Jack retired four years ago, at age 62. What he experienced is probably like a lot of people have: you are not prepared for a lot of increases that come your way, like inflation, Medicare, medical insurance that drops and you have a subsidiary that must be picked up, and many other things. Some experts say you need at least 80% of what you were living on before you retired, but maybe it would be a wise idea to plan for 110%. No surprises, then! The reason for that is, when the time comes, you’ll actually need just as much as when you were working – your expenses do not go down after retiring.

I heard many people tell me this before: many times, monthly expenses actually get higher. Not because you’re necessarily living a more leveraged lifestyle, but what happens is that you now have a lot of freedom, and there are several things attached to that. Well, freedom usually means that you want to go out and have some fun, and fun sometimes cost money. The other side is, as we all get older, medical costs tend to go up, not down. If you have an illness, you have to be prepared for that. That’s one of my biggest fears. You know, Medicaid, Medi-Cal, Medicare… How much is that going to pay? And how much do I have to pay? I think they’re going to make us pay a little bit more, and more, and more. Where they are going to get money? Raising taxes? The point is, in retirement, you need to have money. Or are you not going to retire? And I will say this: you don’t have to retire.

Retirement is not necessarily what we all think it is – where you just stop working and kick back, and you don’t do anything. No, we might retire from what you don’t want to do, to something you do want to do – and still get paid. You might cut back on your hours, but not truly “retire”, maybe work part-time, or have special projects like becoming a consultant. There’s different ways to do it and I would suggest that you don’t just cut it dry completely, because that would be a shock to your systems, trust me (both your financial system and your mental system). All of a sudden stop working is hard to do.

The US retirement pension system really never was all that great. People talk about the good old days when companies provided pensions, but even at its heyday only about 34% of people ever got pensions. The problem with pensions is there’s always assumptions on A) being able to continue to add to the pension system over time every year, and B) the assumptions on how much that you’re going to make on that money that’s in the pension system, and those can fluctuate a lot more than I think a lot of companies realize. But most people thought that instead of the new 401k that they became, that before everyone got pensions. No! At the height of the system, only those 34% of the workers were given the benefit of a pension at all, leaving most of the workforce out of the equation. That’s because most companies did not provide pensions - only the big ones. So it’s kind of a false assumption that the good old days where that good.

Most of the jobs in America are found at small businesses. So the 401k programs offered by most (though not all) companies today provide a good solution, but the social security program is really straining a bit because we can’t afford it, no matter how you stretch the numbers down the road, it’s just not going to have enough money. So what is the new retirement reality for us, everybody here? If you are 58, the social security is going to be there for you, but maybe it won’t for the next generation, therefore you should not depend on it, ‘cause who knows if it will become a ghost of itself later on? A fraction of a once might giant? To survive and thrive in the new American retirement system, maybe you shouldn’t be “retiring”. Think about it.