So the other day I was reading some statistics that mentioned that over half of young workers do not have a retirement plan set up at their place of employment. After pondering for a bit about what kind of 401k plans could be set up with any sense of security, I came across another question that had been marinating in the back of my mind since I had finished reading The 4-Hour Workweek: Does retirement matter?
In the aforementioned book, the author advocates taking mini-retirements (a sort of extended vacation) as opposed to working consistently and eventually having one big retirement. And I have to say, it does make sense.
It’s not so much that I feel like I’m missing out on not relaxing and taking advantage of cheaper travel rates due to the recession ($500 for a one-week trip to Hawaii, or $50 per night in a luxury hotel on the Vegas strip?), but rather what I’ve seen in the retirements of my older family members. Many of them have finished working, and are spending at least 1/4 of their free time going to different doctors and trying to keep their health in check. And I don’t know about you, but that’s not how I’ve pictured retirement.
I’m not saying that savings should be forgotten altogether, but rather that planning for an eventual and undetermined period when one stops working completely seems almost like a foreign concept to me. Sure, there may be a point when I’m physically unable to work, but stopping altogether just seems wrong somehow. Working for an end goal of not working almost seems counter-intuitive. There’s no reason not to enjoy the fruits of your labors while you’re still laboring away.
Let’s say that you’ve saved up $1 million (US) for retirement, and that you also get around $600 per month from various other sources (social security, investments, etc.). Suppose that you retire at 65 (and that social security kicks in at 65 at that point, with dollar values adjusted for inflation), and with current medical technologies and good personal upkeep, you plan to live to the age of 85. That means that you’ll have $57,200 per year, which isn’t that bad. But figure in taxes, medical expenses, home repairs and so on, and that number shrinks quite tremendously. But that number is only that high if you live to 85. If you live to 95 (which is quite possible), that number would go down by about $17,000 per year (not to mention that you can’t accurately predict how long you will live, despite what the Internet might say). So with a large margin of error like that, and unknown expenses in your future, it’s hard to predict how much money you will actually need.
The concept of retirement itself might be outdated. There are people all over the world well over the hill who are still working in various capacities. And it’s not like working for a company is your only option. It doesn’t hurt to save up for the future, but it also doesn’t hurt to save up for now.
