Why You Should Never Fully Retire

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Millions of working people want nothing more than to pack it in and retire. The Internet has spawned websites and chat rooms dedicated to the topic. People swap stories about what they’re doing to make it happen, and how it’ll feel when they get there. But like so many other aspects of popular thinking these days, the desire is disconnected from reality. That’s why most people should never fully retire.

Consider a recent survey that shows that the average Baby Boomer, the generation currently retiring in waves, has less than half as much money as they think they’ll need to retire. And even the amount that they think they’ll need is almost certainly less than what they actually will need.

But that’s only the beginning of the problem.

Why You Should Never Fully Retire
Why You Should Never Fully Retire

Systems Don’t Always Perform as Expected

The news media has been awash in stories about failing pension systems. The poster-child pension failure has been the Central States Pension Fund, which covers nearly 300,000 retired union workers. As active union workers have declined dramatically in recent decades, there aren’t enough workers to fund the plan for all of the retirees collecting benefits from it.

This is hardly an unusual situation, and private sector pension plans aren’t the only problem area.

Depending on which definition is used, it’s now estimated that state and local government pensions have a cumulative funding shortfall of between $1.2 trillion and $4.1 trillion. The problem is more severe in some states than in others. States like California, Illinois and New Jersey dominate the headlines, since their problems are more extreme. But it’s a growing problem nationally.

What’s making the situation more complicated is that the shortfalls are developing at a time of a supposedly expanding economy and rising stock market. What becomes of these pensions if the stock market goes into a prolonged bear market cycle? I suspect we’re going to find out soon. And when we do, bad will go to worse much more quickly than anyone thinks.

Social Security Benefits – a Strong Argument to Never Fully Retire

I’m not in the chorus of people who think that Social Security is going bankrupt. Somehow or other, the government will keep benefit checks going out. They have no choice.

But I’m equally confident that benefits will be reduced through other means. It may be in the form of raising the retirement age (which is already happening), gradually reducing future benefits, or making payments in seriously inflated dollars.

I suppose that’s really all a smoke and mirrors alternative to formal bankruptcy. After all, it all brings us to the same end, which is a gradual and effective reduction in benefits.

Just Because You’re Retired Doesn’t Mean You’re on Easy Street

This is the ultimate moral of the retirement story. Our entire economy is tightly balanced, and that includes the retirement sector. The stock market reversal that happened during the Financial Meltdown made the country aware of this problem. But the fundamentals have not been addressed since. Eight years of economic and market recovery have failed to make the problem go away.

I’m afraid the days of retiring to a life of bliss for over. Just because you’re retired now and living comfortably doesn’t mean that it will always be this way. If you’re on a public or private pension, you could be at real risk of a serious reduction. Social Security meanwhile could turn into a slow bleed.

Enjoy the benefits of both at the moment, but keep planning for the future, just as you always have. Retirement isn’t a magical time in life, when all cares disappear. They’re still there, they’re just temporarily covered over with income streams that we’re being promised are eternal.

”Any one who retires in this economy is a fool”

That was a warning from my Uncle Jimmy at age 88 (now 91). We were having dinner at their house, and in passing he mentioned about going to work on Monday. I was stunned, having thought he had retired years earlier. But that wasn’t the case.

A true example of a self-made millionaire, he feels strongly that the current economic situation doesn’t support full retirement. He made his money in real estate, and continues to do maintenance work on the few properties that he has remaining.

If anyone could outright retire, it would be him. But I’ve known others like him. Self-made financial successes, who see no percentage in retirement. Oh sure, he slowed down, and he does the things that he wants. But he always keeps his hand on the economic handle.

There are some people out there who are so prosperous that they will enjoy the TV version of retirement. But many of those people are rich, and already enjoy that lifestyle during what are the working years for people ordinary means. But for the rest of us, uncertainty continues to loom large.

We ignore it at our own peril.

What’s the Solution? Never Fully Retire!

That’s at the top of my list, but I’ve added three more strategies.

1. Plan on having some kind of earned income for as long as you can.

This doesn’t mean you can never retire. But by having at least a part-time occupation, you’ll be less dependent on savings and Social Security. That should help you weather a pension cut, or at least to avoid outliving your money. I plan to at least continue freelance blog writing, hopefully until I die. And fortunately, it’s one of those skills/crafts that I can do even at an advanced age.

