Planning Retirement isn’t just a Financial Plan:
The Five Accomplishments You Need In Place
Having walked my clients through planning, approaching, and living in retirement financially for the last almost 40 years, I couldn’t help but pick up on other aspects facing us besides the money part, such as grappling with when to retire, what to do in retirement, and how to plan a full and thriving last third of life? As I heard someone say; what are you going to do between now and dead?
As we near our ‘golden years’, we observe our elders living in a great variety of ways, from scrapping by on social security, to cruising or flying around the world, and travelling between multiple homes. There is an undeniable correlation between financial health and satisfaction in the later years, but this doesn’t mean you need to be stinking rich.
A successful retirement appears to have several moving parts: financial, health and wellbeing, relationships, passions and purpose; and let’s face it, nearing death also brings in one’s beliefs and how they experience their own spiritual life. So how do we prepare ourselves for this last and significant period of our lives?
First, not planning for it or setting goals, not contemplating how you will live in retirement, can cause unnecessary suffering later on. With no plan, with no savings, with no interests outside of work, some retirees may end up spinning in their own exhaust, nowhere to go and nothing to do. This can be disastrous on the human spirit. Depression and other mental health problems can take hold, leading to unhappiness and even physical ailments. But let’s not dwell on this, because the fact that you are reading this means you are proactive, interested, and willing to learn. Yay you!
This topic could easily be a 400-page book, but I’m just going to give you the briefest of outlines here.
- Never too early or too late to begin saving. Have your paycheck debited for your employer plan, or, have your checking account systematically debited to go into an IRA, as much as you can afford, and then a little more.
- Invest in a broad, diversified portfolio with stocks and bonds, low fees and good, comprehensive management.
- Beware if you have the tendency, like some parents of adult children, to financially help them to such an extent you harm your own comfortable retirement. I remember a client who borrowed against his home, and withdrew from his IRAs, to help a daughter who said she couldn’t find a job. He did this until he and his wife had to give up their plans on traveling with their friends in retirement. He died leaving nothing for his wife, and only after his death did his daughter go to work to support herself.
- We used to say in the financial business in the 1980s, you needed at least as much in savings as your closest decade in a hundred thousand dollars. For instance, at 40 years old you should have saved $400,000, at 60, $600,000, and so on. Typical standards now in financial planning state it really takes much closer to one million to have financial freedom these days to enable no financial worries, and the ability to take care of all your needs. Yet, I have seen people retire with half that and get along just fine.
- Educate yourself on how money works; how the markets work. Our 30-page booklet on the 7 Big Mistakes Investors Make & The 7 Habits of Successful Investors to get you started. Email firstname.lastname@example.org to let us know if you want one. We can send a link to you to order it.
2) Health and Wellbeing
- Of course, take good care of yourself. Eat a good, healthy diet with lots of fresh vegetables, fruits, nuts and lean proteins.
- Get outside every day. Walk, bike, swim, play, explore, move. Take up yoga or Tai chi, dancing or some other social exercise. These good habits will be easy to follow into retirement. With good balance falls become much less likely among many other benefits.
- Find a mindfulness practice you like such as meditation, contemplation, breathing techniques, prayer and self-reflection etc. Conditioning the mind for wellbeing is also essential.
- If you do have anxiety, depression, or other emotional problems bothering you, find a good therapist. Most of these issues are resolved with the proper help. Our society still attaches an unfortunate stigma to getting assistance in this area, but it is so essential, shows emotional maturity, self-care, and can be a rewarding experience.
- Develop a positive attitude toward aging and retirement. Day dream about all the activities and experiences you’ll be able to enjoy, and the friends and family to spend time with. If you don’t have a close circle of friends, join a club or a class. Get involved in something you enjoy, sports, a book club, knitting, hiking etc. and read, I can’t stress how much reading can enhance anyone’s life in so many ways. There are so many great books in the self-help genre, but even a great book of fiction is a positive experience.
- Cultivate peace with your own passing. Our cultures in the West have a poor record of coming to terms with death. It’s not usually spoken about except in dramatic and negative ways; we pretend it isn’t inevitable, we try to extend the lives of our loved ones in often grotesque and extreme ways, making their last days, weeks or months, lying in a sterile facility hooked up to machines and on heavy medications. My recommendation is to have a good plan. Most states have a type of Dying with Dignity form to fill out, describing what you want done and how, in a terminal situation. Let us know if you would like us to mail you one, just email us email@example.com . Other than this, building a solid belief of your own, whether religious or faith in life and nature, can reframe the end of life as something not to fear. There are many great books on this.
