Feb 22, 2008

Immortality, Death, and Retirement Planning

The other day, my boyfriend and I were discussing death and immortality. I don't know if I've mentioned it in this blog before, but I have a huge fear of death. I'm not a religious person and the concept of just not existing anymore scares the shit out of me. While I know it's not possible to live forever, I get past my morality-anxiety by pretending like perhaps there will be some cure to every illness known to man (including old age) by the time I'm wrinkled like a prune and somehow I can live forever.

Why do I bring all that up? Even though we (and I) can't live forever, our society is all geared around helping us live longer. In the early 20th century, the worldwide life expectancy for a human was 30-40 years old. Now it's 67. In another 100 years, most people will probably be livin to at least their 90s.

That's great in terms of... well, getting to stick around, aware, on this planet for a few extra years and for medical science as a whole, but how does lengthening one's life mess with the concept of retirement?

Ok, so in one of my days of freaking out about my mortality I ended up doing some research into Cryogenics and started reading up on a place where for a shit load of money I could get frozen after I die and maybe, just maybe somehow in the future I could be brought back, alive.

That got me thinking... if ultimately many of us would want to live forever... if that's what all our medical science is working towards with stem cell research and such, well, at what point in our future will the concept of retirement simply vanish?

Retirement exists, as I see it, for two reasons. One - you get old, you just can't work as much as you once did because you're sick a lot and need to take it easy en route to death. Two, you worked a long(ish), hard life and it's time to sit back and enjoy the last few years you have on this earth. Either way, what's that worth if you can remain healthy forever.

It's kind of interesting, thinking about how much our culture would change if immortality were possible, and then how much it has changed simply due to medical advances and the increase in average life expectancy. If we could live forever, even the celebrity making billions upon billions of dollars would still have to be careful with how much money they spent because if life forever were possible, at some point money would run out.

So death, not too far along from birth, is really a requirement for the concept of retirement to work (sorry I'm being so morbid today folks, but it's just been on my mind a lot lately).

Also, there have been a bunch of articles and blog posts out in the past week or so about how retirement is impossible for many people these days, what with the cost of inflation and lack of appropriate savings.

The Motley Fool recently published an article called "The End of Retirement"inspired by the also-recent PBS Frontline series "Can You Afford to Retire?"

Well, the Fool was pitching its investment advice for sale (as it does in every article on that site) but it also pointed out some of the sad yet very real facts raised in the Frontline documentary. "[Thanks to how people of different wealth classes invest throughout their lives...] The richest people are getting richer, and the middle-class workers are falling further behind."

I feel like I fall somewhere in the middle, though lean towards the rich end of the spectrum. While I feel like I've just struck gold with my newly minted annual salary of over $60k (if I can hold this contract job for the whole year, mind you), after you take away taxes... including the lovely 15% self-employment tax I learned about the other day, my healthcare expenses, the fact that as a contractor I don't get time off, paid holidays or any other benefits, and suddenly my $60k seems not as much as it did when I first gladly accepted my offer (well, I asked for $200 a month more, then accepted the offer).

It's weird how two years ago I was thrilled to be making $35k, finally a year out of undergrad with a full-time job. Now, as I worry more about saving for retirement in my 20s and somehow saving up for a house (even a fairly decent downpayment on a house... in The Bay Area) and possibly an expensive MFA a few years down the line, I am not sure how much money I'd need to make in order to really feel, well, rich.

Yet I know I'm lucky and that I'm more rich than a lot of people will ever be.

I want to invest heavily towards my retirement and I already have $7000 put into my Roth IRA of a total $9000 I could invest since I opened my account. Not bad, but that was taking my savings and putting most of it into that Roth IRA. Well, it's nice to know that if I make it to 65 I'll at least have some money to take out, tax free. But what about now? What about that house... or 2br condo... that I'm dreaming of? How about grad school?

