Our Biggest Personal Finance Crisis Requires a Massive Shift in Mindset

Let’s stop using the word “retirement” — it’s toxic

While watching Taylor Swift and Bruce Springsteen videos on YouTube the other night (this is what I do in my spare quarantine time!), Google threw an ad at me for Edward Jones Investments. The financial advisory firm used its time to promote something it calls “the new retirement.”

I immediately got super excited.

After Taylor’s epic performance of “All Too Well” from Staples Center on the Red Tour ended, I did a beeline for Google and searched “Edward Jones new retirement.” My excitement instantly morphed into annoyance. Edward Jones teased me, then proceeded to waste 35 seconds of my life.

Come to find out, the new retirement’s the same as the old retirement.

The retirement investing machine isn’t reinventing a thing. While the marketing makes sense, their actual definition of a “new retirement” does very little to address the nation’s retirement crisis. In fact, it ignores the changing demographics, preferences, desires, needs, and wants of Americans, particularly those under 50 and definitely the millennial generation.

In this article, we address what a new retirement — one that actually makes changes to conventional conceptions of retirement — might look like.

In my first ever Medium article — way back in July 2020 — I wrote:

Life doesn’t follow a linear trajectory. It happens in fits and starts on a seemingly disjointed path if you subscribe to the notion that school leads to work, work leads to marriage and kids, marriage and kids lead to retirement, and retirement leads to death…

I don’t think much about retiring.

I think more about being able to do what I want to do when I want to do it.

In my second ever Medium article — also from July — I further riffed:

The days of working, consistently, for 42 years and retiring as a senior citizen are long gone. The days of scrimping to do this ought to be long gone.

Retirement investing that focuses on hitting some arbitrary nest egg number north of a million belongs in history’s dustbin. It’s out of step with reality for an increasing number of us.

Your sole focus from here to eternity should be on income — generating and allocating it.

In the two above-linked and subsequent articles, I detail — in detail—practical, on-the-ground strategies alongside the theory of a non-linear retirement. Of a retirement not tied to a specific age or amount of money, but rooted in real life as we redefine traditional notions of work and how to maximize, optimize, and best direct wealth.

That’s the focus here — the theoretical and psychological components of redefining work and how to maximize, optimize, and best direct wealth. It’s all about mindset and the will to do seemingly extraordinary things with your money:

So you’ve got cash to live by the month. You’ve got cash for an emergency fund, earmarked for nothing other than periods of reduced income (e.g., unemployment). This excerpt leaves out the all-important rainy day fund. It’s truly life-changing when you embrace the distinction between emergency and rainy day fund. You’ve got cash for other discretionary needs, wants, and desires. You have cash to cover periods where you choose to not work or work less (transition or temporary retirement).

It’s quite an endeavor and achievement to fill all of these funds. It’s not for everyone. Even if it is, a lot of people will quit — or at least cut meaningful corners — before they get there. But getting there is critical to attaining financial flexibility and making the pessimistically optimistic lifestyle work for you.

Living expense fund. Emergency fund. Rainy day fund. Discretionary needs and wants funds. Transition or temporary retirement fund. A comprehensive income allocation strategy designed for a world where we discard the word “retirement.”

Sounds daunting. Maybe unrealistic. Even impossible.

However, we live in a world where nearly every personal finance and retirement guru fixates on saving — at least — a million dollars for retirement. This means saving something north of $500 a month for 40 years. Start later in life and you’re on the hook for way more than $500 every 30 days if you expect to amass that magic number of $1,000,000.

Needless to say, it’s not going well. Pick your data. I spun the wheel and discovered that, according to one survey, 35% of Americans have nothing — as in zero dollars — saved for retirement. Spin the alarming data wheel again and it gets worse (via MarketWatch):

In an interview, economist Teresa Ghilarducci, a professor at The New School in New York City and one of the nation’s leading experts on retirement, told me that half — that’s right, half — of Americans aged 55 and up will retire in poverty or near poverty.

