retirement

New Lifestyles, New Plans

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It seems that life used to be plainly segmented. First we got educated, then we worked, then we retired.

Financial plans followed suit: first we accumulated during our working years, then we spent in retirement – hopefully, not running out of money before we died.

Increasingly in the 21st century, life is sliced and diced. Periods of education may happen at any age. People remake themselves to meet the needs of the marketplace, or their own preferences. Stretches of leisure may be mixed in with periodic bouts of consulting or other work in the golden years.

Some people choose to retire to volunteering or a new business venture or employment in a more enjoyable field, or seasonally, or part-time. There are a lot of ways to live life these days.

In addition to changing lifestyle patterns, people are living longer than ever before.

In this new environment, financial plans and planning need to be more flexible, and serve different purposes. The key theme: flexibility.

1. Investment products that tie your money up for years are less appropriate than before, as changing circumstances could mean an unforeseen need for liquidity.

2. The accumulation of funds in traditional retirement accounts still makes sense. Adequate funds make work optional in later years, or enable volunteer work or even a business start-up.

3. It may pay to pay more attention to tax brackets, as shifting circumstances could change tax status from year to year. Techniques to take advantage of low-bracket years may reduce lifetime total income taxes.

The key, of course, is not what the trends are or what many people are doing, but what YOU want to do. Clients, if you would like to talk about this or anything else, please email us or call.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Saving for a Successful Retirement

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When you picture a successful retirement, what does that look like to you?

To some people a successful retirement means luxury cruises, European vacations, and a big house with a pool for the grandkids. To others a successful retirement might mean a quaint cabin with a porch to watch the wildlife from. Some people picture retirement as never having to work again, others might view retirement as a new stage in their working career where they can focus on their hobbies and passions.

The answer to this question is going to have a lot of impact on your retirement planning. If you want to build your dream house and have a second vacation home on the beach, you will need to save a lot more than if you just want a quiet cabin near the fishing hole.

When you go looking for financial planning advice some sources will recommend saving as much as 25% of your earnings for your entire working career. We have known some impressive savers in our day and watched them build incredible nest eggs through the magic of compound returns. We know many more who saved far less than that, though, and not many of those would consider their retirement a failure.

A cynic might conclude that financial planners have a vested interest in trying to convince you to save and invest as much money as possible with them. A more charitable interpretation might be that they want to make that luxury retirement lifestyle possible for you. That takes a lot of money, and if that is the retirement you want you would do well to heed those aggressive saving recommendations. But you might also consider whether that is the retirement lifestyle you want or need and adjust your financial plans accordingly.

There is no one size fits all plan for retirement, and you might not even know what you want to do with your retirement at this point. Obviously, the more you save, the more options you will have in retirement. But we think it is also important to have a little fun every day. You never know how long you have left, and it does you no good to live like a monk to fund a retirement you may not get a chance to enjoy.

Clients, if you would like to discuss your financial planning, please call or email us.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

The Joy of Being Cheaply Amused

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Once upon a time, we went out on a Friday night – to the dollar theater. This was a discount affair, where good movies – not prime, first-run movies – could be seen on the big screen, for a dollar.

In the ticket line, we happened upon friends and clients, recently retired. They told us it was a regular part of their entertainment. They also hiked the trails at the state park, played cards with friends, read books from the library, and liked to watch the sun set over the river.

He said, “One of the things we had to learn early in my teaching career was the joy of being cheaply amused. We were not making much money, and did not really have a choice.” Even in retirement, on a good pension and with plenty of resources, those habits stuck.

That phrase struck a chord with me. I had long noticed that those who feel compelled to keep up with the Joneses, or whose happiness seemed to depend on shopping or acquiring things, were difficult clients to work with. Those traits are connected to a general desire to always want more.

In contrast, the joy of being cheaply amused seems to correlate with simpler lifestyles, longer-term orientation, and a greater sense of contentment.

This has a huge impact on lifestyles in retirement. The conundrum is, those who are cheaply amused tend to be the ones who can afford the bucket list trip to Europe or Alaskan cruise, to be generous in helping children and grandchildren, who have money for really significant activities.

In other words, some of the most successful retirees we know have grown into being able to spend well. Not having a lot of money starting out in life is good discipline for being thoughtful about spending later on.

Clients, if you would like to talk about this or anything else, please email us or call.

Moving Target

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We have observed that spending in retirement is a moving target. One theory says we spend more money in the early years of retirement than in the later years. Financial planner Michael Stein describes it this way: the Go-Go years, the Slow-Go years, and the No-Go years.

Spending in retirement impacts some of our most fundamental plans and planning. Retirees have a wide range of lifestyles, avocations, and circumstances which take money. It’s a personal thing.

In our experience we see people spend less as they age. When we first noticed this trend, we wondered if that was because some people run low on money. However, we recently have taken note that people with resources tend to spend less as time goes on. (Health expenses may run counter to this trend, increasing toward the end of life).

