The Bogleheads' Guide to Retirement Planning Read Online Free PDF Page A

while working full-time. A 2004 AARP survey on baby boomers’ expectations of life in retirement found that 70 percent of the baby-boom generation expects to spend more time on a hobby or interest, 68 percent will have more time for recreation, and 51 percent expect to be involved in community service or volunteering.
    Those goals are all commendable. But how do you generate the income for your living needs, given diminishing pensions and the cloudy outlook for Social Security? The big change in retirement is that you will probably not be fully retired from gainful employment. Numerous surveys have found that more than 70 percent of retirees expect to work in some capacity, and for some of them, the primary reason will be social fulfillment. Retirement certainly has the potential to be a multifaceted phase of your life.
    Money is undoubtedly important, and a steady source of income is critical to a happy retirement. However, money cannot buy happiness. In her book, You Don’t Have to Be Rich: Comfort, Happiness, and Financial Security on Your Own Terms , Jean Chatzky reports that at the $50,000 income level, increases in happiness level off. Statistically, people who earn around $50,000 a year are just as happy as those earning more than $100,000 per year. Your lifestyle is your choice; simply be aware that studies show that a more expensive lifestyle does not necessarily correlate with additional happiness.
    Retirement is about what you are retiring to, not what you are retiring from. In addition to your financial goals, your retirement goals should include the elements of health, social interaction, intellectual stimulation, and happiness. In their book What Color Is Your Parachute? In Retirement , Richard N. Bolles and John E. Nelson present some of the findings of Charles Morris, who attempted to define a “good life.” His characterization of “ways of life” is a purposeful synopsis of what you might aspire to retire to. Some ways of life described are (a) improvement, working for realistic solutions to specific problems; (b) service, devoting yourself to the greater good and to others; (c) enjoyment, pursuing pleasures and festivities; (d) contemplation, introspection to achieve a more rewarding inner life; and (e) action, using physical energy to accomplish things.
    If you are retiring as a couple, it is very important that you agree on a common vision for the future and the strategies that are needed to reach your financial goal. Without consensus, there is the chance that you may be at cross-purposes, a potential recipe for conflict. Planning for the future involves trade-offs; you should agree on what you are willing to give up today in return for your shared vision of life tomorrow.

WHEN TO BEGIN THE RETIREMENT PLANNING PROCESS
    Financial planning to support yourself in retirement should begin early in life, although planning how you will live your future life in retirement may not take place until well after you reach your mid-50s. Accumulating assets for retirement can and should begin as soon as you earn steady income, and even before. Parents who have children with earned income can set up a custodial Roth IRA and fund the account up to the extent of the child’s earnings, or the maximum allowable by law, whichever is less.
    Early retirement planning should begin when you have your first full-time job. Planning at this stage involves having a savings plan so that 40 years later you will have something put away for retirement. You may not know how much to save or how long you will need to save, but saving is the beginning.
    Many employers have a 401(k), 403(b), or other self-funding defined contribution retirement plan. Study the defined contribution plan options offered by your employer. Choose a broad-based low-expense mutual fund, and contribute at least enough to capture your employer’s match. Contribute more if you can—10 to 15 percent of gross income is a good target—but especially take