Updated on 09.12.08

Rethinking Retirement

Trent Hamm

George's retirement final edit - 16 by welsh boy on Flickr!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.

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  1. Johanna says:

    My answer to that question is much simpler: Plans change. Ten years ago I thought I would be doing academic research in some form or other for the rest of my life. Seven or eight years later I was utterly sick of academic research. Fortunately, I was able to find something I liked doing much better, but who’s to say I’ll feel the same way in 20, 30, or 40 years?

  2. K says:

    Whether or not you plan to stop working, it makes sense to take advantage of the tax benefits of 401k’s and Roth IRA’s. You can even withdrawal your contributions to a Roth before age 59.5 with no penalty, so keep that in mind too. There is also a rule that allows you to withdrawal early from your 401k.

    One nitpicky detail: “Yesterday, I had a long conversation… has left me thinking carefully and deeply over the last few days.” Timing doesn’t quite seem to make sense…

  3. c says:

    When you’ve found your long-term care and long-term disability packages, please write a post about what you found in the process! I’ve done some looking but so far everything I’ve found is out of my budget.

  4. Rick says:

    My father just turned 57, and is starting a new business (which was his hobby – wine making). If he had fully funded retirement accounts like I could have, he wouldn’t have to worry about still doing his day job to come up with the money to fund his new business. This definitely puts retirement accounts in more perspective for me, since I know when I hit 60 I’ll have a totally different view on life than I do now. However, I’m 26 – how much should I be saving now for when I hit 60? I would like to buy a house someday. I think “Slow and Steady” is the best answer.

  5. Chris says:

    Retirement is just another word for freedom once you’ve earned it. It does not mean sitting on the couch and waiting to die.

    Every goal you have mentioned in the article is how you want to spend your free time once you have earned that luxury. You are really just squabbling over the word retirement.

  6. Your Friendly Neighborhood Computer Guy says:

    I think it is important for folks to know WHY they are saving for retirement and what their ultimate goals are. If they’re just putting money away for the sake of putting it away, they may find they’re not able to retire when they want.

  7. G Pendergast says:

    Savings are stored possibilites. A time may come when you do not want to work even if you can. Savings make thatpossible.

  8. "Mo" Money says:

    Instead of thinking about retirement, how about talking financial independance? When you are financially independant, you can do whatever, retire, continue working in a job that you want no matter what the pay, etc…!

  9. Jeremy says:

    Financial independence is where it’s at. I doubt I’ll ever quit work entirely, but I’d sure like to be able to have far more freedom in what I do with my life.

  10. I agree with Mo Money – my goal (and I am close) is financial freedom. I can work as little or as much as I want. As others have observed, when you are retired you get no days off so you better like what you are doing!

  11. Eden says:

    That’s a great perspective to have on retirement and it really got me thinking. I definitely don’t intend to sit around and do nothing. My master plan means I will be working, but it will be doing things I enjoy and things I can do out of the comfort of my home.

    Not that I will stop saving now, like you said, the tax advantage investing is something that can’t be passed up.

  12. Emily says:

    You didn’t bring up the fact that people may not be able to keep working. Many people find themselves retiring early because of health conditions and layoffs. You need to be prepared for anything life can throw at you. By not saving for retirement, one assumes that they will either die early or have amazing health and a desire to work for the rest of their lives.

  13. Curt says:

    Saving for retirement is a great idea, but most people should focus on living within their means and forget about retirement until they are out of debt.

  14. Great Article Trent! Of course we are all planning on working untill we fall.. But then life is full of unexpected surprises. Thus having a safety net in terms of a solid retirement portfolio will give you much more flexibility that having to work untill you are 85..

  15. I will agree with others that
    retirement = financial freedom

    Financial freedom offers many benefits both financially and emotionally. I beleive that financial freedom should try to be achieved as early in life as possible. Of course, this means a combination of continuous cash inflow and managing cash outflow.
    Obviously, the lower one’s expenses, the easier it is to achieve financial freedom. Of course, our consumerist society makes this part of the equation difficult.

