Whether retirement is possible or not is an important question to ask, but many of us never stop to take a look at the big picture of our finances to answer the question. (David’s Note: Maybe we are too afraid to ask?)
A few weeks ago, over dinner with friends, one of us did ask the question – and it had lead to an interesting discussion. We started talking about how he works in a “young” industry, where age discrimination is pretty much the norm, especially if you don’t climb up the management ladder.
At some point, he said, “I’m forty, and I can expect to have a hard time finding a job in my profession by the time I’m nearing sixty, maybe even sooner than that. That gives me 15-20 years to finish building a nest egg that should be large enough to support me for at least 20 years. How do I do that?”
A difficult question to ask, and even more difficult to answer. Certainly, age 40 is typically an age when many of us do stop for a moment to take a long, hard look at our life, our goals, take inventory and reevaluate the future. But in terms of building a nest egg, 40 might be too late to ask this question, since if you haven’t saved adequately before, you will need to make a huge effort to catch up.
Acknowledging that the question of “How do you make retirement a possibility” is not becoming easier to answer over the years is also important. If anything, saving for retirement seemed to have actually gotten more difficult.
As ageism in our culture becomes more and more of an issue, experience less valued and youth taking its place as the number one priority for many employers (have you seen the movie Company Men? It addresses this beautifully), older workers in Corporate America are finding themselves vulnerable. You can no longer assume that you will be able to work until the traditional retirement age of 65, because if you lose your job when you’re over 50, you could have a very hard time finding another one with comparable salary. But retiring young is also not an option for many of us, since today’s life expectancy means that most of us can expect to live until we’re around 80.
How many years can you support yourself with no active income, and with the social security system expected to collapse by the time you’ll need it?
One possible answer is that retirement as we know it is gone, that people will not be able to retire at 65. So, if you’re in a “young” industry where ageism is a major issue, you will have to find a way to keep working past 65, even part time and possibly not in your profession. Therefore, starting your own business before you find yourself forced into early retirement might not a bad idea, even if it means working harder than the guy next door and trading some of the leisure time you have now.
Another answer: Go to the T. Rowe Price Retirement Income Calculator, input your data, and see where you stand in terms of your ability to save enough to meet your needs during a long retirement. If you’re on track – great! If not, use the tool’s recommendations to ramp up your savings. You might also need to change your asset allocation and put more in the stock market, although that could prove to be a disastrous decision
if when another recession strikes.
This is a complex topic with no easy answers. But whatever you do, you must ask this question, and you must ask it sooner rather than later: “I am now at point X and want to get to point Y in Z years. How do I make it happen?”
Have you asked yourself this question?
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