On Friday, I took my three kids camping. It was a “fathers and kids” camp, so my wife (gleefully) stayed home. I went grocery shopping, packed, loaded the kids into the car and, as I left the city, thought of all the things I had been meaning to bring but forgot. I forgot a plush toy that I was hoping would help my 3 year old get to sleep, I forgot a box of crackers for late night snacking (but I remembered the marshmallows!) and I forgot my own pillow. I didn’t even think of bringing band aids, and it’s a good thing another father had a supply and was willing to share.
It occurs to me that retirement, or rather leaving your job, is like leaving on a camping trip. Retirement planning is like making a packing list. There are some things that you need to prepare, some things you’ll forget and some things you can’t plan for. It’s also possible to get so carried away in preparing that you never leave. What if, instead of taking my kids camping, I had decided to get a job, earn money and save up to buy a super-fancy RV or, better, a resort hotel?
There are two ways to approach the retirement decision. The more common is to wait until you turn 65, then try to figure out what you can afford. In some ways, that’s how my camping went. I borrowed a tent, grabbed our air mattresses and sleeping bags, bought some food and roasting sticks and left with a change of clean clothes. From that point, we had to make do. We had a lot of fun with sticks, rocks, fire, water and friends. I’m not sure that the families that came with tent trailers or RVs were any happier than we were.
The other possibility is to plan the bare minimum type of life you’d like to have in retirement. For me, I don’t mind continuing to cook my own food, shop sales and travel only once a year (or in a tent). An important step is to add a margin of safety of at least 10% to the minimum. There will always be unforeseen issues, but resourcefulness and some saved cash should be able to address most of them. As soon as you have saved and invested to produce the minimum (+10%) income you need, you’re ready to wave goodbye to your day job.
But… what if? Insurance salespeople play up fears in order to sell their product, but financial planners also tend to be cautious in planning. What if you are injured? What if you become ill? What if you live longer? What if you need long-term care? On the other hand, what if you die two weeks after you retire? That’s not to say these aren’t good questions, but if you spend your whole life planning for every possibility, you may never be able to enjoy your retirement.
I’ve heard a number of anecdotes about people dying within a year of retiring. That’s one reason I would rather have a less extravagant retirement and start earlier. When I forget to pack stuff for camping, the solution is to either go without or buy (or borrow) what we need. In life, I can either do without or go back to work. For now, I’m enjoying the trip.
How do you plan for potential problems in retirement? Would you rather retire earlier with less security, or later with more certainty?