  16. rstlne says:

    Retirement doesn’t mean being idle. They could do charity work, for example.

  17. Kevin says:

    I have a similar vision – to keep working past “traditional” retirement age, at least part-time. That being said, I could probably live off that income alone because by then my home will be paid off (well in advance of that hopefully). But we still contribute quite a bit to our retirement each month because like #4 said, savings are possibilities. I can plan all I want for my 40s, 50s and 60s and beyond, but only then will I know what I actually will want to do.

  18. Susy says:

    I agree with all the “financial freedom” commenters. We save for this reason, not for money in retirement. We plan on working till we die, but we save like crazy. We also save because it is a form of life insurance. By the time our term life insurance expires we wont need to renew because we’ll have enough put away.

    Great comments everyone!

  19. Jan says:

    > spending all my time traveling around

    Time traveling? Now there’s a concept that would combine nicely with compounding.

  20. RobinH says:

    Wanting to work as long as you can is great, but not everyone loves their jobs or can realistically plan to continue doing them into old age.

    Also, it’s nice to anticipate hypothetical medical advances, but the fact is, we’re not there yet, and there’s no guarantee we will be when you need it. I have a friend in her early sixties who just died of complications of Parkinson’s (if stem cell research had taken off ten years ago, we might have had a cure- but it didn’t and we don’t). Another friend had a stroke in her *thirties*- and was out of work for months- she’s a professional musician, fortunately she made a good recovery in the end.

    Saving, investing, and planning to ensure a financial surplus as we get older is a sensible way to hedge against the very significant risks of age (not to mention life!), as well as (as other commenters have pointed out) giving us the freedom to do as we choose and not make unpleasant choices due to financial hardship.

  21. Carmen says:

    Why on Earth do people want to continue working until they die? There are so many wonderful things to see and do that I am gobsmacked to have read this. Although I wonder if it’s because the reality is that most people already know that they won’t be able to afford a “retirement” as we currently know them?

    My husband and I are in our mid 30’s and would “retire” tomorrow given half the chance. As someone famous once said, apparently that shows we have imagination.

    I agree with Chris that retirement = freedom.

  22. Sandy says:

    I deliver lunches to the elderly still in their homes. Hopefully, all of us will be able (and want to) work til we die. However, I can’t imagine any of the wonderful (and once very productive) people I deliver to going to work every day. Several are just in their late 60’s and have serious medical problems. While you are young, it’s hard to imagine that you’ll ever get older, or sick…but as I see every day, people do. And illness does come to many. Saving as much as you can while young is the best (and pray that the stock market doesn’t crash just before you need the money!)

  23. Laura says:

    I know that whatever long-term care and disability insurance you choose will be well-thought out. I’d like to know what your criteria for evaluation is for these policies!

  24. Trent Hamm Trent says:

    “Why on Earth do people want to continue working until they die? There are so many wonderful things to see and do that I am gobsmacked to have read this.”

    I would far rather serve on a school board than visit a tourist trap. Public service makes me feel useful and feel good about myself and others. Traveling and spending money can be fun for me in short doses, but I don’t enjoy it for very long – I’m itching to create or produce or manage something. Different people are wired differently.

  25. Fern says:

    As is often the case, the readers share as much wisdom as the author. “Savings are stored possibilities.” I love it.

    it would seem a cruel irony that people bust their butts for much of their active, working lives to have the money to do whatever they want, except that by that time you’ll be much older and might not be able to accomplish it all. that’s why a slightly earlier retirement is the ticket for me. I want to ENJOY my golden years, not just survive them.

  26. trb says:

    The truth is that we are all just “temporarily abled”. Almost everyone will face a time where it will be very difficult for them to get paid to do a job. So retirement savings are a hedge against when that disability (or dis-inclination) strikes you. Even if you don’t plan to sit on your bum all day, you may not be able to get out of bed on your own. I like Trent’s analysis that ‘these are the days to be saving’. That’s probably true for many of us.

