Will You Have to Work During Retirement?

I remember attending a conference decades ago where a financial advisor described retirement as a three-legged stool: Social Security, your company’s pension, and retirement savings. He said that, with these three sources adequately funded, clients would be able to enjoy retirement without having to work.

A great deal has changed since then.

We all know about Social Security’s solvency problems. We also know that most pension plans have been replaced by do-it-yourself 401(k) plans and the like. Meanwhile, the nation’s personal savings rate has varied from as low as 0% to as high as 5% just in the last 10 years.

We’re living much longer. It’s a double-whammy. We’re saving less than ever at the very time we need to be saving more than ever.

This leaves you with four choices when it comes to funding retirement:

  • You can contribute more money to your retirement savings.
  • You can invest in higher-risk investments, hoping that higher returns will compensate for the reduced amount you’ve saved.
  • You can defer retirement, and keep working.
  • You can do a combination of the above.

You probably know people who retired without sufficient funds. Some of these folks manage to get by, barring major problems such as health issues. Others become depressed as they discover that they lack the money to do many of the things they hoped to do in retirement. Many of these people end up returning to work, often in entirely new careers.

If you see yourself living on a meager income, and if you haven’t saved enough to boost that figure by retirement age, the best solution is to change your financial plan. Set new goals.

If you now realize that you need to postpone retirement, and if your present job is not making you happy, maybe now is the time to consider a career change. This could require additional schooling to develop new skills.

Why not visit a career counselor? Have that person review your work experience, your education and training. Bring along ideas about activities you would like to explore. Perhaps you can eventually transition from a typical 40-hour work week to one where you work only a few hours, just enough to boost your income. Researchers who study happiness report that job satisfaction is one of the most important factors determining whether you're happy.

True retirement is not for everyone, anyway. Heart surgeon Dr. DeBakey, at the age of 88, operated on Boris Yeltsin. You can think of many others who are still working, who consider 65-year-olds to be young ’uns.

Sure, some work to eat, but many work because they’ve found a life’s work that they love. If you will need to work into your 70s, and if you haven’t found your work fulfilling, start your search now.

Originally published in Inside Personal Finance October 2005

More Retirement Advice