Not only does some form of occupation help to ensure your ability to survive financially, but it also has social, psychological and emotional benefits as well. Just having a reason to get up every day is an often under-estimated advantage as we age. As well, keeping an active occupation enables you to make a full-on reentry back to working life, should that ever become necessary.

Have you seen those retirees who sit around the house watching TV all day? Don’t be – or plan to be – that person! I don’t know anyone who lives like that who’s happy. During program breaks, all they do is complain.

2. Don’t be in such a hurry to retire.

The earlier that you retire, the longer that you will need to provide for yourself financially. That means that you will begin tapping your retirement savings early, as well as drawing Social Security benefits. That can make sense if you’re either chronically unemployed or underemployed by age 62, or if you have serious health problems. But if you do, your Social Security benefit will be seriously reduced.

Statistically, 48% of women and 42% of men begin collecting Social Security retirement benefits at age 62. But you can increase your monthly benefit by 6% per year if you delay collecting your benefit until you reach your full retirement age (FRA). You can increase it by an additional 8% per year if you delay collecting benefits past your FRA, up until age 70.

Under that formula, a $1,400 per month benefit at age 62 would increase to $2,000 per month at age 67. That’s the FRA for anyone born from 1960 or later. You can increase the benefit further, up to $2,480 per month, if you delay collecting benefits until age 70.

3. Plan to keep your expenses low.

If you’ve been frugal all your life, you have a built-in advantage. You can just continue the same lifestyle. Retirement is all about doing more with less, and that’s a true talent. But if you’ve been living well, perhaps because you can afford to during your working years, you may be in for a rude awakening.

The problem with a high consumption lifestyle is that it can be crippling in retirement. Nothing about it affords you the discipline necessary to live on an income that’s fixed at a lower level. This is especially true about the big expenses, like housing and cars. They’re built-in expenses, and if they’re high they cause a chain reaction of higher costs across your budget.

Live light and on the cheap, and you’ll live a better life with more options.

4. Save and invest money like your life depends on it – because it probably does.

For all the reasons we discussed earlier, you still need the largest retirement portfolio that you can create. Never assume that you’ll be fully insulated by high pension and Social Security benefits.

I’m one of the world’s greatest cynics when it comes to the promises of investing your way to retirement riches. But at the same time, a generous investment portfolio will provide you with a large financial cushion. Even if it does nothing else, it will give you maneuvering room in sudden changing circumstances.

In addition, income from a retirement portfolio can supplement Social Security, pension and earned income, helping you to stay comfortably afloat longer. It’s about applying the principle of multiple income sources to retirement. And given that the average person is living another 20 to 30 (or more) years after retiring, this is an absolutely necessary step.

Don’t worry if you haven’t been able to save up enough retirement savings to give you a golden retirement. That’s great, if that’s what happens. But even if it doesn’t, just having a gigantic emergency fund can soften any number of financial blows.

Have you been paying attention to the news about pension shortfalls and benefit cuts? Are you at all concerned that your retirement may not be as secure as you hope? If so, what are you doing in response to these concerns?

( Photo by frankieleon )

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30 Responses to Why You Should Never Fully Retire

  1. I retired at 60 and do not regret it. No pension but I have way more money than I need. However I still do part time side gigs for entertainment and they provide the six figures of annual income that completely cover our cost of living. But not for the good reasons you stated. In my case it is for the mental exercise and to keep my brand alive, just in case I decide I want to work again full time. However I agree with you, few have my level of resources and those that do still may want to keep a toe in the water in case they change their minds!

  2. You’re hitting on the “keeping your options” open idea Steve, and I think that’s what most people need to do. Good on you for having more money than you need, but I’m sure you can appreciate that that doesn’t describe the average person. It seems that you have a talent, which is something worth pursuing for anyone who is in or contemplating retirement. I believe we all have talents waiting to be developed, and retirement is an excellent time to bring them out. The problem of course is that so many people stop striving when they retire. From my perspective, it’s better to pursue your talents for all of the reasons you listed.

  3. This is a perfect article for my life. I have a state pension. I retired at 48. Mainly to pursue my own business. I never think that this penson will last the rest of my life. I am glad I have it now because it sustained me while I basically made no money my first four years in business.

