Friday, January 11, 2013

Do I really need to save for retirement?

Last weekend, my Wife and I had the opportunity to have a few of her friends over for dinner on different days.  After a few hours of casual conversation, I couldn’t help myself and the topic changed to personal finance.  Knowing that I have a somewhat legitimate background in personal finance, they tend to ask some more probing questions and the conversation develops from there.  In both separate cases, they asked me whether they should be saving for retirement.  I think you can probably guess my response, to which they asked “Why can’t I just work for the rest of my life”.  I thought this to be a particularly intriguing question simply because I have never faced it.  I thought about it, and you can read my response below.
First of all, you have to really contemplate whether you want to keep working until you die.  Most people do not, and that’s usually because they are not doing something they love.  My Wife’s friends just so happen to be working in their dream jobs, so this isn’t really a motivation for them: on to topic two.
The second thought that flowed through my mind was that you cannot be certain that you will be physically able to work for the rest of your life.  Even if you love your job, there could come a time when you simply are not able to put on your shoes in the morning.  You could live off of social security and become either your family’s or the state’s problem, but chances are you will have a pretty miserable end of life.
The third and most important reason I gave for financial independence is freedom.  Even if you saved up enough money to reach your “target” appointment, you can still keep working at your current job if that’s what you love.  The point of this goal is that you are no longer forced to work somewhere merely for the paycheck.  If things get bad at your company, they lay you off, or you just don’t like the work anymore, you can sleep easy knowing that you can simply leave and go somewhere else or do another career with your life.  It’s this freedom I strive for.  This is something that many people rarely have. 
Alternatively, here’s another thought.  Say the idea of saving for retirement bothers you, but you do love your job and are not concerned with my second or third points.  You could set some money aside and use that towards your own personal charity or doing some other good in the world.  Just because you make more than you need, doesn’t mean you have to spend it all.  You could give it away and make your mark on a needing non-for-profit.  You might even start getting involved.
I still stand firm that everyone needs to save for retirement.  It may be more than 40 years away, but nobody has a magic crystal ball, and the risks of not saving for retirement far outweigh the immediate rewards.
Wonderful Moment of the Day: Cat is loving the cat tower!

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