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IF 20-SOMETHINGS ASK me for financial advice, I suggest getting a job right out of college and saving like crazy, so they quickly get themselves on the fast track to financial freedom.
If 60-somethings ask me for advice, I advocate a phased retirement, seeking part-time work in their initial retirement years and, if they enjoy it, perhaps keeping it up into their 70s.
Yeah, I know, I sound like a real killjoy. My advice raises an obvious question: Is there ever a time when we should cut ourselves some slack and not have a job?
Let me start with this: If you have a burning passion—perhaps to establish yourself as an artist in your 20s or to commit yourself to religious study in your 60s—you already know what you need for a fulfilling life. Everybody else’s opinion, including mine, is of little import.
But what if you don’t have a calling? It’s worth keeping five key ideas in mind:
First, in crass economic terms, adult life is about using our human capital—our income-earning ability—to amass financial capital, so one day we no longer need to rely on our human capital. This “no longer relying on our human capital” is what non-economists call retirement, and it often takes three or four decades of saving and investing to accumulate enough.
Second, beyond paying for retirement and other goals, it’s desirable to amass money because it provides a sense of financial security and it gives us the flexibility to lead our life as we wish. If we sock away a moderate amount of savings early on, we’ll remove one of life’s biggest stressors.
Third, most of us aren’t very good at anticipating what our future self will want. Maybe our greatest desire will be to retire early. Perhaps, in our 40s or 50s, we’ll want to swap into a career that’s less lucrative but more fulfilling. Or maybe we’ll be happy to persevere with our current job. It’s hard to know what we’ll want, which is another reason to save diligently starting early in adult life. The larger our nest egg, the more options we’ll have.
Fourth, our focus often shifts as we grow older. We become less motivated by the prospect of pay raises and promotions, and more focused on doing what we personally care about. With any luck, once we have a better handle on what we really want, we’ll get the chance to pursue those passions more fully during a second career or once we’re retired.
Finally, most of us enjoy striving toward our goals. To be sure, we imagine that the greatest happiness will lie in achieving those goals. But in truth, it’s the striving that offers the great pleasure. This pleasure is captured by the notion of flow, those times when we’re engaged in activities that we’re passionate about, we find challenging, we think are important and we feel we’re good at. At such moments, we can become totally absorbed and lose all sense of time. We should design our life—including our retirement—so we enjoy frequent moments of flow.
The five ideas above help explain why we should save early in life to prepare ourselves for later, when we might want to change how we spend our days. But that still leaves one question unanswered: Why, come retirement, should our days necessarily involve working part-time?
The short answer is, it isn’t necessary. Unless you don’t have enough saved, there’s no need to work part-time in retirement. But I think it’s an idea that deserves more attention. Today, retiring as early as possible is considered a badge of honor, and continuing to work later in life is viewed as somehow offensive to the whole notion of retirement.
But as I’ve argued before, there are all kinds of reasons—financial and otherwise—to continue earning money through our 60s and into our 70s. It can feel good to be a productive member of society, plus retirement can be a whole lot less financially stressful if we still have a little money coming in. What about those savings we earlier amassed? Even if we keep earning money, we’ll likely still find plenty of uses for our savings, including travel, helping family members, supporting our favorite charities and perhaps paying long-term-care costs.
I’m not saying that working part-time in retirement is the right choice for everybody. But if there are activities you find fulfilling, and you can make a little money doing so, why not?
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier articles.
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Great comments so far. We selected the easiest resistance to become millionaires. We immigrated to this great country with our kids in our mid 30s with just $5K.
We practiced the following:
1) Never own a business because the risk/reward isn’t that great. The majority fail, the hours are long and the risk is high.
2) We understood as teenagers that a degree in STEM, even just BS has a long-term work possibility. We still think it’s the same today.
3) Have the right balance between work and home regardless of the consequences. We worked on average 40-42 hours per week, sometimes it cost us in raises, but we still came ahead if you calculated pay per hour per permanent employee.
4) We mostly looked for a perm job even if the pay was lower because the long-term benefits and the pressure were more important. All our jobs were in the private business, nothing was ever guaranteed, I was laid off 3 times, and in the last 10 years of employment, my salary was cut by 30%.
5) Long vacations are a must, at least 4 weeks per year.
6) We didn’t invest a penny in the first 4 years because we had to buy our first house and 2 reliable cars.
7) I understood early on that either you are a successful entrepreneur(low chance) or use the best stock market in the world = the US, to do well. It is the easiest way to build wealth thru compounding. We started to save 3% from our paycheck because the employer’s max contributions were 3%. With every raise we got, we increased our savings by half the amount and our spending by half. Within several years we were saving 15-20% without feeling it. The above is a proof that even if you start later in life you can still do it.