    Things are better now. I’m starting to see some profit. I operate on the assumtion that social security and my penson will not be there 20 years from now.

    I have zero faith in any system run by a state or federal gov.

    I’ll never retire. For 20 years I used to work two sixteen hour days and had four days off. Every week. It got boring. You can only fish or play so much golf or sit on so many beaches or whatever you like before it gets lame and your brain turns to mush. It’s a complete myth.
    This dream has been shoved down our throats here in America for 100 year’s. It’s a lie. I never plan to retire. Not until I’m dead.

    We were meant to keep moving in life. If your dream is to say travel. Do it now. Even if it’s once a year. You can do everything as someone without a job. Maybe not as much but you can if you plan it right.
    Also even if your retired I doubt many would have money enough to travel around the world for weeks or years at a time.

  4. Obviously I completely agree Tim! If anyone’s ever actually calculated the cost of the idle retirement-travel the world-do any/everything you want version of retirement with realistic numbers, they’ll find that you need well over $100,000 a year. That’s not retired, that’s rich, and few people will reach that level. In the years that I did income taxes it was very rare to see anyone fully retired with a six figure income. Most were half or less, and that was a generally well-to-do clientele. I’m not saying it’s not possible to reach that level of retirement income, but let’s face it – how many people are willing to do what it takes to reach that level?

    In truth, what we should all be looking for is balance throughout, much more so than retiring rich. I agree, travel and enjoy life when you’re young. The good habits you’ll acquire through living a balanced life will carry over into the retirement years. Actual full retirement isn’t necessary in most cases. People routinely dismiss the non-financial benefits of work, as if it’s a prison sentence. I suppose that it is if you hate your work or your job, but that should provide the motivation to actively seek work that you like. I can’t imagine working a lifetime at something you hate doing so much that you live to retire. And I’ve seen too many people working happily in their retirement years to think otherwise.

    Use retirement income to create income sources that you enjoy doing, and you’ll never run out of money. Sit back and assume your pensions and SSA will cover you come what may, and find your golden retirement disrupted at an inconvenient time.

  5. I did want to mention one other thing that people take to much for granted. I believe it is crutial that when you finally decide to leave a job by way of retirement that you cannot be in debt, period.

    No morgages, car payments, credit cards. Nothing and I mean nothing. That to me is of as much importance as having savings. That is part of a essential savings plan.

    It took me 30 years to reach that status. While I was waiting to see some profit from business and just living on my penson. Which isn’t a huge amount. I would have never survived if I had debt.

  6. Absolutely! However, the trend is going the wrong way. Baby Boomers, many of whom got too comfortable being in debt, carry indebtedness into retirement. The statistics on this are ugly. Debt payments are income reducers, and can make retirement very uncomfortable, and even impossible.

    Too much debt can even nullify a large retirement investment portfolio. Staying out of debt is a critical component of keeping living expenses to a minimum. You can’t retire comfortably if you’re carrying debts from yesterday into retirement. Not to mention, that debt limits your options and maneuvering room.

  7. I’ve had a 30-year career of above average income, way above average saving, and way below average debt. My assets generate enough low-risk income to support at least 2x my current lifestyle. I did everything right.

    To stop working, I want and need good health insurance for the next 10 years. Obamacare is unacceptable and its future is uncertain anyway. Other options like health-care ministries don’t pass the sniff test either. How ridiculous is it that I would gladly buy insurance at almost any price, and it simply isn’t available? That’s a twist that I didn’t see coming.

    So I come to work every day only for the benefits, and everyone knows it. I know I’ve had my last promotion, I have been and will be “targeted” (as has been written about elsewhere on this site) and I just have to tolerate it for the next 11 years or until I am shown the door. Assuming that Medicare doesn’t get pulled away from me by then.

  8. All true Larry. The whole health insurance situation is completely unstable, especially if you want to retire early. Look at how employers change plans virtually every year trying to keep it a bit more affordable. And we have no way of knowing where Medicare will be in 10 years, given that it’s already in deficit.

