Retirement Seems Like An Impossible Dream? Try This Strategy

necessity of retirementThe markets have been rallying since October. That sounds like good news for baby boomers approaching retirement age.

But here's a different question: why are we so into the idea of retirement in the first place? The answer seems obvious. Who wouldn't prefer leisure to labor? Almost everyone talks of wanting to retire someday, and pretty much every major financial decision the experts tell us to make is designed with this goal in mind. We talk of building up wealth so that at some point we can live off the interest or perhaps 4 percent per year, preferably when we're young enough to enjoy ourselves. Ads for financial planning firms feature mature but definitely not decrepit couples, purposefully staring at whatever ocean vista their wealth has afforded them.

Here, however, is the reason to reconsider retirement.

1. The math is fuzzy.

2. And, it's unclear that a life of leisure is desirable as it sounds.

The Math
It's a staple of personal finance literature to show how saving small amounts over 40 years produces mind-boggling returns. Invest $3000 a year at 8 percent a year, and you get get roughly $900,000. Fair enough - though $3000 was a third of the average family's income 40 years ago, in 1972.

Not exactly the kind of cash even a diligent young person could put away by cutting out a few lattes.

And, of course, many people haven't managed to save even latte money. The Employee Benefit Research Institute's annual Retirement Confidence Survey says only 19 percent of workers aged 55-plus have over $250,000 in assets. Living off 4% of $250,000, plus Social Security, is possible, but not exactly ocean vista style. Even living off 4% of $1,000,000 doesn't make for a terribly rich life. In an era of longer lives, it's quite difficult to build up enough assets in 30-40 years of working to support 30 (and potentially 40) years of not working in particular comfort.

But even if the math comes out right for you, here's another thought. Surveys of Americans find that two thirds of adults say they would continue to work even if they won the lottery. This question has been asked in many surveys over the years, and stubborn majorities of us continue to proclaim we would not want to be idly rich.

I've been scratching my head trying to figure out how this fact fits in with our retirement fixation. Building up $5 million in retirement savings and winning $5 million in the lottery would enable the exact same life.

The Lure Of Retirement
So why do we dream of a leisurely retirement when we wouldn't use a windfall to live a life of leisure now? The best explanation I can see is that people believe if they won the lottery and became financially secure they'd be able to do work they loved in a flexible way. They wouldn't have to think about money first. They could seek out work that offered meaning and pleasure.

If that is the case, though, then the lure of retirement is not a statement on work in general. It is about quitting the work one is currently doing. So perhaps we are asking the wrong question. Rather than calculating how many lattes we must forgo to live off interest at age 65, why not put that same mental energy into figuring out what kind of work we wouldn't want to retire from?

This is a far more productive line of thought. The economy has changed to offer many ways of working that don't involve reporting to an office, factory or store from 9 to 5.

The website builder Weebly reports that a surprisingly high proportion of its customers are seniors starting online businesses. Work can be creative (witness the sellers on Etsy or Zazzle), and can be fulfilling - a part-time job at a non-profit comes to mind.

The good thing about having some savings and Social Security is that generating even a small income as a senior goes a long way. Earning $10,000 a year is $250,000 you don't need to have in savings.

There's also some evidence that the mental stimulation of a job can keep seniors in better health. While we think of retirement as a time to travel the world and golf, those activities take money. Living off a dwindling nest egg takes the fun out of them. Freelance 20 hours a week, though, and you can golf and pay your bills.

To be sure, there comes a point when none of us will be physically able to work in any fashion. But in an era when healthy people can live to age 90 or more, that's a lot fewer years than we think about under the rubric of retirement. Happy people know that "work" need not be something we dread or merely deign to do. Indeed, if you choose the right work now, retirement itself won't seem nearly so alluring. After all, you can run that online business while staring at that ocean vista - and have a much easier time affording it.

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Most will be forced to work till they die because those in government who had a fiducary duty to protect their retirement money, have chosen to squander it however they have known enough to protect their own retirement money! They also made it Legal for themselves to engage in insider trading while making it Illegal for their fellow countrymen and women to do the same! Does that sould anything like shared sacrifice, Mr Alan Simpson. He has had the nerve to call American Senior Citizens Greedy; when what he should be doing is looking into a mirror, to see one who is Greedy !!

May 09 2012 at 8:55 PM Report abuse +1 rate up rate down Reply
1 reply to gmydogbud's comment

True enough and sad for our elderly. Our Presidents Johnson, Clinton, Bush Sr. and Bush Jr. took "surplus" money form Social Security to balance the budget or sent the cash to special interests. When will our Government actually protect it's people and get their hands out of our savings?

September 12 2012 at 11:06 AM Report abuse rate up rate down Reply

Who is paying four percent interest? The market is down, down and downer and banks and credit unions aren't even paying one percent. After they stole from us in one hand ( the banks) they are stealing from us in the other. Retirement is Plan A. Elected suicide has become the new Plan B and unfortunately I am not making that up. It has become a frequent occurance w/ the elderly. A lot of people also do not elect to retire, but are forceably retired via layoff. I hate the banksters and the wallstreeters. All of them.

May 09 2012 at 7:03 PM Report abuse +2 rate up rate down Reply

I "retired" 4 years ago. I have not sat down since. I stayed with my career so I would get the pension. Survival level, not more than basic bills. My wife then went to work. She was a stay at home mom and an itinerant artist while our kids were growing up. I could not be happier about it. I have been able to drop everything and help my father, who has since passed, and help friends in need. What a joy. I don't know where I found time to work full-time.
"Comfortable retirement" depends on your frame of reference and expectations. I only made slightly over median income so my expectations were not high. I survive just fine and I do not get SS. My pension is about median income so my wife's income is all gravy.
Plan ahead and put up with BS and you will be OK.

May 09 2012 at 6:05 PM Report abuse rate up rate down Reply

Not if you are a Politician or a over paid CEO.Other wise forget about it!

May 09 2012 at 5:09 PM Report abuse +2 rate up rate down Reply

Another complicated, confusing retirement strategy. Here's the deal: if ya wanna retire, pick an age. Next, assume you will need $800K... figure how much average per month ya gotta save... THEN DO IT!!!

May 09 2012 at 5:08 PM Report abuse rate up rate down Reply

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