OK. that’s a horrible title, but I felt horrible after reading this article today on CNBC. Here’s a snippet:
Just 4% of today’s retirees said they are “living the dream,” according to a new survey from asset management company Schroders.
And just as many — 4% — said they are “living the nightmare.”
Most of the respondents fall somewhere in between — 44% said they are comfortable; 34% said they are not great, but not bad; and 15% said they are struggling, according to the rounded results.
Seismic shift
I’ve talked about this in a few posts. See Retirement plans for a deep dive. Or please save for your retirement. The problem that we face is that retirement has made a seismic change in our lifetimes and many did not see it coming. We’ve gone from generations where retirement was a brief period that arrived in our mid-60’s and was largely funded via a pension from our employer, to a new model where each and every one of us is responsible to save enough money to fund 20 or 30 years with no salary.
Think about that: When lifespans were short and it was relatively easy to put a small amount of money away per employee, grow the balance through compounding, and payout a reduced salary through retirement, large companies with actuaries, investment teams and lawyers handled this. Now, when we are living much longer and there are more unknowns, jamokes like us are responsible.
That’s not fair
Doesn’t seem fair, right? Fair or not, it is the reality. Dealing with our increased lifespan and the rising cost of everything, especially healthcare, it is nearly impossible for companies to offer a pension. Our government can’t seem to manage it either. Regardless of what side of the aisle you are on, it’s hard not to see that the social security system is in trouble. Companies and our government can’t figure out how to make it work, so the responsibility falls to us. This may not be fair, but let’s take responsibility. There is no alternative.
I’ll work forever
I’ve said this myself. I didn’t. There comes a point in time where we get tired. Where we get more easily frustrated. For me that came about after about 37 years on the job. Most of us will want some form of retirement. This could involve a part-time job. Maybe something in a new field.
Prepare now
Let’s start with an example of someone younger and fairly new to the workplace. This person has time on their side and a lot more options. Later we’ll talk about those nearing, or in retirement (like me). Though much of what we’ll talk about will apply to all. Regardless of where we are in the spectrum, we need to prepare now.
Save
Saving money is mandatory.
Retirement has made a seismic change. My parents generation could have lived paycheck to paycheck and not saved a dime, but then lived off of their pension in retirement. Maybe they wouldn’t have a boat or a lake house, but a pension that paid 75% of their salary, along with the possible addition of social security would likely have made them comfortable.
Today, we cannot afford this. This is the seismic shift. We need to plan as if we are fully funding our retirement lifestyle for 20 years or more. Step 1 is saving. I’ve got lots of posts on this. Here and here to start.
Allocate savings
In our budget, the first line item is savings. We pay ourselves first. Savings need to go to our emergency fund so that we don’t need to raid our investments or go into debt when crisis happens. The remainder needs to be invested. Read more on compounding, asset allocation, and other posts. It’s really not that hard to do this yourself. A low-cost S&P 500 fund is a good start.
Time
Here’s the big variable. I love the Sylvia story in the secret to building wealth. Sylvia was a secretary who invested regularly over a long career and accumulated a fortune. Look at the Al & Peg story in compounding. It is astounding how much wealth one can accumulate over long periods of time.
Those who have 20, 30, or 40 years until retirement have a huge advantage over those close to, or in, retirement. But here’s a secret. I’m in retirement now. I invest pretty aggressively because I expect to live another 30 years or so. That means for some of my money, it will have a chance to grow for another 30 years.
Don’t pass up free money
Many companies offer a defined contribution plan instead of the old defined benefit pension plan. Many defined contribution plans offer a match. There are many variations, but essentially, the company matches some percentage of each employee’s contributions. There are a huge number of people who are not contributing at all, or not contributing enough to take full advantage of the company match. If you have a plan at work, find out how the match works and be sure to get all the free money they offer.
No time
We talked about what we can do if we have time, let’s talk about what we do if retirement is here or close.
As I mentioned, even if you’re in retirement, you’ve likely got many years ahead. Some portion, albeit a smaller portion, of your money needs to be in equities to continue to grow.
Working
When I retired in 2019, I felt I needed something to fill my days, so I took a part-time job selling cars. I’ve always been a car-nut and thought it would be cool. It was. It was completely different than what I’d done for 37 years of my career so it didn’t feel like work. I worked with a really nice group of people. I enjoyed it, but at some point, working every weekend got old. This wasn’t the perfect retirement job for me, but it was fun for a while.
I have a friend who recently retired who drives for Amazon delivering packages. I have another friend who drives for Uber and Lyft. These days there are lots of options for part-time work with flexible schedules.
I was doing some research on Starbucks for an investment article here. Starbucks offers health insurance for part-time employees. This is important to many retirees. That may be another option.
Wrap-up
The CNBC article is a bummer. 53% of people surveyed were at some level of being uncomfortable about retirement. That’s huge. Retirement is coming. At some point we are just too old. Maybe we do something less stressful or less physical, but we’ll need to scale back. And it is up to us, and us alone to be ready.
I have lot’s of posts on saving, investing, budgets, emergency funds, loans, credit cards…all of them have tips for how to save money, and make these products work to your advantage.
Saving for our own retirement isn’t easy and it is certainly not something any of us were trained to do. I was very fortunate to work in the financial industry where I had the good fortune to work with experts in many of the fields we talk about here on the blog. My goal is to share what I’ve learned to help those readers who don’t want to be part of the 53%.
It’s not always easy, but with some effort, it can be done.
Let me know questions, thoughts, or how I can help.