The day the world retires
When people have enough money saved up in their retirement accounts, they can retire, right? It doesn’t mean they will retire, it just means that they can.
More and more people today seem to have enough money to retire, even if they aren’t very old. There are more and more millionaires, seemingly almost every year. When I say “The day the world retires,” what I really mean is the day the world can retire, not when the world will retire.
If you’re a millionaire who’s able to retire but choose to still work, it’s a different type of work. It’s probably a work that you love to do, or a work that you believe can make a difference in the world: a work that helps others. You’re no longer working to make ends meet, and you don’t have the pressures, unlike working class people, to make a paycheck. In that sense, you are retired when compared to people who still have to earn a paycheck to survive at their current standard of living.
As more and more people become millionaires and are able to retire, there’s another trend. It’s costing less and less to live. Because of inflation, it’s hard to see this, but a minimal level of living is pretty cheap if you’re willing to live on rice, beans, and eggs in Thailand. Computers have definitely gotten a lot cheaper, and they fit in the palm of our hand in the form of a smartphone. From this computer we can get an amazing, cheap education in the form of an Ivy League education. Those colleges and others offer many free, auditable courses on sites such as Coursera, edX, and Udacity.
And things are still getting cheaper. A lot of these ideas come from Diamandis and Kotler in their 2012 book: Abundance: The Future Is Better Than You Think. And they got a lot of their ideas from Ray Kurzweil’s book: The Singularity Is Near: When Humans Transcend Biology.
As more people become millionaires and still others gain more wealth over time, even if it’s not as millionaires, and as it costs less to retire because the cost of living decreases, more people will be able to retire than ever before. Maybe someday, everyone will be able to retire. This isn’t to say that there won’t be rich and poor: some will be retiring on rice and beans, and others will be retiring as jet setters in utter luxury.
But at this point, people around the world will be able to pursue the truly important things in life: relationships with family and friends and a relationship with God. It reminds me of the Harvard study that has been ongoing for nearly 80 years that shows that quality relationships are the most important positive factor in our health. The director of the study, Robert Waldinger, said, “The surprising finding is that our relationships and how happy we are in our relationships has a powerful influence on our health.” When we can all retire, we can devote ourselves more fully to those relationships.
But we’ll also be able to pursue other fine things in life which were previously afforded by retirees and the very wealthy: philosophy, music, learning, reading, and art. Both creating these things, understanding them, and simply appreciating the works of others will be ubiquitous and happen much more often than it does now. Perhaps video games, movies, and TV shows will be art to be pursued as well. And of course, virtual reality may be an integral part of enjoying exotic experiences at a fraction of the cost of physically going to those places.
But why do some people now have enough money to retire, and how can it ever translate to everyone being able to retire? I’m not 100% sure, but I do have some ideas. The general trend is that more people than ever before can afford to retire, and the number of people in this category keeps growing. So the first and most simple point is that if the trend of more retirees continues, we’ll one day hit a point when everyone can retire. But how do people retire today?
By and large, people today are able to retire because of investments. Usually, those investments are in the form of stocks, bonds, and sometimes real estate. Stocks are perhaps the best of those investments, so I’d like to focus on that asset class. With a single stock, you own a small piece of a particular company. Companies typically employ physical capital like machines, robots, and buildings, as well as non-physical capital like intellectual property and software, along with human capital in the form of employees, all in order to provide consumers and other businesses with goods and services in exchange for money.
Not all businesses use or offer all of these things, but you get the idea. When we own stock in a company, we own some chunk in the business that is using those things to try to make a profit. If profitable over a long enough time, a business can usually grow, and thereby sell more stuff and earn more profits. Some business shrink for various reasons. But good investments tend to either have stocks that are growing in value, stocks that give cash payments to us on a regular basis in the form of dividends, or both.
That’s how people retire in one of the most simplified illustrations: They own stocks of good companies. As a retiree needs money to live, they can either use the dividends from the stocks for the money, or they can sell some of the stocks. Prospective retirees can retire when they are reasonably confident that they won’t run out of their stocks before the time they die. It’s actually more complicated than this because of things like Social Security, but since Social Security can run out I don’t like to rely on it.
If one day 75% of the world (excluding children) is truly retired, meaning they aren’t even working for fun, what will happen to the other 25%, assuming they all have to work to make ends meet? Well, I’m guessing the remaining 25% can make a lot of money by working, because there are so few human workers out there. It will be more expensive to hire them than the people of today, and they can then save up money and retire sooner than the people who came before them, because they’ll be earning higher wages. These high wages will change the landscape so that it makes more sense for businesses to develop and employ robots and artificial intelligence (AI) to do more and more of what humans once did. This will put some downward pressure on human wages to alleviate their growth caused by the lack of workers. Finally, as there are fewer and fewer people who need to work because they have enough investments so that they can retire, more and more people will work on the things they love out of passion and joy, and not just for wages. Part of this will be helping your working neighbor who is not as fortunate as you because you’ve already retired.
This brings me to my last point on helping your neighbor. When someone can retire, and their investments do better than average, they might be able to pass the money on to their children when they die, so that their children are always retired. Finally, what about the billionaires and multimillionaires and everyone with much more than they need? Maybe they will be the ones giving to the last 25% of working people so that those people can invest and finally retire as well.
The capital in our world (factories, robots, software, AI hardware and software, etc.) is increasing every year. With increased capital comes increased output of goods and services without human labor. At some point, if AI gets good enough and the output increases enough, we’ll have enough output to satisfy the needs of the entire world. Humans will enjoy the output of that huge amount of capital even though humans are no longer working alongside the capital to produce the output. It won’t be a utopia because people will still struggle to find meaning in life, but we could have a renewed focus on that search for meaning and purpose.
It’s easy to think that a world with everyone retired is not possible, but given our current trajectory, with more and more people able to retire almost every year, I think that day can come: it’s only a matter of time.