  9. What really irks me now in my early 50’s, is that the underachievers of my youth – the ones who ended up working in low level government jobs – are all retiring now with guaranteed pensions and benefits, and brag that “they earned it”. While corporate pensions and retiree benefits were axed, for those of us who went to college and set our sights higher. It’s insane. And I write this with no disrespect intended towards those who worked public-service jobs, but we need to bring their gravy train to an end somehow.

  10. No disrespect intended? Are you serious? I am one of those low-level government employees you speak of.
    I spent 25 years in law enforcement and believe me when I tell you I earned it.
    I’m sorry your disgruntled. I didn’t see you out there facing people coming at me with knives, getting spit on, jumped and had feces thrown on me. I didn’t see you there working Christmas eve, day, Thanksgiving day, weekends for 25 years.
    All for a base salary of 69,000 per year.

    Yes, I have a pension and healthcare. I EARNED IT !!!!

    I take offense to that high minded low-level garbage that you speak of.

    Have a good day !!

  11. On the other hand Tim, there are a lot of people in government – the majority by far – who haven’t faced knives and feces – and got what you did, in the way of early retirement and healthcare for life. What Larry is talking about is a serious problem. Government workers are getting a better (and earlier) retirement packages than the taxpayers, sometimes with something approaching 100% of salary for life. So maybe we exempt police, fireman and EMTs, but what about the rest? There are some 22 million government employees in the US, and what they get in retirement and healthcare is crushing state and local government budgets and raising taxes. A clear divide is developing between government and non-government workers, many who now earn more than people in the private sector.

  12. Yeah, I figured someone would take offense. They always do. Just like my retired cop and prison guard friends who are living a life of total leisure in their mid-fifties, insisting that “You people who make six-figures, you will just never understand.”

    But here’s what you don’t understand. Go to a site like Fidelity.com, someone that sells annuities. See what it takes to buy a life annuity that provides the pension you are now getting. That number will be in the MILLIONS of dollars. None of you seem to truly appreciate that.

    Yes, I’ve saved a few millions on my own. But I can’t buy the health insurance that you’ve also been given. And that’s not fair.

    You guys are bankrupting own towns and cities and states. I don’t blame you, you were offered a sweet deal and you gladly took it. But it can’t continue. The system needs to keep you working – at something – in your 50’s and 60’s. Guaranteed pension at only 25 years employment, simply must end.

  13. Larry – I agree guaranteed pension after 25 years is overly generous for most government workers. But when you put your life on the line as police, firemen and EMTs do, I can see it. We wouldn’t expect the members of the armed forces to put in 40 or 50 years, so we have a precedent. We can’t expect people who risk their lives to work the normal tenure. Most of us in the private sector don’t risk our lives.

    Maybe as an alternative, people in dangerous jobs can be moved inside after so many years on the front lines. I do agree something has to be done about the public pension system, it’s too generous to too many workers, and there needs to be reform. But in typical fashion, the reforms will be forced by fiscal crises, and the outcome will be worse than anyone expects.

    Tim, I think your benefits are grandfathered, and protected. But I have a couple of firemen in my family, and they say that benefits are being reduced for new hires. The later you’re hired, the less generous your retirement will be. They don’t like it, but they get why. I think something like that is inevitable. There was a guy who wrote in a comment on this site (I forget the article) who was a government worker retired on a $60,000 pension. When you compare that to the average Social Security benefit of about $1,400 per month, it’s an imbalance that has to be reconciled. There should be special benefits for people in dangerous occupations, but it certainly doesn’t need to be across the board. A teacher, maintenance worker or administrative employee getting 25 and out at full pension and health insurance is nothing less than ridiculous.

  14. Kevin, I totally agree that no one should have to put their life on the line past about age 50. That’s why I said that “the system” must find other job tasks for them. We can’t just hand them a multi-million-dollar pension annuity at that point and expect nothing more from them. Heck, most of the retired cops I know also work “off-duty” jobs like sitting in a rented police car at street construction jobs, and that lets them double-dip into SS as well. I refer to that with a word that starts with “sc” and ends with “am”.

    And I don’t expect anyone who’s currently riding that gravy train to engage in productive discussion. Tim shows that “I’ve got mine” is the attitude, and I’d probably react the same way.

