Why traditional retirement planning is outdated

The retirement concept as we understand it today is less than 140 years old. In 1889, German Chancellor Otto von Bismarck established the world’s first state pension in his country, setting the retirement age at 70 – a milestone that only a fraction of the population actually lived to see.

The principle was straightforward: continue working until physical limitations made it impossible, at which point society would provide care during your remaining years.

That world has vanished. The forces transforming how we live and work are so profound that tomorrow’s retirement will likely bear little resemblance to yesterday’s. The real question isn’t whether retirement will evolve, but how swiftly we can adjust our mindset to embrace this emerging reality.

For the first time in human history, we possess both the tools and the longevity to fundamentally reimagine what our later decades could become.

The forces driving change

Several powerful trends are rendering traditional retirement planning outdated.

Firstly, longevity has surged. A 65-year-old couple today has a 50 per cent probability that at least one partner will reach 92. Modern retirees are facing 25 to 30-year retirements − far exceeding the 10-year periods our grandparents prepared for.

Secondly, health spans are expanding. People aren't merely living longer − they're maintaining vitality much further into their lives. Numerous 70-year-olds today possess the vigour that 50-year-olds had just a generation ago.

Then, consider how the workplace has transformed. Career changes occur every four to five years, with multiple industry switches becoming the norm. Remote work has enabled location independence for millions, while the gig economy creates flexible arrangements that were previously inconceivable.

Finally, technology has removed barriers. You can operate from virtually anywhere, orchestrate your life through your phone and maintain connections regardless of physical distance. The infrastructure that once anchored us to particular locations has largely evaporated.

These shifts appear permanent rather than temporary, demanding a fundamental rethinking of how we structure our lives.

What tomorrow's retirement might resemble

The forces outlined above mean that life no longer needs to follow historical patterns. Rather than working continuously until 65 before stopping entirely, imagine a more adaptable approach that capitalises on these new realities.

While these possibilities weren't available to the previous generation, they represent options that future retirees will have the privilege to explore.

1. Regular sabbaticals during your career: Take breaks every few years to recharge, pursue passions, or spend concentrated time with family. Remote work makes this increasingly feasible.
2. Intentional family time: Instead of watching your children's formative years from the sidelines, consider taking a year away when they're young to travel as a family or be fully engaged in their everyday lives. Those moments cannot be recreated later.
3. Extended discovery periods: Take time when you have the energy to embrace the adventure. Test whether your retirement dreams match reality.
4. Condensed traditional retirement: Once you get financial clarity on your ideal future and become financially independent, consider what activities you enjoy. Instead of 30+ years of full retirement, do the work you want to after your main career with a much shorter final retirement, having already lived many dreams along the way.

Those who take time to consider their values, the human and financial capital throughout their career, may arrive at retirement with a much clearer vision of how they want to spend their later years than someone who never had time to consider their eventual destination.

Preparing for multiple scenarios

Research shows we struggle to predict what our future selves will actually want. The only reliable way to gauge your response to unstructured time, different environments, or various lifestyle choices is to trial them.

For those ready to embrace the evolving forces shaping our world, we recommend the following: begin modestly. Arrange a two-month sabbatical. Experiment with remote work from another city for a month. Test part-time consulting in an area that intrigues you.

Crucially, incorporate these possibilities into your financial life management. Rather than saving exclusively for one big retirement, consider creating dedicated funds for periodic sabbaticals, location trials, and extended family experiences. The financial investment in these experiments typically pales in comparison to their lifetime value.

If tomorrow's retirement is likely to be more flexible, health-focused, and internationally connected, your financial strategy should accommodate these possibilities.

Sam Instone is co-chief executive of wealth management company AES