Each person has their own objectives and habits, and life throws some curve balls too. Case by case, it could make sense to plan on spending more in the early years of retirement. Bucket list items, to be done once, might come early in retirement.

The Alaska cruise, trip to Hawaii, or tour of Europe should be undertaken when you have the time and money and health to do it. The boat or camper, if one is desired, should be purchased when one has more years to enjoy it.

One of the most gratifying parts of our work is working with people on their plans and planning. We’ve worked with some of you from mid-career all the way into many years of retirement. Each one of you is as different as a fingerprint.

Clients, if you would like to talk in more detail about your retirement aspirations or anything else, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

 

What Did Don McLean Mean?

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The song American Pie is one of the most iconic pieces of pop culture of the last century. Don McLean used its poetic imagery to evoke events and trends both from the world of rock and roll and American society. The narrative he wove caught the imagination of millions.

Some of its references seem clear, while others have multiple interpretations. It seems like thousands of people took a crack at decoding the entire, long, song. From then until now, each listener constructs their own meaning from it.

McLean himself was loathe to interfere with the meanings that people drew. For decades he refused to say anything about the commentary of others or describe in greater detail his own thoughts about any of the references.

The single thing he did say has obvious applications to the things we collaborate on with you. In concerts and interviews, he would share what it meant to him: “It means I don’t ever have to work again if I don’t want to.”

Isn’t that what many of us strive to do with our working years? We use our skills and talents and effort so that someday we can say, “I don’t ever have to work again if I don’t want to.” Few of us produce an epic work at a young age that sets us up for life. But many of us, like McLean, depend on the fruits of our labor to achieve financial independence.

There is a process that turns your skills and talents and effort into wealth that may get you closer to your goals. It’s why we are in business.

Clients, if you would like to talk about this or anything else, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

 

The Worst State to Retire In

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It seems like everywhere you turn, there are opinions about retirement. We have not seen this particular bit of advice, so here goes.

After thought and study, we conclude that the worst possible state for retirement is… the state of confusion. Confusion may seriously impair the retirement experience.

• If we don’t understand the income potential of our lump sum balances, we may either be unnecessarily tight with our budget, or run the risk of winding up broke.

• Running out of money is a common and natural fear. Arithmetic guided by experience and knowledge may ease that concern.

• Decisions about Social Security benefits and pension payouts may have a large impact on financial security. The advice one gets at coffee break or at the water cooler may not be the best.

• Health care transforms for most people in retirement. Putting all the pieces together can be confusing. Medicare Part A, Part B, Part D, and supplemental insurance all enter into it. Personal health and financial factors play roles, too.

We advocate thoughtful approaches to major life decisions. A framework of solid information and the right arithmetic may help reduce confusion.

All in all, the state of confidence is a far better place to retire than the state of confusion. Clients, if you would like to discuss this or anything else, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Have You Heard About Unretirement?

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Retirement is a fascinating topic. New ideas about it seem to pop up regularly.

For nearly all of human history, we worked while we could and stopped only when we couldn’t. The average person had no reasonable chance to accumulate capital on which to live.

But by the middle of the 20th century, things began to change. With Social Security and greater amounts of private savings, most people retired from work at some point. A new lifestyle was born.

Now, anecdotal evidence suggests that some people plan to work as long as they are able—at one thing or another. One client tells us of her plans to do something she enjoys. Another likes working at the state park. Consulting offers some a way to stay engaged, but on a less-active basis, either part-time or seasonal.

We also know people who simply never left their primary occupation after they reached normal retirement age. They enjoy the work and their coworkers, and could not see the point in quitting.

Obviously, this form of “unretirement” is not for everyone. Some go back to school, pick up new or old hobbies, volunteer for causes in which they believe, or spend time helping with family. Travel, reading… the list of things one might do in retirement is limited only by one’s imagination.

Although we each have our own ideas about what retirement means, we all have one thing in common. Our choices will be richer, more varied, and better if we have money. The option to continue working is a better situation than not having a choice because of financial necessity.

Clients, if you want an assessment about the money end of your retirement, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Made It! Age 62, Eligible for Social Security

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Yes, at age 62 I could claim Social Security benefits. But I won’t.

After talking with you for decades about your Social Security benefits and the tactics you might use in claiming benefits, I’m looking at my own situation. There may be lessons in it for others, so we’ll talk about it here.

Suppose my benefit at age 62 would be $1,500. That’s $18,000 a year! Why wouldn’t I claim it?

1. If I wait until later, my benefit will be larger. That’s $2,128 monthly at full retirement age (66 and 4 months) or $2,856 at age 70.

2. If I claim now, since I want to keep on working, my benefits would be reduced by 50 cents for every dollar I earn over about $17,000.

3. My benefits would be partly taxable because I would have other income of over $23,000 for the year, basically. (It’s complicated—consult your own tax advisor.)

