Retirement vs. work

It’s still January, which means I’m still thinking about goals and planning for the new year. Invariably, so are many of my clients, as they try to project what the year ahead will look like.

So it was in this spirit that I read the results of the 2014 John Hancock Investor Sentiment Survey, which measures attitudes and trends in retirement planning. The results weren’t astounding in their novel revelations of what’s on people’s minds, but rather in that we, as a nation, are all over the map in our intentions for retirement. The summary of the survey, found here, has the title “John Hancock Survey Finds More than Four in Ten Investors Plan to Work in Retirement.” However, the article goes on to say that nearly the same percentage of those surveyed ended up retiring much earlier than the typical retirement age of 65, whether due to health, layoffs, or some other unforeseen circumstance.

Here are some takeaways I gleaned from the findings.

Many people think they will work past the typical retirement age of 65. Around 45% of those surveyed had the intention to work during retirement, either continuing their current work on a part-time basis, taking a different part-time job, or some other variation. The reasons for continuing work were varied – some cited not wanting to be bored, others wanted to feel productive – but, of course, many of those surveyed had financial reasons to continue working.

A large number of people who have recently retired did so well before the typical age of 65. This nugget of information is the first glance of the intentions not meeting the reality of most people’s lives. The median age of those surveyed who had already retired was 58, well before the typical age and certainly not working during retirement age. I’ve mentioned some of the reasons for the early retirement, such as health issues, job loss, or burnout.

As much as we like to think we’ll be working past retirement age, that’s not a good plan. Clearly, if people who haven’t retired think they will keep working, yet the people who have already stopped working past the typical retirement age, there is a disconnect between what we want and what tends to happen. As a country, we need to own this reality and plan accordingly.

What’s needed for useful retirement planning is flexibility above all else. If we could buy knowledge of the future, we would all want to know how life is going to turn out. People who don’t like to live on the edge tend to plan for the future as if they have a good idea about how things will turn out. However, those who plan also need to be flexible, and perhaps plan for multiple scenarios when figuring out their retirement strategy.

What can you do to build flexibility into your retirement planning?

– Find a good financial advisor who specializes in retirement planning. Hiring someone who has trained and retrained and tested and been working on retirement planning for a long time really helps. You can do the work yourself, but if you’re not an expert, it’s possible you are missing out on the best ideas and returns. Financial advisors have different compensation methods, so you can find someone whose guidance is well matched with how they are paid.

– Create (or maintain) an automatic periodic savings plan. No matter what your stage of life, this is a no-brainer. It takes the choice and thought out of saving, and even the most sophisticated investors use this technique of automatic saving to make life easier on themselves.

– Live below your means. Okay, so maybe this one is obvious, but it bears mentioning. If you need less to live on when you’ve retired, you’ll have more options and more flexibility. This suggestion is not an all-or-nothing effort – it could be as simple as cutting out the daily Starbucks run.

– Overfund your permanent life insurance plan. If you have permanent life insurance (learn more about the different kinds of life insurance here), you can put more than the minimum premium into the policy, and build up cash values that earn more than most “safe” investments out there. The values grow tax free, and you can borrow against the account. It’s simple, safe, and easy.

As a disclaimer, I’m not a wealth advisor. I’m just putting some ideas out there that are common sense. Every once in a while, it’s good to be reminded that the best laid plans can sometimes go off in a different direction.

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