How to Think About Retirement Planning
Some people are reluctant to accept change, especially cashiers because nobody likes to count nickels and dimes. But the world is constantly changing and the retirements of generation Y will look very different than generation X. The trend towards a gig economy has only just begun. In the private sector less people are working 40 years at one company, and more are doing contract work, starting side hustles, and becoming self employed. According to Intuit, in just 4 years from now up to 40% of American workers could be independent contractors. Wow, what other changes will we see in 4 years? I don’t know, because I don’t have 2020 vision. XD
So as we adapt to changing economic strategies, by growing our income streams for example, our retirement plans must also reflect this new world of mobile apps, and short-term work that is long on flexibility, but short on benefits. When it comes to making smart retirement decisions today we should separate the things we can control, from the things we cannot.
We start by thinking about the factors that we have full control over, such as how much we need to save (and therefore, spend) in order to meet our long term goals. For example, I want to reach financial independence by age 35, which means I need to save about 1/3rd of my income right now. Although diet and exercise habits aren’t directly related to personal finance, they’re extremely relevant in the big picture because healthcare can be a major cost, especially for Americans, when we reach retirement age.
According to the National Council on Aging, about 92% of older adults have at least one chronic disease. Jeez Louise! Chronic diseases account for 75% of the money America spends on health care. Diabetes alone affects 23% of Americans over the age of 60. According to Statistics Canada, more than half of all Canadian adults are overweight or obese. 🙁 Although certain aspects of our health revolves around genetics, we also rely heavily on epigenetics, and the idiosyncratic personal choices we make today to determine how we live our golden years. Just like with a motor vehicle, proper maintenance can extend our life expectancy, and keep the repair costs down in the long run. This way we can save our money and spend it on meaningful experiences rather than on medication and treatments. 🙂
We have some control over how much income we make and how long to stay in the workforce. But there are things that are simply out of our control completely. We should still do our best to predict the outcomes of these factors, and take necessary precautions, but we don’t have to worry about them. We shouldn’t waste our energy on thoughts and elaborate plans that we can’t do much to act on. Life is short, so there’s no point in sitting around thinking about all the ifs, ands and buts.
By splitting up the various components of retirement planning we simplify the process and can easily focus on the parts that we can take action on and make a difference, while not stress out over the other components that we can’t affect.
With the advent of Uber, AirBnB, Etsy, and other technological advancements in the labor market, the gig economy is allowing anyone with a car, a home, or just a love for crafts to make a side income, or even turn them into a primary source of income as many people have done. 😀 But at the same time, due to the autonomous nature of peer-to-peer and contractual transactions, there is more responsibility on individuals to manage and save their own money instead of relying on an RRSP or 401(k) to fall back on in retirement.
Random Useless Fact:
Pit bulls were created by breeding bulldogs and terriers together to produce a dog that combined the strength of the bulldog with the agility of the terrier.