  15. I get your point Larry, but you’re framing it in a way that’s condescending. To a person who spent 25 years insulating people like you and me from desperate characters, it goes beyond putting the label of “I got mine” on it. If you’ve saved a few million, as you say you have, your humility and empathy should be higher than it is.

  16. Well you can’t have it both ways. Such jobs are either deserving of a free permanent paid vacation after 25 years, or they aren’t. Personally, I don’t think any occupation is entitled to that. As you have noted, new hires are no longer being offered such lavish benefits.

  17. Hi Larry – Not to beat this point to death, but the death of Ventura County sheriff Ron Helus in the California bar shooting Wednesday night is a compelling reason for 25/30-years-and-out for police, and I’d add firemen and EMTs. There’s just so much combat an individual can stand. 25 or 30 years is enough.

  18. This is terrible. I always had this feeling of dread if I stayed past my eligibility for pension.
    Like I was tempting fate. I feel terrible for this guy and his family. 29 years in the job and that’s how it ends.
    I was so grateful to get out on my terms.
    If you stay long enough at something like this your odds of living go down quick.
    So yes, without that pension I would have stayed forever and probably would not have lived long enough to retire.

  19. Kevin, I don’t think you published the last comment I wrote on this topic. Should officers be entitled to “non-combat” duties after an age where physical ability might be a concern? Absolutely. “The system” should provide for that. To completely discharge them to a permanent paid vacation with benefits, is not financially responsible. Especially given that many of them continue working in new careers anyway.

  20. Larry
    Seriously if the state offered me a office job maybe investigating gang crime or trained us in cyber crime I would have loved that. Using a computer and numbers or working on gang crime. I did that unofficially. I used to keep a notebook of tattoos and symbols. Things like that but they didn’t.
    I was either from lines or nothing.
    They should train officers for this.
    If they boosted are pay to six figures I would have forgone the benefits and pension and funded my own.
    Starting pay was in the 40’s
    Lower when I started.
    I never took the job for a pension. I needed a job. It was there long before I got there.

    I was always grateful for it. I retired and started my own business. In the beginning that pension gave me a chance because I didn’t make a dime of profit the first three years.
    I so now make a decent profit but it was a struggle for a few years.
    I don’t know who you know. Maybe you know some real kmuckleheads. The guys I know are very grateful for that pension.
    Which by the way goes down every year.

    I don’t wish to argue but to suggest im not grateful or didn’t earn it got personal.

    I won’t respond. That’s all I’m gonna say. You have your opinion I have mine. I respect people’s opinions like I would want mine respected.

  21. Tim, I’d love to quit my job and be backed up by pension and benefits that give me the freedom to get a new business up and running. I’d love, love, love it. Who wouldn’t?

    My cop friends, who are by no means knuckleheads, also mention “six figures salary” as if that solves a lot of problems for someone like me. It really doesn’t. I have to save (furiously) for my retirement, which I have to fund completely for myself. As I tell my friends, you were given a pension backed by an annuity that would cost me a few million dollars to buy. I can’t get decent retiree health insurance, at any price. I am stuck in my job until Medicare age.

    By no means did I disrespect anything you said. Those are the facts. You got a sweet deal and you took it. You would have been crazy not to. But as Kevin has also written, our governments cannot afford to keep doing this.

  22. Larry I can see your point, at least to some degree. Maybe 15 or 20 years of street duty, followed by something like the kind of work Tim suggested. But from what I’ve heard from cops, being one can mess with your mind. You deal with the darker elements of society, become cynical and fearful, but you’re expected to transition effortlessly into civilian life at the end of each workday. I think at some point, early on, you have to get out of that. You have to have the option to move into a different phase of life that allows you to move out of that mindset completely.

    I’ve heard this from firemen and EMTs as well. They see and experience things that are nightmarish, and often life-threatening. For example, I know a cop who made a routine traffic stop. After he gave the driver a ticket the guy backed up the car, ran the cop down, then drove over his arm. The cop went out on disability then retired (he was 50 or 51 at the time). I don’t think you can do your job after an episode like that, because you’ll always be looking for a similar outcome, and that will prevent you from doing your job. As people who don’t put our bodies and lives on the line everyday, I don’t think we can appreciate what that’s like.

    Now imagine something like that happens to you, and you have a spouse and kids at home. I can’t wrap my arms around that – can you?