Other than knowing I ought to live more frugally overall, I haven't a clue about how to allocate my money. They say "max out your IRA first" (if you don't have a 401(k) and that sounds fine and dandy, but now that I'm a slightly higher tax bracket I'm not even sure if I should be investing in my Roth IRA or if now I ought to open up a traditional IRA that gets taxed later on. Ugh, I'm so confused.

Llama Money jokes about how the $1 million saved up for retirement isn't really enough anymore, and explains how to save up $1 billion by retirement instead in this post.

"If you start investing at the ripe young age of 26 ( that’s how old I’ll be in a few months ), then you have 34 long years to enjoy the magic of compound interest. Assuming you earn an average return of 10% per year ( shouldn’t be difficult if you stick with low-cost index funds ), then you must save $308,700 per month until age 60. At that point you will have just over $1 billion in your brokerage account."
Yikes! Um, I don't think I'll be able to save $309k per month anytime soon, or ever.

Llama poses that putting away $280 a month is enough to at least help you out financially at retirement.

The only thing that helps me worry less is knowing that I'm the type of person who won't want to retire. I can't imagine wanting to stop working just because I'm old. I'll want to work a more flexible job, maybe take a bunch of time off, travel the world. But I don't see why I should stop earning an income as long as my health allows.

And being that I'm 24, I can't imagine myself incapacitated to the point where I'd be forced to live off my IRA income and nothing else. If that's what's going to happen, well, I better figure out how to start, uh, making $339k a month so I can save the $309k. Yea right.


E.C. said...

We are living longer, but the statistics about life expectancy a couple hundred years ago are somewhat misleading. At your age, you could still easily have had a few decades to live. The numbers were skewed downward by very high infant and child mortality rates.

MEG said...

If we lived much longer (presuming we'd also be able-bodied/minded much longer too) then we could still retire; in fact it might get easier to do so. We'd just work for a portion of our lives (say until 80 or so) while accumulating our millions, and then we could live off our assets indefinitely after that--or keep working, whichever. Just like today, but with a longer timeline.

"Retirement" will always exist in some form or another, given that the most basic definition of it is "to not be employed by a company."

And FYI I read in Time a year ago or so that women in their 20's today can reasonably expect to live to be over 120 years old. Which makes sense when you think of it: our great grandmothers are living to be 100, and they grew up with very antiquated medical advice, prevention, and treatments compared to what we're growing up with. Scary.

hereverycentcounts said...

MEG: in that case, as a freelancer, does that mean I'm retired now? I'm employed by myself. :)

her every cent counts

Dana said...

The truth about mortality is that they've looked at hunter-gatherer tribes and what's really killing those people is accidents. If you don't get into any nasty accidents and you don't die in childbirth (which also occurs less among forager peoples), you can expect to live to your sixties or seventies, even without modern technology. They're called "elders" for a reason. :)

"Modern" humans only got to recapture our former life expectancies around the 1950s or so, and only in First World nations. You could say that thanks to modern medical technology, which is vital for quality of life in our crowded conditions, we have reclaimed our birthright. So, expect a decently long life anyway, as long as you take care of yourself and luck smiles on you.

As for inflation, I really feel the risk is overblown unless something catastrophic happens. The current concept of inflation assumes that people continue buying the same products year after year. This includes major purchases such as refrigerators and cars. Other than the super-rich and the not quite mentally together, who do you know that buys a car a year? House prices go up and down with the market. Technology prices consistently drop after a new product has been introduced, and drop anyway over time--it's a lot cheaper these days, for instance, to buy a calculator than it was in the 1970s. Clothing prices can be gotten around by buying secondhand for most things. Ditto for most other household items. Food prices are a little tricker but if you are saving money in other areas of your life then often you can deal with fluctuations in food prices also.

Your Money Or Your Life by Joe Dominguez and Vicki Robin addresses this issue in their Step 9. It is a worthwhile read. There really is no reason that people can't work out some way to live mostly or completely on a fixed income such as interest from investments. Really, in the end that's all retirement is, and you can do it at any age. You can also find ways to get back into the workforce later if you need more money or just get bored.

Post a Comment