The Early Retirement Myth, Part Two

Early feedback from part one of this series was clear, retiring early is a myth of youth. The more years we work either as an employee or an entrepreneur, adults realize retiring at forty or fifty-five years-old is an illusion. An e-mail I received this week summed up the myth, it read:

“...if you have the smarts, passion, energy and focus

to achieve the financial resources needed to retire at 45 or 55

and live another forty years; you are by definition a driven person.

The same goal-oriented, successful individual is not going to be

satisfied with what you term a “3-G” retirement...”

Many times “early retirement” is a euphemism for trading in an unsatisfying job or career for work that is more meaningful and rewarding. It is not about ending employment to spend forty years on the beach relaxing; it is about reinventing yourself and discovering happiness in the second half of your life. Life after fifty looks different for everyone and the options are endless. You can continue to work if you like your job and the company values the expertise of mature employees. There are more options to work from home as technology improves or to have a flexible work schedule if you must go into an employer’s building. All of these changes make it easier to continue working into your 60s and 70s if you choose.

Over the years, I began to view the retirement life stage more  holistically including health, financial well-being, satisfying relationships, meaningful activities whether they are paid or unpaid, physical activity and spirituality. As the global economy sputters towards recovery, the financial impact of retiring early cannot be ignored. According to the Census Bureau in 2010 nine percent of U. S. senior citizens lived in poverty. A global income study, Elder Poverty in an Ageing World, by a team of researchers (Smeedling et. al) was published in 2008. In their study, the United States had 25% of seniors over age 65 in poverty leading Australia, United Kingdom, Italy, Germany, Sweden and Canada with 6 percent based on 2000 data.

I know many workers experienced forced “early retirement” through a lay-off, company shut-down and unexpectedly being terminated from employment in their 40s and 50s. “The element of surprise is the worse feeling,” according to one 50+ blog reader that emailed me about their small town plant closing last summer. The human resources professional did not see it coming. New owners acquired the manufacturing plant two years ago and assured the senior management team their operation was performing satisfactorily two weeks before filing the WARN Act (impending plant closing) paperwork. Recently I received an e-mail through LinkedIn. The 54-year-old former HR Director found work at a higher salary after a four month job search, lots of networking and earning certification in her HR specialty. In the past few months, more experienced workers are finding good jobs again. One blog reader recently purchased a franchise after reading the post in July, performing their research and contacting Jim Gleason.

http://workinglater.blogspot.com/2012/07/buying-franchise-is-it-right-for-you.html

Maybe early retirement is an oxymoron. What is your plan for your life after work? Retiring early? Share your views in the comments section anonymously if you prefer.  I'm interested in hearing from you.

 You have 168 hours, make it a great week!

The Early Retirement Myth

                           The Early Retirement Myth: Why I am Not Retiring Early
                                                    and Neither Are You

I have a friend named Fred who constantly asks me when I’m going to retire. This is simultaneously a compliment and it is annoying. It is a compliment because obviously Fred imagines as a single mom/head of household for nearly twenty years; I am financially savvy enough to make the numbers lineup to retire at age 55. It is equally annoying because:

(a) The numbers are FAR from lining up despite my best efforts

(b) I enjoy working and the social engagement that comes from interacting with others

(c) With my genes I could easily outlive the Institute of Medicine’s forecast for U.S. women’s life expectancy of 80-85. My grandma died at home in her sleep at 104 of no particular disease and other family members are living well past IOM’s predicted expiration date

(d) All of the Above.

At forty-three years old, Fred has a rockin’ career, 2.0 young children, a wife, suburban home and seems to be on the trajectory to “Dream Street.” He assures me when he’s my age—he’s closing his office door for a life of 24/7/365 leisure. With a 401(k) approaching seven figures, Fred thinks his future is going to be an endless vacation. This is the point when I bring out the stick pin to burst the bubble of Fred’s Early Retirement Fantasy. If you are reading this in your 40s (and I know some 20s & 30-somethings read this blog even though I tell them there are secrets spilled here you have to be at least 40 to comprehend), let me guarantee you this: Barring some extraordinary life event, 99% of employees and business owners will not retire by choice at 55. There is a good reason for this. Fred, take notes.

Most of the people who talk about early retirement only focus on the financial aspects. From researching and interviewing people who have retired well and marginally before starting this blog; the happiest retirees approach leaving work from a holistic perspective. If you aspire to the traditional 3G retirement lifestyle of Golf, Grandkids and General Practitioner with no extra revenue being earned; it is very expensive. In 2012, according to Fidelity Investments, a 65-year-old couple is estimated to need $240,000 to cover out-of-pocket medical expenses not covered by the Medicare plan in place today. Imagine carrying the weight of all your family's health care needs on your broad shoulders at 55—you might even still have kids in college!

When I was consulting a financial planner in the roaring 1990s—she said I would only need 70-80% of my income when I retired. What did she expect me to give up? Driving? As I was shredding her proposal a few nights ago, I realized her projections were before Starbucks, iPhones and DirectTV were even in my budget. Anyway, the retired people I interviewed said in the early years of their retirement, they spent much more than when they were working. Many retirees wanted to travel and never had time when they were employed full-time. Other retirees found time to indulge in hobbies and it cost money to pursue these activities—even gardening can become pricey. You have your first grandchild and lose your mind buying “stuff” even the most boring grandparent will donate money to their namesake’s College 529 plan. Uber-cool grandparents splurge on the $$ (not available in stores) 6V Hello Kitty Quad ATV scoring it on eBay.

It doesn’t matter how much is in your 401(k) in 2013 or if your company is the rare one with a defined benefit pension plan. At fifty-five you’re walking away without the full company benefit that kicks in at 62 or 65 anyway. If Fred thinks he can retire at 55 and then cruise into Social Security with a reduced benefit at 62—oh please! When he turns fifty and joins AARP their website will warn him of the folly associated with that strategy. Claiming social security benefits early is the right choice for only certain situations. Still not convinced? In Part II we’ll cover that other non-financial reasons, you may want to nix the early retirement idea and think again. Forward this to someone!