Retirement: Future Me Still Needs Money

We tend to think of retirement as an age: 65. 66. 67.

But financially, retirement is more about income.

While you’re working, money regularly comes in because you work.

In retirement, that income may come from different places: Social Security. Retirement accounts. Pensions. Savings. Investments. Business or rental income. Part-time work. Other resources.

The mix will be different for different people.

Social Security may provide important retirement income for eligible workers.

But what it provides depends on your earnings record, the age when you claim benefits and other individual circumstances and program rules.

Instead of guessing what you’ll receive, look at your own information and learn how the benefits work.

A personal my Social Security account can show estimates based on your earnings record and let you compare estimated benefits at different claiming ages.

And don’t automatically assume: “Social Security will handle everything.”

Maybe it covers a large part of what you need. Maybe it doesn’t. The question is what your retirement could look like.

This is what makes retirement saving psychologically weird.

You’re giving money to a person you’ve never met: Seventy-five-year-old you.

Today’s you might want: Dinner. Vacation. New furniture. A nicer car.

Seventy-five-year-old you might want: Housing. Medicine. Groceries. A vacation too. Maybe some fabulous shoes.

Same person. Different Tuesday.

You’ve heard it: Start young.

There’s a reason people say it. Money invested over longer periods has more time for potential growth and compounding. Wonderful.

What if you didn’t start young? Should we call 27-year-old you and yell at her? She isn’t answering. 😂

Work with today.

Starting later may mean you need a different strategy: Perhaps saving more. Working longer. Adjusting expectations. Using other resources. Getting qualified professional help. But:

Here’s the other side.

Sometimes financial advice acts as if every available dollar should be sacrificed to Future You.

But Current You still needs: Housing. Food. Emergency savings. Healthcare. Transportation. Debt payments. Children. And an actual life.

Retirement is important. So is remaining financially stable long enough to reach it.

If your employer contributes to your workplace retirement plan based on your eligible contributions, that benefit can become part of what you’re building for retirement.

Understand what you must contribute, what the employer contributes and what plan rules apply.

That doesn’t mean ignore rent to receive a match. It means make the decision with the whole picture in front of you.

For a fuller explanation of employer matching contributions and vesting, see Make the Most of My Job Benefits.

A 401(k) or IRA is an account.

Depending on the account and the options available, the money inside may be invested in mutual funds, stocks, bonds or other assets.

The account and what the money is invested in are related—but they aren’t the same decision.

For a fuller explanation, see Grow My Money.

New job. Another new job. Ten years later: “Wait...didn’t I have a retirement account at that place I worked in 2018?”

Keep track of retirement accounts from former employers.

Depending on the account, the plan and your circumstances, your choices may include:

There’s money sitting there. You need money now. Tempting.

But retirement accounts can have rules, income-tax consequences and possible additional taxes or penalties when money is taken out, depending on the account, your age and the circumstances. There may also be exceptions in certain situations.

That’s why it’s important to understand the specific consequences before taking a withdrawal.

And there’s another cost that’s easy to miss: Money you remove today is money that is no longer there working toward retirement.

Sometimes people genuinely need access to money. Life happens. Just understand the consequences before turning long-term money into today’s spending money.

Maybe your dream is: Last day of work. Turn off the alarm. Never work another minute. Beautiful.

Someone else may want to: Consult. Work part time. Run a small business. Teach. Volunteer. Change careers. Work because they enjoy it instead of because the mortgage is standing over them.

Retirement doesn’t have to look one way.

It’s tempting to think: “I’ll spend less when I’m retired.” Maybe. Some costs may fall. Others may rise.

Healthcare may matter more. Travel may matter more. Housing may change. You may help family. You may still have debt. And retirement may last much longer than you expect.

Nobody can predict every expense decades ahead. But you can begin thinking about the kind of life you’re trying to fund:

Where might you live? What ongoing expenses may remain? What might healthcare cost? Will you still have debt? What would you like to do? What income sources might support that life?

A home can be an important asset. It may appreciate. You may build equity. Maybe you plan to sell, downsize or use that value somehow later. Fine.

But a house also costs money to own: Taxes. Insurance. Maintenance. Repairs.

And unless your retirement plan includes doing something with the home’s value, simply saying: “I own a house.” doesn’t explain how groceries get paid.

We love the children. Hopefully they’ll love us too.

But: “My kids will take care of me.” isn’t much of a financial strategy.

Maybe they will help. Maybe they’ll want to. Maybe they’ll be able to. Maybe they’ll have mortgages, children and retirement plans of their own.

Prepare as much as reasonably possible for your own future.

You know your current monthly expenses because Mr. Bixli has been all in your business.

Retirement deserves some numbers too:

What income might you have? What savings and investments have you built? What might Social Security provide based on your record and current program rules? Do you have a pension? What debts may remain? What might your expenses look like? How could taxes affect the money available to spend? What gaps do you see?

The closer retirement gets, the less useful: “I think I’ll probably be okay.” becomes.

This matters.

You didn’t spend decades saving money so that retired-you could sit at home staring lovingly at the account balance.

That money has a job: Housing. Food. Security. Healthcare. Family. Travel. Hobbies. Enjoyment. Life.

The goal isn’t simply to accumulate the biggest pile possible. It’s to create resources that can support the life you’re trying to live when employment income changes.