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!

Why You May Not Be Retiring

Don’t order that gold watch just yet!  You can also postpone the cruise you were planning, keep the hammock packed up and tell your boss to delay your “surprise” retirement party for about five years. That’s the result of the “SunAmerica Retirement Re-Set™ Study” released last week. In this nationwide survey of pre-retirees and retirees age 55+ the concept of retirement has changed significantly and I don’t think we should be surprised.

The bottom-line is 54% of the respondents in the 2011 survey viewed retirement as a new chapter for opportunities in their lives. In 2001 only 31% held that view. Retirement a decade ago was looked at as a time to “wind down.” In addition to the financial aspects, 2/3 of those surveyed wanted to remain productive, active and connected with some type of “job” as the primary means to accomplish those goals. Lastly, pre-retirees planned to delay retirement until age sixty-nine.

Unexpected health problems and job losses forced many of the current retirees surveyed to leave work earlier than planned. In the current survey, SunAmerica renamed their four profiles of retirees: Ageless Explorers-Cautiously Contents-Live for Todays and Worried Strugglers. Use this link to access the study and see which category fits you.

http://retirementreset.com/wp-content/uploads/2011/07/M5124RPT_07111.pdf

While SunAmerica is interested primarily in the financial aspects of retirement, there are other considerations as well. Where will this new generation of “never say retire” workers find a job? The brain drain of Baby Boomers was supposed to be a risk for employers, but they seem all too eager to replace 47-65 year old Boomers with GenX, Gen Y and Millenials. The prestigious company names where Baby Boomers built their careers and resumes are handing out severance packages (for the lucky ones) like Halloween candy. Many large corporations replace the intellectual capital and maturity experienced workers offer. Privately, HR professionals and workforce planners offer a host of reasons from perceived employee benefit costs to tension between Boomers and workers of later generations as reasons mature workers are offered “a package”. I’ve also talked to younger managers who say they don’t feel comfortable with older workers reporting to them. Their reasons varied.

So if you feel good and want to earn money by working longer; it is important to find companies, industries and managers that embrace experienced workers. Despite lists that profess to have found the “Top Companies for Baby Boomers” or “Best Companies for Senior Employees” these have to be reviewed critically like any other “Best” list. Department to department and manager to manager, companies change. The list ranks the overall policies and hiring practices. A new term, “Encore Career” combines mature workers, earning a paycheck, doing work that is meaningful to them with flexible hours. Some sectors to consider for your “Encore Career” are health care, membership organizations/associations, nonprofits, educational services companies, companies that provide services to older people and smaller companies. Perhaps a lower level role within a large global corporation is a possibility if it is in the same industry as your primary career (the hiring manager may have to challenge HR to bring you in). Some state and local governments still have opportunities and there’s always the possibility to experience entrepreneurship. The opportunities are as varied as franchisee, independent consultant, proven multi-level marketing organizations to opening an independent business. Go For It! Take Your Encore!