The Need to Rethink Retirement

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This is a guest article by Flexo from Consumerism Commentary. Flexo has embarked on a ten-day, ten-venue tour.

Recently, our fearless host of Debt Free Adventure began investing for retirement. Even while still on the path of paying off debt, I think it’s a great idea to start planning for a time when he will be living without the income received as a reward for the time and effort spent working.

Here is one reason not to delay investing for retirement: the government, at least here in The United States, will most likely not be able to take care of you. To prove this, I opened my latest Social Security statement. According to the Social Security Administration’s tables, at the full retirement age of 67, I would qualify for payments of about $2,500 per month.

This is based on the assumption I would be earning the same salary I earned in 2009 each year until I reached full retirement age, and paying into Social Security on the taxable portion of that income each year. Today, a monthly income of $2,500 sounds like an excellent benefit, but retirement is 33 years from now. Even assuming a conservative 3% rate of inflation, that $2,500 looks more like $915 does today. That’s not going to go far and with reduced benefits likely, I may not even see half of that.

Besides taking responsibility for our financial future by investing in 401(k)s, Roth IRAs, and all the other choices available, it’s time to rethink what retirement is. The generation of workers following those in retirement now or retiring soon will be the first who needs to significantly adjust its expectations and challenge its assumptions.

Why retire at all?

The main reason to stop earning money in exchange for time and effort is because increasing age makes it difficult. Yes, spending more time with family and checking off “bucket list” items are good reasons too, but in general, we tire of work. Some of us might be lucky to earn our money doing something we are truly passionate about but most simply want to stop working because it’s difficult keeping it up while maintaining a healthy lifestyle.

Consider “semi-retirement.” Leave your job with appropriate fanfare but find a way to continue earning income doing something you are passionate about.

If you do retire, reduce expenses

Without making any changes, life in all aspects gets more expensive every year. Even if you assume you moderately increase your income every year for the next several decades and maximize your savings and investing, there is a chance that comfortable living will always be out of reach. Financial advisers promise returns of 8-12% in the stock market but aggressive predictions, inflation, and taxes make a real return of 4% seem more realistic.

I’m a strong believer of finding ways to increase income significantly rather than incrementally, but when this can’t be done the choice is to reduce the other side of the equation: expenses. No one likes to hear it, but the image of retirement pushed by the media, including 24 hours of free time, living in an expensive location, and enjoying a stress-free existence is just not likely. Most people will need to consider making a number of sacrifices.

Downsize your living arrangement. Not every family is exactly the same, but it is safe to generalize that needs change over time. By the time you retire, you may have paid off your house. Your kids may be adults no longer in need of your financial support. You may be able to use proceeds from selling one house to buy a smaller house, perhaps in full without a mortgage, and have a sizable portion of cash remaining. Downsizing is one way to take advantage of an increase in real estate prices. If you don’t downsize, buying and selling at roughly the same time — being on both sides of the transaction — results in canceling your advantage.

Relocate to somewhere extreme. The dollars you’ve earned, saved, and invested will go farther when you move somewhere where the cost of living is low. I’m not suggesting retiring to Kansas or Oklahoma, though I am sure those are fine states full of beauty and enjoyment. I am suggesting looking into options outside of the United States.

Central and South America are the most obvious choices because they are still relatively close to the United States but, for now, often benefit from a significantly lower cost of living. There are places you can buy land and a large house for the equivalent of $150,000, and be within the culture of a city or an ocean.

This relocation comes with risks. You should do as much research as possible, including visiting the location ahead of time, understanding the local bureaucracy, and investing in the local currency. Liz Pulliam Weston explains how relocating outside the United States could allow you to retire like royalty while describing more of the risks.

Stay active and healthy. Aging is not always a friendly process, and health care costs can increase significantly due to increased needs and higher prices. While there are many unpreventable medical conditions that present themselves with age, some costs can be controlled by living a healthy lifestyle.

Other than the above, saving money in retirement is much like saving money at any other time in your life. Prioritize your expenses, move a few steps towards a frugal approach to life, and make the most of what you have. The retirement of the future would be unrecognizable to those in retirement today. It would be impossible to guarantee a stress-free multi-decade vacation, so the best approach is to start considering your options and your needs as soon as possible.

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1 Writers Coin

I’m always in awe of people that retire to another country and live by the beach. What a drastic, shocking change. Granted it seems nice, but I don’t know if I could do it. Visiting people back home, going back and forth—it seems like a lot of hassle.
But those people sure do seem happy…

2 Evolution Of Wealth

I have to agree with Writers Coin on this one. Should the advice we give people be to change? What if they like what they are doing and where they live? I think you said it best when you mentioned “adjusting expectations and challenging assumptions”. This needs to be done asap. Maybe I’m an optimist but I believe that people can do what they want to in retirement. I believe that they can have the choices and flexibility financially to figure out and enjoy what they want to do. This won’t just happen. What people need to realize is that they have to work for it and that work starts today.

