What Does Retirement Mean to You?
Life expectancy in the U.S. in 1900 was 47.3 years at birth. In 2022, 80.2 years at birth if you are lucky enough to be a female. 65-year-old males today are looking at 17 more years. Only expectations, these last two stats do not control for education and family genetics. Maximum potential age is even higher, and who knows what health technology will bring in the coming years. Longevity is on our side.1
The Financial Story
Financial writers overplay the topic of retirement as if it were a financial condition that needs a cure. “Save, save, save” is the fireside mantra of Grandpa talking to his grandchildren. Many of my college students begin a semester believing saving is primary to learning about household economics. Financial advisors play to their self-interest to sell products droning on about saving 10% of your income—into their firm’s accounts. CFPs speak about 4% withdrawal rules and other suspect rules as if retirement is a ubiquitous, ever-present utopian period of life shared with like-aged others. Take the advice, and you will be two standard deviations above average in every way. Gratification isn’t hard because the outcome isn’t a surprise. Life is supposed to end this way.
There is no defensible rule of thumb for savings and withdrawals from savings. Savings and financial account management is personal and depends on many factors.
Economics-based planning is more careful. What does retirement mean to you? Are you like
’s 63-year-old divorcee who is financially fragile, or do you never plan to retire, or are you a lucky one who doesn’t need to fund it on your own because you are endowed with a future inheritance? A common purpose for savings is retirement, so a book chapter is required.Since January 2024, Economics-Based Personal Finance has been released in installments, and we are ready for the final two chapters. Chapter 7 begins next Tuesday, and the topic is Retirement Planning—retirement planning with an economic angle. Is it better to have an IRA or a Roth? What is the measurable difference between taking your Social Security benefits later and not? Would an early retirement be a reasonable idea when considering investment risk? Important topics will be addressed over the next couple of weeks.
In the meantime, two posts of interest have been updated and are open reads:
Returning from the Great Retirement explores how the financial effects of inflation change work plans, and Returning from the Great Retirement, Part 2, examines how retirement is affected by investment risk. I hope you enjoy them.
Paid subscribers have access to the book in last week’s post, and the most recent version of the book can be purchased here.
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