Why Saving For Retirement Is Bad Advice
I hate when people say, “save for retirement!” as if it is the holy grail of life. Sure, the average person will not be able to stop working when they are meant to retire because they haven’t saved more. But to simply telling someone to save is meaningless.
But telling a 20-something year old to save for retirement is worse.
It’s like telling a three year old not to eat ice cream because they’ll get fat. Yes, intellectually it is the right idea, but the emotions just aren’t there.
So where am I going with this? Well, let me ask you a few questions: What will you do regularly when you retire? Will doing those things make you happy? How do you know?
What is retirement?
Actually, let’s start with the most important question. What exactly is retirement? To me, the idea of retirement is that you will be able to spend your time the way you want to. — Like summer break, except that it gloriously lasts decades instead of a few months. What are some of those things you can do day in, day out for a few decades?
I was lucky to have been able to find my limit for travelling within a few months. To be fair, I was working and travelling for two months and so every day I was doing stuff. By the end of the two months, I was so ready to go back, have a routine, and build both my skills and this project. At the same time, I know that I cannot just say I’d be happy travelling the rest of my life, or being a couch potato, or playing video games for months on end.
How about you? Do you have a pretty good idea as to what you could do regularly and be able to enjoy the ups and the downs of those activities year in, year out?
If you’re like most people, the answer is no. So why would you ever want to save for a future that is so blurry? Which leads me back to my point: It makes no logical sense, and more importantly, no emotional sense for someone to try to save for some sort of future that they cannot imagine.
Maybe this is why why most people in life do not end up saving for retirement.
Yet, we’re made to believe that it’s the right thing to put aside 10% of your salary every month.
Now, I’m not arguing that you can do whatever you want with that money. I still think putting aside 10% of your salary is a good idea. But, instead of putting it toward retirement, I would suggest to save that money to discover what exactly it is that you would like to do day in, day out by either taking a gap between jobs or taking unpaid time off.
What does that mean?
What to do instead
Well, let’s say that you have come up with a list of 50 things that you think you’d love to do during retirement. But you’re not sure if you actually would like doing those things for that long because you’ve never been in that situation before.
Instead of waiting for that day for you to start testing out these ideas, I suggest that you take a few months off between jobs or to take a sabbatical to do those tests.
Do you think you can paint for a few hours a day? Well then, spend a few hours a day for a month or two painting and see how it feels.
What about volunteering for different causes? Try it out and see.
Have you always been a huge fan of drones but haven’t had a chance to learn how to fly one yet? This is a great time to do so.
Go through that list and notice which activities keep your excitement over the course of a week or two. Those that don’t are probably bad bets in being able to keep you entertained for years — good thing we found out now instead of when we’re retired. But those that are have a potential to become things you can do month in, month out. Year in, year out.
(And maybe this exercise will also solidify what your hobbies are and lead to other possible opportunities for you, connected to doing what you love.)
Using these few months to test out things you think you’d enjoy is a great way to get clarity without taking much of a risk.
That’s exactly what I’ve done.
After my first job, I explored entrepreneurship and was building a company that sold physical goods. Eventually I realised that I didn’t like having to deal with inventory, with logistics, with sourcing.
After my second job, I took a few months to renovate my house by myself. I converted the basement into a studio apartment. It took me 5 months to finish, but I discovered that I loved building things from scratch. The idea of building a shipping container home is now something I’m pretty sure I’d enjoy.
After the home renovation, I took the concept of building things from scratch to something different. I tried writing a book. Each day, I’d write a few thousand words and within a month, I had the rough draft of a book complete. It was also super liberating to have done all of that within a month and also a lot of fun. Once again, I enjoyed creating something into this world that didn’t exist before.
I then decided to turn the book into a blog and started learning about search engine optimisation, building a helpful user interface. I really enjoyed seeing more and more people find the information, ask questions, and thank me for helping them out. It was something that I now know I would definitely enjoy doing. This is why you’re able to read this now.
So although I may not build shipping container homes, write books, or create blogs for the rest of my retirement years, I know the concept of creating and building something from scratch is something I do enjoy and I now have a pretty long list of things I want to try building.
And now, during my third job, as mentioned earlier, I got a chance to travel for 2 months. Luckily, I didn’t have to take any unpaid time off as the company allows for its employees to work remotely. But through that experience, I found out that I cannot travel that long (which surprised me). I was so physically and mentally exhausted even after one month.
That also gives me clarity that I would not want to live in different parts of the world every month. I know that I will not want to just travel all day long. As much fun as it is, travelling that long is super exhausting.
But I do enjoy taking a few weeks off at a time. It’s refreshing to get out and see just how amazing this world is.
Save for the Exciting Life You Want
Once you have actually gone out and validated the ideas and have a shortlist of things that you’re starting to feel like you can be doing during your retirement, then now saving for retirement isn’t just some wishy-washy thing, but can become saving for the ability to do those things more frequently. It doesn’t become saving for retirement, but saving to do more of the things you know you love.
And if you know you would love doing those things more frequently, why wait until you’re “officially” retired before you start doing it regularly? Why not start now? This is especially true if some of those things you love doing are also being done by others who are able to make a living off it.
I’m not saying you have to turn these things into full time jobs, but it does become a source of additional revenue that you would have fun doing.
However, if you don’t really enjoy what you do full time right now, maybe this can become a goal for you to work towards. For example, my interest in building a shipping container home might give me the ability to either live in it, sell it, airbnb it. Either way, I’d have a lot of fun building it.
Regardless, being able to do more of what you love will require time and money and the best way to have more time is to buy it back from your day to day life. Yes, it can be yours when you retire in your 60s (though I think the government will bring retirement age to late 70s, early 80s by the time I qualify) and get your retirement package (that I think will become less and less).
Or you can create a mini retirement for yourself like what was suggested to find your hobbies and interests. That money that was supposed to be for retirement can now go towards giving you the space to pursue what you love, to create, to give. That money can go towards buying back your time.
Saving for retirement is bad advice for those in their 20s. Most of us don’t truly know what we want to do during that time so there is no emotional connection to that hazy future. However, instead of just splurging that 10% on other things, take that money to slowly buy back some time between your different jobs, or to sustain a sabbatical and test out all the things you think you’d want to do regularly during retirement.
By doing this exercise, you will be able to confirm what you can see yourself doing year in year out. You might have even found passions for things that you would want to do even more regularly.
And if you know anyone who’s made a living doing exactly what you want to do on a daily basis, then maybe you can also explore how you could make some money which can continue to fund what you enjoy.
Once you have a list of things you know you’d enjoy doing, the conversation isn’t about saving for retirement anymore, it’s about saving to be able to do those things.
And who knows, maybe some of those things are so much more exciting that some of the things you used to buy no longer excite you as much, and you’ll be spending your money on things that really matter to you instead.