Sunday, June 2, 2013

What, Me Worry About Retirement?

     I remember back in the late 1970s when I interviewed for a job at the company where I eventually went to work, everyone there bragged to me about the great benefits that were offered. The company had its issues -- the office was out in the middle of nowhere, and the company wasn't considered the leader in its industry -- but the pay was pretty good. And there were those benefits.

     Honestly, at the time, I didn't give a hoot about the benefits. I needed a job! So okay, it was nice to have good medical insurance. But what did I care? I was young and healthy. And when you're 30, who even thinks about retirement? The idea was laughable to me.

     Then the years went by. And boy oh boy, by the time I left, I sure was happy that I'd been included in their great retirement package. To be honest, it wasn't as great as it had been, back in the 1970s and '80s; and I didn't get the whole package because I got laid off before I qualified for retirement. But still, it was a lot better than what I would have done on my own.

     Most young workers probably never think about retirement. It's such a vague notion, and so far off. People are focused on starting their careers; then starting families, buying a house, and buying things for their kids, and maybe opening up a college fund.

     Even if retirement does somehow make it onto your radar screen in your 30s or 40s, it's hard to save money when you have so many pressing immediate needs -- especially if you're trying to raise a family on $40K or $50K a year, as a lot of people are.

     When I started working, there was no such thing as an IRA or a 401K plan. Those saving plans at least do help people face the reality that there is such a thing as retirement in their future. Would it help if high schools and colleges required courses on personal finance, so people learn the skills necessary to save and invest for their future? It might. But not everyone has a "head" for money ... just like not everyone can draw, or play music, or are good at math.

     I know some friends and relatives -- people in their 50s and 60s -- who have absolutely no concept of how they will support themselves in retirement. They readily admit they have little to no financial knowledge, and no ability to make investment decisions. Some of these people -- those who are smart and realistic about it -- have hired a financial adviser to help them negotiate through the thicket of financial options. But finding an honest and upfront financial adviser is about as easy as finding a good car mechanic. Yes, they're out there; but they're hard to find.

     So what can we make of all this?

     Saving money is hard. So is eating your vegetables and doing your exercise. But we should all do it, one way or another. And if we don't, we're going to pay the price.

     Let's face it, investing your savings is not all that difficult. (You've heard of the low-cost index mutual fund, haven't you?). All you need is the ability to do math at about the 10th-grade level; along with some healthy skepticism about the advertising, marketing and salesmanship that you see on the subject. And there is plenty of material out there to help you get educated, starting with John Bogle. Nevertheless, some people are just not interested; or they have a blind spot about money. And so these people really should find themselves a good finance mechanic. (If they're lucky, they have one at their place of work, in the form of a good retirement program.)

     Also, just maybe it makes sense for some lower income people not to try to save too much for retirement . . . and not feel bad if they can't. If you're scraping by, living hand-to-mouth, when you're in your 40s, you'll probably be scraping by, living hand-to-mouth, when you're in your 70s.

    According to Social Security statistics, "among elderly Social Security beneficiaries, 53% of married couples and 74% of unmarried persons receive 50% or more of their income from Social Security." And "23% of married couples and about 46% of unmarried persons rely on Social Security for 90% or more of their income." 

     Does it help to try to make people feel guilty about it? Nobody ever promised that Social Security was going to afford us a comfortable retirement, just that it would keep a roof over our head and a meal on the table. We always knew if we wanted to travel, that would be on our own dime.
    Finally, while a lot of people brag and boast about being able to retire in their 50s, there's no reason why anyone should feel bad, or feel like a "failure" if they can't afford to retire at age 55 or 60, or 62, or even 66. My own dad worked until he was 72. He didn't suffer for it. I have some friends today who find it rewarding -- and who also gain some self-respect and direction in their lives -- while still working into their late 60s and early 70s, even if it's not a high-paying career-type job.

     I guess what I'm saying is, there seems to be so much pressure on us these days about retirement. Maybe because Baby Boomers are starting to retire, it's become a bigger subject, because everything Baby Boomers do becomes a bigger subject. But let's not have a heart attack about it.


Anonymous said...

Excellent post. Bravo!
I have seen over the years, that those so-called 'early retirees' who bragged about retiring in their 50's slink back to find a job, any job, when they are in their late sixties (too late literally) and try and find a job because they ran out of money. It's just a matter of time.
I like to listen to Suze Orman every week and I have read most of her books. This past week she was begging Baby Boomers NOT to retire at 62, NOT to take Social Security till they were 70. You can watch Suze for free on iTunes and take her advice with a grain of salt.
Again, excellent post. Thank you. said...

I worked as long as I could saved as much as I could and have a decent retirement today. On the other hand, I would not have given it much thought had it not been for David. It pays to marry an older man who is thinking about retirement. Dianne

Lorna said...

I'm retired and ok but have no head for the math. I find your posts helpful.

Chris Grande said...

This is a great post - I like the honest conversational style of just laying out a major concern that people need to be thinking about.

Today the issue is more complex as fewer employers take on the responsibility of providing someone a check for life (who stays at a job that long anyway). So people need to think about saving but also ways to keep costs (especially inflation-prone costs) down!


Olga said...

My brother, like my dad before him, retired from IBM--but what a difference in the retirement plan by the time my brother was eligible. Fortunately for him, he has always been very careful and purposeful with his money.
When I first started my working life, we had to start paying into the pension fund after two years and I remember resenting the loss of that money, but there were older folks stressing the importance of a "three legged stool" for retirement--pension, Social Security, and personal savings. I may have been reluctant, but I paid attention and I am so glad that I did.

