“Retirement” is not defined by age. Rather, we define “retirement” as the time when work becomes optional. That is, you believe you have enough money to sustain yourself for the rest of your life. But a funny thing happened along the way!

Your number had to change. Here is a true story. When I started my career in 1970 (yes, I am that old) working for IBM selling computers at NASA Goddard Space Flight Center and was making $10,000 per year, I thought that if I could ever make $25,000 a year for five years, I would be well along the way to making work optional.

Then something called “inflation” began soon after Nixon took the United States off the gold standard, the government had huge deficits to support the Vietnam War and oil prices doubled within a few months. With inflation and interest rates as bad as they are today, they were both worse in the 70s. How bad? From 1970 to 1981, inflation averaged 8% according to awealthofcommonsense.com. That means making $25,000 11 years later required a salary of $58,300 or said another way $25,000 was worth the same $10,000 in purchasing power 11 years earlier.

Like most early married couples, we wanted to get out of an apartment and into a home. When we bought our first home for $54,000, we were excited to get a mortgage for 15%! A mortgage today is about 7% and we think that is bad. Even at a 2% rate of inflation, over 25 years in retirement, the cost of living will increase by 64 %! Thus, the first reason that your number will change is due to inflation. What happens if (when) inflation raises its ugly head during your retirement?

Next, life will get in the way. As we continue through our working life, we accumulate more of what we think we need and certainly more of what we want. At one point $500,000 looked like enough, then one million, then two and perhaps many more. It is human nature to fear running out of money, so we all want to make sure we have “enough” and thus, we want to err on the side of caution.

Wanting is one thing and needing is another. One of the biggest expenses in retirement is health care which continues to go up at a faster rate than inflation itself. An average couple age 65 can expect to spend $315,000 on healthcare in retirement according to Fidelity. A wealthy couple may spend much more as a result of higher premiums for Medicare based on income. Those that have a longer life expectancy will also spend a lot more not only because of more years, but more aliments along the way.

Then there are the kids and grandchildren. It is very hard to say “no” to family even when intellectually one knows it could jeopardize retirement. A child loses a job, has a significant financial setback, or maybe wants to buy a new home but needs a family loan. All things that most parents are going to help the child get through. All of a sudden, the grandchildren are graduating high school and headed to college, but mom and dad didn’t save enough. What grandparent isn’t going to want to help?

There are so many more examples of life getting in the way during retirement that were unplanned. That is why you need a plan in the first place. One that anticipates enough inflation and life getting in the way. Even then, a plan needs to be flexible and adaptable. Life in 2024 is much different than it was only five years ago pre-COVID and pre-inflation. Stuff happens and you need to be prepared. Those with a plan are generally better prepared than those without one.

Many so-called financial planners are just asset gatherers, but don’t really do the planning they claim to do. We have 13 CERTIFIED FINANCIAL PLANNER™ professionals in our Clearwater and Tampa offices who understand the importance of planning. It is never too early; nor too late, to start planning. Please reach out to us and take advantage of a complimentary consultation in person or by Zoom.


The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and are subject to change.
Investment Advisory Services may be offered through ProVise Management Group, LLC.