- Fostering good relationships takes time, effort and the ability to forgive— maybe yourself or others. We all say or do things we don’t mean at times, are hurt by others words or actions, and without processing through these productively, we can be emotionally drained, hurt or worse. Forgive yourself and others. I know it’s hard. I will never forget a ninety-six-year-old, long-time client on his deathbed telling me he had been too hard on his wife and children. He was verbally abusive. He carried this all of his life. If he had been self-reflective, brave enough to look within, and been able to forgive himself, he wouldn’t have been so full of pain at the end.
- Approaching this last stage of life, we can take the opportunity to develop a positive relationship with ourselves and others that will nurture us.
4) Passions and Purpose
- What do you envision doing during retirement? So many people have jobs they don’t really enjoy, and so they dream of retiring as soon as possible, looking forward to having endless free days, like permanent weekends. But they’ve spent little time thinking about what they will do in retirement. I’ve seen some retire in their 50s and become bored, aimless and searching. Some go back to work. Some actually lose interest if life.
- On the other hand, I’ve seen people in their 70s who have no intention of retiring anytime soon because they love what they are doing.
- Studies show the more control you have over what you do at work, who you work with and so on, the more satisfied you are. I believe that is why entrepreneurs often scoff at the idea of retiring, they are already living the life of their dreams.
- To discover what your perfect retirement might look like, create a vision board of activities and places you’re interested in exploring. Think about what you enjoyed as a child?
- Ask, how you may serve your community?
5) Deciding When to Retire
- So, I am guessing you are beginning to see it’s not just at what age you can fiscally retire, it is so much more than that.
One, you want to retire when you are healthy and able to enjoy your passions
Two, you’ve figured out how you are going to fulfill your needs for community, purpose, interests and activities.
Three, make sure you aren’t just continuing to work because you have no idea what else to do with your life. Maybe you aren’t totally satisfied with work, but haven’t invested the time to explore what else might interest you.
Four, what about semi-retiring? This is getting very popular for those who have this option. And if you don’t, perhaps you could retire and pick up a part-time job doing something you’ve always wanted to do, like teach art or be in a counseling position.
Five, talk with your financial advisor about the income you will need during retirement. Take in to account how much your desired lifestyle will cost, your social security, and the amount of investments it will take to produce the income.
All of these subjects require some introspection; knowing yourself well will help you plan your later years to your benefit. Settling in to the idea of being an elder in the community, offering your hard-wrought wisdom, having loving relationships, enjoying the fruits of your labor, knowing how to still play, and exploring the world with a sense of wonder, can make your retirement the best time of your life.
Investing in stocks and bonds and having adequate insurance coverage is essential to any comprehensive wealth accumulation plan. The stock market has historically grown at a faster rate than inflation. So why do so many people have such poor results in their portfolios?
Stock markets are cyclical. When one category of securities falls (such as large US company stocks) investors get nervous and make an emotional decision to move to another category that may be moving up at the time, (such as government bonds, for example). We instinctively want to move away from what seems painful. The mistake is that your investments often don’t respond the way you hope from this type of behavior.
In actuality, if you keep moving your investment from one type of security to another, it will erode the potential return because it will likely be in a market that will experience a down turn when the original US company stocks experience its next big move up! Truth is, no one really knows which sector will bring the best results and jumping around rarely produces positive results. Patience does.
It seems logical to pick mutual funds and other managed investments by how well they have performed in the past. It feels comfortable and looking at the data gives us the sense that we can predict how it will perform in the future.
Truth is, predicting future performance based on past performance has created loads of unhappy investors. Studies show the vast majority of funds DO NOT out-perform the market. Picking 100 or 150 stocks out of a stock market that has thousands of choices results in a very small chance of outperforming the broader market returns.
LACK OF DIVERSIFICATION
If you have 10 different mutual funds you may think you have good diversification. After all, you hold so many different funds, right?
Maybe not. These funds could have the same individual stocks in them, which means duplication – plus, there could be gaps in the portfolio – and the next good return is in a category you don’t even own! The next cyclical downturn in stocks could weigh heavily on your portfolio if you aren’t balanced among several markets.