Yesterday, I had a long conversation with a friend of mine, mostly about what we plan to do for the rest of our lives. I told him about my plans and dreams – writing, volunteer work, local politics, and so on – and I also mentioned how I was saving carefully for retirement.
Right then, he asked a key question, one that has left me thinking carefully and deeply over the last few days.
If you’re planning on working until you literally can’t work any more, why are you saving so much for retirement?
This is a question that a lot of self-motivated individuals should be asking themselves as they put together their retirement portfolios. I know I certainly don’t plan on sitting around all day twiddling my thumbs when I reach some mythical retirement age, and I don’t plan on spending all my time traveling around, either. I want to be out there, contributing what I can to society.
So what does that mean for retirement savings? Here are my thoughts regarding my own situation.
First, right now is the time to save for the future, no matter what the situation. At this point in my life, with two young children at home, I need to be at least somewhat careful with my work. That means I have to be very careful with my career choices, selecting paths that pay well and give me some degree of security. Also, my life naturally trends towards frugality – most evenings are spent at home with the family, making a homemade supper and enjoying simple fun together. Relatively low spending coupled with a focus on steady, strong wages equals a surplus (or at least it should), and that personal surplus should be invested.
Second, once the kids are old enough to no longer rely on us, I’ll be more willing to take risks and bold steps. When my children reach the point of independence and we have our home paid off, I’ll be far less worried about the day-to-day bills and will be much more willing to take risks. That includes taking on community jobs I’d never otherwise consider (like running for the county board of supervisors, etc.) or even looking at volunteer leadership positions within the community.
Third, by the time they move out, I’ll be reaching the eligibility age to start withdrawing some of the money in retirement accounts without penalty. Given our plan for having more children, I will be 57 by the time the last one likely moves out. I can begin withdrawing from my Roth IRA without any taxation or penalty at age 59 1/2. It’s pretty nice how those two ages line up, isn’t it?
Another factor to consider is that health care is steadily improving. I’m thirty. What medical advances will be made available by the time I’m sixty? A cure for cancer? Genetic revitalization? Nanobots to repair damaged tissues and clear arteries? Whatever it is, I plan to take full advantage of it and live as long and active of a life as I can. That may mean I’m productive into my nineties – or even older – and saving now gives me plenty of resources to do interesting things with that stage of my life.
In short, for me, Roth IRAs and 401(k)s are not retirement vehicles – they’re merely tax-advantaged investments to help pay for my activities in the second half of my life. Right now, when things are financially stable, I can save up for periods later on in my life where, by my own choice, things aren’t quite as stable.
What about financial security during the end of your days? Many people mistake retirement savings for a long-term care and long-term disability policies, ones that will pay for their health care costs when they reach those final years.
My approach to this is to get such policies early and lock them into low premiums. This way, whenever I reach a point where I’m unable to keep going, whether at age fifty or age ninety, my care is paid for. This is my end of life planning, and I’m currently shopping around for such policies.
This doesn’t really change the amount I’m putting away for retirement. The more I put away now – while I can – the more options I have further down the road. It’s also a big carrot for me to focus on my personal health so that I can enjoy those golden years when they come around.
I don’t want to spend my golden years on a golf course. I want to spend it doing something that matters.
If you’re an active and self-motivated person, don’t just think of a Roth IRA or a 401(k) as a retirement account. Think of it as a long-term investment that will pay off when you’re sixty, perfectly timed to help you do spectacular things with that period in your life.