Photo: W+G Editorial
he standard path of one’s professional life may seem boiler-plate in theory, even if not actually the norm: four years of college, maybe a few more spent earning an advanced degree, then three to four decades of a steady career before the golden age of retirement, which is, on average, right around 62 .
However, a new term has been coined to describe a slightly different final act—one that is more realistic for the majority of Americans. Dubbed “pretirement,” it’s meant to describe a phase between firing-on-all-cylinders full-time work and the sudden stoppage that comes with retirement. This concept—which has been bubbling up among financial experts for the past few years —was originally billed as a way to scale back work before an eventual retirement date, but more pragmatic forecasters see it as an outright replacement to a permanent workforce exit.
Put another way: If typical retirement is that basic light switch that you simply flip off, pretirement is more akin to a dimmer switch—a phased approach slowly dampened over time.
“It’s incredibly expensive to retire, and some people do not have the money to do so,” says Tori Dunlap, the author of forthcoming Financial Feminist and founder of Her First $100K , a money and career platform for Gen Z and millennial women. “Retiring in and of itself is a massive privilege.”
In fact, Dunlap believes today’s workers—who have fallen behind in building up savings despite more concerted efforts toward long-term financial planning —are having a harder time reaching that retirement light switch in part because the nature of work itself has changed so drastically. “They’re realizing that they don’t want to work in the same job, in the same career, in the same way for 40-plus years,” she says. According to Silvia Manent, a certified financial planner who manages more than $70 million in investments for her female-focused client base , there’s little incentive for people to do so. “Older generations used to stay at their jobs for their entire careers… They were very loyal to the company, and as part of that loyalty, most companies had pensions, which acted like another form of social security. But pensions, because they are so expensive and because interest rates have been the lowest they’ve ever been, no longer exist with private corporations.” Meaning that the burden of saving for one’s golden years falls entirely on the individual. “People across generations are looking for different ways to continue to provide, to ensure they have purpose, and that they’re contributing in terms of the income they want to make in our society.” —Jean Accius, senior vice president of thought leadership, AARP Echoing that sentiment is personal financial advisor Ramona Ortega, who believes that this transition from company-provided pension funds to individualized retirement funds like the 401(k) is a key reason many experts worry we’re facing a potential retirement crisis —meaning that huge numbers of people may not have enough resources to live on once they stop working.
“We didn’t tell people, ‘Oh, hey, by the way, we’re now going to shift this burden to you,’ and at the same time, we’re also not going to teach you anything about what this means,” Ortega says. She’s concerned that reliance on individual investment plans, like 401 (k)s, Roth IRAs, and even cryptocurrency puts key retirement planning tools in the hands of people who lack financial literacy—and leaves them unprepared. “It’s this idea that ‘look, it’s super easy, just push this button,’ when it’s really not.”
What’s more troubling is that this seismic shift is happening now, when the cost-of-living adjustment for 2022 was 5.9 percent , the highest increase in nearly 40 years . Similarly, the current inflation rate, now at roughly 9.1 percent, is the largest annual increase since 1981 . And despite severe talent shortages and the seemingly employee-led impacts of the Great Resignation, current wages are no match for these rising costs. Corporate salary raises , projected to average just 3.4 percent, still trail both those rates, while workers are paying more and more for their own benefits . And while some states and cities have passed laws to raise the minimum wage, the federal minimum is still $7.25 per hour —and hasn’t been adjusted in 13 years .
As for Social Security? “No one is waiting around for their Social Security check now—it’s never going to be enough,” says Ortega, who founded the Thrive Campaign for building intergenerational wealth in Black and Latinx communities. Social Security is set to run out of cash reserves […]
Photo: W+G Editorial