My great aunt recently turned 103 years old. From walking to school to watching walks on the moon, from a chicken in every pot to a smart phone in every hand, she’s certainly seen a lot! When we look at retirement through her eyes, that has certainly changed too.
Pensions (1875 – current).
With the first pension in 1875 (provided for employees of the American Express Railroad Company), pensions were gaining popularity in the 1910s and 1920s. By the time she started working, pensions were commonplace. I bet the actuaries of her plan did not anticipate her longevity! Pensions, often known as Defined Benefit plans now, are still around though Defined Contribution plans are much more prevalent.
The Great Depression (1929 – 1939).
Like many, living through the Great Depression certainly has left a lasting impression on her. Not one to waste food and one to always save first, spend later, I strongly believe that living in such a financially trying time only made her stronger. She’s the epitome of hard work and appreciating the value of a dollar.
Social Security (1935 – current).
As part of the New Deal to lift the US out of the Great Depression, President Franklin Roosevelt signed the Social Security Act into law in 1935. At that time, Aunt Josie and her employer would each contribute 1% to the trust fund. Today, each employee and employer contributes 6.2% of our FICA taxes to Social Security and 1.45% to Medicare.
Medicare (1965 – current).
Until President Lyndon B. Johnson signed the Medicare Act in 1965, retiree healthcare was the great wide open. Some employers provided their retirees with lifetime health benefits, while others did not. In fact, President John Kennedy tried to push for a national health care program during his presidency after a study showed that 56% of American over 65 did not have health insurance.* With higher life expectancy now and the cost of healthcare rising exponentially, it’s more important than ever to consider healthcare costs in our retirement years. And with the advent of Health Savings Accounts in the early 2000s, and their popularity right now, we should be using this to our advantage.
Individual Retirement Accounts (1974 – current) and 401(k) Plans (1978 – current).
My aunt was winding down her working years when legislation started passing for IRAs and 401(k)s/Defined Contribution Plans. By the time they were gaining in popularity, she started collecting her other retirement benefits. IRAs and Defined Contribution are the cornerstone of our retirement plans, however. And in our lifetimes, we already seen some changes, such as the addition of Roth capabilities. With recent retirement bills in motion in DC, we may see even more.
My retirement probably will look a lot different than my aunt’s retirement. Which means my planning strategy needs to be different too – by saving as much as I can and as early as I can, reviewing periodically and researching any changes that may occur in my employer plan or in retirement savings overall. And when I run retirement income calculations, I always override the suggested time frame to plan for 100 years old – I don’t want to be worried how I’ll afford living in my later retirement years. Your retirement will look different too – how will you plan for it?
P.S. The question I always receive when I mention my aunt is “what’s her secret?” She never gave me a straight answer, “I’m just blessed with good family, friends and health.” No, ciocia, we’re the ones blessed to have you!