Reader Responses March 4, 2019

SURVEY SAYS: If You Didn’t Have to Work, Would You?

I dream of financial freedom—to spend my days as I like, to volunteer more, to travel and to spend more time with those I love. However, I do wonder if sometimes boredom would set in and I’d end up working in some capacity.

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Last week, I asked NewsDash readers, “If you had enough money for which you didn’t have to work, would you still work?”

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More than one-third (34.7%) said they would not still work, while more than one-quarter (26.3%) indicated they would work occasionally and just for fun. Twenty percent reported they would work part-time, but in a different field, while 12.6% would work part-time in the same field, and 6.3% would work full-time in the same field.

In verbatim comments, readers shared what they would do besides working if they had enough money—volunteering was the most cited. Others shared why they would, and do, continue to work—it’s not all about money. Editor’s Choice goes to the reader who said, “Work has taken up enough of my life; I want to play while I still can!”

Thanks to all who responded to the survey!

Verbatim

With sufficient funds, I’d want to establish a scholarship foundation and work part-time at running it, along with full-time staff.

If I didn’t have to work to earn money, I think I would travel and volunteer almost all the time.

If I had enough money to be able to stop working, I don’t think I would, unless I found a volunteer opportunity that would keep me involved and stimulated. I cannot imagine just sitting around. I might do some traveling, but I would definitely want to stay part of the working world.

I have enough now. My wife wants me to be Medicare eligible before I retire.

Yes, I would still work part-time to maintain a daily-active schedule and fellowship with my colleagues. Also, working part-time would allow me to pay golf and volunteer in my local community.

I’m retiring in three months and, no, I have no plans of working again.

It’s not work if you enjoy what you are doing! So, enjoy what you do for as long as you can!

Life’s too short. If money is not an issue, why not spend time doing what you enjoy with those you love.

I would travel, spend a lot more time with my grandkids, spend a lot more time by the pool, and maybe once in a while do something that resembled work.

I always thought that I would continue working at some level even if I didn’t have too. However, after being laid off and living on severance for 2 1/2 months early last year, I enjoyed the time I had to take my children to school and hang out with my wife and exercise anytime I wanted during the day. I am actually looking forward to the time I don’t have to work and can spend the time doing whatever I want and then occasionally working if I choose and on my terms.

There are so many other things I would rather do than work; I just hope I’m still able to do them when I have enough money and am able to retire!

I’ve had enough money for years before I stopped working that I could easily retire, but I chose to keep working for about ten more years because I enjoyed it and making a difference. Now I volunteer for the same reason.

I’d choose part-time work that I found personally fulfilling and might bring positive change to the world. Regardless, I would never be bored without a full-time job. I fill my time with: square dancing, teaching ESL classes, Spanish conversation groups, learning the accordion, helping my mother, going to plays and concerts, and yardwork. Plenty to do, if you look for it!

I could devote more time to the volunteer organizations which I belong to and help.

I guess it all depends on how old I am when I have what I consider to be enough money!

Well, I would work but it would be on my farm.

Would I work if I didn’t have to…. H E double hockey sticks NO!

The problem people have is knowing when enough is enough. If I had “enough,” I’d only work to help others and volunteer.

I would enjoy life to the fullest, soaking in all my time with family and friends. I would volunteer my time with things that I believed in and felt could use the support. I’m already in my 50’s, no need to work if I didn’t need the money.

Likely volunteer more, not necessarily work.

Work has taken up enough of my life; I want to play while I still can!

Working is to generate money for survival; family and volunteer work is what makes a difference in your life and the lives who you affect.

I’d like to volunteer – perhaps at an animal shelter, hospital or some other club/association. Do it for the fun and socialization!

Most likely, I would volunteer instead of work.

Actually, I do not need to work for money, but afraid of boredom and too much time on hand. So, I work full time in the field I love.

While it would be great to not have to work, I don’t want something bad to happen for that to happen.

It’s all about priorities – what are the budget essentials and what are truly optional.

I have plenty to keep me busy without having to work. I love to travel. Projects around the house and activities with friends and family will keep me busy enough. And there are some volunteer opportunities I’m interested in. There won’t be time to work!

I think you need to define “work” for this question. If I had all the money I need, I would not need or want to work for pay. However, I would volunteer plenty.

I look forward to the day I qualify for early retirement.

Work is a tool, with no inherent value. People have inherent value.

I have not worked since retiring three years ago. Life is good! However, that may not be everyone’s ideal. Different strokes for different folks.

I would spend my days doing something that I love and putting all my time and effort into that. I dream about that all the time…something to do with golf and dogs…my two favorite passions…and maybe my husband can come too! 🙂

I think I could find ways to fill my days without working. I would, of course, have a house in a warmer location than where I currently live!

