Time and Money During Retirement

Planning for Life After Retirement: Beyond Money & Consumption

Most of us are familiar with advertisements of the financial planners aimed at potential retirees. That last paycheck has to last a lifetime! The question becomes how much money do we need for the rest of our lives? What if we live to be ninety? or (God forbid!) a hundred?   The answer to those questions depends upon our habits of consumption. 

Do we want to maintain our present lifestyle Do we want to move elsewhere? Or journey around the world? Consumption opportunities are endless, and so could be the amount of money needed to fulfill them. A gold mine for the investment industry! 

This post aims to shift planning for life away from money and financial capital to broader notions of our investments in human, social, and cultural capital. Our most fulfilling leisure (non-work) time may be what we do to continue our accumulation of human, social, and cultural capital, not only for ourselves but others rather than spending time in consuming money, goods and services. How do we want to spend our time during retirement?  

As a social scientist I would define capital as the accumulation of labor. This is the broader view of a social scientist whose training was in psychology and sociology, with interests in human, social and cultural capital, rather than economics with its concerns about financial capital (money and physical assets).  

Much of the world of human, social and cultural capital cannot easily expressed in monetary (i.e. market) values.  Remember, however, that markets are very fickle, and monetary values easily change. This exercise is mainly to illustrate that reducing life to concerns about financial capital and money is not very wise.  As a means to that end, I will invite you to compare your available time to financial resources in monetary terms.   

We use time to accumulate labor as human capital, e.g. our health, talents, skills, charisms, habits, wisdom, etc. A Nobel prize winner in economics even included virtues!  Human capital consists of forms of accumulated capital that adhere to our person rather than to relationships such as social capital. Our human capital will continue to produce benefits during retirement perhaps even more than money in the bank.  The quality of our life after retirement will probably depend for more than our human than our financial capital. A very simple example: the importance of our health. If we end up in poor health, we will likely want to trade all our financial wealth for good health.

We also use time to accumulate labor as social capital, which consists of relationships and their related institutions (marriage, work, professional, community, religious, political etc.) which also continue to give us benefits. Again, there may be more valuable than more than money in the bank. Time spent with grandchildren may be priceless. Before we follow siren calls to move to a better climate, we should count the costs of the networks of relationships that we might be abandoning. A retirement community elsewhere may be attractive in our sixties and seventies, but in our eighties and almost certainly in our nineties, age mates die, get sick and move away! We may become very lonely. Social capital inheres in relationships developed over time. Family relationships tend to be strongest, but the amount of time we have put into relationships in the near past is also important. 

We also use time to accumulate labor as cultural capital (language, disciplines, education, books, videos, beliefs, values) that enable us to share life and communicate with others. Fortunately, cultural capital is more moveable than human and social capital. We can use it to meet new people and do new things.  

Finally, we also use time to accumulate labor as financial capital (money and tangible things like our homes).  Financial capital is the focus of financial planners. At the same time that we have (hopefully) been accumulating financial capital to fund our retirement years (social security, pensions, annuities, etc.) we have also been accumulating human, social and cultural capital. I believe that these forms of capital are far more important for our retirement years. More importantly for now, our remaining time is far more important than our financial resources. Saying life is priceless may seem to be pollyannish, so let's get practice by making some money comparisons. 

Let's use the language of money to talk about the value of our time during retirement. For those who are at or near retirement age, monetary value of an hour of time is our hourly salary. Every hour we do not work is an hour in which we could have earned an hour's salary. For those who have been retired for a while, it is not so easy since we don't know what hourly salary we might fetch. One could aways reenter the job market and get market estimates. However, and easier way, if we are comfortable with our retirement income is just to divide our annual retirement income by 2000, i.e. a forty- hour work week for 50 weeks (assuming a two-week annual vacation). 

"Americans ages 65 and older earn a median salary of $1,193 per week or $62,036 per year. This figure is for full-time workers, so it doesn’t take into account the many people in this age bracket who drop out of the workforce to begin taking income from Social Security and their retirement savings. "

In the Table above person with an annual salary, or retirement income of $56,000 should value the worth of their sixteen-hour day at about $500 which is a weekly worth of around $3000 and an annual worth of around $160,000. 

Assuming good health, three years of activity should be valued at about a half million dollars and a decade of activity at over a million and a half.  One should be able to undertake some quite significant projects during retirement with those assets. 

The value of one's time far surpassed the value of one's retirement income. If one looks at the value of one's time plus one's retirement income it means that over a decade this person has about two million dollars of resources to undertake significant projects.

The median amount of home equity for adults age 65 and older is $250,000. Housing wealth is many retirees' main asset. While homes often constitute 70% of a person's net worth, financial planners recommend only 20-30%. In the above example I am assuming 50% with another $250,000 of assets. The half million dollars of net worth are not nearly as important as the one and a half million dollars of time worth available to this person in the coming years

Time is not only our most precious resource (we each have about sixteen hours a day) it is also in the long term our most valuable resource. 

Sixteen hours a day assumes good health. For those in retirement age without good health, the bottom part of the above chart estimates an eight- hour day of productive activity.  Even with impaired health that cuts productivity in half, time still is our most valuable resource.