Retirement at 65 (or Earlier) Isn’t a Fairy Tale

A few weeks ago, a reader sent me a link to a rather… frustrating article at Huffington Post entitled Why Retirement at 65 Is a Fairy Tale. The article’s key argument is that for people today, retirement at age 65 – at least with the traditional idea of retirement which involves no longer working – is simply not realistic.

I found this article frustrating because it makes a ton of assumptions about lifestyle and personal choices and, based on those lifestyle and personal choices, the article assumes that everyone is consigned to working far past “normal” retirement age.

The article offers this as a big reason for that argument:

The reasons are simple: We don’t have enough money. We know we are likely to need more money because we are going to live a longer life than those previous generations did. (According to the National Center for Health Statistics, the life expectancy of a 65-year-old has grown by 37 percent since 1950.) And for many of us, we don’t really want it to be a life of just golf and Mah Jongg. We like the work we do, want to stay viable, and believe we still have contributions to make. Whether the jobs market sees us as valuable is another story for another day.

But the truth is, whenever middle-income boomers gather, the most popular topic of conversation is “How much do I need saved in order to retire?” It’s a number that bounces around a lot and at one point was around $1 million, but current wisdom puts it at $500,000 in investable assets.

And the bad news is that most middle-income boomers have not even come close to this level of asset attainment, found the study. Only one in 10 boomers surveyed had investable assets of $500,000 or more. Even more concerning, more than half (54 percent) have less than $100,000 and one-third (34 percent) reported investable assets of less than $25,000.

I absolutely agree that a lot of people are not adequately saving for retirement. After all, three quarters of Americans are living paycheck to paycheck. It’s pretty hard to accumulate retirement savings when you’re living paycheck to paycheck.

The catch is that anyone earning more than about $40,000 per year in total household income that is living paycheck to paycheck is doing it by choice. They’re choosing to have things now rather than save for later.

When you choose to have a smartphone, you’re choosing now over later. When you choose to have home internet access, you’re choosing now over later. When you choose to eat out, you’re choosing now over later. When you choose to have a cable or satellite service, you’re choosing now over later. When you choose expensive housing, you’re choosing now over later.

Obviously, there are people who are deeply struggling for whom this isn’t a choice, but I’m talking about the 50% of Americans in the middle, those that are above the bottom 25% in terms of salary but are also struggling paycheck to paycheck.

For them, it comes down to a choice. You can have those perks right now – eating out, hobby and entertainment spending, and so on – or you can save for retirement. When people choose to have the things in the present, they choose not to be able to retire in the future. It’s a choice.

It’s not even that stark of a choice.

It’s not too difficult to choose to start saving, say, 10 or 15% of your income in a Roth IRA or a 401(k) and then maximize your enjoyment of the rest of your income. You just have to be willing to cut out the non-essential spending that you’re doing with that money right now.

It’s not too difficult to find a more cost-effective place to live. It’s not too difficult to see if you can live with one fewer car. It’s not too difficult to eat more meals at home. It’s not too difficult to sell some of the junk in your closet to pay down your debts. It’s not too difficult to open your windows instead of using the heating or air. It’s not too difficult to find free things to entertain yourself.

You might think that you don’t want to live without those things, but the thing is, you can live without them. You’re just elevating your desire for those things to a higher level than your desire for retirement. In other words, you’re making a choice.

If you want retirement, you just have to choose to find ways to cut back today, and then choose to do smarter things with the money left behind by those better choices.

One reason is that most of our retirement money is tied up in our homes. While the median investable assets are $25,000 to $100,000, the median home equity value reported was $100,000 to $250,000. And we have to live somewhere, right? Some folks consider selling their homes and buying something with income potential like a duplex. Others consider renting out an unused bedroom to bring in some extra income each month. The bottom line is that if you need monthly income to live, it can’t be sitting untapped in your house.

I personally understand the allure of a large home, particularly when you have large children, but that allure only shrinks as you grow older, the children move away, and you’re left with a much larger house than you actually need. If your net worth is tied up in that house, sell it, move into a much smaller house that costs half as much, and then use the proceeds to launch yourself into retirement.

If most of your retirement money is tied up in your home and you’re actually looking at retirement, then it’s time to downsize. Having your net worth tied up in real estate that you can’t sell keeps the door closed to a lot of opportunities.

For that matter, renting is a much better option than buying for a lot of people. Many people assume that they need to buy because that’s the “American Dream,” but the truth is that renting actually offers a lot of financial benefit. You might argue that you’re “throwing money away” by doing it, but home ownership involves “throwing money away” on things like property taxes and maintenance and home repairs and homeowners association fees and homeowners insurance and mortgage interest and mortgage insurance.

A big house will really cost you, and that cost often shows up in the form of a delayed retirement.

The story concludes with this little nugget:

So what’s the happiest ending to the modern day retirement tale? That we all invest in our health and stay on the job as long as we can.

That’s not the only path. That’s far from the only path.

The only reason that most Americans can’t retire at 65 is because they made the choice not to retire at 65. Like it or not, you make that choice every single day when you spend excessively instead of saving adequately for retirement.

If you’re accepting the idea that you can’t retire at 65, it’s because you’ve chosen not to look at your current lifestyle choices with a critical eye. You’ve chosen not to cut back on the expensive extras in your life.

There’s nothing inherently wrong with making that choice, but that choice does come with a cost. You’re choosing to postpone retirement with each extra purchase you make. You’re choosing to make your retirement money thinner with each swipe of the credit card.

Spending more and more while consigning yourself to working until you’re literally unable to work any more is only one possible path among many. It can look like the only path if it’s the path you’re used to, but it’s not the only one.

You have to make the choice for yourself.

Don’t sell yourself short. Don’t buy into the idea that you have to work for the rest of your life. Don’t even buy into the idea that you have to work until age 65. You don’t.

You just have to decide whether it’s important enough to you to give up some of the excesses of your life right now.

If you decide that it is, then there are tons and tons of frugality tips on The Simple Dollar. You can get started here, and there are lots of articles constantly being added to the site. You can cancel your expensive subscriptions, data plans, and programming packages. You can look for a more cost-effective place to live.

On the other hand, you can choose to live life as you always have. That’s not a poor choice – it does offer you a lot of creature comforts right now. However, it does consign you to financial stress and it does ensure that you’re going to have to work past age 65.

Just never tell yourself that you don’t have a choice. You always have a choice. It’s just a matter of what you actually want.

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