When I daydream about retirement, it is in a cottage by the ocean. A tranquil existence spent walking the beaches, coffee at the local coffee shop, casual dinners out at the local tavern. Summer days spent on the front porch reading, winter days spent near the fireplace reading. Being that I know I will have a mental need to continue to be active, I picture myself as a consultant in my field, my hours, my life … the ability to work when I want and play when I want. Just my Beau and I ... and all those visiting grandkids that I hope will be by often for visits. (Between us, we have five, yes five, sons … there should be a gaggle of grandchildren in our future.)
“In 1978, when Congress amended the Internal Revenue Code to include Section 401(k), it envisioned the provision mainly as a way for workers to supplement their companies’ traditional defined-benefit pension plans and Social Security. (Secondarily, it also was a nifty hideaway where highly paid executives could shelter income from taxes.)” -Tim Rutten
Of course that is just my daydream … and it was a daydream that I worked hard throughout my life to obtain. I went to work at 18 years old and, from 1989 to 2000, I paid into a 401k. From 1989 to 2000 when I took time-off to stay home with my 2 sons and finish my Bachelor degree (during that “time-off” I was earning $1000/month babysitting 2 neighborhood children to the tune of 55 hours per week). I managed to amass about $125,000. Now you must know that in early1987, at the age of 19, I was earning $11,440 per year and by the time I left that employment in 2000, at the age of 32, I was earning only $42,000 per year. (You now know why I went back to school and earned an MBA) During that time, I was on track to retire with a nice nest egg.
“Companies seized the opportunity to abandon their defined-benefit pension plans. Today, more than 60 percent of all U.S. workers rely on 401(K)s as their primary retirement fund. They’re not eager to “choose” their own retirement program, nor are they enthusiastic “owners” of American business. They’re draftees. Essentially, millions of us have been conscripted into the equities markets, where we have helped fuel stock prices and provided a bonanza for the financial services companies that manage and sell investment funds.” -Tim Rutten
Then came the market crash of 2001 and I saw my nest egg cut in half. But hey, I was young (thirty-three years old), my degree would provide more earning potential … I did not worry.
In 2004, with my newly earned BA, I went back to work and enrolled in Graduate school. Being that I was removed from the workforce for almost four years and I was trying to change industries, I ended up working for a small family-owned company that did not offer a retirement plan. I rolled my old 401k into an IRA and started to invest. Good strategy ... for about 4 months when my husband was laid off.
The good news, my IRA was starting to recoup some of the losses of 2001 but I could no longer afford to invest, as my paycheck was suddenly the sole family support. Again, I assumed it was only temporary, my husband would find a job, and hey, I was young (thirty-six years old) … my MBA would soon provide more earning potential … I did not worry.
The bad news, my husband decided that he no longer wanted to have a “traditional” job. Traditional job is defined as a job where the employer requires you to be in attendance for “X” number of hours per week and produce some sort of work product. In exchange, said employer would provide medical benefits, maybe a retirement plan with investment matching, and you can expect to receive a steady paycheck every two weeks. You know, a J.O.B!
