Contrarian advice on retirement
By Holden Lewis • Bankrate.com

You've heard conventional wisdom about retirement: You'll dine on Nine Lives if you haven't saved a bundle, you should defer taxes as much as possible, you'll be happy playing countless rounds of golf.

And there is the common belief that Social Security won't be around to pay retirement benefits.

Make way for the contrarians -- those who say you shouldn't necessarily heed conventional wisdom.

Your obit might come before Social Security's
In 2001, a Gallup poll found that of the 796 non-retirees surveyed, 52 percent believe they will receive Social Security benefits when they retire and 41 percent believe they won't. The poll didn't break down respondents by age, but it's safe to assume that younger people are more dubious about Social Security's future.

Should they fret? Probably not, according to Dean Baker, co-director of the Center for Economic and Policy Research.

These are the facts, Baker says: The Social Security trustees predict that the program will take in more money than it spends until 2025 -- and that projection is based on pessimistic estimates of economic growth. Even after the fund is depleted, workers still will pay into the system, and retirees of the future will receive a larger inflation-adjusted benefit than current retirees get, Baker says.

He believes that productivity growth will take care of the shrinking ratio of workers to retirees. There are about 3.3 workers per retiree now, and in 2030 there will be two workers for each retiree. Baker believes that this won't strain the system, partly because workers will be more productive.

Congress occasionally tweaks Social Security taxes and benefits, and Baker feels confident that Congress will continue to do so.

The lesson: Baker believes that Social Security will endure, and that most people are smart enough to save money so they can supplement their benefits into old age.

Take the tax hit now, maybe
Henry "Bud" Hebeler doesn't buy Baker's sanguine view of the day when there will be two workers per retiree. Hebeler, author of J.K. Lasser's Your Winning Retirement Plan, looks at the coming wave of retirees and predicts higher taxes.

Hebeler, a retired Boeing executive, says financial planners rely on overly optimistic projections. He spreads his message of fiscal conservatism via books and spreadsheets through Analyze Now!, his Web site.

He worries that Americans don't save enough, so they'll depend on government benefits for too much of their income in retirement. "Their voting power is so strong, and no one's going to let them starve," he argues.

Hebeler believes that taxes almost inevitably will rise because of demographic and political trends. If taxes rise too high, he says, retirees will wish that they had not saved so much in tax-deferred accounts such as 401(k) plans.

With tax-deferred retirement plans, you don't pay income tax on the earnings you stash away now; instead you pay taxes on your withdrawals in retirement. According to Hebeler's argument, if tax rates are much higher in, say, 2040, you might wish you had paid a lower tax rate in 2002.

The lesson: Hebeler says it's not time to pull out of tax-deferred savings, such as 401(k)s and standard Individual Retirement Accounts, but consider saving some money via Roth IRAs. With a Roth IRA, you pay taxes now, and you withdraw money from the IRA tax-free in retirement.

Get a life
The title of Ralph Warner's book says it all: Get a Life: You Don't Need a Million To Retire Well.

Warner has read countless magazine articles that said you need at least $1 million in savings to retire comfortably, especially if you want to retire early. "I think it's corrosive because real people who have never accumulated savings like this suddenly believe that they can't retire well without a gazillion bucks," says Warner, co-founder of Nolo, a publisher of self-help legal books and software.

Glossy personal-finance magazines promote retirement replete with trips to Europe and McMansions on golf courses, but Warner says it's perfectly possible to live frugally and happily.

The retirees whom Warner interviewed for his book tended to place money about fifth on their priority list, behind things such as developing new interests and maintaining health. "Which isn't to say money has no importance," Warner says. "No one wants to eat cat food or to fear eating cat food."

The lesson: If you focus on money all your life, you'll have narrow interests and you'll be bored when you retire, Warner says. "Without exception, the people I talked to say if you get up in the morning and you're interested and excited about what you're going to do that day, your chances of being a successful retiree are high."

Ditch the terrible wardrobe
A life of idleness looks better than it feels. Many retirees get bored, and they conclude that the best antidote to ennui is work.

Between 60 and 70 percent of retirees return to work in the first year, says Mitch Anthony, author of The New Retirementality. "The human species was not destined to engage in full-time leisure," he says. "Leisure is a beautiful garment for a day, but it's a terrible wardrobe for a lifetime."

If most retirees work, and even look forward to working, what's the difference between retirement and the years before it? Choice, Anthony says.

"I believe what Americans really mean when they say 'retirement' is emancipation: I want to do the things I want, at the pace I choose," he says. "People found out that work was not the enemy; the megalomaniac boss was the enemy."

Anthony counsels people at all stages of life to ask themselves, "What do I want to do when I grow up?"

"If you're not doing now what you want to be when you grow up, you've got some serious thinking to do," he says. And that even goes for retirees, who usually feel that they have more freedom to pursue their interests.

The lesson: If you're like most people, you'll be happier in retirement if you have something to do. Volunteer or take a paying job, full time or part time, but make sure it's something you enjoy.

-- Updated: Nov. 18, 2002