Are you a system thinker?

Are you a system thinker?

If you look around, almost everything you see—from planets to people—is made to work as part of a system.  Take the human body for example.  It has the skeletal, nervous, circulatory, muscular, and digestive systems, just to name a few.  All of those separate systems are brought together to form the incredibly complex human body.  If your circulatory system quit working or your skeletal system suddenly disappeared, your body couldn’t function.  Each part plays an important role.

What does this have to do with retirement?  Quite a bit actually.  The typical retirement has a lot of moving parts; things like your finances, health, family, and housing to name a few.  Those parts work together in a complex system.   If one of those areas isn’t functioning properly, it creates problems.

If your finances are a mess, will that impact your retirement?  Absolutely.  How about your health?  Yes again.  Ditto for things like your relationships with friends and family. Just like a broken transmission will affect how your car runs, problems with these areas will impact how your retirement runs.  So here’s my point:

If you want your retirement to function properly, you need to be system thinker. 

You need to put effort and thought into every key area of retirement if you want the overall system to function well.  What are some of those key areas?

Money—If I ask you when you want to retire, your answer should be a dollar amount, not a year.  Retirement is about independence, not simply age, and money is critical to independence.  You should know exactly how much you need to save in order to fund the type of retirement you want.  That means creating a detailed retirement budget and knowing how big your nest egg needs to be to spin off the needed cash.  A common rule of thumb is that your savings should be twenty-five times larger than the income you want it to produce.

Pursuits—Money is important, but only as a facilitator.  You need it, but you also need to have plans for it.  I’ve written a lot about this idea in my books and elsewhere on the site, but it bears repeating:  Before you retire, you should have very specific plans for what you want to do.  In the near future I’ll be doing a post on creating the ultimate bucket list.  Stay tuned.  In the meantime, you can read this and this to get some ideas on making the most of your time.

Family and Friends—You need to be on the same page with your spouse before you retire.  Here’s a handy checklist to guide your conversation.  Also, don’t forget your kids.  They’re probably grown and out on their own, but the plans you make will likely impact how often you’re able to see them (and your grandkids).  The same is true of your friends.  Keep that in mind.

Location—Are you planning on moving or staying put during retirement?  That decision will affect almost every area of your life.  Here’s an article with things to keep in mind.

Distribution Strategy—Transitioning from accumulation to distribution can be tricky.  Taking too much, too soon from the wrong account or in the wrong markets could be the difference between retirement bliss and retirement blunder.  For your system to function properly, you need a well thought out, sustainable distribution strategy.

Your health—Since 1950, the average retirement age has decreased by about five years and the average life expectancy has increased by more than a decade.  If you want to take advantage of those extra years, it’s a good idea to take care of yourself.  Nothing spoils your dreams faster than a heart attack.

Insurance—You’ll likely need hundreds of thousands of dollars (in addition to Medicare) to cover your health care costs during retirement.  Make sure you have appropriate health insurance and long-term care insurance in place to help offset those costs.

Social Security—There are no “one-size-fits-all” answers when it comes to understanding Social Security benefits and how best to incorporate them into your overall retirement strategy.  Work closely with your spouse, adviser, and local Social Security office to determine how best to claim your benefits.  You can also pick up a copy of The Bell Lap (where I discuss the topic extensively) or visit the Start Here page where I’ll post ongoing articles about Social Security.

As you can see, all of these areas come together to form a complex system during your retirement years.  Handle each area properly and the system will function well.  Handle them poorly and you can expect problems.

After looking at the list, is there an area you need to focus on?  Let me know if there’s anything I can do to help.

Photo by Joe Plocki.  Used under Creative Commons License.

How (and why) to retire debt free

How (and why) to retire debt free

It’s almost impossible to open a newspaper these days without reading about your retirement “number.”  That is, the amount of money you need to set aside to fund your retirement years.  While important, the “number” is only one way to skin the proverbial cat.  What if I told you that you could slash 20-40 percent off the amount you need to save without reducing your standard of living in retirement?  Would you be interested?

