Are You Dreaming? - Does retirement seem like a distant possibility at best? The first step to making it a reality is easy: start dreaming.

By Jack Gordon

Have you really stopped to think about what you want to do in your retirement? Travel the world? Volunteer? Start your own business? Live in a cabin up north or a condo down south? All of the above? Or is it too soon to tell?

Regardless of your answer, you’re never too young to think about it. Still, if you’re like many people, retirement is a distant and somewhat nebulous reality you plan to deal with someday. However, now more than ever, you have to move it up on your priority list, because the responsibility of funding your retirement is likely to fall almost entirely on you.

Defined-benefit pension plans are going the way of the dinosaur, and the future of Social Security is unknown. Kent Jensen, a Thrivent Financial representative in Burlington, Washington, also notes: “Many employees are going to reach retirement age thinking the 401(k) program they have will be sufficient, only to find that there is nowhere near enough assets to do what they want.”

Sounds a little more like a nightmare than a dream, right? Well, before you give up, let’s get back to the dreaming part, because if you start with a vision for your future, the outcome doesn’t have to be dire. “Visualizing the goals we want to achieve is as important as financial preparation,” says Jensen. One drives the other. “Only by setting goals, based on your values, can you get excited,” he says. And excitement is a great spur to following through on your savings strategy.

Just ask Thrivent Financial for Lutherans member Fred Michels. “Retirement has been a lot of fun, I’ll tell you,” says Michels, 85, of Tavares, Florida, who retired 23 years ago at age 62. “Right now, I’m looking out on a beautiful lake, a mile across. My lawn goes right down to it.”

Michels and his wife, Alice, spent their working years in the public education system in New York and Delaware—she as a teacher, he an administrator—not spectacularly lucrative fields. Yet, they put four children through college and still help to support a son who works for Campus Crusade for Christ. For the first 10 years of retirement, they divided their time between the Florida house they designed themselves and a townhouse in Delaware. They also have traveled to China and Russia and have been active volunteers for Faith Lutheran Church in Eustis, Florida. The Michelses would be the first to tell you they have enjoyed a dream retirement and never felt they made any significant sacrifices to achieve it.

So, how did they pull it off? For many years before they retired, they had a dream for retirement. Michels knew he wanted to retire at 62. “My slogan was:‘Out the door in ’84.’” By starting early and establishing a vision of their ideal retirement, Fred and Alice Michels had a goal toward which they could work, plan and save.

Taking his own advice, Jensen, 33, and his wife, Kari, have also worked hard to define their retirement goals. “We anticipate we will spend much of our time serving others. Some of our dreams involve traveling the world on service projects while paying for others, including our family, to come with us.” Rather than waiting for retirement to fulfill this dream, he and his wife already shift their energies from work to service projects and routinely dedicate significant amounts of time to helping others.

“My wife returned to school to obtain her teaching certification to work with underprivileged children. We are going to be traveling to Australia this next summer where she can fulfill her student teaching requirement while also working with underprivileged children in the outback.”

So how does a young couple with a single income and two small children attempt something like this and still plan for retirement? “By keeping debt in check and setting aside 20 percent of our income on an annual basis into tax-diversified investments, we have given ourselves the flexibility,” Jensen says. “Had we just contributed to our 401(k) and IRAs like most people do, we wouldn’t be able to accomplish this.”

After listening to both Michels and Jensen, the moral seems obvious: Don’t wait until you retire to figure out what kind of retiree you want to be. But this isn’t as easy as it sounds, especially when retirement is years away. “At age 40, it’s hard to get a good handle on what your retirement assets actually will be,” admits Patrick Egan, national retirement spokesman for Thrivent Financial. Even more challenging, notes Egan, is the fact that it’s not until further down the road, “when 75 percent of your accumulation has been done, that you can start doing realistic exercises to match your dream retirement with your assets.”

On top of that, “You have to plan to live into your 90s these days,” says Egan. “People say,‘I’ll only live to be 75 because my father died then.’ But health care has changed dramatically, and the statistics are incredible.” Citing a Society of Actuaries 2000 annuity mortality table, Egan points out that if a married couple is 65, there is a 50 percent chance one of them will live to be 92.

Don’t let this overwhelm you. The good news is that if your retirement is 20 or 30 years away, you have plenty of time to let the power of compounding work in your favor. Socking it away now requires far less sacrifice than a frantic catch-up savings scheme when you’re in your 50s.

How much is enough?

A seemingly unanswerable question for many is: How much money will I need in retirement? “Start with a vision of what you want to do and then work backward toward how much money you’ll need to do it,” says Carl Leibner, a Thrivent Financial representative in Tavares, Florida, who works with the Michelses.

One way to start is by thinking about the things you wish you had time for now, but can’t fit into your busy life. Would you like to do missionary work? Maybe you’ll write that novel you always imagined? Or can you see yourself indulging your grandchildren or starting your own company?

Sometimes a picture of what you don’t want can be just as motivating as an image of the ideal. While it’s probably a given that you don’t want to outlive your means, don’t want to spend your retirement savings on your long-term care and don’t want to work until you’re 75, there are other things to take into consideration as well. Look around at family members and friends. Study the choices they have made. Imagine yourself in their shoes. Is an early retirement plan working out, or are they bored and looking for a second or third career? Is another couple’s dream of world travel turning out to be more than they bargained for? Are they now shifting their focus to spending time closer to home? All of these things can help you at least get a hint of what you want to shoot for as you envision your future.

The less pleasant alternative, of course, is to wait until you’re at or near retirement age, look at how much you have happened to save, and only then realize you can’t afford to do what you’d like to do.

And, don’t forget that one of your greatest retirement assets—one that many often overlook or take for granted—is your health. For instance, if you run out of breath going up the stairs, chances are your dreams of world travel might be derailed by health issues. Now is also the time to protect your family and your future against the unexpected by making sure you have enough disability income insurance. According to National Underwriter, by age 40 you have a 43 percent chance of becoming disabled for 90 days or more prior to age 65. Losing income can have drastic consequences to your retirement dreams.

Keep your dream in sight

More than anything, plain common sense can help at this stage of life. For instance, says Egan, “create a budget so you know where your money goes. People are surprised by how much they spend on frivolous things over 12 months. If you get a raise, why not bump up your 401(k) contribution by 1 percent? If you get a promotion and you’d really like to buy a Lexus, get a Honda Accord instead and pump another 2 percent into your 401(k).”

You are far more likely to pass up the Lexus, Egan says, if you have a concrete vision of a dream retirement than if you’re merely aware, in a general sense, that you will have bills to pay at age 70.

In the end, even though your retirement dreams will likely change in the years ahead—along with economic conditions and tax rates—you still can do a great deal right now to ensure that they remain sweet.

Jack Gordon is a Minnesota-based freelance writer.

Act Now!
Don’t put your future on hold. Have a conversation about your goals with a Thrivent Financial representative who can lend valuable direction, specificity and energy to your retirement-savings efforts.