by Joe Hearn | Dec 31, 2015 | Misc.
Well that year went by fast! It seems like just yesterday that Punxatawney Phil was telling us that spring was almost here and now Ryan Seacrest is warming up in Times Square to help us bid adieu to 2015.
How was your year? For me it was great in a lot of ways and challenging in a lot of ways. The positive things came in the form of the usual suspects: family, friends, travel, work, good books, etc. The negative things had a common theme: busyness. In some ways, 2015 felt like a real life game of Whack-A-Mole. When life starts to feel like that it’s important to reflect on the causes and do what it takes to refocus your efforts on the essential. I’ve been doing that for the last several weeks and am looking forward to starting the New Year off well. My mantra is “Less But Better.” That will mean some great new things here at Intentional Retirement so stay tuned.
Before I sign off for the year, here’s a quick round up of a few of the most popular posts of 2015 in case you missed them:
Well, that should just about do it for 2015. Oh yeah, “one more thing” as Steve Jobs was fond of saying. We need to wrap up our Bucket List giveaway for the year. I’ve been periodically writing articles about bucket list items and doing little giveaways with them. The grand prize is a $1,000 airline voucher and that goes to…drumroll…Scott over on our email subscriber list. Congrats Scott! I’ll be in touch with the details. Enjoy the travel and best wishes to all of you for the New Year.
~ Joe
by Joe Hearn | Dec 4, 2015 | Lifestyle Design, Retirement
When we think about compounding, we often associate it with financial success, but other areas of life—activities, travel, learning, ideas, marriage, friendships, clients, contacts, freedom, health, hobbies, religion—compound in a very similar way. Each time we get a small win in one of these areas, we can put it to work to help us grow and bring on bigger, better wins. It’s like earning interest on our interest, but the payoff is a richer life rather than just a richer portfolio. It’s lifestyle compounding rather than financial compounding.
This is a powerful idea and one you should keep in mind as you plan for retirement. The things you do with your life in the years leading up to retirement can have a huge impact on how rewarding your retirement will be. Why? Because with compounding, the really interesting payoffs come at the end.
That’s why Warren Buffett earned 99% of his wealth after his 50th birthday. Not because he somehow became a better stock picker as he got older, but because that’s when the big dollars started compounding. But he never would have gotten to that point if he hadn’t been a good steward with the small dollars.
He made his first trade at age 11 with about $200. Over time $200 became $400 and then $400 became $800. Pretty soon, thousands became tens of thousands, which became hundreds of thousands, which became millions and eventually billions. When you look at the chain of returns, you realize that the trade that got him from $1 billion to $2 billion wouldn’t have happened without the trade that got him from $10,000 to $20,000. The earlier trades weren’t as interesting because they didn’t have as many zeros, but they were absolutely essential.
Lifestyle Compounding
Since other areas of your life can compound in a similar way, then retirement is a time that can really be exponentially cool—IF—you spend the years leading up to retirement doing the things you need to do to build your “capital” of friends, skills, experiences, self-awareness, etc. Unfortunately, we often get wound up in one or two things at the expense of others during our pre-retirement years. For example, we focus on our stuff at the expense of our relationships or our careers at the expense of our health. We promise to get to the other things “Someday.” Then we get to retirement and rather than getting interesting payoffs in the areas that matter most, we’re stuck getting from 1 to 2, 2 to 4 and so on, without enough runway to get to the really interesting numbers.
This is why I’ve often said that delayed gratification is overrated. Not because I’m impatient, but because I know that if I only start to live when I hit some predetermined age (like 65), it will be like Buffett waiting until his 5th or 6th decade to start investing. He’d still be a brilliant guy, but he would run out of time before the numbers got interesting.
And no, it’s not lost on me that sometimes non-financial compounding is at odds with financial compounding. A dollar spent today on travel or a date night with your spouse is a dollar that you won’t be able to add to your compounding assets tomorrow, but if you spend it wisely, you’ll have something else—experiences, memories, strong relationships, skills, etc.—that will then be able to compound and produce greater and greater returns over time and bring you much meaning, happiness and fulfillment. It’s up to you to find the balance between the financial and non-financial that makes the most sense for your situation. Invest wisely in both.
Seneca once said: “Life is long enough, and it has been given in sufficiently generous measure to allow the accomplishment of the very greatest things if the whole of it is well invested. But when it is squandered…we perceive that it has passed away before we were aware that it was passing.”
Ponder that thought and the aforementioned ideas on lifestyle compounding as you reflect on your past and plan for your future. And if you’d like a little help planning for both the financial and non-financial aspects of retirement, check out The Ideal Retirement Design Guide.
Be Intentional,
Joe
by Joe Hearn | Nov 25, 2015 | Retirement
Tomorrow is Thanksgiving here in the good old U.S. of A., which means Christmas is right around the corner. With that in mind, I want to do two things. First, I want to wish you all a very Happy Thanksgiving! I hope you have a relaxing holiday with friends and family and have time to reflect on the many blessings in life. I’m thankful for all of you and appreciate you making Intentional Retirement a part of your reading, research and planning as you prepare for retirement.
Second, since many of you will likely begin your Christmas shopping in earnest on the day after Thanksgiving, I want to lend a hand. We don’t normally have sales in our Intentional Retirement store, but this year I’m discounting one of our most popular guides: The Ideal Retirement Design Guide is normally $159, but for the holidays I’m dropping the price to just $99. The guide is a 12 module action plan for retirement. Among other things, it includes a 72 page lifestyle design workbook, tons of worksheets, 6 Q&A case studies with current retirees and 4 hours of audio interviews with experts in areas like income planning, estate planning, long-term care and retiree taxes.
