Historically, retirement planning has been likened to a three-legged stool — consisting of a corporate pension, Social Security and personal savings. Baby boomers saw the pension fade from existence, leaving them to balance on retirement planning stilts. For younger generations, however, the retirement situation can seem even worse. Sometimes, it feels like it’s all on us. We’re left with only a retirement planning pogo stick.
Further complicating matters, doctors suggest that the length of life Generations X, Y and Millennials can expect may exceed that of our parents and grandparents. We’re likely to live a long time, but our quality of life — to the degree that it is improved by cash flow — is in question because of the heightened savings burden.
Last week, I shared two “silver bullets” — MOVE and WORK— for hopeful boomer retirees who may fear that a 14-year stretch of economic uncertainty has put their goal for a comfortable retirement out of reach. Here’s how these two concepts can be applied to younger generations:
MOVE: The disparity in the cost of living across our great country is so vast that it’s almost unfathomable. I explained how a couple on the home stretch of retirement planning could take a failing financial scenario in Alexandria, Va. — a typical Mid Atlantic suburban environment — and transplant it to Knoxville, Tenn., where the exact same home equity and level of retirement savings would allow them to live happily ever after (financially speaking).
The advantage younger generations have is that we can decide today to benefit from this geographic arbitrage tomorrow. You can choose to live in a higher cost of living area now while keeping an eye on another area to which you might transition later in life, giving your plan for financial independence a turbo boost. Or, for those whose jobs aren’t dependent on their geography, you could move to a lower cost of living area now. This would allow you to save more every year. I recently put my money where my mouth is, transplanting my family from suburban Baltimore to Mount Pleasant, S.C. Check out the cost-of-living in your area and dream about others with this tool: Sperling’s Best Places.
WORK: The second silver bullet for near retirees is to transition from a higher-paying job that feels like a grind to a dream job that pays less, Fully recognize that, both medically and financially speaking, we’re really all better off working indefinitely. The bad news for baby boomers is that many of them grew up with a more utopian view of retirement. They expected to work for “X” number of years and then cast off the chains of employment to spend their latter years in the lap of leisure, if not luxury.
Younger generations, however, should simply never buy this lie, which is propagated by the behemoth financial industry. The financial industry would prefer to dangle before us the carrot of unencumbered bliss, always on the horizon, so that we’ll stay on the hamster wheel, hording in the accounts they manage for fees and commissions. Younger generations should simply expect that we’ll be working indefinitely, and, facing that reality, we should labor tirelessly to seek and find the career that doesn’t feel like work. We can be financially independent as early as our 30s, not because we’ve saved a few million bucks by then — although that wouldn’t hurt — but because we’re working the way we WANT to, not the way we HAVE to.
What younger generations have lost is the hope that we’ll be able to rely on someone or something else to take care of us financially in our later phases of life. What we have gained is the freedom and flexibility to pursue a life that is uniquely ours. Enjoy every minute of it!