Most people just took it for granted. What was it? The fact that when you’re young, you’ll go to college and get a great quality education that lands you a good job and starts a great working career. Or, perhaps you will take up some kind of trade after high school or even join the military and that will be your career path. The choices you make, they may eventually lead to—over the course of forty or so years (if you’re smart, frugal and make good money at your work)—your accumulation of enough money to retire comfortably at the age of 65 or so. That was then and this is now. Is it still true? You may wonder, “Will I ever be able to retire in the 21st century?”
A Cold, Hard Look at My Retirement – When It Happened
I made it. I am retired, albeit I didn’t do it with the full intention of retiring when I was forced to because of my health at the age of 62, eight years ago. A not-so-funny thing happened to me on my way to retirement and it’s called a heart attack, type 2 diabetes and CHF (congestive heart failure). Believe me when I tell you it wasn’t then—nor is it now—any fun.
Before all of that happened to me, I seriously was one of those who had followed the very traditional path of work until you get to the “right age”, 60-something, and then cash in all your chips and begin the “good life” of travel, dining out, and relaxing by the pool. After all, that’s one of the reasons that keeps you working hard, isn’t it? You want that time in your life to come into play that allows you to take all the time you need to enjoy all the things you want to do and not have to fight the traffic, the clock, and the real world every day. But sometimes, those plans blow up right in your face!
If It Isn’t Health, It Might Be Something Else
This post isn’t going to be a health warning. Although annual surveys by the Employee Benefit Research Institute show that about half of retirees left the workforce before they were ready and about half of those blamed their departure on medical problems. God knows I have written about that before so let’s just say it’s important to be healthy and move on to some other real pitfalls and the realities of retirement.
In the last 20 or so years, tons have been written about retirement and the personal finance steps that get you there. Not just at 62, 65, or 70, but at 30, 40, or 50 years of age. Early retirement is spoken about the same way that we speak about doing other fun things in life, as if it’s going to happen and all you have to do is X, Y, and Z. For some, it does. For most of us it doesn’t and for an awful lot of us it never will! Why is that?
The Reasons Why You May Never Be Able to Retire
It may be time to face up to reality. If you are waiting to put together a great retirement plan and strategy and you are still trying to take the first baby step towards that goal, you may have already blown your “great life” plan!
Way too many people just don’t pay any attention to retirement planning until it is so close they can taste it. I’m not talking about the young people who plan financial independence and early retirement (FIRE) from cradle to age 30 or so and then actually get it; I’m talking about Mr. and Mrs. Average Citizen who fall in to one of three categories.
1. The Dreamers
Those who think that every year they will earn more, have more, and save more, but that is always next year. In then meantime, they omit, forget, leave out, skip, and avoid any kind of planning and execution. If it’s not totally ignored, then it is underplanned, underrated, and simply not a “real” attempt at it.
2. The Defeated Ones
These people can’t possibly see how they will ever get to retirement. They don’t have the job skills currently they think they need to earn enough, they don’t have good or any real benefits from their employers, and they haven’t ever considered alternate sources of income that will support their retirement. They see what happened during the recession of just a few years ago and even if they have survived it in one piece, they are still in the same financial place they were in 2008. And worse, they haven’t done very much to move forward, so they feel victimized. The first step is always to start now to recover. Now is always the best time and means you are moving forward. It’s ok to ask this question if you don’t know, “What do I have to do?”!
3. The Self Employed
If you own your own business, the thought of retirement might be just a fleeting one, and you may wonder if you will ever retire. You may be just financially unable or mentally unwilling. It is easy to be entrenched in the business and foresee yourself working well past the typical retirement age. Especially in family businesses which make up approximately 90% of all businesses in America. Yet, for those who own their own business, planning for succession and retirement is not a high priority.
According to a Transamerica Center for Retirement Research report, only about one in three of the self-employed save for retirement and 15% never save anything at all. The reasoning behind this ~45% of self-employed Americans not consistently saving for retirement is that two thirds of all self-employed workers expect to retire after 65 or don’t plan to retire at all. Additionally, self-employed workers prefer to not think about retirement until the time is much closer. The overarching logic behind all of this is that self-employed workers are generally confident that when it comes time to retire, they will be able to do so comfortably, they just believe that. Perhaps with fingers in ears singing “la la la la la”!
The reason for their belief is that they have far greater freedom to continue working or retire on their own terms. But, while you may love the flexibility as someone who is self-employed, thinking about retirement shouldn’t be a fleeting thought. Retirement can be a reality and customized to your own preferences if you plan well in advance.
What to Do
So if you want to be able to retire with some degree of comfort, what should you do, besides start right now? First, think about retirement and try to plan a bit better how much you will actually need. One guideline is to replace 70-85% of your pre-retirement income (which may include Social Security benefits, but be careful of counting on that). But depending on your plans, your percentage may differ. Think about where you’ll live, if you’ll downsize, etc.
Second, see where you’re at and how much you need to save monthly with a retirement calculator. This step can be scary, but don’t give up.
Third, take a look at your budget (you do have a budget, don’t you?) and see where you can cut back expenses, where you can earn more, and how much your can funnel into retirement savings each month.
Fourth, start investing those savings into low-fee retirement vehicles. If you have a 401(k) with a company match, make sure to get that match, because it’s like free money.
I wish I could give you the easy ticket to retirement, but there is no easy ticket. It’s part of work and to put it into reality, it’s the goal you want to reach before the clock runs out and the game is over. Unless you fall into a very small group of people who want to work until they are found slumped over their desks with a pen in their hand signing off on some important work file, then retirement is your ultimate goal.
Yes, health plays a big role, but planning for it along with taking care of yourself can and will get you there. So why not start planning and saving right now?
What does your plan for retirement look like? Are you on the right path now, or are you planning to do it sometime down the road? Or never? Will you ever be able to retire?