What does retirement mean to you?
Do you know anyone that is retired? What is their life like now?
I see two main types of retirement. The first is when a person (or a couple) makes the decision to leave the workplace once and for all. They’ve saved up for decades and now they are ready to move on to the next phase of their lives. This could mean more time with the grandkids, traveling abroad, taking up a new language, moving to a better climate…and much more! This person is basically free to do what they want with their lives (within reason).
This type of retirement can be summed up in one word: Freedom!
Then there’s another type of retirement. In this the person is basically not working anymore but is now (or is still) struggling to make ends meet. This person could have been pushed to retire or is physically unable to work anymore. Rather than moving because of want they may move because of need as they can’t meet their mortgage payments or rent anymore. Instead of saving for the future he/she focused more on getting stuff now. For this person retirement doesn’t represent freedom at all, it represents more problems. Though he/she may have saved some for retirement it wasn’t nearly enough and it wasn’t allocated well.
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This type of retirement doesn’t change the quality of life for the better! It most likely makes it worse. Rather than freedom this person may be a slave to government payments or the good will of others.
Now ask yourself - Which type of retirement do you prefer?
You like the first choice don’t you? Good. What are you doing about it?
- Are you contributing to your 401(k) at least up to the company match? Is it allocated properly?
- Are you contributing to an IRA?
- Do you have any debt? If so when will it be paid off?
- Do you have any life insurance (to make sure your family’s needs are taken care of should something happen to you)? How about long-term care insurance?
- Have emergency savings?
- Lead a healthy lifestyle?
These are just a few things to think about. My main point is if you want to retire with freedom then you have to start planning it now! Retirement is not something to wait on. The earlier you can start planning it and contributing to it the better off you will be.
So I ask again - What does retirement mean to you?
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{ 12 comments }
I do think freedom when I hear the word retirement, but I also know retirees who think frugal living when they talk about retirement. We have some friends that have amassed a good amount of savings and don’t have a mortgage payment, but are also concerned about rising health costs and the cost of living. They should be enjoying the retirement years but they are focused on saving money and living cheaply. I guess it’s hard to change your mentality if you have been living a frugal lifestyle before retirement. If you didn’t eat out at expensive restaurants or buy sports cars before you retired, I guess you might not be inclined in retirement either. I don’t know, retiring is not like winning the lotto as you worked hard to earn your money and you want to keep it for as long as possible. I think of retirement as freedom to choose and spend time and money with loved ones. I’m a long ways from retiring, but would look forward to the opportunity to have more choices.
@ Scott - There’s nothing wrong with remaining frugal in retirement if that was your lifestyle before. Health costs are a real concern. You really need to look into proper insurance before you’re ready to retire. And I agree, it’s not a lottery winning. You’re right that the freedom you get is about spending time with those you love. If you can travel and such then it’s all the better.
Debt is a HUGE predictor of what your retirement will be like. My parents have friends who retired a year ago, and they are very up front about the fact that they have more debt now than they have ever had. I think people have a hard time adjusting to a long term loss of income… our society gets used to thinking they will always make more in the years to come and can pay off the debt then. The debt treadmill does eventually end, but it’s not pretty if you fall off!
I just wrote a post about it here http://simpledebtfreefinance.com/things-to-avoid-debt-in-retirement/ (if interested)
@ Joe - Problem with hoping to pay off debt later on is people usually add more and more to the debt until it’s uncontrollable; always with the hope that something will happen alter on to allow them to pay it off. Good money habits need to be developed now!
@ FFB,
I couldn’t agree more!
I couldn’t agree more. I know someone in there 50’s who just refinanced there house for 30 years!! Took a bunch of money out of the equity and refinancing in your 50’s. You will never get your home paid for! I don’t know with the current economics were in now would be a great time to look at yourself cause we all know that social security is not very secure! Ugh. I see how my dad struggles on a fixed income, I don’t want to do that!
What I’ve seen here in Florida is that even people with their houses paid off can’t keep up with the maintenance, insurance and property taxes on a fixed income. My mother had savings and a nice pension and she had to leave the state for this reason. Retirees are faced with fixed incomes in the face of rising inflation. So don’t wait for retirement to take that once-in-a-lifetime trip–do the expensive things while you have an income. And definitely try to go into retirement without any outstanding debt–that’s my plan! And work part-time as long as you are able!
@ Downwithdebt - Re-upping the mortgage is buying your future now! What do you do later on?!?
@ Mindful in Miami - I think one challenge for upcoming retirees is figuring out a way to make sure their assets continue to grow to cover rising expenses. A fixed income will getting eaten away by inflation and rising expenses. I think you should live your life now but you still need to be careful of your expenses. Taking that round-the-world trip now could put you in a poor situation later on.
Retirement can create two money problems: less income and more time to spend money. That said, I think you shouldn’t wait until you retire to experience freedom.
@ Charter - You can absolutely experience freedom before you retire. My issue is when it’s done at the expense of retirement. We need to balance how we live now with what we want to live like later on.
Agree…planning ahead if very important. Time flies very quickly. Sadly even with forward planning, events like the current market melt-down can take a big dent in money management.
@ Anthony - True but part of your forward planning should take into account the fact that the market can tank.
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