It wasn’t long ago that I blasted the traditional 10% savings plan advice given by financial gurus that recommends you work until traditional retirement age (65+), save 10% along the way, and then sip pina coladas and play golf for the rest of your thrilling days.
For starters, who wants to wait until age 65?
Many folks do, surprisingly. It’s the most common objection that I hear to the concept of financial independence and early retirement, and it usually goes something like this,
“Early retirement is not for me. I want to work until the day I die. I can’t imagine sitting around and doing nothing for all those years.”
To each his/her own (and for the record, “sitting around” is not part of my early retirement agenda).
My opinion? There’s more to life than working on other’s agendas. And even for ambitious life-long workers, there are just too many flaws and things that can go wrong with the 10% plan:
- health problems
- decline in income
- an increase in expenses
- poor economy
- poor market returns
- the need to take care of a family member
- bad economy
- etc. x 1,000
In other words, there is no room for error. No room for life to unfold in unpredictable ways. When you retire might not actually be your choice.
However, you shouldn’t just take my word for it. These realities were recently validated in a survey from Voya Financial of retired U.S. workers, where 60% of the 1,002 surveyed recent retirees retired sooner than planned – and not by choice. 29% of survey respondents said the timing of their retirement was “somewhat unexpected”, while another 31% said the timing was “very unexpected”. 33% of those respondents said they left their jobs involuntarily.
What were the reasons given?
- 16% had to retire because of health challenges
- 11% lost their jobs
- 3% had to stop working because they needed to care for a spouse or dependent,
- 3% retired involuntarily because of their age
Sometimes life happens, despite our best intentions for it not to.
And none of involuntary retirement scenarios even begin to cover all of the semi-voluntary retirements that happen due to:
- subtle forms of discrimination or devaluing of workers because of their age
- inability to get hired into new jobs due to age until giving up
- buyouts accepted with the threat of layoff if not “voluntarily” taken
- no further career opportunities or potential to stick around for
And none of those involuntary or semi-voluntarily retirement scenarios account for the very real possibility that at age 55 or 60 your opinion on work and life might actually shift a bit from what it was at age 25 or 30. That ambitious “work til death” mantra that jived so well with your youth could change as you reach your later years.
So, how much should you save? As much as you freaking can! And then find ways to save even more. Why limit yourself? And with the time value of compound investing returns, the sooner you save, the better. Build up a cushion so that when life smacks you in the face, you have the freedom to counter with a jab of your own – “You want to pay me to leave? Where do I sign?”