This path assumes you’ll retire at the normal retirement age (based on when you were born), which is 67 for most people. For me that is decades away, but luckily this retirement plan allows for a more enjoyable journey to the finish line for most people.
Benefits Of The Traditional Retirement Path
The biggest benefit of traditional retirement is having time on your side. If you’re young, you still have decades before you retire which will allow the power of compounding to significantly impact the size your retirement nest egg. Due to this awesome power, you won’t have to invest as high of a percentage of your income as an early retiree would.
When you’re not planning on retiring early, you can take a job that isn’t in a super high paying field. You don’t have to invest massive amounts of money up front (although it does help) like you do with early retirement. Instead, you can find a job that you love working at. While finding the perfect job is difficult for many, once you find it you may never feel like you have to work another day in your life! Just invest at a sufficient steady pace and you’ll eventually make it to retirement.
One of my favorite parts of taking the traditional route to retirement is enjoying some of the luxuries life has to offer. Normally, these luxuries come with price tags that are outside of the realm of affordability for early retiree candidates. Due to the strict budgets, you simply don’t have room to splurge on anything that isn’t necessary. By taking your time to get to retirement you can probably fit in a few luxuries, like a cruise or a tropical vacation, that you wouldn’t be able to afford if you wanted to retire early.
Unfortunately, retirement savings never grow exactly like you plan. Luckily, with a traditional retirement you have time to adjust should your plan get off track. If investments don’t return what you thought they would, you can invest more money before it is too late and you have to delay your retirement date. Early retirees may not have the time to make proper adjustments and their retirement date might get moved out by many years due to a market crash.
Drawbacks Of The Traditional Retirement Path
The path to a traditional retirement isn’t filled only with benefits. By choosing this path, you’ll have to work for 40+ years until you reach your traditional retirement age. By not saving aggressively, you’ll be forcing yourself into working longer even if something changes that would make you consider dropping out of the workforce. If you don’t have the money to retire, you’d have to live a much reduced lifestyle to quit your job early.
When you have to work for those 40 years, you won’t have freedom to do whatever you want with your time. You might have to miss a big event in your child’s life if it coincides with a major deadline at work. Hopefully you can work around the conflict, but if you rely on your job for income to live off of and invest for retirement, you may not have another option. You could be chained to your desk instead of being financially independent at a young age.
As with any future path, you can’t predict the future and you aren’t guaranteed a job that pays well every year until you retire. Relying on being able to work for 40+ years might be unrealistic if you have certain health conditions or if your field of specialty goes out of favor as technology advances. This might leave you short on your retirement goals at a time when you need to be kicking up your investing into overdrive.
Finally, while it is a morbid thought, no one knows for sure when they’re going to kick the bucket. Wouldn’t it be awful to save and invest for 30 years only to die 10 years before you reached your retirement. Would you regret having worked those jobs for just a few extra luxuries at the cost of giving up time doing what was most important to you and your family?
There is no clear answer whether the traditional retirement path is right for any given person. It is a deeply personal decision, but hopefully these benefits and drawbacks have given you a bit more insight into the huge decision you’ll have to make. Luckily, early retirement and traditional retirement aren’t the only options you have available. We’ll discuss a much less mentioned path in the near future and you’ll have to let us know what you think!
What do you think about the traditional retirement path? Do you think it is a good fit for you, or even for a majority of Americans? Or do you still think early retirement is the way to go? Why or why not? Let me know in the comments below!
Photo by: muha… Text added by: Lance Cothern