3 Flexo

I’d like to be an optimist, too. I’d like to think that if I work hard, save, and invest, I’ll be set to do whatever I want however I want when I feel it’s time to leave work behind.

4 Aaron @ Clarifinancial

I love the idea of rethinking retirement. I know some couples (ahem, Mom and Dad) who still haven’t settled into their new life. I think it’s because life expectations don’t quite meet with reality. You touch on the idea of leveling your income, passion, and involvement throughout your entire life, and that makes total sense to me.

Retiring somewhere less expensive sounds great. My wife and I already discuss things like this, and for us, access to a high quality of health care is really important. So much so that not even some parts of the US would really work because they are too far (ex. Moab would mean going to Salt Lake or Denver). We might be unique in that concern, but it’s something worth thinking about.

5 Peter

I agree that we all need to start adjusting our living expenses and expectations for retirement early. Why not start living more frugally now, you’ll probably end up happier and have more left over later on! Get working on those retirement accounts!

I’ve thought about retirement, and I don’t think I’ll ever stop working, even in my old age. I’d like to be able to take it a bit slower in my old age, but at the same time there is something to be said for working – even if it’s volunteer work or something similar. I think work gives a sense of fulfillment and happiness that can’t be found by just “doing what you want”.

I have a family friend how is turning 100 this year, and he is still working. Not because he has to, but because he wants to. He just released his 8th or 9th book (at 100!) and is still giving encouragement to others, and visiting other elderly at nursing homes, and giving them encouragement. I hope to be doing the same!

6 Kevin@OutOfYourRut

This is a nice dose of cold reality! I think people are buying into the TV version of retirement–a magical time when money will be plentiful and stresses and financial concerns will disappear into the past. If only that were true!

When Social Security was implemented it was designed to be a “supplement for lost wages due to old age”–how full scale retirement for the middle class came into the picture from that is a mystery. TV retirement is for the rich, for most of us it will be a series of compromises, just like the rest of our lives are. Its better to be aware of this and prepare for it accordingly than to pretend it’ll be something else.

I do think that we do reach an age where working becomes physically impossible, but from what I’ve seen that tends to be at the very end of life. Usually if you don’t have enough energy to work at something, you have limitations that are making life difficult accross the board. To map out a full retirement spanning 20-30 years without working is going to be tough for most people.

Outstanding post Flexo!

7 Craig

It seems natural that your expenses would be lower in retirement, and in todays world people will probably wait longer to retire. Other than hobbies, I have no idea what I would do.

8 Paul @ FiscalGeek

Honestly I don’t want to think about retirement in this fashion. I guess I’ve bought into Dave Ramsey’s tagline, Live like no one else, so later you can live like no one else. I’ve lived a good portion of my adult life thinking I should be able to have whatever I want when I want it, and over the course of the last couple of years have come around to the idea that I need to plan for the future, and sacrifice a bit now so that I don’t have to consider some of these adjustments. Yes I totally see my self in some form of vocation, but I’m certainly not going to be trapped in it to make ends meet. With the distance between now and a retirement future there’s a lot that can happen and I’m choosing the positive. Sure if I hit that time and I’m not where I wanted to be, then I can adjust, but thinking about it now seems counterproductive and defeatist.


Awesome suggestions! Retirement doesn’t always mean sitting in a lounge chair on a beach. Many retirees find it hard being without a job. I don’t think I ever want to be without any “work” at all. I think I’d love to be able to retire from a 9-5 and use the extra to pursue other ventures.

10 ChristopherFM

Speaking as one who has both his maternal and paternal grandparents still living, I’ve seen first-hand how retirement has shaken out for them. Both of my grandfathers still work as much as able (one is a retired plumber, the other retired from practicing law and is a now an active reverend).

I don’t know how well either one managed their finances in their working days, but both were able to help all of their children (4 and 5 respectively) get through college. In retirement, I think it’s been a struggle for both. I’ve heard through family members that both grandfathers, in some way or another, sometimes lament over not being able to bring in more money.

It makes me think, that in my late 20’s, I have to find something that I love working on that sustains me financially for 40-50 years; so that when I do choose to “slow down”, there won’t be any worries about money. Better to have health and family, if you ask me. I love Peter’s story about the centenarian who visits the elderly. Now that’s what I’m talking about!

11 RetirementInvestingToday

Personally, when I set out my Retirement Investing strategy I assumed that I would receive nothing from the government. At least that way full control is transferred to me and I am not exposed to the whims of government policy.

That strategy though means some pain during my work career as I am now forced to plan for retirement rather than expecting somebody else to take care of me.