While it may sound too good to be true, that is exactly what you can do by entering retirement debt free.  To see why, let’s look at an example.  Imagine two couples, the Drakes and the Palmers.  They’ve been friends for years and live next door to each other in a small community in Oregon.  The couples, both in their mid-sixties, plan on retiring next year, so they sit down with their respective advisers and calculate how much they’ll need.

The Drakes outline their retirement budget and determine that, in addition to Social Security, they will need $5,000 per month or $60,000 per year.  Approximately $1,300 of that is for their mortgage and $400 is for a car payment.  Assuming a withdrawal rate of 4 percent, the Drake’s adviser tells them they will need a nest egg of $1.5 million to generate the income they need ($60,000 ÷ .04).

The Palmers expect their retirement expenses to be nearly identical to their friends the Drakes with one big exception: they have no debt.  Ten years ago they set a goal to enter retirement debt free.  They paid extra on their mortgage each month and resisted the urge to buy expensive new cars.  As a result, rather than $5,000 per month they only need $3,300.  Assuming a withdrawal rate of 4 percent, their adviser tells them that their “number” is $990,000.

So even though they are planning nearly identical retirements, the Palmers can generate the cash flow they need with nearly half a million less than the Drakes, simply because they have no debt.

Cash flow during retirement

During retirement, your portfolio takes over the job that the payroll department handled during your working years, namely to send you a paycheck every month.  As we saw in the example above, debt makes that task much more challenging.  It cuts into your cash flow and increases the risk that you will outlive your money.

Even so, more people are following in the footsteps of the Drakes than ever before.  According to the Joint Center for Housing Studies at Harvard University, more than 60 percent of people aged 55-64 have mortgage and home-equity debt.  Funding retirement is difficult enough without handicapping yourself with liabilities.  Here are three steps you can take to make sure your debt retires when you do.

1) Commit

Paying off your house and other debts takes time and requires a serious commitment.  It might even mean putting your retirement dreams on hold.  Getting into debt is easy, but getting out of debt means adjusting your lifestyle and choosing to live below your means so that you can allocate the excess to your creditors.  If married, discuss the plan with your spouse so that you can hold each other accountable and work together towards a common goal.

2) Develop a plan

Once you’re committed to the idea of retiring debt free, it’s time to develop a plan.  Make a list of all your debts, including credit cards, car loans, mortgage debt, and school or business loans.  Next look at your budget and see how much you can allocate towards deleveraging each month.  Some say you should start by paying off the loans with the highest interest rates.  Others say you should start with your smallest loans and pay those off first so you can build momentum by seeing quick progress.  Choose whichever you think would work best for you.  As you pay things off, use the money you were allocating toward that loan and apply it to the next loan on your list.

When you get to large loans like your house, contact your lender and ask for a payoff amortization schedule so you can track your progress.  Don’t be tempted by the thought of holding on to your mortgage interest deduction.  Congress is considering eliminating this tax break in order to close the budget gap, but even if they don’t, it may not provide you much benefit in retirement.  You’ll likely be in a lower tax bracket and mortgage interest is front loaded, so the deduction shrinks over time.

These arguments aside, it’s questionable whether paying interest to get a tax deduction is a benefit in the first place.  Let’s say you pay $20,000 in mortgage interest in a given year and you’re in the 25 percent tax bracket.  Deducting $20,000 from your income would save you $5,000 in taxes.  Only in America does it make sense to spend $20,000 in order to save $5,000.  How much better would it be to pay your mortgage off, send Uncle Sam the extra $5,000 in taxes, and pocket the remaining $15,000?

3) Outline your retirement budget

Once you’ve cleaned up your balance sheet and are ready to move into retirement, develop a detailed retirement budget that matches your income with your expenses.  This will help you keep a reign on your spending so you can stay debt free.

