What if you could take your retirement the way you take your vacation days? With the ability to get paid for the months or years off of your choosing, rather than just the last ones?
Instead of getting 15 years off at the end of your life, you could take a year or two off in your 30s, another year or two off in your 40s or 50s, and so on.
Don’t get me wrong—retirement programs are definitely a good idea. If work is how we are able to support ourselves, then what happens when we are medically unable to do that? That’s why industrialized nations across the world established pension programs. The US was one of the last industrialized countries to put one into place when Franklin D. Roosevelt passed the Social Security Act in 1935.
At the time, he said: “I see no reason why every child, from the day he is born, shouldn’t be a member of the social security system. When he begins to grow up, he should know he will have old-age benefits direct from the insurance system to which he will belong all his life. If he is out of work, he gets a benefit. If he is sick or crippled, he gets a benefit… from the cradle to the grave they ought to be in a social insurance system.”
It was a utopian ideal of the highest order. All of us were to be cared for by the state at times when we were unable to work because of sickness, unemployment, or old age. There have been expansions and amendments to the program over time, but today the US government taxes 12.4% of every worker’s income (6.2% from the employee and 6.2% from the employer),and uses that money to fund the Social Security Trust. The trust then pays out to retirees as needed.
But in 1935, when social security was established, life expectancy was only 61. If they made it to the age of 20, workers could only expect to live to 65. If a worker did make it to 65, the state was likely to pay for only a couple of years of their lives, if that. As of 2020, life expectancy has expanded to 79, which means the state has gone from paying for 0-2 years of our lives to 14. And those years aren’t spent sick in bed, unable to work; they’re spent watching TV (4.5 hours/day), eating, sleeping, and socializing.
I am generally pro-welfare state—I think we should be financially protected during periods when we cannot work. But Americans are having fewer children and living longer, so there are fewer people contributing to the trust and several more decades that people are pulling from it. Now that the baby boomers are retiring—officially the largest generation—we have a smaller number of people working and paying for a much larger amount of people taking from it, and for a longer time. At this rate, social security is predicted to run out by 2041.
Countries around the world are facing this same conundrum. Riots have been rampant in France where the pension age was recently raised from the age of 62 to 64, and I get the upset: if you’ve been told your whole life that you only have to work until you are a certain age and then you can retire, moving that age back by a few years feels brutal. Especially if you’re in your early 60s right now and you’ve been banking on the fact that you’re “almost done.”
But the math doesn’t work out. And it’s not working out in many countries around the world.
The solutions are essentially these: raise the retirement age, reduce the payout each retiree receives, or increase taxes. None of these ideas make people happy.
But what if we look at retirement a different way? What if we acknowledge that we want people to be able to work for about 40 years and retire for about 15 years—just as they do today—but we allow citizens to take those years whenever they want? Either now, or later, or some combination of the two. Just like an employee has a certain number of days they can take off in a year and still get paid, all of us have a certain number of years we can take off and still get paid.
The only reason we can’t fund that right now is that the current workforce is funding the retiring workforce and those two groups aren’t the same size. But what if we all contributed to our own funds, accruing retirement months and years just like we accrue vacation days at work? After all, Singapore’s Central Provident Fund (CPF) already works this way. And we could very easily adapt the US 401k system to match.
It's an interesting idea.
I generally disagree with some of the premise, but I do think it's interesting. Taking advantage of one's health and youth while one has it seems tempting.
On the other hand, worker productivity presumably goes down pretty fast once the worker in question is in their 60s-70s, just because they're getting older, so there may not be anyone who wants to employ them.
You've also got the issue that social security benefits do somewhat depend on how much someone earned in their life (I believe, I'm no expert) - so what would be the benefit someone takes in their 30th year?
Yes, well maybe we will also expand our healthspan, or have AI to help us with worker productivity? 🤓
The case I make is for social security is a blend between Singapore's system and our current 401k system. The employer contributes 20% of their salary to their 401k and their employer matches it. They can use those funds to take mini sabbaticals throughout their lives, rather than one long one at the end. But yes, it's tied to income, so the more you make and the longer you stay in the workforce, the more money you save! (You won't have very much money in there at the beginning, but you'll have a lot by the end!)
I wonder if another avenue might be to permit partial retirement via allowing people to draw a prorated share of their Social Security to subsidize remaining with a current employer but perhaps in a part-time role. Currently, there are very strict income limits for those who draw SS before full retirement age (67 years old for my generation). With the growing dearth of young people and labor-force participation stuck in the doldrums, we need to find ways to keep the older yet very productive people - in the first half of their 60s in particular - engaged. It would be good for society, the economy and for individual well-being.
This idea makes a lot of sense, after you've decoupled health from age to a much greater degree than today. However, at that point I think the better idea would be "There is no longer a compelling reason for retirement or long gaps between jobs to be a matter of public expense at all, unless you're doing it for some set of purposes the public cares about." I think we need to normalize the idea of years-long gaps on resumes, among other things. But I don't feel compelled to share the expense of different people's career paths and life choices.
The reason we originally set the retirement age approximately equal to the average lifespan was to ease the burden on people planning for their own futures, so that no one had to suffer for living longer than they'd expected. The fact that we now live many years in relatively poor health near the end of our lives is a very different situation. and we've adapted the policy tool we had to try to cover it. The idea of retirement as a long vacation or reward for having worked 40 years is an anomaly. In the near term, we shouldn't force people to work when they're not able to, regardless of age, but we also maybe shouldn't be paying living costs just because someone hits a certain age. Protests and strikes aside, I think a better solution would be to eliminate age-based pensions, and greatly expand disability-related and poverty-related social security programs to the point that everyone who outlives their ability to support themselves is still covered. If you like, phase it in gradually over the next 30 years so that anyone not near the beginning of their careers doesn't have to worry about it. I realize this would still be a political firestorm, of course, but as noted, this is a scenario where every available option is considered unacceptable to large swaths of the population.