I started an Intentional Retirement YouTube channel a few years ago, but haven’t posted anything in a loooong while. Time to change that. There are several new videos on the channel right now and going forward I’ll try to post new content each week covering both money and meaning. I’d love to have you follow along. Just click on the two links below to watch the latest or you can go directly to our channel to see everything available.
And please do me a huge favor and click “Subscribe” when you visit our channel. That way you’ll be sure to see the latest content when it’s available and it will help more people find us, because the more that people subscribe and watch, the more YouTube will suggest the videos to others. Thanks a ton. You’re awesome!
YouTube Video #1: 3 Unexpected Emotions in Retirement
In this video I discuss the unexpected emotions that can crop up soon after retiring and give you some strategies for how to cope with them.
YouTube Video #2: Should you pay off your house before you retire?
Hardly a week goes by that I don’t get asked about paying off a mortgage early. In this video I discuss:
- The things to consider before making a decision
- The pros and cons of paying off your mortgage before retirement
- What I did with my house and why
Thanks for reading (and watching).
When I say the word “freedom,” what do you think of? Freedom of speech? Self-determination? The freedom to choose your own spouse, friends or career path? Or maybe you envision an open road. Or a favorite pastime. Or winning the lottery. Freedom is not just one thing. There are many different types, states and levels of freedom. When it comes to retirement, I think there are five key types of freedom you should strive for. Those are:
Financial Freedom. Things cost money. If you have enough money to pay for the things you want and need, you have financial freedom. You don’t need to be rich, but you need enough money to fund your ideal lifestyle. Obviously, that’s a different amount for everyone. Find out how much it is for you and get to work. Save more. Be a good steward of your resources. Stop spending on things that aren’t important to you. The more financial freedom you have, the less beholden you are to a job or lender and the more flexible you can be in your life decisions. Of course, money won’t solve all your problems, but it will usually solve your money problems (to paraphrase Naval Ravikant). It’s often the table stakes for the other freedoms we’ll discuss below.
Time Freedom. Think of life as a pie chart that is divided between time you control and time controlled by others. The goal is to gradually shrink the piece of the pie that is controlled by others. The smaller that piece becomes, the more time freedom you have. The more time freedom you have, the more retired you are. Be careful, however. The most common way to achieve the money freedom we discussed earlier is to trade your time freedom for it. That can work while you’re building your nest egg, but it’s not a good long-term trade. The goal is not to be cash rich and time poor. That’s just prison with a fancy zip code. The goal is to have financial freedom while simultaneously controlling your time.
Location Freedom. Location independence is a key theme at Intentional Retirement. Being location independent means that you’re not tied to a specific geographic location for work or other reasons. You are free to move about, explore and experience while still staying on top of work or other obligations. Pre-pandemic, this was a rarely used and somewhat radical concept. Post-pandemic, it has become almost normal. We have the tools and technology to facilitate it and fewer gatekeepers telling us no. Location freedom is important for obvious reasons. If the things you have to do are tied to a specific location, they will prevent you from doing the things you want to do that are not. A caged bird isn’t free.
Health Freedom. Think for a minute about how your health can affect your freedom. For starters, getting sick is expensive. Health issues often sabotage your financial freedom and can force you to continue working, which undermines your time freedom. Even worse, being sick or unhealthy will often get in the way of everything else you want to do. I’m sure many of your plans involve some level of activity. The worse your health is, the less you’ll be able to do. Said another way, your health can act as either captor or emancipator. Better health = More freedom.
Lifestyle freedom. Having the first four types of freedom enable you to achieve freedom number five: Lifestyle freedom. This freedom comes from deciding what you really want out of life and having the time, money, independence and health to pursue those things and make them a reality.
How are you doing so far? Any particular area that still needs work? You can do it. Just keep in mind that freedom can be tricky. When you look at the list above, it’s easy to see how acquiring one freedom can cost you another. That’s less than ideal, obviously. Figure out all five and you’ll be well on your way to a remarkable retirement (and life).
The world is an uncertain place. Bad things happen. No argument there after the last few years, right!? Sometimes those disasters affect a wide swath of people. For example, a global pandemic, a housing crisis, terrorism or a stock market collapse. Sometimes you have the disaster all to yourself. A job loss, divorce, illness or the unexpected loss of a loved one.