8) We decided early on to simplify our life, which meant never owning a pool, a boat, RV, rentals, if we need one we pay for it, it’s all invested in the market at 99+% until this day and I retired more than 6 years ago.
9) We loved our jobs but left to never work again, ever, because we saved more than enough, and we have plenty of interesting things to do. If you don’t, it’s an excuse. We retired with 25+ times our yearly expense, not including SS. Since retirement, it grew by a lot. Almost every week my wife and I tell each other “Retirement is the best job we ever had”. I retired after 23 years, and my wife a few years later.
10) We plan all major expenses years in advance, over the years we have come very close. A good guestimation, looking at the worst-case but fair goals, allowed us to meet these goals. Goals are a must to build reliable wealth and happiness.
11) We were always frugal and only increase some our spending while we can afford much more.
12) My wife and I have been a team for over 40 years, we always understood that compromise, encouragement, and support are a must. We were always running the house, not the kids.
Working as a team also meant that my wife had been working all the time because we shared the burden.
I worked in the investment business for 42 years, saved as much as possible, retired at 67 and am financially secure as one can be in retirement. As for work, I don’t need a paying job, but everyone needs something to do when they are retired. I help friends and family with their investments and volunteer at a local food bank. I am also an avid woodworker and have made many pieces for family and friends. The Pandemic has been a big interruption to our travel plans, but we’re finally back on the road again and hope to make up for lost time while we can.
Once the “extended vacation” phase of retrement ends, we all need something to occupy our hands and minds. My advice to everyone who is planning for retirement is to have a plan for how they will spend their time. Specific projects or travel goals are fine, but that still leaves a lot of time left over to fill. Saving for retirement is one half of a retirement plan and the other half is what you are going do with your time when you get there.
I agree with the advice that young adults should save like crazy, but the rapid increase in the cost of owning a home has created the dilemma of how much to save for their first home verus saving for retirement. Hopefully those who are prioritizing home ownership are also maximizing their employer 401k match(if any).
At 78 years, I have solved the “to work or not work” after “retirement” in the following way. I have been in the construction field for all my working years. The stock market and the California real estate market have been very good to me. I don’t need to work but I have a lot of skills and many of my friends and neighbors need help with various projects. They pay for materials and I keep track of my time. We set an hourly rate and when done, I ask that they send a contribution to my favorite non-profit based on the hours expended. They get a cut rate on my labor and a tax deduction and I get to use my tools and have a reason to get out of bed in the morning. It’s a win-win-win. I feel very lucky.
I thinks some youngsters, if they have some money, should travel for a year or so, overseas possibly. Start work right away, start a family, and you may not get that chance again until you retire. No need to work right away, considering you may be working for the next 40 years. I retired and the last thing I want to do is work, whether 20 hours or less. I love the freedom and ability to do whatever I want, even if doing nothing is what I want. That’s a great freedom. Not having to go to meetings, travel for company get togethers, and be at the beck and call of your employer, is great. I enjoyed my working years, made lots of money in the financial services field, but it was work. Retirement is great.
I’m now 9 months into my encore career. Can’t imagine being more pleased with how it’s worked out. I would have liked more hours in the winter and maybe a little less now that the weather is nice, but that’s a minor quibble. I enjoy the varied work, being able to share my expertise, and being part of a team that is accomplishing important things and making clients happy. Oh yeah, the extra money doesn’t hurt either. Still, for me, 20 (hours) is the new 40. Couldn’t imagine going back full time at this point. So far for me, ICE is winning over FIRE.
I agree with your 20-something advice, but for a different reason. I think it is important to have a mindset that makes work a fundamental part of your life routine. And that means moving immediately right into the work force and acclimating yourself to the demands of the working life. It would be a mistake, IMHO, to ever think that work is “optional”, and you’ll get to it when you get to it. They call it work for a reason. But it really is the only sure way to financial security.
Well said human brain. As medical advances assisted by AI modifies and extends both our healthspan and lifespan our financial and life planning horizon will likely need to increase beyond a few decades.
Nice piece, Jonathan. It resonates with a book I am currently re-reading: Sebastian de Grazia’s 1962 classic, Of Time, Work and Leisure. It’s an intellectual history of these ideas and traces their trajectory from Ancient Greece to mid twentieth-century America. Good stuff.
What if your burning passion is research science which requires a laboratory (including being in the vicinity of other scientists) and access to the most recent journal articles (which are behind a paywall and available with an academic affiliation, but not without a funded lab)? A scaled down retirement is more difficult. I’ve watched scientists do this, but it’s hard because the physical resources and community are such a requirement. This is why I was so happy when we were back in the lab in the summer of 2020 after a brief covid shutdown; Zoom could not substitute for running into colleagues in the corridors or working in the lab (even if we routinely violated the capacity and 6 feet rule). This is different than for most artists or attorneys. My aunt, for instance, continues to paint because she has a studio at home. My dad was able to continue to dabble in the law by accessing Lexis by modem from home. Lab science is different.
