Tuesday, May 4, 2010

Retirement Needs and Wants Are Two Different Things

This comes from a recent press release by Hewitts Associates:
    Four in Five Americans Not Expected to Meet all Their Financial Needs

    Typical U.S. employees will need to have resources equal to more than 15 times their final pay to maintain their standard of living after they retire, according to analysts at Hewitt Associates Inc. About 80% of workers may fall short of meeting all their financial needs in retirement, says Hewitt Associates.

    The figures come from a Hewitt study of projected retirement savings totals of about 2 million employees at 84 large U.S. companies.

First, are we talking about "wants" or "needs"?

Plain and simple, everyone's needs have always been provided — otherwise they would be dead.

The problem with U.S. society today is that a need is any luxury that the neighbor happens to have.

Second, actuaries such as well-known Malcolm Hamilton give good reasons why the large majority of retirees, whether they live in Canada, the U.S., or other Western nations, can live on far less than 80 percent of their pre-retirement income.

Indeed, government statistics indicate that retirees live comfortably on 45 percent to 62 percent of their pre-retirement income.

Although these studies by Hewitt and financial institutions indicate that retirees will require a relatively high retirement income to support these "needs", the writing is on the wall: Most retirees will be living on a small fraction of the income that they made working.

And my guess is that many of these retirees will be just as happy as when they were working - or even happier.

My guess is based on the number of people who have written to me over the years about their experiences with retirement and unemployment.

Ernie J. Zelinski
Author of How to Retire Happy, Wild, and Free
(Over 120,000 copies sold and published in 9 languages)
and The Joy of Not Working
(Over 240,000 copies sold and published in 17 languages)

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