More than ever before, I see our generation struggling with retirement: questions of when to retire and how are front and center for at least a dozen people I know. Many want to retire young. And from what I can see, it’s harder in Silicon Valley than it is in other parts of the country.
For one thing, it’s expensive to live here. Most people can not afford to live here in retirement, not unless they hit it big with tech stock. For another, so many in our cohort have retired young that we feel like we’re missing something if we don’t do the same.
I saw this in a dear friend I knew years ago. They hit it big with a big-name startup and retired in their mid-40s. That was pretty young for a retiree. It’s still young. At that age, I was still building my career, but they were ready to call it quits, even with their kids’ college educations to pay for. It was a long time ago, when money went further here, so even with a couple kids in college they could live well. They did volunteer work for a global cause they believed in and traveled among the high and mighty. The future looked bright.
But then, the stock market plunged, they got caught on margin and just like that, their “fortune” was gone. Poof! In an instant, they knew they had to go back to work in their early 50s. But they didn’t want to. They wanted to be retired.
Let’s push pause for a moment. From my current vantage point, I have to wonder why they felt so entitled to retire young. Most people are still working in their early 50s, but my friend resented having to return to work. Part of this, I’m certain, was the company they kept in Silicon Valley, people who had more money than they knew what to do with.
But another part of it was magical thinking. Most people do not retire at 45 today. Or 55. And frankly, far fewer than ever before retire at the “usual” age of 65 because the world is far more expensive than it was when that arbitrary date was set.Still, like my friend, they reach a point where they don’t want to work any more and will try to find a way to retire.
“And then a miracle happens and I get a big return on my insufficient 401k!”
Now, my friend did go back to work. Had to, even though their long absence from the job market meant underemployment this time around. They worked for maybe a decade, then at age 60, they quit their executive job and retired again. Their financial plan was to draw $3,000 a month from insufficient savings and Social Security. That would take them to about age 75, at which time they’d become a “ward of the state” of California. Yes, honestly. Using California programs for lower income residents, they would survive here in Silicon Valley, or so they thought. Of course, as time went by and the Valley became more and more expensive, their $3,000 a month wouldn’t have allowed them any kind of lifestyle at all. Their plan hadn’t accounted for that.
The flaws of such a retirement plan seem obvious to me and probably to you. It’s pretty clear that they should have continued to work to bring in some income that would provide more security and a better quality of life.
My friend felt “entitled” to early retirement and contorted their life to fit that paradigm. Many others are straining and struggling to do the same thing: retire “early” by today’s standards, rather than continue to bring in income.
I was lucky. I had no intention of leaving the work world when, surprise! I remarried and was able to retire before I was 60. Even with an investment in two homes and decent savings, I’d probably still be working today, at something. That entitled feeling my friend had? I can’t relate to it. Because I have always wanted a life in which I could do the things I want to do that cost money, like travel often. I wanted to live in the San Francisco Bay area. I know I could have retired young and lived well in my hometown on the savings I had, but it held no appeal. I never wanted to feel deprived and I was willing to do what it took to live the way I wanted to.
These are individual decisions. My way is not the only way. Some people do just fine on a limited income.
But some do not. Some use magical thinking to push themselves into early retirement. Like my friend.
So, what happened to my friend? Well, they ended up marrying someone who could carry the freight in retirement.
You’re probably thinking my friend is a woman. Nope. My friend is a man who is now approaching 80, long past his “ward of the state” age. Thanks to his wife, his retirement lifestyle and scenario is a lot different than his original plan.
But not everyone will meet a mate like that. There are other realities, too. The stock market will not always go up. The real estate market will not always be in a boom. The cost of living has never gone down, as far as I know.
Retirement plans have to be realistic. And super-conservative. Plan for the worst-case return because more often than not these days, it’s happened.
It must have been easier for our parents, who could retire with the proverbial gold watch and pension after 30 years with the same company. That’s not the paradigm today.
If you’re thinking about retirement, good for you! But let my friend’s story be a cautionary tale: steer clear of magical thinking.