Would I still be working when I am sixty four?

I have a problem. Well, it is not an immediate one but the time has come when thinking about stopping work and what I am going to be surviving on is only natural. Would I still be working when I am sixty four? Not if I could help it! But if I don’t get very serious about supplementing my pension provisions it is likely that when I retire I won’t be able to afford even hot dogs for dinner.

Over the last couple of years I have entertained myself thinking about extreme options. According to one of these, I could by-pass the whole ‘how am I going to survive in retirement’ issue by going to prison when I am about seventy. Saving on nursing home fees is a bonus!

A little less extreme option is to face the problem ‘like a woman’ and find acceptably reliable ways to ‘store my labour’. My great grandparents used to store labour by buying gold coins of different value and my great grandmother wore their wealth around her neck – like in the picture. Very handy if you live a turbulent life but, let’s face it, this is a thing of the past.

Today we can store labour by saving and investing. With savings being eroded by inflation and the volatility of shares from last year, storing labour this way is like carrying water in a bucket with many holes: before you know it there is hardly anything left in. Not for me!

Or this is what I thought before I started reading about ‘basket’ or collective investment instruments such as mutual funds and investment trusts. The way I see it, there are two main problems with investing in the stock market at the moment: one is the assumption that the world will be the same after the financial upheaval is over and the other one is about finding ways to offset the risks that follow from the current volatility of the markets.

There is not much I can do about the first problem: whilst the world of finance is highly likely to change we can safely assume some level of continuity. Addressing the problem of risk can be approached in two different ways: by investing for the long term and keeping stock for ten years or over, and by diversifying investment portfolios so that the average works out. Mutual funds and investment trusts offer such diversity.

Another advantage of this kind of investment in my eyes is not only that they allow us to spread the risk but they are also generally run by professional fund managers. I am not a sophisticated investor so I would prefer to know that somebody who knows what they are doing is looking after my investments. Or am I entirely off the mark here?

May be I should just get on with reading ‘The Intelligent Investor’, pray and hope for the best. What do you reckon?

22 thoughts on “Would I still be working when I am sixty four?”

  1. If oil is peaking or has peaked then we are looking at a very different future..
    If the Western Capitalist Model has been superseded, we are looking at a very different future.
    If Global Warming predictions are accurate, we are looking at a very different future.
    Whether we look long term or short term it is likely that simplifying our requirements would be a good option – and we might even be happier.

    I’m trying to be realistic, not pessimistic and I’m pretty happy with the idea if it means my grandchildren get anywhere near the lifestyle I have enjoyed.

    1. @Pat: Realism is OK with me, Pat. I am hopeful that our children and grandchildren will enjoy quality of life – it will be very different kind of quality though. Change of values is inevitable. On the other hand, the news is dominated by the search for planets comparable to Earth. I have been saying for a long time that clever politicians will put most of the science budget in finding a new planet, developing means to get there and finding relatively acceptable ways to select who goes and who stays.

  2. I have about resigned myself to the notion of never retiring. Theoretically I am just 15 years away, but practically speaking I am not sure the investing I have done to date will get me where I want be in order to retire. I know that, here on our side of the Atlantic, many Americans are rethinking what it means to retire. Regardless of whether I work a day job, or have other sources of income, I want to be in good enough health and sound enough mind to work if I need to.

    Thanks for stimulating my thinking!

    1. @ThadP: Work is great and both, my husband and I, think that we will continue doing that. Emplyment is not and this is what I would like to get out of. I want to have choice and at the moment it is very difficult to create the conditions for that.

  3. Most likely you will be. Regardless of how well are you (if it is saved as the result of your income) – there is always danger of loosing it or depreciate due to inflation.

    See for yourself : Let’s say you have returns $60,000 in 2010 and at average inflation rate of 5% in 20 years time you will get only $ 23,000 annually inflation adjusted. To keep your capital protected – you need constantly top it up to protect against inflation.

    Can not escape it. The other two observations about passive income and the markets:

    – Only 202 of the 500 biggest companies in the United States in 1980 were still in existence 20 years later.
    – On December 29, 1989, Tokyo’s Nikkei stock average reached its all-time peak of 38,915.87. Twenty years later, the Nikkei has never again reached that level — and, in 2009, reached a new low of 7,054.98.

    1. @Financial Independence: How very interesting. So what you are saying is that neither long term view nor diversification help. I knew my great grandparents got it right!

  4. I definitely subscribe to the same investment theory as you, and I also wonder if it’s serving me best. While I put my 403b and Roth IRA into target-date indexes, I’m not exactly sure that’s the best move.

    Luckily, I’m young, have invested in real estate, and will continue to find inventive ways to increase my income. I also plan to turn a hobby into a business that will afford me both a way to spend my time after retirement as well as supplemental income for as long as I can keep at it.

    With all the uncertainty, I find it best to do what makes you most comfortable as long as you have some semblance of a long-term vision and you change it up as necessary.

    1. @The Happy Homeowner: Most of our wealth is in real estate. Regretfully the whole thing needs restructuring since it is non-income generating.

  5. Another option, which I would suggest to everyone, is to become an expert in a highly liquid collectible. Now, you definitely don’t want to put all your money there, but when you know about it, it is often easy to get extremely high returns and if you pick a market that is fairly robust, they should keep their value well even in hard economic times. I buy Japanese antiques which I can usually find at 50% of their true value, so even if there is a huge slum, I will still come out ahead. It takes time to learn about a niche collectible, but it will pay off handsomely for an alternative investment.

  6. I pretty much got used to the idea that I will be working way beyond my sixties. Do I want it? Hell no. But I am being realistic (not pessimistic). One of the reasons is that I am not a good saver or investor.

    1. @Aloysa: Probably worth becoming. This is how I felt till about three years ago – in fact the ‘material’ world was not part of my world view at all. Now I read books on investment and finance as my bed time reading. Well, ok I was exaggerating…a bit 😀 .

  7. I do hope you find ways to “store your labor.” That’s a clever way to refer to saving and investing, and it is also true. Anyway, as you stated, while there are no guarantees, I do think that given the fact that we’ve been through a Depression and some recessions, and yet the stock market has continued to reach historic high after high, it seems robust enough over the long term to continue investing in. That’s certainly data driven and reasonably sound. With respect to professional managers, I’m biased because of the data that suggests that most fail to consistently beat the market. There are always exceptions though.

    I completely understand the hesitancy to reading Graham’s book. Just because it is helpful doesn’t mean it is particularly exciting, right?

    1. @Roshawn: Regarding the fund manager, I suspect I am still trying to wrigle out of learning enough about investing for it to become interesting. I am such and cliche in this one. Better get on with my reading.

    1. @Miss T: We are not that young but we still have time. Also we already have wuite a bit – in fact at the moment my pension deal is really good. Having said this, until recently I had tenure – now any of us could be made redundant at any time. The word changes fast and what I would like to learn is how to ‘ride the waves’ rather than be crushed by them.

  8. This is a reality all of us must face. As the future is unknown, I think the best policy with investing is to diversify as it helps take out some of the risk. In the long run, chances are that you will come out ahead with this strategy.

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