  27. Howard says:

    “Today we are wasting resources of incalculable value; the accumulated knowledge, the mature wisdom, the seasoned experience, the skilled capacities, the productivity of a great and growing number of our people – our senior citizens.”

    Senator John F. Kennedy, 1956

  28. Carmen says:

    Trent –

    Perhaps my comment was unclear or confusing, since I don’t classify serving on a school board as working. Or other voluntary not-for-pay ‘jobs’.

    In fact those are exactly the kind of “wonderful things to see and do” to which I was referring in my reply, instead of working until one dies. Of course this could include an occasional or frequent tourist trap if one was so inclined!

  29. Carmen says:

    Forgot to say that even though I wouldn’t personally classify something as working, does not mean that it isn’t hard work!

  30. Lou says:

    Personal anecdote: My professorial career abruptly ended 7 years short of 65 and 13 years before I planned to retire, when a slate blackboard came off the wall in my classroom and landed on my head The insurer denied my long-term disability benefits. And, confused by the head injury, I did not competently fight them. If I hadn’t been steadily saving for retirement, I’d have been living on the streets during the years of waiting for Social Security benefits and Medicare to kick in.

  31. KCDesi says:

    Wow Trent. You are just 30 !

    Your writings are way mature than your actual age.

    Keep up the good blog work. I really enjoy them.


  32. My goal is to “Retire Early” and enjoy my life, just as my father had done. And, I’m saving and planning to do exactly that.

    But, I have to agree with Lou here. It’s way better to have the money and never need it, then to need the money and not have it.

    No matter what you choose for your life and your retirement, saving money always gives you options and provides benefits.

  33. bc says:

    My answer to your friend’s question: So I can continue to work because I want to, not because I need to.

  34. Steven says:

    “We don’t retire, we inspire.”
    – Beverly Sills

  35. Catherine says:

    I’ve had this conversation with quite a few of my friends recently (we are in our mid-twenties). My biggest argument for saving for retirement when they say they are going to work forever is: What if you change your mind? What if you’re burnt out at 65? What if you want to travel? What if you become disabled? What if….? You can’t predict for what will happen in the future, but you can save for it to give yourself options!

  36. clint says:

    I’m 59/read you everyday/enjoy your perspective/Money or Your Life resonates with me too…I, too, keep shopping for long term and disability policies…can you share any successes you are having with that project? thanks…keep up the good work!!

  37. M E @ says:

    No way should anyone every sacrifice their retirement savings for education expenses.

    You CAN finance an education, you CANNOT finance your retirement!

    Common sense people, please!!

  38. almost there says:

    I am burned out and only 49, retire at 50 on Halloween. My father is dying and no pension (stops at death) or SS for my mom after he passes as he is a retired teacher that does not have enough earned under SS. Looks like my retirement may be short lived as I did not plan on supporting anyone else ‘cept my own family. Of course I will take care of my mom. I just hate it that years of planning and sacrifice go down the tubes by events other than one’s making. Lesson learned: Put money in a roth ira for your children so that they will be set when they retire and not be a burden on their children.

  39. Bill says:

    I “retired” at Trent’s age to take care of a terminally ill parent for the next several years – they barely made it out of their 50s before the disease claimed them.

    And as other posters noted, you will absolutely have a battle to get disability or long-term care claims paid by any insurance company (you usually have to hire an attorney to get even SS disability!)

    So, you will want to have a pool of funds to pay for that not covered by insurance and to pay while you’re battling to get your claims paid.

  40. RetiredAt47 says:

    A very wise post. In particular, I think these words are key: “The more I put away now – while I can – the more options I have further down the road.”

    When I retired last year, it was not with the thought that I’d never do anything productive again. I simply wanted choices, the ability to try something new without the requirement of a big paycheck. After 25 years in a full-time career, it is immensely liberating to step away from the 9 to 5 grind and now pursue other options.

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