  23. I understand what you’re saying.
    Understand this, at least you have a job that pays well. At least you have the chance to save. Have a chance to fund a retirement. There are many people that would look at you and say the same thing.

    There are so many people in this country that have nothing. No savings, No retirement, No healthcare at all.
    There are many guys like you who have lost their jobs and were wiped out at 50 years old and had to start over.
    I live in one of the poorer sections of the city. I see people who struggle daily in low paying jobs. Working at McDonald’s. Guys who used to work in steel or factories. Had their jobs eliminated and were thrown out on the street with nothing.

    So I would say, consider yourself lucky. You at least have a chance. So do I. I got lucky, yes.

    I am not one of those guys that think I’ll have this pension for life. That is why I started my own business. With the state of the pension system all over this country, I do expect it to implode at some point.

    I have said this many times on this blog. We are all one disaster away from humility.
    So count your blessings and move on with your own life. Do what you have to. Stop focusing on what others have. Your energy would be well served to spend time in other areas of life.

    I can also say this. Once my business makes what I want it to. I want to donate my pension check to others that could use any kind of break in life. I’m sure both of us have had a few.
    Isn’t that why we’re here? Not to live for ourselves. I have clothes, A roof over my head and food. That’s all I need. The rest is selfish window dressing.

    Anyway, that is my mindset. I don’t mean to lecture but we both have more than 90 percent of the country.
    Just be grateful for what you do have. Not what you don’t.

  24. Well put Tim. In the word’s of that genius philosopher, Forest Gump’s momma, “There’s only so much fortune a man really needs and the rest is just for showing off”. It was a movie, but there’s more than a grain of truth in it.

    I was one of those guys who was washed up at 50, but I consider myself completely blessed (not lucky) to have recovered to the point that I’m better off now than at any other time in my life. I’m living proof of James 1:17: Every good and perfect gift is from above, coming down from the Father of the heavenly lights, who does not change like shifting shadows.

    I try not to ever forget that, by patting myself on the back for any assumed brilliance. We all need to step back and count our blessings, and never assume we’re somehow special. We need to celebrate our blessings, while also being ready to share them with others. That can be in the form of money, services or ideas. Life isn’t long enough to think in any other way.

  25. Well this discussion continues to meander in interesting directions. It seems to have returned to where it was when I first got in.

    I certainly am grateful for what I have. I developed my God-given talents and have had a long career in a relatively high-paying profession. I survived a period of mid-career unemployment. I’ve had some health scares, and based on my family history it’s likely that I will have others. I know that I have a finite amount of good health left in me, which is true for all of us. And because I have been able to save and save and save some more, I am financially able to leave my job (which does not allow part-time work) and be able to better enjoy the time I have left.

    If only I could find good health insurance, because it simply isn’t available to me.

  26. The health insurance boat is one most of us are in. My thoughts on that would take us in an entirely different direction, because I’m not optimistic on how it will turn out in the short run at least.

  27. I almost value that as much as the pension.
    The misconception is that I pay nothing.
    I pay 500 per month. It comes out of my pension. I realize it’s much lower than what every one else pays but it’s not free.
    Not for me.

    Alot of those benefits are disappearing. When I got hired it was free but are union agreed to let us start paying for a bigger raise. Which was a mistake but you couldn’t convince anybody at the time
    It raises every year now. It has for the past 15 years.
    Whatever we made in a measly raise was sucked up by healthcare
    Are idiot members, not all but the majority went for the quick cash. Not thinking into the future

  28. This was a classic example of what we talk about on here.
    Three quarters of the people I worked with lived way beyond their means and were desperate for cash.
    Debt makes you do stupid things and takes away your ablity to think clearly. It takes away your freedom of choice.
    The members gave away a future benefit for a quick short term fix.

    Most guys I know now that voted for that crap in the late eighties tell me now they wished they would have listened.
    So the healthcare goes up yearly but the pension does not.
    So over five years mine has eroded. Plus inflation plays a part in it
    So it’s not what it appears.

    That’s why most these guys still work. At least in this state they do.

    Here’s what it also did. The state then used that and offered a state plan that was half the price but totally watered down from the old ones.
    So it forced all these guys into it because they were drowndimg in debt.

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