“I need to retire from retirement.”
— Sandra Day O’Connor
Ms. O’Connor’s comment was likely lighthearted… For most Americans “retiring from retirement” (assuming they get there) won’t be a joking matter.
Last month, The New York Times published an Opinion piece entitled “Our Ridiculous Approach To Retirement.” We won’t disrespect the writer by reproducing (or even paraphrasing) the article here save these chilling points…
“Seventy-five percent (emphasis ours) of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.”
“Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system? Consider what would have to happen for it to work for you. First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 percent of every dollar you earn. (Didn’t start doing that when you were 25 and you are 55 now? Just save 30 percent of every dollar.) Fourth, earn at least 3 percent above inflation on your investments, every year. (Easy. Just find the best funds for the lowest price and have them optimally allocated.) Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die.”
If you have read much of our writing, you know that we don’t really agree with saving as the sole approach for retirement. It is an important component to be sure, but with ever rising costs of living, it is flawed to think we can raise our saving rates to levels sufficient to achieve the kind of account balances the author suggests are needed in retirement. As such, additional policy directives would likely do little more than increase the already excessive burden on workers’ backs.
We suggest individuals develop or purchase a means of sustainable cashflow generation (short-term trading or more passive income streams such as real estate, annuities, etc.) as a way of supplementing retirement savings… but that is a topic for a different day/post.