I used to get paid to convince young people to care about retirement. Not even just care, but to get giddy at the thought of compound interest. To be invested in increasing contributions with each bump in pay and fully on board with sacrificing a little bit of now for later.
At first, education seemed to be the biggest stumbling block.
If only people knew how much more could be accumulated if saving began at 25 instead of 30. If only people knew it’s nearly impossible to live a comfortable life on social security alone. If only people knew retiring at 65 wasn’t necessarily a given, but something earned through careful planning.
So I worked to educate. To garner up excitement. To help young people connect to their future selves.
The problem is, retirement isn’t something most young people can relate to. I’d even say it’s something most people can’t relate to until they begin making their own plans to exit the workforce.
There’s an antiquated idea about retirement that consists primarily of channel surfing and gardening until poor health forces a move into a nursing home.
Try convincing a twenty-something to forgo a night out for that.
The truth is, retirement doesn’t look like that for a large segment of the population. According to an AARP study, 37% of people ages 50-64 plan to continue working in retirement, 44% of which plan to enter an entirely new field. Many of these new careers are centered around passion and choice.
In an article for USAToday, Kerry Hannon, author of What's Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties, and Beyond, explained the vibrant lives many of her subjects manage to create for themselves in retirement: “One of her favorite career-change stories is a retired Navy officer who loved going to the circus as a kid, so he became the company manager for a non-profit circus. His wife, who was a nurse, became the circus wardrobe designer.” After a few years of reciting facts and hoping the right amount of education would force young people to wake up, I realized something. The thought of not having enough forty years down the road doesn’t incite lasting change. Facts about 401k balances and fees don’t lead to action.
But not in the context of, "just put in these next forty years and then you’ll earn the right to make a choice." Instead: decide what you want enough to make a sacrifice, create your own timeline, and do.
Fear is the underlying message much of the retirement industry likes to convey. And it makes sense. According to a study by the Employee Benefit Research Institute (EBRI), 26% of Americans have less than $1,000 saved for retirement and 64% have less than $50,000. That’s terrifying.
But considering alarming statistics like this are released every year, fear isn’t changing behavior.
Worry won’t make you a retirement super-saver. The prospect of being able to live the life you want now, ten years from now, forty years from now -- that might.
If that’s something you want, retire the word “retirement” and start here instead.
Get Clear About the Type of Life You Want to Live - Now and in the Future
After covering personal finance topics for years and openly discussing financial issues with a wide variety of friends, family and acquaintances, this has become clear to me:
Most people don’t know what they want. Or they have some vague notion of what they want, but they’ve never sat down to map it out.
Without a map, there isn’t a goal. Without a goal, there can’t be a timeline. Without a timeline, it’s easy to fall back on the notion that one day your body won’t let you work anymore. And logically you know you should plan for that.
What if instead, you had a plan of making a career change at 40? This career change would require a move from point A to point B, a savings of “X,” and steps 1,2,3, to start. What if that career change would abolish the need for a countdown to age 65?
In March of last year, I decided I was going to leave my job. I set a quit date, started lining up freelance clients and anticipating the leap. Without savings, I would still be in that job, or somewhere else that looked eerily similar.
I want to continue to have a choice, so I continue to save. I funnel money away for my 30-year-old self in a savings account. My 50-year-old self in various investments. My 70-year-old self in a retirement account. I cover all my bases in the name of choice.
What do you want for your life? Put a picture to different decades of your life. Create a timeline to walk back from. This type of clarity negates the need for worry.
Get Comfortable with Goal Setting and the Process of Saving
In my early twenties, when life had settled and I was comfortably working in my first “real” job, I struggled with restlessness. I had been so busy searching for stability up until that point, I stopped giving myself new highs to reach for.
Since then, I’ve come to recognize the periods of time I feel most plugged into life is when I have something I’m working towards. It can be small or large, but the anticipation of how or when that thing will come into fruition, and what exactly it will look like, is invigorating.
Often times the size of a goal is intimidating because we assume the payback -- the feeling of accomplishment or relief -- won’t come until the end. For a goal like retirement, that could be far away.
But according to Jonathan Haidt, a psychology professor at the University of Virginia, we experience the “feel good” effects of goals while we’re working to obtain them. Often times that feeling is even better than the one that occurs after achieving a goal. “When it comes to goal pursuit, it really is the journey that counts, not the destination. The final moment of success is no more thrilling than the relief of taking off a heavy backpack at the end of a long hike.” So what’s the moral of the story?
Creating a financially stable life you can carry with you through retirement is made easier once you become accustomed to setting and working towards goals. When you get a taste for how great progress feels, saving doesn’t mean sacrifice but a small piece of something bigger.
This life of financial goal setting can naturally breed a successful retirement. So work towards getting in the swing of things now.
Go Beyond Traditional “Shoulds”
Sometimes I’m tasked with writing financial rules of thumb. Spend no more than 30% of your income on rent. Save at least 10% of your income for retirement.
These are good guidelines, but they do little more than keep people in line. Or make people feel guilty for their current spending habits. In other words, they wouldn’t make someone rush home to tell their spouse, “I’m going to save 10% of my income for retirement and I’m just so excited about it!”
Excitement doesn’t come from staying in line and following traditional “shoulds.” It comes from doing something that is uniquely you.
My car is ten years old and not the best for snow. Last year I considered upgrading because it was the “natural” next step. But the problem is, I don’t care about cars. I don’t care about what they look like or even how well they run, as long as they get me from point A to point B. So I sat on the decision, dreading handing over a hefty down payment and paying the (small) monthly payment.
On the flip side, I’m going on four trips between now and October. While I kept costs low, that clearly is an expenditure I needed to prepare for.
Buying a car was a “should” that didn’t fit with my priorities. Spending on travel, on the other hand, might not be an accepted “should,” but it’s my priority.
When you’re living a financial life now that reflects your priorities, building the foundation for that to continue in the future comes more naturally.
I don’t necessarily subscribe to the YOLO mindset. While I like the idea of grabbing life by the horns, my biggest wins -- especially from a financial standpoint -- come from saving and planning. I could jump in my car tomorrow and take a roadtrip for a week. Or I could plan and save for six months to a year and spend two weeks roaming around Europe. I’d prefer the latter.
But while I’m all about planning, I know one thing for sure: Life doesn’t start in retirement.
The notion we’ve created that buckling down and funneling money towards that date forty years in the future? Well, that’s a little depressing. No wonder young people dig their heels in at the thought of it.
Instead, we should be getting clear about what we want life to look like at all stages, becoming expert goal setters (and achievers), and allowing a little bit of retirement to bleed into every decade of our lives.
Yes, the best things come from saving and there are specific, logical ways to do that. But let’s retire the word “retirement” already. Maybe then we could all be excited, not fearful, about the future.