balcony, anyway? Consequently the more affluent population needs to create accommodations for elders who, when they exhaust their working years, have no families to care for them. Hence Social Security.
I think that as long as our population remains urbanized, there always will be some sort of social program to support the elderly. If not…well, you know, there's always Soylent Green.
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I think Funny has a good point about how much has changed — all of society, really. But yes, I do believe that people will still be able to retire. Those who were on track pre-carnage are probably still pretty close to being on track now, if they didn’t panic. My once-40% losses are now nearly back to where they were, and I’ve increased my contributions. Lowering expenses helps too. My big worry though is still health care. At least there has been a little progress there.
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