Do you control your retirement date?

By: ispeculatornew
Date posted: 05.04.2011 (5:00 am) | Write a Comment  (14 Comments)

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The other day, I was reading an interesting article about the age of retirement. If you live in developed countries, you know that most of the workforce ends up retiring at an age close to 60 or 65 years old. Slowly that age has been going up. Part of it of course is due to the fact that we are living longer. Retirement is certainly what many of us aspire to but very few of aspire to be out of work over 40 or 50 years. So as we live longer, it’s to be expected that we’ll “want” to work for longer as well. That being said, the vast majority has little control over their age of retirement. They depend both on their company’s policy, on the government policy and of course on their own finances. How so?

Company’s Retirement Policy

It’s less true than it was a generation ago, but still, many employees, especially in the public sector depend on their company’s pension plan. Because of that, they are usually given an age or a number of years worked at which they will be able to retire with a full pension. Baby boombers know this all too well. I’m sure that most of us in the Y generation have parents from the baby boomer generation that have known for 10 to 20 years at what age they would retire. Sure, it can change a little depending on financial circumstances but it’s generally right around 65, which is the official retirement age in many countries.

Government Retirement Policies

Of course, those companies do not come up with these numbers out of thin air. They usually base them off the official country policies and as the demographic situation gets worse and worse in these countries, the official retirement age is rising as countries simply cannot afford to give out benefits that they were giving away in the past. And that will only get worse as every country including the US is facing rising costs and diminished revenues (due to a declining workforce). Already, out of the major developed countries, only Canada and Japan have not yet pushed their retirement to at least 67 years old.

Financial Situation

In most cases, the decision of retiring has nothing to do with desire, age, health, etc. It has everything to do with being able to do it financially. For most, that depends on the pension that they will receive both from the government and from their company. To me, that is understandable to some extent but crazy in many others. Depending on the government to determine how you will live for a few decades is dangerous in many ways. You have no way of being sure if policies will change, if your company will default which could impact your pension payments, etc. There are so many different factors that can play a role. I think that it’s critical for everyone to start, no matter your age or your financial situation, to plan. Create a passive income portfolio, you can start with as little as $5000 and if you can remain disciplined and take the right methods to make it grow, you can become financially independant. That way, there will be no stress when looking at the fiscal problems of your government, at the questions surrounding pensions, and if you do get money from either one, that will just be a bonus. I really think it’s possible for just about anyone (even earning minimum wage) and it’s more a matter of being organized.

So I’d love to hear from you..when do you expect to retire and what will it depend on? Do you expect to depend on some type of government or corporate pension?

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  1. Comment by Ben — May 4, 2011 @ 4:11 pm

    I’ve been working hard on my personal finances goals in the past year. If everything goes well and I can generate a 5% return annually on investment, I should be able to retire at 55 with very little debts.

    A low monthly budget means a smaller portfolio needed right? 🙂

    I have a pension and a share option plan at work to which I contribute to get the max company contributions. Half of my net pay is for living expenses, a quarter for repaying debts. That leaves me quarter to blow on anything else. One month I might threat myself, the other month I might just repay more bills or invest. My main goal is to retire early but still live a good life getting there.

    I don’t take into consideration any government help. I doubt I’ll see any.

  2. Comment by IS — May 4, 2011 @ 5:13 pm

    @Ben – It’s great that you have a precise plan with both an age and required return, that seems to indicate that you are on the right path! Love the attitude all around. What type of investments are you focusing on?

  3. Comment by Ben — May 4, 2011 @ 6:07 pm

    I’ve had a good sum invested in mutual funds. I didn’t know much about investing and funds seemed good at the time.

    I have a GIC ladder to satisfies my need for cash in case of trouble :). Helps me sleep better at night and I get a better return than saving account.

    I’m now working on a dividend portfolio. Following the Dividend Guy Blog, Financial Blogger, What is Dividend and of course IS has helped me understand the whole dividend world better. I’m transferring annually my share option funds from work to broker account so I can diversify better.

    I’m curious about ETF, reading more and more about them. I don’t want to invest in everything but I feel mutual funds may be costing me too much in terms of mgmt fees.

    I’m following some stocks but I’m still unsure about stock trading. I want to gather more knowledge of the market before jumping in.

    Ultimately, I’d like to keep my GIC ladder for quick cash, Dividend portfolio and maybe one more investment medium. I’m always afraid to spread myself too thin with too many different investment tools. I want to understand what I have before moving to another.

  4. Comment by IntelligentSpeculator — May 5, 2011 @ 6:54 pm

    @Ben – Wow, love your sources of information:) Thanks for all of the comments, looks like you are off to a great start honestly, I’m not too worried about it, just keep it going and don’t be afraid to be more aggressive with your investments as you can afford more volatility.

  5. Comment by Stephen — May 6, 2011 @ 12:35 pm

    I dreamed of retiring at sixty, but it’s not gonna happen. Everything was going fine till this recession kicked me in the nuts. If things stay the way they are, then I’ll depend mostly on social security.

  6. Comment by IS — May 7, 2011 @ 9:58 am

    @Stephen – Are you just feeling negative about it following the recession or you simply do not see any way it could be done?

  7. Comment by corporation offshore — May 9, 2011 @ 5:07 am

    Many retired people do not have enough money to travel as much as they want or buy the things that they want. ….some people cannot even afford to go on retirement that they end up looking for work when they should be in some sunny island frolicking on the beach with their families. Just think about all the freedom that you will have if you retire while you are young.

  8. […] from Intelligent Speculator presents Do you control your retirement date?, and says, “Are you planning for your […]

  9. Comment by Stephen — May 10, 2011 @ 12:22 pm

    Hi I.S., that’s the worst case scenario. Things have been a little rough lately and unless my monthly income improves there won’t be much left by the time I reach retirement age.

  10. Comment by IS — May 10, 2011 @ 7:30 pm

    @Stephen – If you don’t mind me asking, how long do you have left?

  11. Comment by IS — May 11, 2011 @ 4:32 am

    @corporation offshore – No doubt, it’s a tough but very true reality but I think for most of us, it’s not too late to work on improving our situations.

  12. Comment by Stephen — May 12, 2011 @ 10:39 am

    I.S., thirteen more years to go.

  13. Comment by IS — May 12, 2011 @ 7:47 pm

    @Stephen – Sounds like you have a while to go. If ever you want a free analysis (anonymous), we do it on DoNotWait, let me know if you’re interested. In any case, glad you are using this blog to help your investments!:)

  14. Comment by Stephen — May 16, 2011 @ 10:27 am

    Thanks I.S., I didn’t know DoNotWait could do that.

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