3 big ways retirement planning has changed

Allworth Co-CEO Scott Hanson takes a look back at the history of Labor Day and why - even more than 100 years after its creation - it still holds a bit of relevance for today's retirees.


Labor Day, the first Monday in September, was established to honor the sacrifices of America workers.

First celebrated all the way back in 1894 (after New Year’s, Independence Day, Thanksgiving, Christmas, George Washington’s Birthday, and then Memorial Day), Labor Day became our nation’s 7th federal holiday.

So, why did people feel they needed a day to celebrate Labor?

In the 1800s, the average manufacturing employee (including children) worked 70 hours a week. Labor Day grew out of a movement to unionize workers, improve working conditions, and as a push to reduce the amount of time an employer could legally require an employee to labor at their job.   

In a sense, the intention behind Labor Day contributed to the invention of retirement.

That’s because, back 140 years ago, if you were able to survive any of the many deadly things (i.e. common infections) that can easily be cured today, you likely worked until the day you died. Labor Day helped bring greater awareness to—not only those people who were still working long hours in oftentimes hazardous conditions—but also to what happened to people whose jobs were so damaging to their health, that they eventually could no longer work or earn a living.  

Thankfully, things have evolved. And, with planning, most people can hope to achieve, if not a fully recreational retirement, certainly a more elective one.

But how do you get there?

Over the years, employers, lawmakers, and enterprising entrepreneurs have created more ways for people to prepare for and pay for retirement.

Case in point: 100 years ago, Social Security, health insurance and pensions had yet to be invented. And 401(k)s and IRAs weren’t even around as recently as 50 years ago. 1  

While these entities have improved the quality of life for millions, you can never let your guard down, nor allow your preparation to remain static.

Whether for good, or ill (more expensive), retirement will change in the future, just as it has in the past.

And so, we must adapt.

Here are 3 ways preparing for retirement has changed.

  • One way or another, you’re getting less Social Security

Forget for a moment (if you can) that Social Security is having funding problems (more money going out than coming in), or that a major overhaul to the system could occur at any time.

As no one knows for certain what will happen, but as we expect there to eventually be changes to the program, we encourage pre-retirees to plan for retirement as though there won’t be any Social Security for them to draw from. 

But even if there aren’t major changes to Social Security, you’re still likely to get less money year after year. Here’s why: you’ve no doubt heard of cost of living adjustments (COLA). These are (typically) yearly adjustments to the benefits you receive (or, will receive) to help you pay for consumer goods and services as they become more expensive.

Well, COLAs used to be rather generous. Between 1976 and 1985, the upward adjustments to benefits averaged 7.7% a year.

That’s not bad. One year, in fact, the bump was almost 15%. 2

More recently, however, the increases have gotten smaller, or stopped altogether. And, the fact is, that in terms of buying power, current recipients are receiving less Social Security each year.

How much less?

In three of the last 10 years, the COLA has been zero.

And, over the last 10 years? The average COLA has been right around 1%. 2

  • The cost of healthcare just keeps going up and up and up

From 1992 to 2017, the yearly cost of healthcare more than doubled from about $5,000 to almost $11,000 per retiree.3

As much as that is, increased healthcare costs have hardly plateaued.

It’s estimated that a couple turning 65 today will need to come up with over $500,000 to cover their healthcare expenses over the course of their retirements. 3

That’s why Medicare Advantage plans are becoming so popular. Private insurance that is regulated by the government, these plans popped up in the 1990s and have become a complex-but-integral part of paying for retirement healthcare expenses for millions of people. (Talk to your advisor before making any commitments pertaining to Medicare Advantage plans.)

  • The slow death of pensions

Back in 1990, when I first became an advisor, even though the corporate world’s move away from them was already in full swing, it still seemed like almost everyone in both the public and private sectors was due to receive a pension.

And while public sector pensions are still available, far less than 100,000 private sector companies still offer them. 4   

Simply, unlike the middle-to-late part of the 20th century, when working for a company that offered a pension was common, unless you work for the government, the odds are that you are going to be nearly 100% responsible for funding your own retirement.  

This is just a reminder that your retirement plan not only needs to be versatile and comprehensive, if it’s going to serve you over a 30-year post-work life, it needs to be both dynamic and updated regularly.    

So, back to Labor Day.

As the traditional “end of summer,” most folks typically spend the day at the beach, or with family and friends barbecuing or eating out.

For most of us, that’s obviously less likely to happen this year.

But no matter how you spend the day, with all we’ve been through this year, and with 75% of 2020 in the books, no matter where you are in the retirement preparation process, or especially if you are already retired, I hope you’ll take a moment to reflect upon all the labor it’s taken for you to get where you are today. 


1 https://www.personalcapital.com/blog/retirement-planning/average-401k-balance age/#:~:text=While%20the%20401k%20is%20one,(59%25%20of%20Americans).

2 https://www.moneycrashers.com/retirement-changes/

3 https://www.moneycrashers.com/retirement-changes/

4 https://www.moneycrashers.com/retirement-changes/