13 November 2007 3 Comments Print This Post  Email This Post

How much are you socking away for retirement? Do you think that 10% of your income is going to get you through your golden years? Maybe it depends on just how long your golden years are. After all, when the U.S. government started the Social Security Administration in 1935, the life expectancy for most Americans hovered just over 65. Since retirement was set at 65, those golden years weren’t expected to last to long, or require much in the way of funding. But the average age of retirement has dropped, to 60, and life expectancies have extended to 77 years. It gets longer (and more expensive) every day.

There is some amount of comfort in all those scary figures, though. The very nature of retirement is starting to change. Many baby boomers, for instance, are simply refusing to retire. Instead, they’re switch fields, or taking on new roles in their organizations. They still have some sort of income, and their retirement plans need to change in response. Consider the 401(k) plan. If you hit 70 and ½ years, you are required to begin withdrawing money from your retirement account, whether or not you’re ready to retire.

There’s no sign of this trend slowing down, either. Many Gen Y / Millenials (those people born between 1981 and 1995) are starting to enter the workplace, and most of them seem to have a very different view of work and leisure. Most don’t expect to have the same career ten years from now, and can’t be expected to rely on the same retirement plans that worked for their grandparents. There’s a need for an element of flexibility.

I feel I’m a pretty good example of this situation. I freelance, so I don’t have an employer holding my hand through the retirement planning process. I like Roth IRAs for the tax benefits, but I don’t feel that it’s going to meet all my needs. The first reason for that is the fact that I don’t really plan to retire. I like my daily grind — I have a lot more control over it than any of my relatives had over their 9-to-5s, and I flat out like what I do. I know that I may have to cut back, though, and that’s where my retirement planning comes in. I need a retirement plan that offers me supplemental income.

I’ve got a work in progress: my retirement plan, as it stands, is based on that good old Roth IRA. But it’s not my end all and be all. My retirement goals focus on building income-producing assets. The classic is real estate, but for some diversity, I like a wide variety of investments. And, believe me, I’m not planning on any Social Security.

Is a classic retirement strategy going to work for you?