If you’re getting close to age 65, and you’re worried about your ability to retire, you can stop worrying right now. To put it bluntly, it’s probably not going to happen.
“Many Baby Boomers were raised to believe in a pension obligation from an employer with whom they spent 25 or more years. So their focus was not on ‘maintaining’ the wealth they created through working by investing,” says Dominique J. Henderson, founder of DJH Capital Management in Desoto, Texas. “They were largely dependent on someone subsidizing their retirement through monthly payments until they died. This is rarely the case now with the transition from defined benefit plans to defined contribution plans. With bad or no advice, you have a generation of people faced with working longer as they have lost nearly three decades of overall stock market growth.”
Let’s take a hard look at the facts and make lemonade out of those lemons, with these six good reasons to stop worrying about retirement.
1. Don’t Worry. Join the Crowd
As a Baby Boomer, you’ve seen plenty of trends come and go, and retirement at age 65 is one of the ones that has come and gone.
Pensions have become relatively rare. Healthcare has become expensive. The 401(k) employee retirement savings plan was supposed to be a modern alternative to a pension. But according to Transamerica Center for Retirement Studies (TCRS), the median total in a Baby Boomer household’s 401(k) account or accounts is estimated to be $127,000.
That’s a nice chunk of change. But a Baby Boomer’s life expectancy is now 82.7 years for a man, and 85.3 for a woman. We’d do the math ($127,000 divided by 17.7 years, or $127,000 by 20.3), but it’s too depressing to contemplate.
You may be wondering how this is supposed to help you stop worrying. Here’s how: consider the sheer size of the Baby Boom generation. If you’re a Baby Boomer, you’re one of a group that sets the trends. And, out of choice as well as necessity, the trend is about keeping active, at work and at play, after age 65.
2. Don’t Worry. You Have Options.
Who retires these days, anyway? In a survey by TCRS, two-thirds of Baby Boomers said they plan to work after age 65, or don’t plan to retire ever.
That’s a radical change in thinking from their parents’ generation. But it should be expected. Baby Boomers, said TCRS president Catherine Collinson, “are overturning long-standing assumptions about working until age 65, calling for dramatic changes in current employment practices, and proving that retirement and working are not mutually exclusive.”
The survey shows that many actually want to work beyond age 65 because they enjoy what they do. But most think they will have to work to maintain an adequate income and decent health benefits. (For more, see Retirement Doesn't Mean You Have to Stop Working.)
Fortunately, “you can work and receive full Social Security benefits just as long as you are full retirement age,” says Mark Hebner, founder and president of Index Fund Advisors, Inc., in Irvine, Calif. “You also need to be careful if you are receiving Social Security disability or Supplemental Security Income payments.”
3. Instead of Worrying, Take a Chance
“Retirement and working are not mutually exclusive.” What does that mean, anyway, unless it’s a reference to the jerk in the corner cubicle who sleeps on the job?
As they reach or approach age 65, workers want to continue to use the skills and experience they learned over a lifetime. But they may want to shift to fewer hours or more flexible hours, a more rewarding role in a related field or even a second career, the survey shows.
That sounds appealing, but the biggest barrier may be your current employer. In the TCRS survey, employers paid lip service to the invaluable contributions of their older workers. But the older workers weren’t so sure about their boss’s real level of commitment. So you may need to take a chance and look elsewhere for alternatives. (For some suggestions, see 10 Money-Making Jobs for Retirees.)
4. Stop Worrying. Declare Independence
If you’re not sure, maybe it’s time to take a risk and consider building a freelance career. You don’t have to go whole-hog and quit your day job. Present your skills on any of the many websites that match freelancer professionals with clients and test the waters. This list, from Entrepreneur.com, is not comprehensive, but it will give you an idea of the opportunities that are now at your fingertips, thanks to the web. (And check out Best Freelancing Jobs for Retirees.)
5. Make Changes. Reduce Worrisome Costs.
Your lifestyle may well have been established decades ago, when you were beginning, or anticipating, a successful career, a family and a comfortable home. Take a look around you and consider: is this where you want to be, for what you’re now beginning – or anticipating – in the future?
Your priorities are, after all, quite different. Being in a good school district isn’t important. Being near cultural attractions and recreational facilities may be. Your home probably has too much space – and too much stuff. The stairs may well be becoming an issue for your knees. And, really, isn’t mowing the lawn a waste of time?
Find a new way of living that’s right for you now. It will probably cost less, taking a little of the pressure off you and yours. This downsizing trend among older Americans has long been predicted, but once again the Baby Boomers have defied expectations by staying put. In a blog posting, realtor Kevin B. Morrow suggests that many Baby Boomers think about it, even daydream about it, but in the end can’t quite take the plunge. A columnist for The Wall Street Journal, on the other hand, speculates that the big wave of downsizing just hasn’t arrived yet.
“Research has indicated that most retirees end up needing only 60% to 80% of their pre-retirement income in retirement,” says Hebner. “Nonetheless, looking to further downsize can eliminate mortgage payments – which is one of the biggest expenses for most investors – property taxes and even the stress that comes with owning a large home.”
6. Make Bigger Changes. Lose Bigger Worries.
About 3.3 million American Baby Boomers are considering retiring overseas, according to a Travel Market Report survey. For most, the initial motivation is a need to live more cheaply. It shouldn’t be. Living abroad isn’t just about cheaper living; it’s about living well. There are many places around the world where Americans can live at a fraction of the price of home, with first-world amenities. (If this is an idea that appeals, see Investopedia’s Plan Your Retirement Abroad.) To being your search around the globe, try this International Living list of best places in the world to retire.
“Living overseas is becoming a smarter choice for many retirees, especially those living on a tighter fixed income,” says financial planner Carlos Dias Jr., founder of Excel Tax & Wealth Group in Lake Mary, Fla. “European countries such as Portugal have lower-cost expenses, such as food, healthcare and even energy. Even though taxes are a bit higher than in the U.S., sales tax is often included into the price of goods, which is actually lower than here.”
The Bottom Line
You’re probably sick of that mantra about “thinking outside the box.” But the thought of retirement at age 65 may be one of those boxes you don’t want to get trapped inside. Consider your many options, and go from there.