12 Jeff

My SS statements show an amount that I sure don’t want to live off of. Having at least 30 more years to work I just don’t see the governement having any money left after the Boomers spend it all. I’m in the same boat as Matt right now. I’m still paying down debt, but I’m aware that I need to invest as well, which I’m doing on a small scale. Being able to control expenses now, and making the change to live a more frugal life while young will carry into our retirement ages. I’m not sure I will ever completely retire. Who knows, but I’m sure not going to put all my eggs in Uncle Sam’s Basket.

13 Holly

My father is retired, but his wife still works part-time for a little extra spending money. He and she both have a SS benefit, as well as healthcare and pension for life from his employer…they take care of their health and travel a lot…so they should be okay.

My father-in-law is in debt up to his @$$ due to poor planning and a self-employment rut. He has the IRS after him (has for years). He is 74 and still works full-time; he also wishes he could bring in more money. He and his wife argue about $ all of the time.

My mother is retired and so is her significant other. They are not married and he has refused to put any of his assets in her name. If he were to pass (he is 73), she would be left nothing except for a very small retirement benefit and a small SS benefit. As it stands now, she doesn’t even bring in enough income to file taxes.

My point is, we can learn from their ‘missteps’. It’s great that you can help your grown children, but be sure to worry about your own well-being first and foremost; I feel it is very hard to know where my husband and I will stand at retirement because it’s very likely we’ll be having to take care of our parents due to financial hardships.

14 Early Retirement Extreme

I must empathetically state, being financially independent (approaching a 2% withdrawal rate), that I am extremely pleased NOT to have to work nor having to go back to work after a mini-retirement after running out of money. In particular though I am glad that I do not have to associate my passions with the less pleasant activities that always seem to creep in once an activity is turned into a moneymaking endeavor. If I make any money on my passions it is purely incidental. I will never depend on it!
With investments, the money just trickles in—like getting 100 or so paychecks a year. While I, in a technical sense, did retire to another country (I was not born in the US), my pursuit of reducing expenses was more internal than external, that is, I realized that more stuff or what people tend to define as more comfort did in fact not make me more comfortable beyond a certain point. Discovering that it has become a journey exactly where the point of maximum comfort lies — it is frequently obtained not by buying stuff but by increasing one’s personal limits, skills, or perspective.

15 Matt Jabs

“it is frequently obtained not by buying stuff but by increasing one’s personal limits, skills, or perspective.”

Very well put Jacob. I love the example you set for each of us.

16 Matt Jabs

I think Flexo nailed this. And even if he turns out to be wrong… it’s better to be prepared than unprepared – regardless of whether or not it comes across as defeatist.

Work hard, save hard, smash debt, and smile along the way. 😀

17 Personal Finance Student

This is some good advice but it certainly cannot apply to everyone. I don’t think most people want to travel far away and many don’t want to work after retirement.

18 Flexo

I don’t think any piece of advice ever applies to “everyone.” I completely agree with you — I am absolutely positive most people don’t want to travel far away or work after retirement. My concern is with people *have* to (not *want* to) consider these options. There’s no guarantee that all we’re doing now — saving, investing, cutting expenses, etc. — will be enough to give us what we want.

19 FinanciallySmart

It is amazing how growing we hear that retirement is the best time of one life. But now looking back we realize that we cannot never retired in the style we have envisioned and so it is best we still think about having something to earn from. This article is another eye opener in which one should carefully plan for his/her life with a good entrepreneur spirit.

20 Unwashed Mass

One topic that seems taboo on all financial sites is any mention of the huge numbers of people who will never be able to retire. I’m not speaking of the lowly, uneducated, unwashed unfortunates, either.

Working paycheck to paycheck will be the reality for a major segment of society for many reasons: they work in a low-paying profession they love;they work for the increasing number of corporations with no real retirement savings program; they are workers displaced from higher paying jobs or industries; they were significantly financially affected by the recession; they didn’t inherit a starter “nest egg” of money, investments, or property.

I’d love to see some articles for this huge segment of society. Given enough money they don’t all need your brilliant savings and investment advice. The concept of budgeting, saving, and investing is not a complete mystery to all.

21 Matt Jabs

Since you feel so strongly about this why don’t you submit a guest article to me on the subject… I promise to publish it (w/editing) if you do.

22 myfinancialobjectives

There is also a funding debate surrounding the Social Security Administration. I have been hearing about this for a few months now. I just finished reading “Get a Financial Life” by Beth Kobliner. I actually just read this part a few hours ago.
She writes:

“Social Security was built on the idea that there would be always more workers paying into the system that older people taking money out. Enter the Baby Boom, a group that is now beginning to retire, and suddenly it’s clear that there’s just not enough cash being paid into the Social Security pot anymore.
That said, there’s a lot that can be done, such as raising the retirement age a tad, or reducing benefits a bit. And here’s what the Wall Street analysts rarely tell you: Even if nothing is done, the program will still be taking in enough money for you to receive most of the benefits (the current forecast is about 75%) that previous generations enjoyed-for the rest of your life”.

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