“Our data is showing that, because of the COVID recession, about 50% of workers over the age of 55 will be poor or near-poor adults when they reach 65,” she said.

The writing is on the wall.

If you’re Generation X, a millennial, or Generation Z don’t set yourself on the same path as your parents and grandparents. In the words of the great Southern California punk band, Social Distortion, don’t be —

Destined to lose and born to fail

I feel like most (or, at least, many) people under 50 are securing a world of hurt for themselves if they adhere to a traditional retirement mindset. If you have managed to successfully set yourself on the traditional retirement trajectory, more power to you. There’s nothing fundamentally wrong with it. It’s just not easy — as the data shows — for large swaths of the population to do.

A critical element of the mindset necessary to skirt our biggest personal finance crisis — being screwed on the way to and in “retirement” — is to realize your limitations. This is our greatest strength — acknowledging, recognizing, and adapting to our limitations.

This doesn’t necessarily mean totally abandoning convention. Conventional approaches to personal finance work for some people. Just not me. And maybe not you.

In this case, we must thoughtfully reframe the way we approach convention. As in, not setting unrealistic expectations for ourselves. Not marrying ourselves to a plan where we’re going to frequently feel like we have failed. Because this can lead to something worse than failing — quitting.

Unrealistic expectation: Before you do anything else with your money, invest $500 a month, or 10% of your income, or whatever. Just pay yourself first!

This doesn’t work for a lot of people. Yet personal finance pundits and retirement “experts” continue to spew the same advice. They know it doesn’t work. They see it not working. Yet they continue to rock it. Makes no sense.

Reframed expectation: Pay yourself last! Only invest after you have cleared debt and filled the aforementioned funds. Don’t focus on a target monthly amount. Don’t focus on a magic nest egg number, such as $1,000,000.

Here’s the secret that’s hardly a secret at all. I’ll say the quiet part out loud. Because this isn’t about being right or wrong. It’s about getting to where we all want to go — together. It’s about taking broad ideas and brainstorms, tweaking them, and turning them into flexible strategies. Keep what works for you; discard what you don’t like so much. You can run with your adaptation on the road to your unique version of financial flexibility or freedom.

You might end up saving $500 a month and/or hitting $1,000,000 after all. Who would not want to do these things? It’s just that your approach doesn’t focus on these numbers. You start from a mindset that says I want to do X within the next 2 years. I want to do Y within the next 5 years. I want to do Z within the next 10, 20, or 30 years.

X might be have all of the aforementioned funds filled so you truly feel cash secure.

Y might be investing aggressively in dividend-paying stocks, living in a different city for a month every year, and attaining financial flexibility.

Z might be throttling back how much you work by a certain percent in 10 years, another certain percent in 20 years, another certain percent in 30 years. Or Z might simply be doing everything in your power (i.e., from standpoints of health and wellness to the type of work you do) to ensure you’ll generate ample cash flow — in one or multiple forms — forever or for as long as possible.

We all ultimately chart our own course as we mentally coalesce around the timely and relevant notion that most of us will either never retire (in the traditional sense of the word) or we, at the very least, won’t retire the way Ma and Pa did.

Set yourself up for success. Remove the word “retirement” from your vocabulary. It’s so limiting and presents so many practical problems (as the data indicates), it has become toxic.

Take it easy on yourself every month. Don’t fret over saving or investing less than you’d like in a given period. Contain your excitement when you hit it big and beat your internal cash flow projections, thus leading to outsized savings and investment contributions. Maintain an even keel.

Structure your personal financial situation in such a way that you nail smaller short-term goals more often than not. Hitting as many short-term goals as possible on a frequent and ongoing basis beats the heck out of living in perpetual uncertainty. Of having the same long-term goal everybody else is chasing ($1,000,000 or more by 65!) and being unsure if you’ll ever achieve it. When a significant chunk of “everybody else” isn’t seeing success, it becomes evident that the road to retirement, as we sell it, is a toxic and unrealistic chase.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.