What do you think of when you hear the word, 'retirement'?
Spending every day on the beach for the rest of your life?
Lounging on the couch all day watching TV?
Traveling the world with no obligations?
It's probably different for everyone. But, I think most people want to be able to retire. To quit their full-time job and enjoy free time in their golden years any way they see fit. For a lot of us, it's something you work toward your whole life. The pinnacle of your life. The final milezone. I think we should all think about retirement a bit more. If you're young you may even put off thinking bout it until you're in your forties. Really, you need to be thinking about it in your twenties. You need to have a plan, or else you may need to work a full-time job for the rest of your life. If that's what you want, that's fine - I'm not here to judge.
My coworker just recently passed away at the age of 62. It was sudden and unexpected. Pancreas cancer. One of the worst kinds of cancers. She was looking forward to retirement. Sadly, that was taken away from her.
This got me thinking about the age of retirement. It's totally up to you and your circumstances when you'd like to retire. But, the magical age seems to be 65. At this age, you get full Social Security benefits. This threshold will increase as lifetime expectancies rise. Right now the average age of death for a male in the US somewhere between 74 and 77. For Females, it's a bit higher, between 78 and 81. But, these are just averages - also known as expected value. Obviously, you can die before this age or even after this age. A statistical graph (called a histogram) of age of death is shown below.
There are many factors that determine our lifespan - including genetics and lifestyle choices. It is quite difficult to say how long you will live, therefore it's fairly reasonable to plan for the average age. If you retire at age 65, you'd have 10 to 15 years of retirement. 10 golden years. That seems like enough time, right? Maybe. The other thing people may not consider is quality of life toward the end of retirement. Your body continues to break down. Most things, including you, will fail at some point.
I work at an aerospace company that designs and manufactures aircraft engines. We design engine parts to last a certain amount of time. In many cases, we'd like for them to last as long as possible, but nothing lasts forever, given constant wear and tear. We need to determine the life of major parts of the engine and replace them after they have reached that threshold. This life and threshold is not the average life of the particular part. If we imagine the engine part as a human, the threshold we limit the part to would not be 65 years. Rather, it would be about 45 years. Why? Because we don't want to risk the part failing during a flight. This risk is in the form of a probability. Looking at the graph above, you can tell that the probability of failing before 45 years is quite low.
So, you may end up in one of two scenarios:
Dying young: "I wish I had lived more when I was younger"
Living long: "I wish I had saved more when I was younger"
In my opinion, you really need to strike a balance. Enjoy your life while you're young while saving for retirement. Sadly, I know there are many who aren't able to do either, let alone one of these things. Given the probability of dying and quality of life when I'm much older, ideally I'd like to retire 10 years earlier than the average retirement age of 65. In order to do this, I need to have a strict budget and make sure to plan accordingly. I'm lucky enough, as of now, to be able to achieve financial independence by this age while still being able to enjoy life right now.
TEDx talk on retirement:
https://www.youtube.com/watch?v=XSHNDyinZSQ&ab_channel=TEDxTalks
Lifespan data:
Social Security benefits:
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