DJan said...

I worked for 30 years at a company that required me to put 5% of my salary into TIAA-CREF. They put in another 10%. When I became salaried in 1999, I started putting in another 5%, and by the time I retired at 65, I had quite a nest egg. I put the entire amount into annuities so I receive money every month for the rest of my life. That, along with Social Security, is enough for me to be comfortable, but not rich by any means. But without it, thinking about living on Social Security alone, I would be poor. Thanks for the great post, Tom!

Laura Lee Carter aka the Midlife Crisis Queen said...

In my early 20s, I called my retirement my "forced savings account" because I had no say in how much was taken out. Today that $5000 has grown to $85,000, and I'm so glad somebody was thinking about retirement when I was not!

Bob Lowry said...

An excellent point, Tom. Retirement used to be what everyone did, at a set age, in a similar fashion.

Luckily, today there is much more flexibility. If someone can afford to retire at 50 or 55 and wants to, he or she can. If someone is comfortable working until 75 and then wants to retire, great.

Whenever we read there is something we "should" do or "must do" in this regard, it is important to remind ourselves each retirement journey is unique. There are no real absolutes, except that it takes money to live!

Douglas said...

It would do no good to have a mandatory course in retirement planning in high school for the very same reason you weren't thinking about it when you were 30. It's odd, isn't it? When you are young, you think you will live forever but you also don't care to think about paying for that life. I am glad I put some money in a 401K, sorry I raided it during the first few years, and appreciate that it is still there. My company had a good pension (which I did not have to contribute to) but it also depended on supplementing it with Social Security... Not that it mattered when I retired at 58.

Dick Klade said...

Lots of good thinking in this post. I believe a high school course addressing both citizenship and personal finance would be a great benefit not only to those who take it, but to society generally. As another commentator said, however, I don't think talking to young folks specifically about retirement would do much good. When you're young and bullet-proof, you just don't want to consider such things.

Kathleen McCoy said...

Wonderful post! I think that a high school course stressing financial responsibility would be terrific. I think there are such Life 101 courses at some high schools, but the value of not getting overwhelmed with debt, especially credit card debt that is all too available to college students and other young adults these days, can't be emphasized too much. And the great value of compounded interest (even with interest rates so low these days) also needs to be emphasized.

I agree that the value of retirement planning, per se, is probably not something that young people can hear and take in. I remember being in my twenties and early thirties and thinking that I would never retire, that retirement was this awful period of just sitting around waiting to die.

However, after 42 years of hard work, long hours and juggling multiple jobs, it started sounding pretty good to me! My husband and I didn't start saving seriously until we were in our early forties. His boss at the time, who was visiting from the main office in Wisconsin, talked with us seriously over dinner about the importance of planning and building a future for ourselves. We started saving immediately and, with lots of hard work and despite the downturns in 1987 and 2008 and the housing bubble burst (a big setback for us), we managed to save enough to retire in our mid-sixties.

When we retired, it wasn't something thrust upon us. It just seemed like time. That said, we depend more on Social Security than we had planned and are trying to be careful to conserve our savings. The only thing that we would do differently, besides starting to save earlier than we did, would be to diversify the savings more -- with more money in non-401K, non-taxable, savings. We don't live lavishly. We travel a little, but mostly we have learned to love living simply -- enjoying reading, exercising and being together as well as with family and friends.

Anonymous said...

Thanks for the posting. Too old to be a Boomer, and because I did not spend the required 10-20 years (I've forgotten what the requirement was in those days, but it was at least 10 years) with my first employer, about 1/3 of my employed years do not figure into either of the two pensions that I receive after retiring at age 66. The laws are more favorable, now; but, now the employers are not apt to offer an acceptable retirement plan. Fortunately, I saved about 1/3 of my gross earnings over the years and am pretty sure that my money will last longer than will I.

Dick Clade - You wrote, "...high school course addressing both citizenship...." In 8th or 9th grade I was required to take a course called Civics. It did not address saving for retirement, but it did address how the various levels of government worked and our responsibilities to our fellow citizens.

Perhaps there should be a course that for at least one semester does nothing but pound into thick skulls that everyone will die - guarranteed.
Cop Car

Shelia Hogan @ said...

At first, we won't think about insurances and stuff since we're focusing on our need to get a job. However, we'll realize that we should start saving our money for our retirement. Saving is really hard, but when we know how to do it wisely, we'll always succeed. Thanks for this post! I hope you'll inspire others to think about their future. :)

Anonymous said...

I know this is an old discussion, but still so relevant...

>>"...Most young workers probably never think about retirement. It's such a vague notion, and so far off. ..."

Yes, exactly why I think talking to younger people about "retirement" and "retirement savings" is a royal waste of time. They can't even fathom what we are talking about...

So I believe when talking to younger people, the topic should be "building wealth." Of course, the actions will be almost the same: contributing to a 401k and/or IRA and/or pension and/or investing on one's own, etc. , or better yet all of these things as available.

I think "building wealth" is something that can be heard by people in their teens and twenties. "Saving for retirement" is not.


Patricia Briggs said...

That’s true. When we were young, retiring is usually not in our mind, because no one knows the importance of it compared to later on in life. Now, we aware on the possible things that could happen to us when we get older, health-wise. And having an insurance plan could give us the security we need.

Patricia Briggs @ Source Brokerage