BUT WAIT, THERE’S MORE! 🙂 The guide also includes several bonus items that aren’t available anywhere else, such as my eBook 50 Essentials for Retirement Success. Give yourself or someone you care about the gift of an awesome retirement. Sure, they might get you an ugly sweater or a Snuggie, but you can give them (or yourself) the confidence and peace of mind that comes with having a great plan for what should be one of the most rewarding periods of life.
To learn more about the guide or to order, just head on over to our Store. For your ordering peace of mind, our store is administered by 1ShoppingCart, one of the biggest names in ecommerce. When you click the “Buy Now” button, you’ll be redirected to a secure product page where you can complete your order.
Thanks and Happy Thanksgiving!
Joe
Photo courtesy of Steve Snodgrass. Used under Creative Commons License.
by Joe Hearn | Nov 4, 2015 | Social Security
Who says Congress can’t act quickly when they need to? Just last week they rapidly (after much previous delay) approved budget legislation to narrowly avoid a government shutdown. Unfortunately, buried deep in the pages of that budget—probably somewhere between synchronized swimming studies on Sea Monkeys and a real life iron man suit (actual expenditures in previous budgets)—was a provision that ends two popular and lucrative Social Security claiming strategies. What are the changes to your Social Security claiming options and how will they affect you?
Change #1: Restricted Application for Spousal Benefits
Prior to the change, a person who was eligible for both a benefit based on their own work record as well as a spousal benefit based on their spouse’s work record, could choose to file a restricted application for only the spousal benefit at Full Retirement Age. This would allow their own benefit to continue to grow by earning delayed retirement credits. Then at some future date (as late as age 70), when their own benefit had grown to exceed the spousal benefit, they could switch to the larger benefit. The new law gradually phases out this option.
Those born on or before January 1, 1954 will continue to have the option to file a restricted application for spousal benefits. Those born after that date will not. In other words, if you’re 62 or older by New Year’s Day 2016, you’ll still have the option to file a restricted application once you reach Full Retirement Age (66 for those born between 1943 and 1954). If you’re younger than 62 on New Year’s, it’s Auld Lang Syne for the restricted application option. It should be noted that this change does not affect the ability of widows to file a restricted application for widow benefits and later switch to their own benefit.
Change #2: File and Suspend
Under the old law, there was a strategy called “File and Suspend” whereby a person could file for their benefits, but choose to immediately suspend payment of those benefits. Why would someone do that? The answer lies in the fact that you need to claim your own Social Security benefits before anyone else can claim benefits based on your record. In other words, you need to claim your benefits before your spouse can claim spousal benefits based on your record. But what happens if it makes sense for your spouse to file now, but you want to delay filing so you can continue to earn delayed retirement credits? Enter the “have your cake and eat it too” File and Suspend strategy, which allows your spouse to go ahead and claim benefits on your record while simultaneously allowing you to continue earning delayed retirement credits.
Under the new law, anytime a person suspends their benefit, it will automatically suspend payments to anyone else receiving benefits based on that record. This effectively eliminates the File and Suspend strategy going forward. About the only time it will make sense to voluntarily suspend will be if you change your mind on claiming your benefits and want to suspend payments so you can start earning delayed credits again. The new voluntary suspension rules take effect 180 days after enactment of the new law, which is approximately May 1, 2016.
What actions should you take as a result of these changes? For many people, losing these strategies will mean lower lifetime Social Security benefits, which could mean drawing more from savings or delaying retirement altogether. If you’ve done a Social Security claiming analysis on your own or with your adviser, you should review that analysis to see if the new law warrants a change in strategy. And if you haven’t yet done an analysis, but retirement is right around the corner, now is the time to review your options. The clock is ticking.
As always let me know if there’s ever anything I can do to help. And if you have any questions about the new rules, feel free to post them in the comments section of this article and I’ll do my best to answer them.
~ Joe
by Joe Hearn | Oct 8, 2015 | Investing, Retirement
To a large degree, happiness is being able to do what you want when you want. To get to that point, however (and here’s the paradox), you often have to do what you don’t want when you don’t want. Case in point: Retirement.
You’ve heard me say many times that:
All of that is still true, but I want to give you a quick reminder.
You still need money.
I didn’t say that retirement was not a math problem or that money had no role to play. (see this, this and this for articles on preparing financially). Instead, I said “more than.” In other words, it’s money plus something else. Money plus meaning.
Why the reminder? I got an email from a reader named Patricia recently that discussed this very topic. Here’s a brief excerpt:
“I am one of those people who deferred. I worked really hard for 30+ years, saved like hell, deferred life in many ways so we would be able to retire early. And according to you, I totally screwed up.”
First off, there are many things that fall under the category of “screwing up” in my opinion, but working hard and saving so you can retire early is not one of them. Hat tip to Patricia (she and I had a nice conversation via email) and anyone else out there who is doing what it takes to build a nest egg and achieve financial independence.
Second, I took Patricia’s email seriously, because if she felt that I was somehow disparaging the savers and deferrers (is that a word?), then others of you may have had that feeling too. Nothing could be further from the truth. Hard work and disciplined saving is absolutely critical if you’re going to meet your retirement goals. That said, the money without the meaning is pointless just like the meaning without the money is often unrealistically out of reach. It’s up to each of you to balance those competing interests in a way that works for your life and goals.
In 8 Habits of Successful Retirees, I told you to live with a sense of urgency (#1), retire to something, not from something (#4) and choose yes over no (#6). Just don’t forget Habit #5: Retire based on your bank account, not your birthday. Run after the meaning, just don’t forget about the money.
~ Joe
