Maybe don’t re­tire?

Since the av­er­age hu­man lifes­pan has in­creased dras­ti­cally, many peo­ple live for many decades past the cur­rent re­tire­ment age. Here are some ways to make your money (and health) last.

Finweek English Edition - - COLLECTIVE INSIGHT - By Michael Falk Michael Falk CFA CRC, is a part­ner with the Fo­cus Con­sult­ing Group.

enough! All this non-stop, com­mer­cialised “I need to plan in or­der to re­tire com­fort­ably in fu­ture” twad­dle. Other thoughts that are con­stantly be­ing drilled into in­vestors’ heads in­clude: Will I sur­vive un­til my re­tire­ment? Can I spend less to­day so I can maybe spend more to­mor­row? Who are they – “they” be­ing mem­bers of the fi­nan­cial ser­vices in­dus­try – kid­ding?

They are not kid­ding. How­ever, they may be some­what con­flicted since those in­vested re­tire­ment rands gen­er­ate fees.

Let’s con­sider three key un­con­flicted views on re­tire­ment be­fore reach­ing con­clu­sions:

The med­i­cal pro­fes­sion con­tin­ues to re­search age­ing and the im­pact(s) on re­tire­ment. The dis­cov­er­ies around re­tir­ing com­pletely, or ex­it­ing the work­force, while still liv­ing, should be of in­ter­est. It seems “stop­ping” is bad for your health. Neg­a­tive health shocks and mor­tal­ity are gen­er­ally higher fol­low­ing re­tire­ment. So, re­tire­ment could be bad for your health. Maybe don’t re­tire com­pletely. Work part-time, or at least stay active.

Mem­bers of the so­ci­ol­ogy com­mu­nity don’t speak di­rectly about re­tire­ment, but dis­cuss hap­pi­ness. Their views sup­port the no­tion of friend­ships, re­la­tion­ships and com­mu­nity as be­ing in­te­gral to health and hap­pi­ness. This con­nects with re­tire­ment if only from the per­spec­tive of with­draw­ing from your work­ing com­mu­nity. How much of your so­cial time is spent with co-work­ers? Sur­veys in de­vel­oped coun­tries show that peo­ple some­times don’t re­tire be­cause they en­joy the com­pany of their co-work­ers.

If you re­mem­ber your wed­ding vows (for bet­ter/worse, sick­ness/ health, richer/poorer) you may have for­got­ten the most im­por­tant “but not for lunch”. You, your spouse and 24/7 – just sayin’. Work to keep your re­la­tion­ships alive and well. Get out of your house for at least part of the day.

The psy­chol­ogy pro­fes­sion also doesn’t speak di­rectly about re­tire­ment, but about men­tal well-be­ing. Peo­ple of­ten have their per­sonal iden­tity wrapped up in their work iden­tity. Think about when you meet some­one for the first time. Af­ter the name ex­change, of­ten comes the ques­tion “What do you do?” What hap­pens when there’s no work? This sense of your­self is in­ex­tri­ca­bly linked to health and hap­pi­ness. Don’t re­tire from some­thing, but rather to some­thing that is longer than a few months in length. If you don’t have some­thing in mind, don’t re­tire. Vol­un­teer, pur­sue hob­bies, in­ter­ests (per­haps go back to study) and your “bucket list”. Don’t just ex­ist, live with pur­pose.

Maybe the con­cept of re­tire­ment is lit­tle more than a fi­nan­cial in­dus­try scheme to gen­er­ate fees. The un­con­flicted view would sug­gest that maybe you should not re­tire. Okay, but: What if you can’t find work be­fore want­ing to stop work­ing? Maybe re-think re­tire­ment as un­em­ploy­ment for older in­di­vid­u­als. If you’re older and can’t find work, re­tire­ment sav­ings can mit­i­gate stress lev­els. What if you don’t die be­fore re­tir­ing? Maybe re-think of re­tire­ment sav­ings as sur­vivor in­sur­ance. With no sav­ings, trust that you will not thrive.

Why save for re­tire­ment if you are not likely to live that long af­ter re­tir­ing? Those sav­ings might help re­place your lost earn­ings for your spouse, or an­other fam­ily mem­ber. Might this be a legacy of “pay­ing it for­ward”? Sav­ing for later in life – whether in a re­tire­ment prod­uct or not – is ben­e­fi­cial. Don’t risk your older self hav­ing to face re­tire­ment with­out sav­ings. Imag­ine your­self re­tired, aged 70 and short on money. Ac­cord­ing to re­search, peo­ple shown a sim­u­lated aged pic­ture of them­selves set aside 6.8% of their pay on av­er­age for re­tire­ment, ver­sus 5.2% for those shown a cur­rent pic­ture of them­selves. (See http://bit.ly/2sUI1AW.)

Con­flicted or oth­er­wise, the fi­nan­cial in­dus­try has a role to play. Per­haps the most per­ti­nent ques­tion is how to save enough for re­tire­ment with­out sac­ri­fic­ing too much of your life­style to­day. The ad­vice will likely be to plan one step at a time.

Th­ese steps are tried and tested:

1. What will re­tire­ment cost you? Use a re­tire­ment cal­cu­la­tor or the as­sis­tance of a qual­i­fied pro­fes­sional to es­ti­mate your needed and as­pi­ra­tional spend­ing. Th­ese es­ti­mates are unique to you and can be done for a va­ri­ety of re­tire­ment ages.

2. Find out how much, if any, re­tire­ment ben­e­fits are avail­able to you from an em­ployer or gov­ern­ment, through an old-age sub­sidy.

3. The dif­fer­ence be­tween #1 and #2 are your sav­ings goals. Based on age and time to se­lected re­tire­ment age, the cal­cu­la­tor and pro­fes­sional can help you un­der­stand how to reach both your needs and as­pi­ra­tional goals. Even if the amount is daunt­ing, start sav­ing now, and reg­u­larly ev­ery month. Ev­ery bit helps. Save be­fore you start spend­ing. Prom­ise your fu­ture self to in­crease your sav­ings amount with ev­ery pay in­crease. Within a few years, you will find that you have man­aged to save a size­able amount, and as you have done it con­sis­tently and reg­u­larly, you won’t no­tice it miss­ing from your pock­ets.

4. In­vest sav­ings for the long term. In in­vest­ment par­lance, this means di­ver­si­fy­ing some of your sav­ings into stocks, with the help of a qual­i­fied pro­fes­sional.

5. Re­visit #1 to #3 an­nu­ally; #4 is of­ten bet­ter re­viewed less of­ten. Re­tire­ment is not cheap, but maybe that’s be­cause it’s worth it. Sav­ing this way will en­sure that you have money at hand in case you fall ill, or lose a well-pay­ing job be­fore you want to re­tire. And re­mem­ber, don’t re­tire un­til you must. ■

Don’t re­tire from some­thing, but rather to some­thing that is longer than a few months in length. If you don’t have some­thing in mind, don’t re­tire.

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