In the Singler household one of the age-old debates is whether retirement is an age or a number. Well, I know they are both number, but let me explain. My opinion is that retirement cannot be measured by age. For example, since your turn 65 you no longer have to work. Instead, I typically argue that you can retire when you have enough money to be able to afford to retire (hence the number, not the age).
Traditionally, many Americans have retired at the age of 65. Many of our grandparents or even parents had the benefit of pensions that they used to supplement social security and savings, so retirement at age 65 used to be a fairly attainable goal. However, over the years, fewer and fewer companies are offering pensions to their workers. With the advent of the 401(k), workers have been more responsible than ever for saving their own money towards retirement. Often, employers match a small amount that works contribute their their 401(k) plans, but it is typically significantly less money than a traditional pension. In addition to the slow demise of pension plans, social security benefits have been delayed. For those people born in 1960 or later, full social security cannot be collected until you reach the age of 67.
In my opinion, another barrier to retirement is that raising kids has gotten a lot more expensive. Extended families are less likely to live near each other than in the past, so child care for young children is a significant expense for families. In the past it was more common for grandparents to watch children after school while now we see a lot of before and after school care programs that cost money. And then there is everything else…..kid’s sports (especially traveling), cost of their electronic devices that didn’t exist a generation ago, additional fees at schools with small budgets and the rising costs of food make it harder and harder for parents to put away money for retirement. Then, there’s the huge expense of college for children. Should parents take on this obligation then thousands of dollars that could have been put toward retirement?
The bottom line is that it may or may not be realistic for you to retire at 65. Some people who have done very well financially may have been able to set aside vast sums of money for retirement early and retire by the age of 40. My husband met one of these people on a vacation to Costa Rica. The individual had started several businesses and even been a business partner of Jay-Z (which we confirmed by googling because we didn’t believe him). The business man was in the process of building his retirement house on the beach in Costa Rica. On the other hand, I meet with folks all the time at Halcomb Singler, LLP, regarding bankruptcy or debt settlement who realize that they will never be able to retire. Other people picture retirement more as a “semi-retirement” with a part-time job that you enjoy to help supplement your living expenses.
Unfortunately, I believe the new reality is that the majority of Americans aren’t going to be retiring at the age of 65 as they had done in the past. Instead, more people are going to find that even though they have reached the “retirement age” that their investments along with their social security won’t be enough to sustain them for their entire life. So, before automatically thinking that you will be able to retire at age 65, remember to ask yourself (and probably your financial advisor) whether you will have enough income to make retirement possible at that age. If not, see what you can do to increase your savings, work longer, decrease your expenses, move in with children, or any other number of actions that might make your retirement the best it can be for you.