Regardless of what form they take, most disasters or times of crisis have one thing in common: They tend to do a number on your finances. The stock market dropped more than 50% during the housing crisis of 2008. Covid job losses in 2020 were in the tens of millions. Two-thirds of U.S. bankruptcies in a typical year site medical issues as the key contributor. How can you keep a crisis from ruining you financially? Here are 22 practical ways to manage your finances before, during and after a crisis.
Not surprisingly, the best time to prepare for difficulty or disaster is before it happens. Here are a number of things you can start doing now to prepare for (or help prevent) a financial shock.
- Review your asset allocation and risk tolerance. You want your money to grow and keep pace with inflation, but you don’t want to take more risk than is appropriate for your situation. Regularly review your investments to make sure that your risk and allocation are dialed in.
- Have a written retirement plan. One important side effect of having a written retirement plan is that it gives you perspective in a crisis. That perspective can help calm your nerves and keep you from making reactionary mistakes. A good plan has a certain amount of unpredictability and volatility built in. Knowing that your plan will work in spite of the current crisis can be a powerful calming agent.
- Build a cash reserve. Cash is critical in a crisis. Many experts suggest that you set aside 6 months of expenses in a cash emergency fund, but that’s always seemed like a daunting place to start since surveys show almost half of America couldn’t cover a $400 unexpected expense. So start with a few thousand dollars. That’s enough to cover a major car repair or other unpleasant surprise without going into debt. Once you have that set aside, add to it until you have enough to cover a month or two of expenses. That would give you a cushion if you lost your job or had some other big disruption. Then, if you’re able, keep building your cash reserve until you get 4-6 months of expenses set aside so you have enough to ride out a major crisis.
- Tighten up your budget. The fewer obligations you have, the more financially resilient you’ll be. Most people have a lot of waste in their budget. Trim the fat. Look for ways to delete, downsize, simplify and optimize. This will free up some extra cash to add to your cash reserve and will make any remaining spending more sustainable even if your income takes a hit.
- Fixed vs. Discretionary expenses. There’s nothing wrong with splurging now and then, but if you’re going to do it, make your splurges discretionary (e.g. travel) instead of fixed (e.g. an expensive mortgage). In tough times, you can quickly turn off discretionary expenses, but you can’t quit making your house or car payment.
- Get your legal affairs in order. Don’t leave a mess for your family. Make sure you have a will and powers of attorney and make sure they’re up to date and reflect your current wishes.
- Review your insurance coverages. What if you died or became disabled? What if you had a major illness or needed long-term care. Protect your family. Make sure you have adequate life insurance, disability insurance, health insurance and long-term care insurance.
- Pay off debt. Debt adds risk and reduces cash flow. The less debt you have, the more financially resilient you’ll be. Make a plan to gradually eliminate your debt and you will greatly increase your odds of weathering a financial storm.
- Get healthy. A health crisis often leads to a financial crisis, because getting sick is expensive and can result in the loss of income. Be proactive with your health. It’s one of the 8 Habits of Successful Retirees.
- Do a pre-mortem review. Think about the types of crises you might face and ask yourself “Could my finances withstand this?” Look for weak points and vulnerabilities. Try to anticipate what could go wrong and look for ways to strengthen your defenses.
- Hire an adviser. You’ll be more likely to do everything listed so far if you have the help (and accountability) of a trusted, competent adviser.
- Don’t panic. The Navy Seals have a saying: “Under pressure, you don’t rise to the occasion, you sink to your level of training.” That’s why I spent so much time on the “Before” portion of this article. When bad things happen (and they absolutely will happen), take a deep breath and think about everything you’ve done to prepare. Don’t make rash decisions. Seek advice from your trusted advisers. Handle your emotions. Respond well. Do what needs to be done. Lead. Take care of those close to you. Have empathy for others in need and look for ways to help.
- Study the type of crisis you’re in and respond accordingly. History doesn’t repeat, but it rhymes. For example, the market crash in 2008 had similarities with previous ones. How did those work out? How long did they last? What were common mistakes that people made? How can you avoid the same mistakes? Knowing history helps you to keep things in perspective and chart a logical course through the crisis.
