As a financial planner, one of the most common things I hear is about everyone’s need to “save for retirement.” The phrase itself is vague, impersonal, and unspecific. People who are decades away from the presumed end of their working lives have “saving for retirement” as a primary goal. I’ve also heard from plenty of people who are terrified of retiring for fear of what they will do next. Then, many others have a really thoughtful idea that they are very excited about. It’s clear that “savings for retirement” is not a one-size-fits-all financial strategy; in fact, I would challenge that we need to expand our ideas of the retirement savings paradigm. 

To be clear, I can’t emphasize enough how important it is for people to save in general. But, I’ve become a little disillusioned with the idea of “retirement” as it has evolved from its traditional meaning. Many in the personal finance field are fixated on the idea, and, as a consequence, design our finances with the main goal of saving for this “cliff” event later in life.  

Redefining the Retirement Into Stages of Life

Before we get into the numbers, I want us to pause and ask: What would your “stages of life” even look like for you? At Thinking Big, we try to avoid using the word “retirement” as much as possible. Instead, we help clients envision what the various parts of their lives may look like. The NY Times recently called attention to this rethinking of life stages and how we can adapt our systems and institutions for longer life expectancy. 

The article points out that the concept of retirement neglects the fact that, as human beings, we crave meaning, connection, and community throughout our lives. Oftentimes, work provides us with a lot of these important things. Fellow financial planner, Mitch Anthony has spent his career studying this concept, wrote about it in his book, “The New Retirementality.” In the book, he advocates for helping people think more about what the next stage of their lives looks like rather than simply focusing on the numbers. 

When you look past the numbers, you can really consider if “retirement” is the right way to think about your next steps in life. But making that shift can be hard. We’ve been taught to think about arbitrary ages (according to social security benefits, for instance) when we should stop working and then live off what we have earned. I encourage you to challenge what you’ve been taught and focus on what’s right for you personally. The reality is that the arc of each person’s life varies greatly from this traditional paradigm. One person might not have a straightforward idea of where they’ll be with their career in 20 years. For another person, that vision may be crystal clear and include changing career paths several times. Still another might plan to dedicate certain parts of their lives to more travel and leisure activities, rather than saving them for “when they have time.” The options are endless, particularly when you let go of “saving for retirement.”

How Retirement Savings Can Go Wrong

First, let’s address the savings feedback loop and how it can be harmful to our financial life. Too often, we hear that you should be saving for retirement. But this is such a personal and oftentimes “unknown” thing that it can become a crushing burden. You could end up feeling stuck needing to earn a certain amount of money in a job even though you hate it. The feedback loop tricks you into thinking you need this job so you have “freedom” in 20 years instead of a job that earns less but makes you happier? (Though I want to point out that the assumption that you have to earn less to enjoy what you do is not true and often harmful for a work-life balance.) 

How does this get reflected in your finances?

What if we replace the word “retirement” with the idea of saving to have more choice later in life while being protected from the unexpected? Let’s look at a few different approaches:

1. Traditional: You want to be able to stop working completely at a certain age. In this case, you’ll run the calculations and figure out how much you need to save and how much to invest.  
2. Transitional: You envision your career path as full of different transitions. You plan to continue working in a demanding, higher-earning job that allows you to save for a certain period of time followed by a different type of work that is lower-earning, but more sustainable, yielding you more working years. In this case, we would identify which savings strategy feels most comfortable to you in different stages of your life. 
3. Continuous: You have the type of work that, as long as your mind is sharp, you can continue to do well into your 60s, 70s or even 80s. In this case, working at much reduced levels and incomes later into life is a huge financial boon. We’d look at how your ability to continue working changes how much you actually need to save for things like health and living expenses.  

These are a few, very simplistic examples. Our lives, of course, are far more complex than that. 

We can all agree that the more we can save, the more choices we’ll have later on in life. However, we still want to make sure that our savings actions and strategies are actually helping to actualize the life we want – rather than keeping us stuck in an old paradigm.

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