Ready to Retire?


Last week, I talked to a friend about a major home improvement project costing thousands of dollars that I have to have done. My friend said she had another friend who delayed her federal retirement because she had to do the same project. My heart dropped because I would be distraught if I had to delay my retirement for a home improvement project.

Off the top of my head, I can think of at least three friends or coworkers who have retired or plan to retire but are having financial difficulty. One friend retired and had to get a full-time job within six months. A coworker has physical issues that affect her work performance; yet, she struggles to come to work every day because she cannot afford to retire. Another coworker’s physician advised him not to work, but he decided to buy a new car instead. Now, he cannot retire.

Years ago, I lived in a neighborhood where I would see my neighbor gardening as I left for work every day. Each time, I thought, “One day that will be me.” I watched coworkers who retired successfully; they brought their lunch to work and bargain shopped. Over time, I, too, learned to squeeze a dollar. I asked people who retired for advice, and the best advice I was given was that credit was for major purchases, i.e. house and a car. Now, if I cannot pay for it with cash, I cannot afford it.

Before I proceed, I want to make something clear. This blog is not for those who can afford to retire but do not want to go home and watch “Doctor Oz.” I will save having interests outside of work for another blog.

According to Forbes, there are many reasons that affect retirement. For brevity, I will only mention what I believe is the biggest contributing factor in the Washington Metropolitan area, i.e. still paying bills and unable to save for retirement.   

Every so often, I will attend a retirement seminar, and often, they will mention the cost of living. Currently, the median price of a Washington metropolitan area home is $372,990.  I will have to consider this upon retirement, and U.S. News and World Report has a listing for every retiree: The 10 Best Places to Retire on Social Security Alone; Best Places to Retire for Under $40,000; 10 Best Places for the Wealthiest Retirees; the list goes on and on.

One more thing, years ago, I met with a financial advisor who suggested retirement portfolio diversification, i.e. Civil Service Retirement, Federal Employees Retirement System, Thrift Savings Plan, stocks, bonds, savings, etc.  If one crashes, you can tap into another.  All financial investments carry risks. During the Great Recession of 2008, retirement savings in 401Ks and Individual Retirement Accounts dropped by 50% in just a few days.

Retirement planning takes time, but it is never too early or too late to plan for it.   There are steps you can take that will help you secure your financial security no matter what your age. Who knows? In a few years, you, too, could be sitting at home watching, “Doctor Oz.” Then again, let’s hope not.

Cynthia V White is part of the GovLoop Featured Blogger program, where we feature blog posts by government voices from all across the country (and world!). To see more Featured Blogger posts, click here.

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Mark Hammer

Folks owe it to themselves to take a look into the social history of pensions and the social institution of retirement. Much of what we like to passively think of as simply the “natural order” of things is a lucky byproduct of the alignment of a great many historical, social, and economic factors. Retirement exists, in the way we conceive of it, because of a sort of eclipse involving those factors.

What are those factors?
1) Entering the workforce full-time at an early enough age: When the institution began, there was no assumption of a need for post-secondary education. Credential-creep has made the point of entry into the workforce later and later.
2) Entering the workforce debt-free: Both post-secondary costs, and the easy availability of credit in various forms, result in young people beginning their careers having to pay off debt, deferring their earning years.
3) Beginning adult and family life later: More folks may be having fewer children, but children still cost a lot, whether you have them at 23 or 38. More folks are finding themselves with fewer peak earning years during which they are pulling in a decent household income while not having to cover major family-life expenditures. So, fewer peak saving years prior to when they expect to withdraw from the workforced.
4) Lower consumer expectations: Among my parents’ generation, the notion of a trip overseas, or any sort of big vacation, was this exotic dream. It was NOT something one expected to be able to do annually prior to or after retirement. Maybe you fit one overseas trip in post-retirement, just to satisfy yourself that you had done it. It’s not just travel, but a wide variety of other consumer goods and lifestyle choices (thank you, HGTV, and 0% new car financing!). Harder to save enough when you expect to spend more.
5) Larger, more concentrated, families: Having more children was traditionally a means to provide support during one’s later years. Having one or two children, each of whom live a 3hr flight away is not a recipe for having someone come over and mow the grass or rake the leaves when you’re not up to it. Yes, you can pay someone, but that’s not traditionally what people saved up for when they saved for retirement.

So, in general, people are starting their working life later, starting it swimming against a financial current, forking over large amounts of money for a much larger period of their working life, expecting decidedly UNmeagre lifestyles, and then wondering why a social institution predicated on having 45 working years, with 20 of them allocated to saving, is not sustainable with a working life of 35 years, only the last 5-10 of which could involve serious saving.

Keep in mind that, when public pensions, in 1889 in Germany, they were for persons 70 or older. That age was picked by Bismarck’s actuaries and financial advisors, because it was affordable. There was NO presumption of withdrawal from the labour force, with pension replacing earned salary. It was conceived of as a topping up for “a lifetime of service to the Fatherland”. By the end of the 19th century, public pensions were fairly standard across much of Europe, and pensionable age had dropped to 65. As an elected government, you couldn’t afford to go lower (improvements in public health meant more people of pensionable age), but with every other country offering pensions at 65, politically you couldn’t afford to go higher. So 65 it was. Never had anything to do with *ability* to work (although Ford-type assembly lines, and emphasis on mass-production of goods made older workers a liability), and historians tell us that the majority of people continued to work for the majority of their income well past pensionable age until WWII. What we think of as the natural order of things, when it comes to retirement, is really only 50-60 years old.

Mark Hammer

I meant to add that the “eclipse” is quickly falling out of alignment. I don’t see this as a crisis. A few generations benefitted from a fortuitous set of circumstances, and another generation is trying very hardto keep alive what the previous generations had, but the social landscape has shifted enough that we need to be prepared for another sort of arrangement.

I like to tell people that the new role of pension and retirement savings is not to replace earned income, but rather to unyoke occupational choice from fiscal necessity. We’ll continue to work, but we’ll have the latitude to choose the kind, or pace/schedule, of work that suits us. Such work would not likely have provided the level of compensation that could sustain a family, but with the financial cushion of pension and savings, we’ll be able to afford to do the work we always wanted to do. Personally, I don’t think that’s so bad.

The problem that an extended working life creates, however, is leaving enough employment opportunities for the folks entering the workforce. Not a trivial matter.