As you can see, debt is inherently limiting at a time when most hope for greater independence and opportunity.  Eliminate it and you will gain the freedom, flexibility, and peace of mind that so many see as the hallmarks of a great retirement.

Note: I first published this article at

9 tips for taking great travel photos

9 tips for taking great travel photos

Ask a hundred different people what they plan on doing during retirement and the answer you’ll likely hear most is “travel.”  There is just something compelling about getting out and seeing the world.  Especially when your itinerary is no longer limited by the standard two-week vacation.

One of the joys of visiting a far off place is being able to bring back great photos that you can share with others and use to remember your adventures. Unfortunately, most people come home with a camera full of forgettable snapshots.  That was certainly true of me.

In fact, I was so frustrated with the quality of my photos after returning from a trip to Paris a few years ago that I asked my friend Nick (a professional photographer) for help. Below are his key photography tips as well as a few more that I’ve learned along the way.

1.  Buy the right equipment

Nick’s first suggestion was “Get a quality digital SLR with two good lenses: a wide and a zoom.”  I must admit, this was tough for me to do.  I like to travel light and am partial to a camera that can fit in my back pocket.  I also don’t want to look like the stereotypical tourist, laden down with camera equipment and walking around with my nose buried in a map.  But I wanted to take better pictures, so I went out and bought a Canon T2i with an 18-55mm wide lens and a 55-250mm zoom lens.  It is a great camera and what I sacrificed in portability I more than made up for with better pictures.  A point-and-shoot just doesn’t have the quality and versatility of a good SLR.  Go buy yourself a better camera.


2.  Use the rule of thirds

The rule of thirds is a compositional technique used to create more interesting pictures.  Imagine that the picture you want to take is divided into thirds both horizontally and vertically.  Important elements of whatever photograph you’re taking should fall somewhere on those lines.

Let me show you what I mean.  Here’s a picture I took of a bird when I was walking on the beach in Florida.  If you divide the picture into thirds by drawing two vertical lines, Mr. Bird is right on top of the left side line.  It makes the photograph more interesting than if I had just centered him and snapped the shutter.  Resist the temptation to center everything.


3.  Look for interesting angles

In addition to the rule of thirds, another way to make your photos more interesting is to take the picture from an unusual angle or vantage point.  Instead of standing at eye level, dead center in front of something, try to capture it from a unique perspective.  For example, get down on your belly, hold the camera above your head, or move so you’re facing your subject from the side.

Case in point is the photo of Mount Rushmore below (courtesy of Nick).  Most photos of Rushmore are taken while standing on the visitor’s platform.  They usually have a few strangers caught in the frame, and have T.J. and Teddy dead center.  How is Nick’s photo different?  He found an interesting angle by climbing the hill opposite Rushmore.  Throw in his use of the rule of thirds, the fog blanketing the valley, and the beam of sun illuminating the faces of the Presidents, and you have a really cool shot.


4.  Shoot tight

Another common faux-pas is trying to get everything in the shot.  People love to zoom out.  Ask someone to take a picture of you and they will likely zoom out (or walk backwards) until your entire body, head to toe, is in the frame.  Ask them to take a picture of you next to a mountain and the goal will be to squeeze both you and Everest into the frame.  This usually makes the subjects of your photos look small and far away.

To avoid this problem, shoot tight (aka zoom in).  Pick out an element that looks interesting and zoom in on it so you can see all of the colors and details that made it interesting to you in the first place.  Here are two examples.  The first is a picture of a trout that Nick took while on a canoe trip with his family.  The second is a picture I took of part of a lamppost outside the Library of Congress in Washington, DC.  Neither of these pictures would have been very interesting if they were just wide shots with all the surrounding scenery.


