Retirement is a modern construct.

  1. The numbers

If you’ve even dabbled remotely in the financial literacy world, you’ve probably been hammered time and time again on the importance of saving for retirement.

A lot of people though, either underestimate the importance of saving for retirement or don’t realize how much they need to live comfortably in their old age.

The numbers

There are many ways to estimate how much one should save, but for simplicities sake, we’ll ignore the nuances and use Fidelity’s recommended numbers:

If the average salary in the U.S. in 2019 was $51,168 (, you would need $511,680 saved in order to live comfortably in your old age.

While daunting at first glance, with the power of compound interest this number is fairly “easy” to achieve over the course of 30 or 40 years.

The problem is, however, there’s a large portion of people where the importance of retirement (and financial literacy in general) hasn’t even crossed their mind.

The issue

I started to notice the lack of widespread financial literacy during my undergrad. When you choose a degree that contains a “trade” aspect people will often gravitate towards you for advice in that subject.

Prior to finance, I was a nursing major, so naturally, any ailments my friends or family were experiencing were commonly mentioned in conversation. The same would happen in terms of “finances”.

I’d have fellow peers, co-workers, and family members; basically, anyone I had a relationship with reach out with about questions on investments, loans, budgeting, etc.

And while it was flattering to have people refer to me for expertise (I boasted a 2.3 community college GPA), it put in perspective how little people critically think about their finances.

This was made even more clear to me after I started doing “Financial Literacy Workshops” for different student organizations on campus. In these workshops, I would cover basic budgeting tips, how to pay off debt, and how to save for retirement.

Before each workshop, I would take a quick survey of the room to see what students already do or don’t do, and what they are familiar or unfamiliar with.

Budgeting was semi-common, followed by general knowledge of debt, but the one topic students consistently didn’t know about was saving for retirement.

They all knew that “they should save for retirement”, but anything more than that phrase was unknown to them. Minds would be absolutely blown when I pulled out a compound interest calculator.

After a series of workshops and meetings, I kept wondering: “How is retirement getting missed?”

Then it dawned on me: Retirement is a modern construct.

Let me elaborate.

The investment vehicle

When I turned 18, I didn’t walk down to the DMV, take my driver's test, and get my driver's license.

My dad taught me how to drive with a learner's permit in high school. Over the course of a few months, I was able to take my driving test and get a license.

The same goes for my dad — one of his parents taught him how to drive, then he took his driving test.

This trend of being taught how to drive by the older generation probably goes all the way back to horse riding.

In our society, it’s relatively common to have family members or close friends teach you certain life skills like driving, cooking, sewing, etc.

In the case of driving, unless you wish to drive early (which for many isn’t affordable), you typically don’t learn how to drive through school, textbooks, or without some sort of supervision.

Usually, someone shows you how to do it.

The knowledge gap

With the introduction of Exchange Traded Funds (ETFs) in the 1990s, the decline of pensions as an investment vehicle, and dwindling social security benefits we have generations of people with a knowledge gap on how to aptly prepare for retirement.

This knowledge gap is detrimental, as building retirement savings needs to take place over decades in order to fully utilize the power of compound interest.

Furthermore, wealth inequality still plays a significant role, as “wealthier families are far more likely to be invested in the market in the first place”. For many people, getting to the 1st and 15th every month is the priority, not retirement.

The idea of our current retirement system is a new one. We’ve gone from having large families to social security to pensions to 401ks all within 100 years. It’s no wonder there’s a knowledge gap on how to prepare properly.

And If you’re anything like myself or the students I taught, personal finance is more like flying a plane than a car.

How many people do you know that own planes?