Rethinking Retirement  

Where to Invest Now

Human Capital vs. Financial Capital

It’s been said the financial markets don’t like uncertainty. But one thing that is certain is that with the market declines of the past decade or so many people have seen their planned retirement dates pushed further and further into the future. While many are wondering what asset class should they invest in to make up their losses, others are taking an even bigger picture view and asking what type of capital they should invest in – financial capital or human capital?

Throughout our lives, each of us have taken our own personal human capital – our talents, strengths, abilities, knowledge, experience and expertise – and traded that human capital for financial capital - i.e. - a paycheck. A part of that paycheck was (hopefully) set aside as financial capital and saved for the time in our lives when our human capital would no longer support us. The outdated idea being that as our human capital declines through age and declining skill sets we would transition from being supported by our human capital to our financial capital.

Unfortunately however, for millions of Americans and others around the world, the financial capital we’ve been able to accumulate – both individually and collectively – isn’t enough to fully support us in retirement. In theory, an individual’s financial security at retirement was to come from three sources – an employer’s pension, personal savings and social security. Today, less than 20% of U.S. private industry workers are covered by an employer’s defined benefit pension plan. Social Security now takes in less in payroll tax revenue than it is obligated to pay out in benefits, meaning that at current rates the program is unsustainable even for those in their early 50’s right now. Finally, while personal savings in the U.S. is recovering from an all-time low, the average nest egg for most retired Americans is less than $250,000.

While the financial capital picture may be less than rosy, there is good news.  More and more Americans are reaching normal retirement age – 65 – with more human capital than ever before. When FDR set the "normal retirement age" at 65 back in 1935, the average life expectancy was only 62! When you consider the nature of work back in the 1930’s – largely industrial or agricultural - it’s reasonable to believe that a large percentage of a worker’s human capital was indeed used up by 65, if in fact they even lived that long.

But today, with an average life expectancy in the U.S. of 78, generally better health and the change from largely physical to predominantly intellectual work, millions upon millions are reaching age 65 with significant reserves of human capital remaining in the tanks.

In fact, there’s so much human capital remaining at 65 that today’s retirees have redefined what it means to be retired. For many, retirement now represents a new beginning and the chance to pursue a vocation as opposed to job or even a career. They’re not retiring so that they never work again, but so that they have the freedom to pursue the kind of work that provides personal meaning and fulfillment. And herein lies the secret for those in their 40’s and 50’s today.

Retirement no longer means that you no longer work. As early as 2001, William D. Novelli, Executive Director and CEO of AARP suggested that earned income will be a critical element in securing one’s retirement. The recent turmoil in the financial markets underscores this point. The key will be to find work that you are truly passionate about and allows you to create a balanced lifestyle you can enjoyably sustain for years to come.

What that means then, is that rather than invest all of your money, time, worry and anxiety in the stock market hoping you’ll accumulate enough financial capital to never work again, invest a portion of that time, energy and perhaps even money, into yourself. Develop your own human capital. Spend some time figuring out what it is you would do if you could do anything at all and figure out what additional skills, training or education you may need that will allow you to do it.

In today’s intellectual economy, it is the knowledge, skills and expertise gained through years of experience that is proving to be most valuable. With the leading edge of the baby boomers now age 62 and beginning to retire en masse from their primary careers, there is a real fear within many industries that there will not be enough skilled workers to fill the positions left by these retiring boomers. That creates opportunity not only for those retirees are who are re-shuffling into new, more satisfying jobs, but also for those in their 40’s and 50’s who have begun to look longingly at retirement as a way out of jobs that are no longer meaningful or fulfilling. Those who have identified what they want to do and have developed the required skill sets will be the ones in position to secure their desired jobs and negotiate the most flexible schedules, pay and benefits.

The idea of retirement as a 30-year vacation has faded away.  Today's retirees confirm what psychologists have long told us - people need a purpose. We need something to apply our energies toward. Couple that with the financial necessity of an earned income, and the whole definition of retirement changes. So rather than allocate all your resources toward building financial capital, make sure you invest in and develop your human capital as well.


Keith Weber, founder of the Rethinking Retirement Institute, spent 20 years in the financial services industry. He is now a consultant, speaker, and Certified Professional Retirement Coach helping people prepare for the non-financial aspects of retirement. The information presented here is for educational purposes only. Please consult a qualified financial advisor for assistance regarding your specific situation. Keith can be reached at or for more information, visit


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