I think there is much to be gained by continuing to work – personal interaction with one’s peers, keeping up with technology and maintaining skills to name a few.

I’m there — retired last fall. But I’m back to fill in while my replacement is having surgery. I really don’t miss all this stress!

I plan to work as long as I am healthy and can do it. Work keeps me energized and moving. I get bored and spend money when I am not working.

I would love to have enough money so that I did not have to work. I’d use that money, while still working, to set up a charitable trust to support the causes dear to my heart.

I’m on the cusp of retirement and believe I have enough money to retire; however, it’s scary and makes one wonder…is it ever enough? So I keep working.

“You don’t need a million dollars to do nothing, man…take a look at my cousin, he’s broke, don’t do sh*t” -Lawrence, Office Space

It’s about happiness, not money. I plan on doing whatever makes me the happiest, regardless of whether it makes me money or not.

Work wouldn’t be such a drudge and I could look at it as working for fun!

I’m not making any plans….I don’t see this happening for me.

My husband and I are retiring to Aruba in 8 years. To combat boredom I plan to open an adult lemonade stand.

I would spend my time with family and friends and travel the world. If I got bored, and rich enough, I would create a foundation/volunteer.

That would be “Living the Dream” wouldn’t it?

I view retirement as an opportunity to continue to participate in different fields or non-profit where they can’t pay as high a salary, but are doing interesting and beneficial work. Basically, I’m saving so that I can continue to work at lesser pay.

I’ve put in my time, as they say, and have been blessed with a successful banking career. If I could retire today, I am confident I could find enough activities to fill a 40 hour work week — volunteering at a dog shelter, spending time with my first grandson, taking hikes and bike rides, and traveling in our new single engine plane with my retired military pilot husband. I’d also be nice to actually have time to get to the “stuff” in the house and yard on a more frequent basis!

Why would someone work if he or she had enough money not to? You could do all the things you can’t get to because you have to work.

I love what I do. It gives me purpose and I believe I have something to contribute. I am not ready to give it up just yet. A much earlier retirement would probably be in order though!

ABSOLUTELY NOT! I started working at 15, I deserve to have several lazy days in a row watching reruns of Andy Griffith.

The freedom to commit most time and energy towards global environmental and social sustainability is the ultimate goal. Let’s leave behind a better world than we came into.

I am there today but cannot imagine not doing what I love and mentoring next generation professionals. They challenge me, by invitation and personality, about how and why we do what we do in the way we do it.

My ideal situation would be to have enough money not only not to work but to enjoy travel & leisure activities and be able to help others (including financially).

There are more volunteer things I would prefer to do instead of working

Financial freedom gives you choices. I’d seek out volunteer opportunities that would have an impact in our community.

I don’t expect boredom to be an issue. I’ll find something else to do. But, if it involves too much spending, I may end up working!

My wife has already decided this. Yes, I will working in some capacity.

If I had enough money to not work and found myself bored I would volunteer my time to a cause that I believe in. That way I could stay connected but wouldn’t have to keep to a specific schedule. If I ever got to that point, I would have definitely earned some time to just do whatever I wanted.

I would miss interacting with other people and helping to solve problems, but I would definitely go for a shorter commute! Volunteering at a local non-profit would also work for me.

I would & I am. Learned during a layoff that I married my spouse for better or worse but not for lunch every day.

I would work when it fit my schedule (in between spending time with my grandchildren) and doing something I enjoy. Definitely not in the financial world I work in today…way to stressful!

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.
Opinions March 1, 2019

Barry’s Pickings: Adequacy

Ask several retirement plan professionals, “How much income in retirement is enough?” and one may get several answers. Michael Barry, president of O3 Plan Advisory Services LLC, discusses why this is an individual decision, and what issues in the retirement plan system need to be addressed.
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Art by Joe Ciardiello

Art by Joe Ciardiello

In the era before the widespread adoption of 401(k) plans, employer sponsored retirement plans were designed around a concept of adequacy that focused on a replacement ratio, generally a target percentage of preretirement income. Thus, the Aon Consulting/Georgia State University 2008 Replacement Ratio Study concluded that “[r]equired replacement ratios now range from 77 percent for a person earning $80,000 to 94 percent for a person earning $20,000.” Aon’s more recent study, 2018 Retirement Income Adequacy at U.S. Plan Sponsors, takes an account balance-based approach, finding that “[t]he average needs for full-career contributors are 16.4 times pay at retirement, or 11.1 times pay after adjusting for the expected value of Social Security at age 67.”

An idealized definition of an adequate retirement

Underlying both studies is a retirement income target “based on the idea that individuals need an income that will allow them to maintain their preretirement standard of living over a postretirement lifetime.” To its credit, Aon, in its 2018 study, considers an “alternative scenario” in which “retirees may personally choose to reduce their standard of living in retirement.” And discusses, as one possible consequence of not meeting the target, that an individual could simply choose to work longer.

