Additional Math Pages & Resources

Tuesday, November 22, 2011

Using Elementary Math When We Grow Old. Part I

For two years, the subtitle of this blog has been "using elementary math when we grow up." Today I am making a temporary adjustment to " using elementary math when we grow old ."

Life includes these activities - we are born, we grow up, we get an education, we work, we retire, and we die.  Normally I deal with education or work, but today I want to consider retirement.

I suggest a quick trip to the Wikipedia page on retirement for an overview of this topic.  

Retirement means stopping work and paying for things with our savings or a pension earned during our working life (or we may depend on our families, or the government). In the stereotypical American Dream, it means golf, and bridge, and cruises, and walks on the beach ...
Why do beaches and bicycles always appear in retirement planning brochures?

Germany was the first to introduce retirement in the 1880s, about the same time that the USA introduced state-mandated, universal education. Since then, most countries have adopted both mandatory education for youth, and government-encouraged or government-mandated retirement for seniors.

Are Retirement and Education related to Unemployment?
Perhaps there is no direct cause-effect relationship, but consider this - because many governments insist on both
  1. childhood education (which delays our entrance into the workforce) and 
  2. senior retirement (which speeds our departure from the workforce)
in most developed countries, there are a few more working hours at either end of our lives, now available for others to fill. That might reduce unemployment for a few, while the retired among us can work on their hobbies instead of a job - like my old Polish friend in Paris, restoring his car...

Is Retirement Advisable? or Desirable? or Inevitable?
Not necessarily.

If people earn and save a lot when they are working hard, will they retire as soon as they have enough money? No. They won't. Look it up if you like, the evidence is clear.

Can Math Help?
Yes, but it's not simple math. Not elementary math. See the formula below on calculating savings during your working years. If you can figure it out, and have saved as it suggests, you are probably smart enough to retire today:

Decisions to retire seem to be based on a combination of wealth, health, family and interests. Money is only a part of it, although no one wants to run out of money before they die, of course.

See the formula below on calculating spending down your retirement savings by age 120. If it doesn't make sense to you, maybe you are not yet ready to retire!

You can talk to your investment advisor, or talk with your spouse, or sign up for a night class in retirement math - they might be able to shine a light on your retirement future.

Tomorrow we'll tackle the math part of retirement from another angle.