Wising Up

Kristine Hayes

IN THE 1990S, WHEN I started working fulltime, conventional wisdom suggested two possible routes to a comfortable retirement: Find a public sector job that offered a traditional pension plan or, alternatively, join the private sector and set aside 10% of my salary each year in my employer’s 401(k) plan. I was led to believe that if I followed either recommendation, I could sit back, let compound interest do its magic and achieve a financially secure retirement.

For 20 years, I followed conventional wisdom, assuming such one-size-fits-all financial advice would serve me well. My first job was at a public education institute and I was fully vested in the pension plan after five years. Next, I took a job at a private school where, as part of my benefits package, I had access to an employer-funded retirement plan. An amount equal to 10% of my salary was contributed to the account each month. I assumed there was no reason for me to make additional contributions to a retirement account. I also assumed the money in my employer-funded account could be invested in fairly low-risk options and still achieve a high rate of return. I imagined my life would remain on the same trajectory, and I’d glide through to retirement.

The problem with conventional wisdom: It only works if you lead a conventional life.

The stock market collapse of 2008 wiped out all the earnings that my retirement fund had accumulated over the previous decade. A midlife divorce meant forfeiting half of my pension. Suddenly, my life had taken an unconventional turn, and I realized the importance of going beyond basic rules of thumb.

I needed to educate myself on investment strategies. I learned women are generally more financially conservative than men, including favoring less risky investments. I learned that setting aside 12% to 15% of my income toward retirement would likely be necessary if I was going to retire at age 65, and I’d need to save even more if I wanted to achieve my goal of early retirement. I learned I needed to embrace the inevitable ups and downs of the stock market if I was going to earn investment returns that outpaced inflation and significantly boosted my nest egg’s value.

These days, I contribute 25% of my income to a retirement account that’s invested primarily in stock mutual funds. When the stock market takes a dive—as it did last year after the Brexit vote—I view it as an opportunity to purchase more shares with the same amount of dollars. More important, I’ve learned to ignore conventional wisdom and settle on my own financial rules.

Kristine Hayes is a departmental manager at a small, liberal arts college in Portland, Oregon. Her previous articles include My One and Only and Say It Forward.

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