A recent article in the CSMonitor, perhaps intended to shock you into action and begin to up the ante on your retirement plan, suggested that the likelihood your children will live for a century. Personally, the thought of living that long frightens me just a little. While Trent Hamm offers “sixty-five will be the new forty” or “few people want to retire at 65″, he seems to be missing the arc of the story.
We may live longer but will we want to contribute, no matter what career choice you make, for 60 plus years? And he is making some assumptions about the populace as a whole.
Take that average 20-year-old. The assumption is that all of them will go to college – which less than half do – and those that do will land a job in their chosen field – also less than half do – and they can see the worth of paying for their future rather than paying for their college loans – far less than half do – and those that do invest, will net 8% – without participation in 1982 to 2000 run-up, these new investors will find the return not much better than flat – misses the reality of how most of our lives are lived.
And that leaves the underinvested, the undereducated and underemployed who will skew the investment and employment numbers by eating up more jobs per working adult and worse, by the time they are finished a 40 year working career, will not be able to work much longer – in part because of the physical demands of this lifestyle.
While it is great fun to speculate that those born today will live a century, the truth is that arc does not account for forty years of dependency – 20 at the front and probably 20 at the back-end.
Then, just as Mr. Hamm is about to conclude he suggest that $8 million is the new retirement target for 25 year olds beginning on their own story arc. To do this, of course with a steady 8% growth in the markets (which market he doesn’t say) and with a retirement target of 65 years old, this youthful investor would need to sock away about $2400 a month. The illustration was meant to show the reader that if they target 80 years old instead, they would only need to save $725.
Who at 25 knows what 65 will be like? So if you were to follow Mr. Hamm’s suggestion, invested only $725 found, as life often does, that 65 is a much more appealing end-of-the-line number, you will have missed the mark.
He does suggest that you do your retirement planning without Social Security in the calculation. This is probably prudent for someone who is 25. But how people use Social Security may change and efforts to increase the programs solvency are being discussed and even implemented.
So when it comes to Social Security, you need to consider a couple of newer sort of approaches current and soon-to-be retirees are employing. Those that have invested diligently will probably wait until the last possible moment to draw their benefits and those who didn’t invest well, will work longer and wait to draw the program’s benefits.
How you approach your daily budgets, the quality of the loans you procure and the diligence of your investments and savings plans all play a significant role in how you retire, when you retire and whether or not you can. I have said it before and it bears repeating: Retirement is a whole life approach with numerous goals.
To read Mr. Hamm’s guest post in CSMonitor, click here.
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