Being Able to Retire: So Much More Than Just Luck
The other day a friend asked if saving 18 percent was enough to be saving for retirement. Instead of giving a simple yes or no answer as was expected, I had to answer with a question of my own, “How much do you want to have saved when you retire?” Then I followed up with, “At what age would you like to retire? What do you expect your lifestyle expenses to be at that point? What’s your opinion on inflation and stock market performance over the next 20 to 30 years?”
And that’s usually when I lose people.
Retirement is, for most of my friends, something in the distant future, perhaps even a mythical state of being, much like finding a four-leaf clover or happening upon a pot of gold at the end of a rainbow. Since it’s not something that can be easily envisioned, I find that many women employ what I call the “Wishin’ and Hopin’ Financial Plan.” It’s also known as the, “I’ll Worry About That Later Plan,” similar to the, “If I’m Lucky, I’ll Get There Plan.”
It’s Not About Luck
Saving for retirement, even in your 20’s and 30’s, isn’t just a crap shoot though. It’s something that you can actually calculate with a few educated guesses about what your life is going to be like when you reach retirement age. If you’re willing to “run the numbers” (or have a financial planner run them for you), based on how your life is today, you can at least have a solid idea of what you can do today to increase the likelihood that you’ll be able to retire comfortably when you want to.
Financial plans, just like your weekend plans, are flexible. They are adjustable. And they should be adjusted, at least annually, for any changes in your life. Just like you would cancel your dinner reservations for Saturday if you learned that your best friend’s boyfriend was planning to propose and wanted you there for the surprise, you can make changes to your financial plan when things like a job change or an engagement happen and affect your long-term plans.
A financial plan is really just taking a bunch of assumptions based on what we know today and projecting them out mathematically to the future, then seeing if what we’re doing today fits with the math. If it doesn’t, you can make changes to make it fit. Those changes include saving more, adjusting the age of planned retirement, or planning to spend less in retirement. It’s about so much more than hoping you “get lucky” and can retire at some point.
The reality is, someday you’re not going to be able to work anymore and for most of us, the day we don’t want to work anymore will come much sooner. And when that day arrives, you will obviously want to be able to afford to retire. (If it’s already here and you’re in your 40’s or younger, I suggest you consider a career change pronto.) And being able to afford retirement isn’t something that is controlled by your luck. You can do things today that will get you there – and if you are lucky, maybe you’ll get their sooner than you planned.