Planning for your retirement can be a daunting task, not because of the “math” you have to do to determine how much you need during your retirement years but rather defining what you actually want, need, and expect in your retirement. Determining when you want to retire is just as important as well.
Asking yourself how you picture your retirement is like asking yourself what you want out of life or what you want to be when “you grow up.” It’s soliciting more of a philosophical answer than it is a solution to a math problem. Thus, planning for your retirement is not as easy to plan for as it may seem on the surface.
Traditionally, we plan for retirement based on the age standard set by the Social Security Administration. Social Security was created in 1935 as a welfare program to provide retirement income benefits for those who have reached a certain age. You can withdraw from Social Security as early as age 62 at a reduced rate or wait until you’re 70 to receive your maximum retirement benefits.
When asked what retirement means, most people interpret it as a time in their lives in which they stop working completely and start withdrawing from their 401(k)s and Social Security. We traditionally define retirement this way because that’s what we’ve been taught for so long.
Too many financial firms and the media in general paint the retirement picture as an older couple holding hands sitting on the beach with their grey hair. When I ask my clients what they want in their future, that’s hardly the picture they paint.
What if we started to show more images of people going on worldly excursions or pursuing their dreams of opening up a coffee shop instead? It would completely change people’s mindset about what retirement can look like and what potential lifestyle lies ahead.
Retirement doesn’t mean you completely stop working. For us, planning for retirement means saving enough to have the option to work, not needing to.
Most of my “retired” clients are still working through age 70. They are exploring different hobbies and turning it into an income stream. Some are looking into building tiny homes and renting them out. They are definitely not sitting around doing nothing with their lives and depleting accounts.
If working is optional, what do you see yourself doing in the future?
What do you want to accomplish? Got any projects you’ve been meaning to pursue?
What 3 aspects of your life are most important to you and why do you want to sustain them?
Be specific with your answers to those questions.
Retirement doesn’t necessarily mean you stop working and then immediately start withdrawing from your accounts. That is saving just for the purpose of saving. No wonder people feel discouraged from saving for “retirement.” There’s not enough personal intention attached to the savings goal.
Retirement doesn’t happen at the same age for everyone. Take it from this woman who decided to retire at age 28 and meeting her goal of accumulating more than $2 million in net worth. You would say that she “retired” early, but really, she just left her current job to transition to a new phase in her life. She had an intentional savings plan.
This illustrates that retirement doesn’t necessarily have to start at age 59 ½ — the age you can start withdrawing from your 401(k)s and IRAs without penalty. You can even “retire” multiple times in your life.
Instead of looking at retirement as a period of time in which we can withdraw from our accounts, we need to give it a deeper meaning. Look at it as a series of meeting long term goals in which you specifically define what you want to accomplish at each stage and what type of lifestyle you want to have during that time period in your life.
You need to give saving for the long-term future an intentional, purposeful meaning and be specific about what you see yourself doing 10, 15, or 20 years from now and why those things are important for you.
For example, if traveling to Europe for 2 weeks each year is something you want to maintain doing, you should incorporate that goal into your long-term financial plan. If you want to work in philanthropy part time during your “retirement years,” that should be incorporated into your plan as well. Some individuals work through their 80s and 90s because they really love their jobs.
THE BOTTOM LINE:
Don’t save just for the sake of saving.
Be true and honest with yourself of what’s important to you and how you see yourself in the future. The more specifics you can provide in your answers, the more clear you can see what future you can potentially have. From there, you can calculate what amount of income you will need to afford that lifestyle.
Remember, retirement planning is a discovery process of YOU and it doesn’t happen overnight.