4. Flexibility: A decision to defer claiming Social Security can be changed at any time in the future, if circumstances change.

Since I want to work to age 92, my guess is that I won’t claim until age 70. But that’s just me. Under what circumstances would it make sense to claim at age 62?

A. If your spouse qualifies for benefits twice as large as yours, check into claiming on your record at age 62 and changing to a claim on your spouse’s record at full retirement age. This gives you some benefit from your earnings record, which might otherwise go unused.

B. If you have an impaired life expectancy, an earlier claim might make more sense. A person who plans to claim at age 70 but dies at 68 ends up collecting nothing.

Clients, this is intended to illustrate some of the basic considerations about Social Security strategy. You can learn more at www.SocialSecurity.gov, where you may sign up for a personal account and obtain personal benefit estimates at any time.

Please email us or call if you would like to discuss this at greater length.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

This is a hypothetical example and is not representative of any specific investment. Your results may vary.

Working Like a Dog

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I am happy as a clam, working like a dog. Where did those sayings come from?

Who knows whether clams are happy or not? “Working like a dog” does not actually seem to be too taxing. (My dog Bailey mainly sleeps, eats, goes on walks and plays—he spends very little time coaching effective investing behavior, his only real job.)

I am obsessed with my work. It gets a lot of my energy but in turn energizes me. My long-held goal of working to age 92 shapes my habits—I can’t work to age 92 unless I live to age 92. This has an impact on what I eat, physical activity, sleep habits, and everything else that bears on health and wellbeing.

This may have a key benefit for clients. At an age when some people are coasting toward retirement, we are striving to build for the decades ahead, focused on the future. Our widely recognized new media presence at http://www.228Main.com and related social media venues are examples of that focus.

Two key things over the past decade have forged our enterprise into what it is today. In the interest of sustainability (working to age 92), Cathy and I adopted a snowbird schedule in 2010—spending parts of the winter in a warmer place. A few years after that, family health issues began to impact my travel schedule.

The snowbirding led to a conscious process of figuring out our most important activities and paring back the extraneous. Talking to you, researching investments, and managing portfolios are those key activities.

The schedule challenges made a necessity of learning to delegate. An entrepreneur cannot build a reliable organization unless she or he is willing to find good people and entrust them with vital aspects of the business. This is difficult for many—but I had no choice.

Together, these factors enabled us to build a focused, effective organization to serve you and other wonderful people. By striving to invest only with those who are a good fit philosophically, we have the same story for everyone. The efficiencies of having everybody on the same page are enormous.

So yes, I am working like a dog. And swimming most days, walking every day, eating healthy, enjoying family (now including grandkids!), appreciating my surroundings, loving Beautiful Downtown Louisville, and of course, grateful to be trusted by you to help with your plans and planning.

Clients, if you would like to discuss this or any other topic, please email us or call.

Related reading:
1. About challenges making us stronger: https://228main.com/2016/12/12/kiln-fired-personalities
2. About focus: https://228main.com/2017/10/02/focus-people
3. About the investment philosophy we share: https://228main.com/2016/05/25/niche-market-of-the-mind

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Case Study: The Life of Mr. S, and Working to 92

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Long ago, I met a man in his late forties. He had just resigned one position and accepted another. Needing a place for a 401(k) rollover, he agreed to do business with me. Our methods and access to investments were quite limited then (I was still in my twenties!), but I did the best I could.

Through the years his life evolved and changed; like all of us, he had his share of joy and pain. His wife began to suffer a chronic illness. His industry consolidated which caused some moves from town to town. But his children all ended up in successful marriages and careers, and grandchildren came. I advised him on wealth management throughout, helping him manage challenges from family health expenses and other things.

At sixty-six he retired, fearing he had not saved enough. The size of the fruit crop he needed each year seemed too large for the orchard he had grown, so to speak. We devised a plan that gave him a chance for things to work, although without any guarantees.

Of course, through these years, our knowledge and experience and confidence and capabilities flourished. We grew together.

Mr. S is pushing eighty-one years old now; poor Mrs. S had her disease go from chronic to acute and she succumbed a short while back. Mr. S stays busy helping with grandchildren and keeping up his home.

His retirement finances have worked out well, although this is not evidence of anything to anyone else. Good fortune played a role, past performance is no guarantee of future results, and all that. But I still want to tell you what happened so far.

Over fifteen years, Mr. S has withdrawn more than he retired with—and he also still has a current account balance that is larger than when he started. He tells us it is like the endless coffee refills they have at the café.

I call Mr. S when I need a pick-me-up; his gratitude is boundless. This, friends, is why I want to work to age 92.

That gives us a little more than thirty years to help many more of you get to eighty with more confidence than you ever thought possible. If you are fifty or older now, we will do our best between now and then to earn your gratitude when you turn age eighty. Clients, if you would like to talk about this or anything else, please email or call us.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This is a hypothetical example and is not representative of any specific investment. Your results may vary.