Retirement is about the strategic endurance of personal savings and finances throughout retirement. Strategic financial calculations and planning must be undertaken to ensure that senior citizens don’t have to worry about any standard of livings or medical cost while retired. The failure to appreciate such considerations early in life is why terms such as, “semi-retired,” and “working retired,” exist.
The average amount of money that you need to maintain a retirement lifestyle annually is about $44,000. That is just to pay any reasonable standard of living costs. Then there is the fact that the average retired couple needs about $280,000 to last them throughout retirement to pay for medical expenses. Aspiring retires who don’t calculate their retirement saving exactingly to their standard of living costs should know that the average salary of a working 65-year old is $19,000.
So Should You Retire Young?
More people who are reaching retirement age also don’t consider how stressful retirement can be. Many people suddenly go from working full-time, five to six days a week for multiple decades, to an abrupt full stop. It can be an emotionally jarring, stressful, and depressing experience. Our social and emotional identities are sometimes inextricably pegged to our given vocations. The pop-culture definition of retirement is to take it easy and do nothing. Is that realistically feasible to do, even at the sunset of life?
It is hard enough to make these considerations as a senior citizen. What to think of people in the 20s, 30s, and early 40s who are aspiring to retire as early as possible in life? Is it a realistic, viable, or sensible thing to do?
What Is the FIRE Movement?
FIRE is an acronym meaning, “Financial Independence, Retire Early.” It’s a financial lifestyle path where, if you can afford it, you can pursue lifelong ambitions without worrying about finances. The FIRE movement isn’t about, “retiring,” per se, but more about working or pursuing life projects that are personally meaningful. Hating a job or getting rich quick isn’t what FIRE is about. That said, unless you are under 45, extremely wealthy, spend a lot less than you earn, and have invested wisely, then FIRE may not be for you.
The Young and the Retired
If you are over 65 years old, you should have over $358,000 saved for your retirement needs. The average person between the ages of 55 and 64 barely has $120,000 saved for retirement. A Millennial should have at least $33,000 for retirement, but on the median average, has about $12,000 saved. Meanwhile, the average American barely has $5,000 saved. While most Millennials are good at saving, many are hesitant to invest. If you are young and intend to retire, it isn’t enough to just have money saved.
You must calculate that you have enough money saved to last you multiple decades. The average person lives until their 70s or early 80s. If you retire at 65, you are calculating savings to last for a few years or a decade or two on the average. If you want to retire at 30 or 40, FIRE movement notwithstanding, then you need to have expenses calculated to last for four or five decades. Or more.
Some experts say you need $1 million to retire. That is a general-purpose amount. You need $280,000 for medical expense just for post-retirement life, so try calculating for that amount from your mid-30s to the end of your life. Then add in standard of living expenses. How much money you need to retire at in your 30s or 40s could be a lot more than $1 million.
However, let’s pretend that you are a wealthy 35-year old. You run a successful company, or you made smart investments as a teen, or you lucked into a vast inheritance. Being independently wealthy, would you retire? What would you do with your time? Would you travel the world or indulge in hobbies? What would be your identity? Being, “retired,” just isn’t an identity within itself. What would be your purpose in life while retired at such a young age?
Make Careful Considerations
If you are young and wealthy enough to retire, it is a choice that you’ll have to weigh carefully. You will still need to worry about paying your health expenses. It is possible, you will become bored, stressed, and frustrated at having nothing to do. If you are fortunate to be able to consider retiring young, look at it a transition to a new career or launchpad to do work on your own terms. Whether young or old, you need an identity in life.
Read More
- How to Cope With Forced Retirement: Tips for Moving Forward
- Retirement Challenges: This Is Why Not Retiring Is Best
- What’s Holding Up Your Retirement Savings? It’s You.
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.