What is the future of retirement? Despite the popularity of the F.I.R.E. movement, longer lifespans have made it very difficult for most people to save enough to fund a retirement that could last as long as our working lives. Yet, the mere suggestion that retirement as we’ve come to know it will no longer exist is met with a lot of resistance from people of my generation.

For many years, people my age have looked forward to a long period of relaxation and leisure after their working life. Today, I consider why we need to rethink the traditional model and look towards the future of retirement. I’ve also got some thoughts on what our lives could look like instead.

This post was originally published in August 2020, and updated in June 2023.

Where did our current view of retirement come from?

Boomers grew up with the model of retirement we saw from our parents. My parents’ generation worked and retired in an era of guaranteed defined benefit pensions, shorter life expectancies, and high interest rates. These things combined created the perfect scenario from a pension perspective.

Many of us watched our parents retire at 65, or sometimes earlier, to a life of leisure after working at the same job for 40 or more years. But the world has changed and, for many reasons, that model of retirement is no longer realistic.

Let’s go back a little further in history to a time when retirement didn’t exist.

Retirement is a relatively new concept

In the history of mankind, the concept of retirement is relatively new.

Until the late 1800s, there was no retirement. In an agricultural-based economy, most people worked until they died. If anyone was no longer able to work, their children or other family members cared for them.

As the economy because more urbanized and industrialized in the 1920s and 1930s, governments established pension plans like the U.S. Social Security program and Canada’s Old Age Security Pension. These plans were created to provide for people in their old age.

In the post-war industrial era, we started to see a rise in employer-sponsored pension plans. Many employers felt younger workers were more suited to the demands of industrial labour so the idea of these plans was to help older workers transition out of the workforce into retirement.

An important consideration that we often lose sight of is that government and private pension plans were all created with the assumption that the majority of retirees would die within a few years of starting retirement.

Then, we started to live longer. Life expectancy at birth in the 1920s was around 60 years in both Canada and the United States. Today, life expectancy at birth has increased to around 80 years.

And, someone retiring at age 65 today can expect to live to at least 85. (Source: StatsCan) To avoid running out of money, they probably need to plan to live well into their 90s. That’s a lot of years of leisure to fund.

People started retiring earlier

And despite people living longer lives, over time we saw a decrease in the retirement age. Between the the mid-1980s and 2000, the average retirement age declined from 65 to 60. Since 2000, we have started to see a gradual increase. Pre-pandemic, the average age of retirement in Canada was 62 before it crept up closer to 65 in 2022. (Source: StatsCan)

So people were living longer lives and wanting to retire earlier. This meant they were funding a longer retirement from a shorter period of work.

Is a 20- to 30-year retirement desirable or feasible?

There are a few reasons why it’s time to stop and revisit the current standard of a full-stop retirement. We need to think about what makes sense for the future of retirement.

First, people aren’t just living longer, they are living healthier lives. Twenty to thirty years is a long time to sit around doing nothing. Love it or hate it, work gives us a reason to get out of bed in the morning.

Secondly, many people approaching retirement have very little savings. The Healthcare of Ontario Pension Plan’s 2023 Canadian Retirement Survey found that almost half of no-retired Canadians aged 55-64 had less than $5,000 in retirement savings. And 32% of working Canadians have never set aside any money for retirement.

Finally, in addition to low savings, many pre-retirees are carrying debt. According to the latest data available from Statistics Canada, 42% of seniors are in debt.

You don’t need to be an actuary to figure out that, with all the other financial pressures we face, it’s not feasible to save enough over 30 to 40 years of work to finance a retirement of 25 or more years. Even at a savings rate of 10% per year, with above average rates of return, it wouldn’t be possible to accumulate sufficient savings to provide a reasonable income that would last 25 to 30 years.

Add in the pressure of an aging population on government pension programs, and the math no longer adds up, if it ever did.

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A possible solution – Victory Lap Retirement

I’m not suggesting we need to go back to the days when we continued working until we die. However, I do think that the future of retirement for most seniors will need to include some paid work in addition to income from pensions and investments.

A few years ago, I read a book called Victory Lap Retirement and I had the opportunity to meet Mike Drak, one of the book’s co-authors. After reading the book and hearing Mike speak about his personal experience, I realized there is another solution that we hadn’t really given much thought to.