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On some very rough assumptions, assuming a career beginning at age 35 and retirement at age 67, an individual would have to save (annually) around 24% of pay, between their own savings and what their employer contributes, to have 11.1 times final pay.

That’s a lot of money—on top of what the employee and the employer are contributing to Social Security.

Competing needs and preferences

There are, however, a number of factors that can make these numbers problematic. Consider: it costs a middle-income family $233,610 to raise a child to 18. More (sometimes a lot more) if you’re helping your child pay for college. This cost, of course, reduces your pre-retirement consumption. Targeting replacement income for an individual with, say, three kids, may radically overestimate her post-retirement needs.

Paying off student loans, home purchase, raising and educating children, all affect the spending and saving patterns of individuals, often in very different ways.

We do have a problem with getting people to save adequately for retirement—several hundred thousand years of biology have conditioned us to underestimate the importance of the future. Indeed, at the beginning of the 20th century the life-expectancy-at-birth was less than 50 years. The need to provide for a long (possibly very long) old age—when we can’t, or really don’t want to, work—is a relatively new thing. The behavioral economists call this bias against the future “hyperbolic discounting.” As a result, we need to push against human hard-wiring to get people to save enough for retirement.

That is all true, but …

There must be more to life than saving for retirement

Some parents are not going to say to their daughter, “I’m sorry honey, I can’t pay for you to take piano lessons. I have to make sure I have 11.1 times my final pay when I’m 67.” Otherwise, the only people playing piano in the future will be rich people’s kids.

The basic insight of economics is that, under conditions of scarcity, all decisions are tradeoffs—of one preference against another. The needs of individual human beings are radically heterogeneous. So that, while we can come up with guidelines, there is in fact no one right answer as to what is “adequate” retirement savings for any given individual.

A subjective definition of an adequate retirement

All of which is prologue to what I really want to say.

Before the advent of the 401(k) plan, employer retirement plans provided a one-size-fits-all solution to the retirement savings challenge: everyone got the same benefit whether they wanted it or not. Critically, whether they wanted the benefit offered or some other more modest one plus some additional cash, say for piano lessons for their kids. Or, for that matter, to go to Venice before they got too old to walk around. And for this purpose, these plans used an objective definition of adequacy, e.g., the 77% of preretirement income target proposed by the 2008 Aon study.

The brilliance of the 401(k) system is that it allows individual employees to decide how much to save and how much to spend on other things. In doing so, the 401(k) system provides a different and radically subjective answer to the question “what are adequate retirement savings?” Under the 401(k) system, we let each individual participant decide. Indeed, unless we get revelation from some deity, there is in fact no objective answer to that question. There are only different opinions. And in the end, the 401(k) system gives the final call to the individual saver. After all, it’s his money, his individual situation—who is in a better position to weigh and choose between the tradeoffs?

This flexibility, at the individual level, of the 401(k) system is what has allowed it, in tune with the zeitgeist, to flourish. If the 20th Century was about creating wealth from scale, from a “mass” economy—where everyone (more or less) drove the same car and watched the same TV shows—the 21st Century is about the individualization of decision making, with cars built to order and a billion YouTube channels.

A new set of problems

This new and radically subjective 401(k) system presents us with a number of problems to solve.

Unlike, e.g., in a defined benefit (DB)-based system, under-saving in the 401(k) system remains a critical risk. We have developed ways—tax incentives, matching contributions and, most significantly, defaults—to get employees in employer plans to save more. We need a better understanding of whether those strategies are effectively (and efficiently) counteracting the human tendency to hyperbolically discount future needs. And we need to find ways to push these strategies out to individuals who aren’t in employer plans—the “uncovered.”

We need to understand better the role of the employer and how employers can add value to this system.

And we need a solution to the payout problem. It’s telling that, still, after nearly 40 years, we don’t have one. In this regard we are, again and indeed even more so, confronted with the problem of heterogeneity—retirees’ needs and preferences in the payout phase are an order of magnitude more heterogeneous than they are in the accumulation phase.

Some sort of pooling option—in fact a sort of “mass solution”—is clearly needed, so that each individual saver does not have to self-insure against longevity. And a way of getting those individuals who should to seriously consider taking that pooling option.

The solution to any one problem leads inevitably on to others.

But, with respect to the retirement savings meta-issue—how much is enough?—we have at least located the decision where it belongs, with the individual.

 

Michael Barry is president of O3 Plan Advisory Services LLC, and author of the new book, “Retirement Savings Policy: Past, Present, and Future.” He has 40 years’ experience in the benefits field, in law and consulting firms, and blogs regularly http://moneyvstime.com/ about retirement plan and policy issues.

 

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Strategic Insight or its affiliates.

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