Plan For Financial Independence, Not Retirement

drseussWhen the Social Security program was started in 1935, the average life expectancy was 61 years old. Today, life expectancy is around 80, with more and more people living into their 90s and beyond. Yet, much of society continues to expect people to stop working in their early to mid 60s and retire, because giving up work is “simply what most people do.”

Yet, times are changing. People are working longer. And it’s not about economic distress. The WSJ recently reported that this trend is being driven by many highly educated workers in professional-services jobs who are sticking around by choice, doing something they love to do. Dr. Jan Abushakrah, 69, typically works 60 hour weeks as chairwoman of the gerontology department at Portland (OR) Community College. Retirement isn’t on her agenda. She says “As long as I am healthy and happy every morning when I wake up and have something exciting on my plate to look forward to, it is easy to say I could keep doing this forever.” Personally, I feel the same way. Helping people is a great way to spend your time.

Money isn’t the main factor that people keep working in later years. 67% do it because they want to stay active and involved. 51% enjoy working. 50% want to keep health insurance and other benefits. 47% need money to make ends meet. 38% want money to buy extras. 15% try a new career.

We have our clients target their “financial independence” date rather than their retirement date for planning. This is the date at which you have enough assets for the rest of your life without needing to work for money. The beauty is that once you reach this point, you keep working only if you want to. For those that have a vocation- a higher calling, rather than a job, and are making an impact, continuing to work is a likely possibility.

As someone approaches financial independence and can afford to stop working, they need to ask themselves a series of hard questions starting with “What would I do if I didn’t have to go to work today?” Certainly, there are physical activities, grandchildren, travel, education, charities and lots of other options. What combination produces a “series of successful days” that becomes a successful life? With financial independence, there are thousands of choices. You can make your own “cocktail” of choices every day.

Of course, it is important for spouses to work on these planning issues together. As financial independence approaches, both spouses should create an individual vision of what each wants to achieve in the next phase of life and then compare notes. Sometimes you have a situation where one person in the couple loves their job and the other only likes theirs. That’s a big difference. Communication, compromise and negotiation is key.

At the same time, older Americans are exercising more, which keeps them young. A recent study showed that how we age physically is, to a large degree, up to us. A recent study of recreational cyclists aged 55-79 by King’s College in London showed that on almost all measures, their physical functioning remained fairly stable across decades and was much closer to that of young adults than of people their own age. As a group, even the oldest cyclists had younger people’s levels of balance, reflexes, metabolic health and memory ability. However, the study showed that endurance and strength does decrease to some extent over time. All in all, though, aging is simply different for active people. On a personal note, for those of you who know I annually run the 10k Cooper River Bridge run here in Charleston, I am happy to report that due to some extra training and use of a coach, I was able to run my best time in 7 years last month. Not sure if I can turn back the hands of time, but maybe at least slow them down a little.

With Americans living longer, we suggest you focus on financial independence rather than retirement. At that point, you’re in control. You can determine what every day’s activities will be- hopefully, all things you want to do. You hold the keys to your future. As Dr. Seuss would say: “Oh, the Places You’ll Go.”