Time to Retire “Retirement”?

In financial marketing circles you don't hear much about personal investing. It's "retirement investing." Personal financial planning? It's mostly "retirement planning."

Out in the real world, that's a problem. Many, perhaps most working people aren't actually retiring. Some can't afford to retire; others prefer not to. The vast majority of "retirees" working part time say it's by choice, not necessity.

The meaning of "retirement" gets even murkier as young people aspire to retire early. Movements such as FIRE urge them to spend almost nothing, save and invest almost everything.

Alas, spending almost nothing is not a meaningful life plan. Suze Orman interrupted her own retirement to assert that somebody retiring at 40 would need $5 million to live on. Maybe $10 million. She later recanted, after learning that the  potential "retirees" realized they would have to keep working for a living. They simply wanted to stop "working for The Man" and start doing something they enjoyed or found fulfilling.

"Retirement," whatever it means, is not a useful financial goal. The goal should be financial independence. Canadian writer  Jonathan Chevreau calls it findependence.

[W]hen you’re financially independent, you work because you want to, not because you have to. “Findependence is necessary for retirement,” he says. “You can be findependent and not retired, but you can’t be retired without being findependent.”

The FIRE movement (Financial Independence, Retire Early) should become simply the FI movement. Calculators could help Millennials check their FI progress like they check their FICA scores.

Former Marines should love this approach. "Semper FI, guys. Semper FI."

Even HNWI's Can Be Financially Clueless

Three questions from an oft-cited quick quiz:

■ If $100 earns 2 percent per year, in five years will you have more than $102, less than $102 or $102? 

■ If the interest rate on your savings is 1 percent per year and annual inflation 2 percent, could you buy more, less or the same with your money in a year’s time? 

■ Is it true or false that buying a single company stock usually provides a safer return than the stock of a mutual fund?

As noted in the NY Times, a survey found that only one-third of Americans could come up with correct answers for all three questions.

Financial cluelessness prevails even among High Net Worth Individuals, as Jason Zweig illustrates in his discussion of wealth-management fees. An investor was paying an adviser 1.5% to manage a $5 million account. When asked how much 1.5% of $5 million was, the investor guessed, "7 thousand or 8 thousand?" 

Fortunately (for themselves if not their advisers) many HNWI's have a handle on basic arithmetic. Zweig wonders if fees based on assets under management are on the way out. What do you think?

Could the future bring a split between investment management, handled at low cost by robo advisers, and financial planning for a fee? 

Might financial planners then become quasi-professionals, charging retainers or hourly fees like lawyers and accountants?