Have the traditional rules of retirement started to change? Not that there was ever a ‘set in stone’ model in place, but I can remember growing up when people would retire between 55 – 62 years of age. Nowadays it seems like that number may be jumping closer to 70 years. The global recession is starting to play a major role in employees’ retirement plans. I have seen several cases where companies are starting to cut their 401k company match in an effort to cut costs. I guess that is better than cutting jobs, but now is the time for people to invest in 401k plans – not cut back.
I have personally witnessed a change in the behavior and rules of retirement for several people who are very close to me. The following are examples of people I currently know whose retirement is directly impacted by the current economic crisis.
- Temp Worker – I have become close with a temp worker in my current job. She has been with our company for about 18 months and is close to 70 years old. A few years ago, she and her husband had a very nice retirement nest egg. The only reason that she and her husband held temp jobs was to pay for their travel and vacations. Now she is doing everything she can to keep her temp job so that they can pay for their rising health care costs and prescriptions. Their once healthy retirement portfolio has almost been cut in half.
- Manager – My direct supervisor was about a year away from retirement at the start of last year. He had plans to start spending more time with his hobbies in life and his family. Retirement would have allowed him to start doing the things he really wanted to do in his retirement years. Based on the assets now leftover in his 401k, he no longer believes he has the money to retire and is changing his rules of retirement by planning to work at least 5 – 7 more years.
- Mother-in-law – My mother-in-law had about 2 – 3 years of work remaining before she planned on retiring. She is a schoolteacher and will have a pension to help pay the bills when she decides to retire. That pension was setup to payout funds based on averaging out her last 3 years of salary. Due to budget cuts and school deficits, her salary will probably decrease over the course of 3 years pushing her pension down with it – along with her rules of retirement.
All of the financial experts are saying not to worry about the stock market, your 401k, and your retirement. They are saying that now is the time to keep investing and your 401k portfolio will build back up. I feel fortunate enough that I am in my mid-30s and have lots of time on my side. I have the time to build my 401k back up in order to still have a healthy retirement. The same can’t be said for the individuals I mentioned above. They are all bordering on their retirement years and are now impacted by the global recession. While these people have money for food and can still pay their bills and mortgage – their plans for retirement that they worked so hard for are now gone.
Taking Control
I think this is an excellent time for people to start thinking differently about their retirement. I challenge anyone who reads this post to change your mindset and start taking control of your finances and retirement planning. Gone are the days of retiree medical benefits and pension plans. Even if you have some of these benefits through your employer, you can never be sure that the company will be around by the time you retiree. My father worked for one of the Big 3 auto companies and never thought one or even two of them could possibly go out of business. Company 401k matches and other health benefits are being cut – so why not take control of your own destiny? Why not define your own rules of retirement?
I personally hold myself responsible for my family’s retirement planning. I will not count on Social Security benefits to be around when I retire. Nor will I look for Medicare or retiree medical benefits. I am assuming the worst and planning for it. I can sum it up in two simple words – financial freedom. That is my ultimate personal finance goal and where I plan to be someday.
Are you defining your rules of retirement? Or are you going to allow other factors dictate your retirement plans?
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To make matters worse, I received an article from Fidelity that stated that 20% of workers 45 years and older have stopped contributing to their retirement plans. I realize that the stock markets are terrible right now, but people have to start thinking about their futures. In 20 years, our government will be only be able to pay for a few things; and your retirement is not one of them.
Yet another reason to start developing additional passive streams of income. Another thought provoking post!
Ever snce I read Tim Ferris’ 4HWW, I’ve completely dumped the traditional ‘retirement’ word. Instead I want to strive for liberation; the freedom from a potentially unfulfilling 9-5 to pursue whatever business/charitable/personal pursuits I want.
I’m thus tailoring my efforts to one day hopefully achieve liberation. It’s many years off, but as a sophomore in college I’ve got some time. It basically involves a crap-ton of hard work and continuous building of passive income streams.
I see a similar trend developing among others, largely in part to the huge inspiration that Ferris unleashed with his book.
My wife and I recently met with a financial planner and when asked when we wanted to retire, she said 68 and I said 40. I looked at her and said 68? Are you kidding? She laughed and said she wanted to do some type of work up to 68. We need to follow-up on this one
Financial Planning needs to be something that we all give a SIGNIFICANT amount of our time each year, but the fact is that most families spend about as much time each year on financial planning as they do on about 1 drive thru burger at McDonalds…5 minutes. Here lies the root of our problem in my humble opinion, laziness.
Great post!
-Brandon
I think your article is one of my main motivators for wanting to create multiple streams of income and revenue. At the same time, I want to create those streams doing things that I am passionate about. That is why I work part time in a private group practice; work full-time at my current job; carefully monitor my IRA’s/401K to make sure they are allocated according to my objectives, so that reinvested dividends earn more money over time; work on designing e-books I can sell over and over; join affiliate programs; and keep my eyes open for other passive, positive cash flow opportunities.
Having said all of the above, my trust cannot be in these income streams, because in the end, there is only One Who provides, and He is in charge
Furthermore, I need to always check my heart and be generous with whatever income comes my way.
@Dusty – I couldn’t agree more.
@Blake – Thanks for the book reference. I may have to check it out.
@The Passive Dad – I can’t blame you on that. I would love to retire by 40!
@Brandon – Thanks for the kind words. I feel very strongly that we need to spend more time in our schools educating people about personal finance.
@Steve – Wow, I am glad I can help to motivate you. Good luck with your creation of multiple income streams.
Planning’s good. But it doesn’t help when your assumptions crash in flames. I had plenty of money to retire, and in fact planned to be retired by now. No more!
To gild the proverbial lily, there’s a good chance I’ll be laid off. When you reach a certain age, there’s not a chance you’ll ever be hired for a decently paying job. I’m past that age. So, I’m now looking at the possibility of an “enforced” retirement during which I really should not be drawing down what remains of my retirement savings; Social Security payments that will come nowhere near supporting me; and the extreme unlikelihood of finding even part-time work that will bring in the 14 grand I would be allowed to earn while drawing S.S.
There are some things you can’t plan for. A depression settling in just as you’re ready to settle in to your armchair is one of them.
Funny about Money’s last blog post..Layoff Plans: Use savings or start Social Security?
Hey man! Thanks for the reference!!!
I enjoy reading your blog. Let me know if you would like to be on our blogroll and vice versa.
Mike
Mike Rowan’s last blog post..$8,000 Tax Credit for First Time Buyers | Mortgage Rates Drop
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