5.  Shoot wide

OK, I know I just told you to shoot tight, but sometimes you need to zoom out to tell the story.  If you’re standing next to the Eiffel Tower, you don’t want the photo to be a close-up of your face.  To know when to zoom in and when to zoom out, ask yourself: “What am I trying to capture with this shot?  What story am I trying to tell?”  If the answer has something to do with that enormous thing in the background, then zoom out.  Here are a few examples.  The first is courtesy of my friend Andy Stoll while he was snowboarding in New Zealand.  Andy spent four years on a round-the-world journey and captured tons of great pictures like this one (read more at  The second shot is Nick canoeing up in the boundary waters.  In both shots the background is a big part of the story.


6.  Take pictures at dawn or dusk.

It’s amazing how much the right lighting can affect a picture.  If it is a bright day and the sun is directly overhead, your photos can look washed out and overexposed.  The best light of the day is often the first hour of daylight and the last.  That is when it is softer and the angle of the sun makes for some interesting shadows.  So resist the temptation to sleep in when you’re traveling. Some of your best photos will come in the small hours of the morning or the early hours of the evening.  Below is an example of the latter.  I’m standing on the ice flow looking out over the Cook Inlet in Alaska as the sun sets.  Notice it’s not a bad use of the rule of thirds either.


7.  Know when to get out of the picture

Of course you’ll want to remember your travels by having a certain number of “posed” pictures.  The ones with you in the beach chair holding up the Pina Colada or your spouse in front of Buckingham Palace.  But resist the urge to be in every shot.  Again, one goal of taking pictures is to try to tell the story of the place you’re visiting.  Staying out of the photo often makes it more authentic (aka better, more interesting, etc.).  Below is a picture (courtesy of Nick) of the harbor in a little fishing village in Ireland.  Getting in the picture would have changed the entire dynamic.  Also notice that by shooting tight he really brought out the colors and details of the boats.


8.  Get involved

One way to tell the story of a place and still be in the picture (without looking out of place), is to make yourself part of the story.  Don’t be afraid to meet some locals and participate in their traditions, activities, events, or festivals.  You’ll not only walk away with some amazing memories, but you’ll likely get some great photos too.  Below are a few examples courtesy of Andy.  The first is him at Holi, the second largest Hindu Festival in India.  As he describes it: “The streets are filled with revelers running around with water balloons, squirt guns full of colored water and bags of colored powders. You exclaim ‘Happy Holi’ as mobs of people splash and rub colors on any and all passers by, as a sign of the change of season.”

The second shot is after Andy had worked his way onto the set of a movie in Jodhpur, India.  Again, I’ll let Andy describe it: “Playing a 19th Century British Soldier (huh?) in the soon-to-be-released Bollywood film Veer, starring Bollywood badboy Salman Khan. It’s an epic, period film about the uprising of a band of rebels against the ruling Maharaja who is aligned with the British crown (think Braveheart, but with more song-and-dance numbers).”  Both shots are great examples of moving from spectator to participant.


9.  Learn how to shoot with a tripod.

There are plenty of really interesting photo opportunities after dark (especially in cities), but to capture them you often need to shoot with a tripod.  That’s because you need to leave the shutter open long enough to allow in enough light to properly expose the picture.  If you try this without a tripod, the shake from your hands will cause the picture to turn out blurry.

The technique is pretty easy, though, as long as you know some of the basic settings on your camera.  Just put your camera on the tripod, switch to manual mode (usually denoted by an “M” on the mode wheel), and then slow down the shutter speed.  My camera allows for up to a 30 second exposure at which point you can switch to “bulb” mode and leave it open for as long as you want.

I’ll put a few examples below.  The first is the Raven Glacier Lodge in Alaska where my wife and I were married fourteen years ago.  I took this picture when we stayed at the lodge with family this past Christmas.  The second shot is one I took of the Lincoln Memorial in Washington, D.C.  Nick took the third shot on a winter camping trip with his family.  All three photos were taken using a tripod in order to get the proper exposure.


So there are some basic tips for taking great travel photos.  Keep them in mind next time you travel and you’ll come home with photos that are a little more “National Geographic” and a little less “forgettable snapshot.”