The idea of Victory Lap Retirement makes a ton of sense. Instead of retiring from your career on Friday and immediately starting a life of leisure and full-time retirement on Monday, you transition gradually from work into retirement by doing a victory lap.

A victory lap involves working longer but not in the same capacity as your full-time career. The book suggests a couple of different options.

The Glidepath Strategy involves reducing your hours in your current job, or leaving your current job and spending time consulting in your field of work. This approach makes sense for someone who enjoys their work but wants to work on their own terms, freeing up time for more enjoyable activities like travel, spending time with family, and hobbies.

The second, and riskier, strategy is the Passion/Hobby Strategy. This involves getting outside your comfort zone and doing something completely different. It could be turning a lifelong passion—like gardening, writing or music—into a source of income. You might even start your own business.

Both options give the opportunity for the best of both worlds. The ability to earn income, while having more time for the fun stuff in life. 

Why this approach makes sense

There are a few reasons why the concept of Victory Lap Retirement makes sense for the future of retirement.

It aligns with the future of work

The idea of a victory lap aligns well with the evolution we’re seeing in the future of work. It’s a natural extension of the multi-stage life concept introduced by Lynda Gratton and Andrew Scott in their book The 100-Year Life. In the multi-stage life, periods of work are interspersed with periods of education and leisure.

It’s better for your physical and mental health

Believe it or not, the current full-stop retirement model could be bad for your mental and physical health. In Victory Lap Retirement, the authors speak about “Sudden Retirement Syndrome”. This is the withdrawal and shock than can happen when a person suddenly ends their career. Abruptly transitioning from a busy work life to a life of leisure is stressful and can lead to boredom and destructive behaviour. Some studies have shown it can even shorten your life.

If you fail to come up with a plan to use the leisure time available to you each week, you could suffer from self-doubt, regret, lack of purpose, and boredom.

Victory Lap Retirement

It provides a sense of purpose

Finding activities to fill the 2,000 or more hours that we work in a year is critical to a successful retirement. Everyone needs purpose in their life, and a reason to get out of bed in the morning. The book suggests we can learn valuable lessons from the people of Okinawa off the coast of Japan. The people of Okinawa live longer, healthier lives than most people on the planet. Interestingly, they don’t practice retirement and don’t have a word for it. Instead, they practice ikigai, which translates to having a sense of purpose. For more information on the people of Okinawa and ikigai, take a look at this article from Harvard Business Review.

A victory lap can give you that sense of purpose and keep you physically, mentally and socially engaged.

It makes sense financially

Victory Lap Retirement also makes sense from a financial perspective. Generating active income, or a “playcheque” as the book calls it, gives you more financial flexibility. Maybe the income from your victory lap will cover discretionary spending like travel and entertainment. Or, you could delay drawing down your retirement savings. You may also be able to defer starting your government pensions in exchange for a higher lifetime benefit amount.

Planning for your victory lap

Like everything worthwhile, a victory lap requires careful planning. And the planning needs to start several years before the date you think you want to transition from your full-time career.

Think about what your victory lap could look like. Does a glidepath strategy make sense for you or would you rather pursue the passion/hobby option?

Do your homework and research what you need to do now to make it happen. Do you need to learn new skills or take courses? Make a plan to get that done.

Look after your health so you have the energy to make your victory lap happen. Eat well, get enough sleep and make time to exercise.

Speak to a financial advisor to make sure you have a financial plan in place. Know what kind of lifestyle you want to live, how much it will cost, and how much income you will need to generate. A financial advisor can also help you with income planning. Many people find it difficult to transition from a lifetime of saving to one of spending. Having a strategy to draw down your savings will help with this.

What will your victory lap look like?

A victory lap is a way to get the best of both worlds. A chance to enjoy more leisure time while still having a sense of purpose. I will leave you with one last quote from the book:

True wealth is based on personal satisfaction and having the freedom to live life on your own terms.

Victory Lap Retirement

Since reading this book, I’ve been giving a lot of thought to what my own victory lap could look like. I’ve started to come up with ideas and make some plans. Check out the book and Mike Drak’s blog posts on the Booming Encore website and start creating your plan. You can even download a free copy of Mike’s latest book Longevity Lifestyle By Design to help you plan your next chapter.  

What do you think of the future of retirement? Tell me your thoughts below.