The Retirement Outlook for 20-Somethings
Over Memorial Day weekend, a few friends and I took an RV to Banff, Canada. I'm from Chicago and have only been in the Pacific Northwest for a few short months. We Chicagoans are flatlanders and the geographical splendor of the snow-caps that now surround me is a source of a daily inspiration.
While we were heading through Glacier National Park, I sat at the coffee table in back of the motor home playing cards with my girlfriend, contemplating the turquoise melt-water when Brian said from the front seat, “Take a good look, my friends. We're gazing into the future. Here's us in 40 years. This is what retirement looks like.”
It lead to an interesting discussion between a group of 20-somethings about what we picture our retirement will be like. The vision of Florida, golf courses, cruises, and RV trips didn't fit for any of us. We all agreed that our generation, with its student-debt, terrible economy, and little ability to trust the solvency of social security, has to redefine our image of retirement.
Why 65 (ish)?
Right now, according to the website for Social Security, I'm set to retire in 2053, a year that seems positively sci-fiesque. My NRA (normal retirement age) is 67. Why 67?
Well, according to the website, Social Security was set up as part of FDR's New Deal in the 1930s. The retirement age was set for 65 to pay the older workers to leave the work force, making room for younger workers. Keep in mind that the average life expectancy for men in the 1930s was just under 60 years old. In other words, the government would give you money to stay at home only if you made it to the modern day equivalent of 89 years old.
My great grandparents, like many of the their contemporaries, would have benefited from Social Security if they could've lived another 10 years. That's a slightly more morbid image of retirement. It was my grandparents and their friends however, who cashed in, propagating the image of retirement as golf pants and yacht shoes.
Life Expectancy on the Rise
With the rise in life expectancy came a rise in how many people were getting Social Security benefits. I found these numbers on the SS website as well:
|Year||Number of SS Beneficiaries||Dollars spent|
I agree with FDR that spending a mere million and change to usher the 50-odd-thousand modern day centurions to a more relaxed lifestyle making way for the young blood ready to throw their hats in was a great idea. What's harder to chew is the now 50 million plus living well past 65 and the $615 billion going to them each year. I'm not here to debate the ethics of it, just the reality that with the baby-boomers readying themselves for retirement, I'm notbanking on much coming my way when 2053 rolls around.
Baby Boomers' Parents
My parents' parents were able to make out like bandits for the exact opposite economic freakishness that my generation is struggling today.
- They had no reason to doubt the strength of Social Security
- They graduated college with little to no debt and could start saving immediately. (The GI bill covered college for many of them.)
- Half of them had pensions, a concept that is far from reality today.
- At the point that they were ready to sell their homes and move to sunnier pastures, the Baby Boomers were coming of age, quickly filling any occupancies and spiking up housing costs.
None of these advantages do us Gen Y'ers enjoy and look forward to. For most of these, we get the exact opposite. Even if my dream was to be behind the wheel of a golf-cart for the rest of my days, the odds are against me.
As we got closer to Lake Louise, we all attached ourselves to the idea of a meaningful retirement rather than a leisurely one. Two of my RV companions work for big corporations involving a lot of desk time, jobs that they like fine, but probably wouldn't want to do for the rest of their days. On their list of things they could see themselves doing in their more golden years include:
- Group exercise instructor
- Tour guide
- Museum docent
- Farmers market worker
- Secret shopper
All of these options were geared to their specific passions. All of these will generate some income and take some time and energy. This isn't a list of full time jobs, but just activities to keep them young and make it so they're not wholly reliant on savings. From there, I spouted off some of the tenets of Get Rich Slowly, which I plan on following into retirement:
- Money is more about the mind than the math — Knowing the numbers is secondary to playing the mental money game well. One thing that the older folks around me seem to have is wisdom. With another 40 or so years to figure out how to control my spending, I hope I'll have most of the mental aspects of money down.
- Small amounts matter — I practice frugality now and will continue in the future. Just because I'm no longer working for every dime, whether it come from savings of government assistance, does not mean my hard earned thrift should be out the door.
- Large amounts matter, too — Yes, I'll be frugal, but there are a lot of smart decisions I can make before retirement to free-up finances during retirement. Whether it be having my mortgage paid off or make the right decision on a car, getting the bigger expenses out of the way will free up a lot of possibility.
- It's more important to be happy than to be rich — I don't want to worry about money in retirement but even more so, I don't want to obsess about money in retirement. I want to continue to cultivate my joy in simplicity, and have that carry through indefinitely.
- Do what works for you — There's no right way to save and there's no right way to retire. If you've got your golf clubs picked out, good on you. If you're hoping to do your same job past 100, awesome. I like the idea of a physically active retirement. Maybe that means picking potatoes, maybe it means leading those super cool pool dance classes. Whatever you do in retirement, make it meaningful, not just leisurely.
I can't predict what my retirement will look like. I know the games have changed and that the image of the perfect retirement no longer exists. For now, I'm going to continue to save for whatever the future may hold and when I can, enjoy a little taste of what my great grandparents might have experienced in the back of an RV, gazing wistfully out the window as the scenery flies past. Why wait, right?
Have you started thinking about your retirement options? Or those of you closer to your NRA, what will retirement look like for your children?