This assumes people will be able to work for how long they choose. Not all of us are able to due to physical challenges, age discrimination (this from personal experience), and lack of opportunities.
Even more true if one lives in a rural location.
I didn’t plan it but my retirement went through an eight-year phased process. After my wife retired, I scaled back my work by getting rid of my management role. This eliminated the primary source of work-related stress for me but left my research and development work, which I enjoyed. I then transitioned to working four-day weeks, although I was often working 10-hour days. This, at least, gave me consistent three-day weekends. The year prior to retiring, I cut my hours by 20%, coming close to what I envisioned our retirement income might look like. While not planned, I was offered a consulting job at a different company, working one day per week from home, reporting directly to the CEO. I was getting a five-figure monthly retainer so as not to worry about billable hours. While this was for a six-month “task,” this arrangement lasted three years. I then requested a further reduction during the last two years, working one day per month before finally retiring in earnest. After that, I volunteered for our local Care Givers organization where I give rides to people who are homebound to their doctor’s appointment. There’s no pay but once a month, we get free pastries/bread from Panera.
If you really do get a job and start saving heavily at age 22, by the time you are 60 you might have $5 million, $10 million, or $20 million. Saving and investing really does work! If you retire at age 60 and live modestly – which you have been doing all your life to accumulate so much wealth – you can enjoy yourself.
The idea of working throughout life resonates with me. I believe I will be happier and heathier if I do, not to mention wealthier. After an unfulfilling corporate career, I’ve finally reached a point at 55 where I don’t need a large income to support a family, which opens up many possibilities. I just haven’t figured out what I want to do next.
I worked in financial services. Long hours, high stress, high pay, great bonuses.
At some point my wife said “enough already” and I switched to work at a
not-for-profit. Much less pay. Very much less stress.
But I still felt as though I was a net contributor to society.
Money certainly reduces stress. If we keep our expenses, including debt, low early in life, the unspent income becomes savings that add a feeling of security for the present and about the future. Later, ample savings and/or continued income buoy confidence that we can handle problems that arise or that we can choose to make changes in our life, such as different work or a switch to none at all.
Having money reduces stress for others, also. We are often concerned about friends or family that we know aren’t adequately prepared for retirement or even for present emergencies. It’s a good feeling to know we won’t cause that stress for others.
Working part time was a great way to ease out of the work force and still feel good about earning and contributing. This is something to consider when a couples retire at different times.
While touring Italy for two weeks in our early sixties I had a revelation. At that age we wanted to pay for comfortable accommodations, and searched for the best, but not necessarily the most expensive food. The cost for such an adventure was quite high.
I came to the conclusion that I had the sequence wrong. I had begun working summers full time since I was 13, and immediately upon graduating college. I decided after graduating I should have tried to find the means to travel for a year when I could stay in youth Hostels, and eaten street food. That way I could have seen the world in a more economical way.
David, i’ve often thought we should take a (now called) gap year either before or after college for exactly the purpose you state.
The gap year is popular in other countries but doesn’t seem to have caught on here. When Lonely Planet hosted online forums there was one specifically for gap year travelers.
However, when I was traveling in my 50s and 60s I found traveling less expensively much more fun. These days I probably need a hotel with an elevator, but I have stayed in a lot of B&Bs and pensions with plenty of stairs, and fellow travelers to chat with at breakfast.
I retired at 60, but consulted about 8 hours a week for the first 5 years. It brought in six figures of income and allowed our nest egg to grow, untouched. I didn’t need the money but I did need the off ramp to not earning. Now my retired work is unpaid, chairing college, hospital and charitable foundation boards as well as mentoring engineering students at my alma mater. A successful retirement is all about purpose.
An early-career layoff shocked me into re-evaluating my priorities. I was forced to confront the reality that getting my financial house in order was far more important than climbing the corporate ladder.
I decided that a combination of investment/side gig was what I needed and when I found a new job, I started investing in rental real estate. I kept up contributions to my 401(k), but also acquired a few rentals. In about 10 years, this produced an amazing transformation. Even though my job produced most of my income, the rentals provided enough that I was confident I could survive without a job if that became necessary. This reduced my stress and, allowed me to work fewer hours, and let me express my own opinions rather than following the company line.
Somehow, this made me more valuable and my career flourished. I still managed to retire at 62, and through the tax magic of a 1031 exchange, the rentals moved with me to our retirement location.
So, essentially I brought a part time job with me where I am the boss and cannot be fired. This is much less onerous than working for someone else. Instead of having to worry about what company policy might be on any issue, I make company policy. It is a great retirement.