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In this episode of Intelligent Money Minute, we had the pleasure of interviewing Larry Siegel, the director of the CFA Institute Research Foundation and a prolific investment management author. The discussion revolved around why people stop working even when it may benefit them to continue working. In this blog, Larry Siegel sheds light on the reasons behind early retirement and the potential benefits of working beyond traditional retirement years.
The History of Traditional Retirement Age
Larry Siegel explains that the age at which most people stop working, typically between 62 and 67, can be traced back to the 1880s when Chancellor Otto von Bismarck in Germany established the National Pension Scheme. This age has persisted through the establishment of Social Security in the US by President Franklin Roosevelt in 1935 and the subsequent eras of defined benefit and defined contribution pension plans. Tradition and inertia have played a significant role in preserving this retirement age. Additionally, physical limitations and a desire for easier work, which often coincide with age, have also influenced the decision to retire.
The research indicates that for physically demanding jobs, retirement in the mid-sixties may be appropriate. However, for those in less physically demanding roles, retirement at this age might be premature. The concept of retirement has evolved, and now many of us are engaged in think work, which does not necessarily require physical stamina. For such individuals, retirement at this age may be too early, as their skills and productivity could still be valuable to the workforce.
Lack of Flexibility in Retirement Decisions
Despite the potential benefits of continued work, many employees face challenges in transitioning to easier roles or negotiating part-time work arrangements. Rigidity in employment laws and established customs often limit the options for workers who wish to continue working beyond the traditional retirement age. The result is that many employees are forced to retire when they could still contribute meaningfully to the workforce.
The decision to retire should be individualized, considering the unique circumstances of each person and their specific employment situation. At Intelligent Investing, we believe in customizing financial strategies to suit our clients’ goals and preferences. We leverage our proprietary Intelligrations® to help our clients run various scenarios, such as unexpected health crises or part-time work arrangements, to achieve optimal financial outcomes. Our passion is to minimize financial stress and maximize the quality of life for our high-net-worth clients.
Larry Siegel Bio
Laurence B. Siegel is the Gary P. Brinson director of research at the CFA Institute Research Foundation and an author, consultant, and speaker on investment management and economics. Before retiring from full-time work in 2009 he was director of research at the Ford Foundation and, before that, head of research at Ibbotson Associates (since acquired by Morningstar). He attended the University of Chicago (BA 1975, MBA 1977). His book, Fewer, Richer, Greener, has been published by Wiley and is available, along with his other work, at https://www.larrysiegel.org.