Time and Money During Retirement
Planning for Activity During Retirement: Beyond Wealth Accumulation & Consumption
We have all heard the pitches of the financial planners to retirees. That last paycheck has to last us a lifetime! 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 all those questions depends upon our habits of consumption. Do we want to maintain our present habits of consumption? Do we want to move elsewhere, or journey around the world? The consumption opportunities are endless, and so could be the amount of money needed to fulfill them. A gold mine for the investment industry!
How do we want to spend our time during retirement? I define capital as the accumulation of our labor. We accumulate labor as human capital, our health, our skills, etc. A Nobel prize winner even included our virtues! We also accumulate labor as social capital, relationships (marriage, work, professional, community, religious, political etc. We accumulate labor as cultural capital (language, education, books, videos, beliefs, values) that we can share or at least communicate with others about. Finally, we also accumulate labor as financial capital (money and things like our homes). Financial capital is the focus of financial planners. I was only use it for comparison purposes.
I am going to use the language of money to talk about the value of our time. 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.