It is not too early to begin planning for your retirement as soon as you start your first job, and begin putting money away for that time in your life that is probably 30 to 40 years in the future. In order to retire successfully, you must of course have adequate savings to support you, because trying to live on Social Security alone is not going to leave you with a very pleasant retirement period.
When vs. How
But we think perhaps a better question than “When” is “How Should I Think About Retirement?”. Historically, the concept of Retirement arose when individuals were engaged in work that was typically more physically demanding than what most experience today, and when they reached the point that they were no longer able to function in that role, they entered retirement. It also typically involved working at one job for 40+ years and may have included a pension of some sort. This retirement phase was generally a relatively short period of time in “old age” where people primarily rested from their years of labor, and didn’t do a whole lot, for perhaps a few years. In fact, in 1935 when the New Deal set the retirement age at 65, the average life expectancy in America was only 63!
Our more recent history has evolved to include the “Retirement Dream” where an individual works hard for 30 years or so, though work that is typically less physically demanding than previous generations, until they can retire at age 65. They probably contributed to a retirement account such as a 401(k), and can look forward to a life of leisure, often involving travel and other hobbies for another 25 to 30 years. This idea is often what prompts the first question noted in the heading “When Should I Start Thinking About Retirement?”.
So, what do we mean, when we say the better question is How Should I Think About Retirement? By focusing on the how vs. the when, we believe that you begin laying the groundwork for a period in your life that has the potential to be one of your most fulfilling. It is an attempt to change the conversations from Retiring FROM to Retiring TO. Yes, you may very well be retiring from your regular employment. But what do you want the next 30 years or so to look like? Is it going to be fulfilling enough for you to plan some trips with your loved ones, maybe play a little golf, spend extra time with grandchildren, etc.? What do you want to Do or Accomplish during your retirement years?
Breaking Down the Retirement Years
If you think about 30 Years in Retirement, we often break it down for our clients like this:
- The first 10 years are your “Go-Go” Years- the years that you will be the most active.
- The next 10 years are your “Slow-Go” Years- you will typically be less interested in exerting the energy, or even having the energy to “Go and Do”.
- The last 10 years are your “No Go” Years, often due to medical issues of one sort or another.
Freedom to Choose
Because we are looking at the possibility of between 10 and 20 active years where we are not bound by the restrictions of regular employment, we ask “What do you want to do with the luxury of time that you will have at your disposal?”. Here are some ideas that have arisen from conversations with our clients:
- I want to work as a consultant in my previous field, so that I can work when I want to, but still be able to do what I enjoy and find stimulating.
- I want to continue to work in my current job or business, but work fewer hours and take more time off for vacations, etc., or possibly just work part-time.
- I want to start my own business doing ___________.
- I want to start volunteering with ____________ organization and use my skills to have a positive impact. Or, in some cases, I want to start an organization or outreach to do ____________.
- I want to spend my time travelling to see _____________.
- I want to help take care of my grandchildren…well, we actually don’t hear that particular goal all that often!
The point that we are attempting to make is that all of these responses and more are indicative of an expressed goal or wish to Do Something in Retirement. It is not just about sitting around, doing nothing all day, every day. Most people would find that particular type of leisure very empty and unfulfilling, especially those who have worked hard all their lives. We all love vacations because they are a break from our routines, but if leisure time becomes routine, then it loses some of its inherent joy.
Additionally, based on our experience, those individuals that we have known who did not retire with a plan to pursue some particular goal, dream, etc., have tended to deteriorate either mentally or physically pretty quickly. Most individuals want to feel as though they have a purpose of some sort, and are making a contribution, so these are the types of questions that we encourage to help think through that How question, before they ever officially retire.
If you would like to read further about how to look at retirement, there is a book that we often recommend and/or give to our clients entitled, The New Retirementality, by Mitch Anthony, and it can be purchased on Amazon.