The objective of post-retirement life should be to lead an active an meaningful, healthy life, without suffering from the consequences of scarcity of resources. Thus, a planned approach with long term tools that serve to support retirement life should be undertaken. Tools like reverse mortgage and medical insurance can be very helpful for this purpose.
Post retirement planning is part of the social security mechanism that has evolved across the world. Yet, that may not be the only reason for one to save. Saving is closely linked with consumption and planning, not just after retirement, but all that one needs to do before it. Understanding it can help us plan our life better.
Saving is a part of normal economic well being, and there is no reason why it should be linked with or restricted to the post-retirement life. There are many better and less painful reasons to save, and the most important and welcome reason is investment, which is the basis of any organized business activity. In fact, the returns usually diminish with the increasing lack of flexibility of investments.
It is not that there is no rationale in planning for the retired life, but sacrificing your whole life for the sake of being able to take care of highly unpredictable and expensive health care at the fag end of your life just prior to your death would also be unhealthy and abnormal.
When we talk about saving for retirement, we are primarily talking about the period when we would not be fit enough to be of any productive endeavor.
This itself is a very dangerous thinking pattern, because if there is a time, when we must be active, it is the post-retirement phase only. If we begin with the intention of becoming inactive after a particular age, we are actually saying goodbye to healthy aging. If you are wanting to raise the argument that one can be more active and healthy in old age without the anxiety of earning, let me say that you are mistaken. Economic incentives are one of the strongest motivation for action for human beings, irrespective of age, and by retiring this incentive, one actually retires the active and healthy life as well.
What we do need in the later years of our life is additional income from our past investments, but it is not very wise to sacrifice the best periods of your life for the sake of those years alone. Hence the appropriate approach would be to include productive investments as part of our economic decision making. Let me emphasis that it would again be better not to link them with the ultra-safe approach of saving the earnings for thirty years later. Instead the approach should be to make the investment decisions on the basis of maximum returns, while entertaining calculated risks. Such an approach is likely to maximize your life time earnings, and utility far more than committed savings with the intention of serving your post-retirement medical bills alone.
In my opinion, retirement will be best served by appropriate financial planning. For example, plan purchasing real estate that you can utilize for serving your later life, by way of lease or reverse mortgage, while serving yourself and your family during your youth as well. Similarly, plan an active life even in the later years, even up to the point you will actually leave this mortal world. If you think you can not carry on with your current vocation, plan in advance for another vocation for those years, maybe with lesser earnings and a tighter life-style, but ensure that you enjoy that vocation. There is nothing in life that is a greater asset than a vocation you can enjoy. It will keep you active, satisfied and keep your accounts more active than those of your physician.
Saving per se is as desirable, as you might be interested.
What you do not need is the doomsday predictions of becoming a destitute unless you part with half of what you earn today in some complicated pension plan that will start giving you some regular returns after thirty five years. Thirty five years is just too long to plan for, and whether any returns after that much of time will be worth anything at all will largely depend upon how the global economy and financial system survives those long years. One mishap somewhere may wipe out half of your life time savings.
Even if is after just five years, it may not be worth it! Live for today! Save for today as well! Enjoy saving, enjoy life today!
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The Internal Revenue Code prescribes limitations on the early withdrawal of Roth IRA investments, which must be understood at the time one opts for this plan. Apparently, these limitations are a disincentive against these plans.
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