Many of us have got that special number in our head when it comes to retirement. $1 million, $10 million, $100 million, whatever. For others, there is no number. Not saving for retirement can be intentional and a modest move for people who have a plan to rely on resources other than their own. The current media sentiment on people who don’t save or have enough for retirement is usually shame or pity. However, this not need be the case. One may not need to save towards a set, and often unachievable target. So what are the reasons why some people aren’t too worried about building up a nest egg? We look at and review a few of the reasons below.
You will be likely working until you’re dead anyways
Some of us will never retire. The age most workers retire has been steadily increasing over the past 10 years in the U.S and U.K. This could be attributed to the increase in life expectancy rather than solely due to a diminished retirement savings. If you enjoy your work, why would you want to stop anyways? The availability of work-from-home jobs has made it easier to participate in the workforce as an employed or self-employed individual. The COVID-19 pandemic has likely increased the opportunities for stay-at-home jobs that may be suited to generalised skill sets workers who may be looking to switch careers in retirement. Also, don’t be concerned about working in old age. Working in our later years provides numerous health benefits by keeping ones mind active.
You will likely spend less in retirement than you do now
A number of studies have been conducted on determining how much you will spend in retirement. However, these do not always reflect reality. A number of expenses that no longer become relevant in retirement drop off your bank or card statements. For example, mortgage and child expenses comprise the bulk of family spending for a large portion of our working lives. Once we get to retirement, mortgages will have been paid off and the kids will hopefully be able to support themselves. Also, many in retirement tend to spend less on food and drink as well as on paid recreational activities. Maybe in retirement we finally discover that the best things in life are free.
You can rely on social or government support for essentials if you can’t save for retirement
In the United Kingdom, the NHS provides coverage most types routine and emergency medical treatment. Furthermore, local councils provide support to individuals who may be struggling to pay bills or require government subsidised housing. There are also several charities that offer British citizens support for food, childcare and other services they may require in times of need.
In the United States, there are less available social services however these vary depending on your state of residence. Social welfare programs exists, as do income related benefits such as higher minimum wages and lower income tax rates.
Regardless of where you live, there are services you can consider taking advantage of in retirement. Your tax dollars go towards funding these services. Some people may feel guilty for using these services, but they are there for a reason. The COVID-19 pandemic will increase adoption of such social services where governments offer such benefits.
You need less to keep busy and entertained
One of the main reasons for building up retirement savings is to use the money for leisure activities. When eight hours of your day are no longer committed to working, you have more time for yourself. Now with the options of part-time or flexible employment and remote working, there is less of a need to devote your later years to keeping yourself busy with ‘full-time retirement’. You can entertain yourself in more ways than ever before from the comfort of your own home. Streaming entertainment services, online gaming, and other forms of entertainment provide an endless source of low cost activities. They can also serve as inspiration for learning and developing new hobbies.
Even if home-time becomes boring, there are plenty of options to get out and explore the world around you. Budget air travel, road trips, bus tours and other forms of low cost travel provide a number of options. Retirement spending no longer needs to be spent on expensive cruises, business class trips to exotic islands or expensive alcohol. You can skip most of that expensive stuff and still have a productive, entertaining and engaging time in retirement.
Your financial goals are not tied to a number
Once you realize your goal isn’t a multi-million dollar retirement balance, you can focus on living a healthy and productive lifestyle where there is no financial end-goal but continuous learning, earning and living. You don’t need to be saving 5-10% of your annual income (or more) every single to have a better life for the future. Although saving for a couple years of unexpected unemployment or zero earnings will provide greater financial security. Idealised retirement balances and compound interest returns should not be considered guarantees nor should achieving total financial freedom. How long should you even plan to save? You can’t predict how long you’ll live, although many like to think they can based on their diet and exercise. Life is a gift and health is no guarantee. So, is it wise to rely on a cash balance and passive income to keep you going?
The moment you achieve financial freedom is subjective anyway and can vary based on your circumstances or even mood. All that you can count on is your desire and ability to work or earn passive income. Some of us can entrust our country of residence to provide a minimum level of care for health and well-being. Regardless of your savings balance, you are better off relying on your ability to adapt to the changes in your circumstances. Such changes can require you to seek new employment or income generating opportunities, or seek government assistance where necessary.
You can rely on other people
Those that can rely on the generosity or financial assets of others have an advantage when it comes to retirement. Wealthy relatives, partners or friends can provide generous inheritances or gifts. A fairly dated (2010) but cited study conducted by the Survey of Consumer Finances (SCF), found that the average inheritance in the U.S. was around $700,000 for people who received an inheritance, which turned out to be about 22% of all survey respondents. This means 78% didn’t receive any inheritance at all. The median inheritance for those receiving assets was about $69,000. Based on the survey results, less than a quarter of us can expect a boost to our savings sometime before or during retirement. Hopefully you’ve got other ways of supporting yourself rather than relying on the death of a benefactor to lead to your big pay day.
You already have enough money
If you have earned a big chunk of cash or you earn income from other investments or businesses then you won’t need to save for retirement. Hopefully your cash stash or income streams can last well into the future beyond your expected death date. It’s no surprise that running out of money is one of the most cited reasons why retirees or pensioners worry about when reaching retirement. If you’re concerned you won’t have enough or don’t care, there are other options, as discussed above, that can be utilized to help you live a better life in retirement, even if you are nowhere near your special number.
You shouldn’t feel down on yourself if you’re someone who is not ‘on track’ for retirement. Given the unpredictability of our professional and personal lives, some may have other plans with how they intend to support themselves in later years. Some people make the choice to save-up to targets based on their forecast spending. This may not click with everyone. Fortunately, as humans we can adapt to tightening our belts when necessary. This won’t always result in a lower quality of life unless we believe it will. Non-savers could have an upper hand when it comes to retirement. They have the luxury of not needing to devote as much effort to retirement savings as those of us who regularly sweat missing financial milestones or targets. However, hopefully they’ve got ideas in mind with how they intend to support themselves if they don’t intend to rely entirely on their own means.