- Communicate effectively with your family. Be honest and transparent about the situation so you can all be on the same page. It can be as simple as “Hey, we’re going through a tough time. We need to make some changes. We’re going to get through this, but we need to take action. Let’s have grace and patience with each other and come out stronger on the other side.”
- Be data driven. Review your plan. What is it telling you based on the new circumstances? Do you need to cut back spending? Delay retirement? Reallocate investments? Change your Social Security claiming strategy? Let the data be your guide. Don’t make rash decisions, but when the data is clear, be proactive and don’t be afraid to stop, pause, shift, delay or change as necessary.
- Be optimistic, but realistic. You will likely get through this if you do the right things and take the right actions. But avoid false optimism that keeps you from doing what needs to be done. Don’t be afraid to take bold action when needed.
- Use dynamic spending. If you’re already retired when the crisis hits, dynamic spending can be a good way to preserve your nest egg in the face of investment volatility. Read more about it here.
- Continue investing if you’re able. This is especially true if the markets are dropping and you’re able to buy shares on sale. But if you need that extra money to weather the storm, you can stop your automatic investments in things like your 401(K). Just be ready to start them back up as soon as you’re able.
- Look for help. With a major crisis, the government often passes emergency assistance measures. For example, with COVID we saw special unemployment benefits, PPP, tax relief, stimulus checks and student loan relief. Local organizations like food banks are also there to help. Don’t be afraid (or embarrassed) to get help if you need it. That’s why those things are there.
- Review. Do a post-mortem review of the crisis. What did you do well? What did you do poorly? What did you learn? What can you improve? Enduring one crisis doesn’t make you immune to the next one, so take what you learned and use it to be better prepared going forward.
- Recover, rebuild and restart. What do you need to do to recover? What needs to change because of your new reality? For example, if your credit report was impacted by the crisis, what can you do to start repairing it? If you panicked and moved your investments to cash, how can you get invested again? If you depleted your cash reserve, how can you start building it back up? If you stopped things like 401(k) contributions during the crisis, start them up again as soon as you’re able.
- Reevaluate your priorities. Pa Ingalls of Little House fame once said “It’s an ill wind that doesn’t blow some good.” One of the benefits of enduring a crisis is that it often gives you a better understanding of yourself and what’s important to you. It forces you out of ruts and gives you a new perspective. Use those insights to recalibrate and reorient your life around things that bring you meaning, purpose, happiness and fulfillment.
Just like the rest of your body, your brain changes as you age. Sometimes those changes are normal and relatively minor, such as forgetting a word or a person’s name. In a small number of adults, however, those changes are indicative of something more severe that can affect your daily life and decision making. That’s concerning from a health standpoint, but also because a misstep with your financial or legal affairs could derail your retirement. How can you spot the difference between a normal cognitive change and something more serious? Below is a list of 15 potential indicators of cognitive decline. Again, we’ve all experienced the occasional item on the list, but if you suspect something more serious than that (either with yourself or someone you love), it might be worthwhile to have a conversation with your doctor.
- Difficulty with daily tasks such as housework, paying bills or following a recipe
- Forgetting important dates or events
- Getting lost while walking or driving in a familiar area
- Forgetting how to play games that you’ve always enjoyed
- Difficulty participating in a favorite hobby or sport
- Frequently losing or misplacing items
- Losing track of the day, week, month or seasons
- Difficulty remembering words
- Difficulty carrying on a conversation
- Difficulty planning
- Trouble with familiar tasks or simple concepts
- Disorganized files, documents or checkbook
- Decline in personal hygiene
- Mood swings or depression
- Mental fog or confusion
Again, if you suspect that you or someone you love might be suffering from cognitive decline, meet with your doctor for evaluation, diagnosis and treatment. And meet with your advisers to make sure that your financial and legal affairs (e.g. will, trust, powers of attorney) are in order.
And don’t forget about prevention. Your health is going to change as you age. It’s unavoidable. But there are things you can do to help maintain your cognitive health. The Mayo Clinic recommends that you stay physically and mentally active, eat a healthy diet, maintain social connections, and manage risk factors like high blood pressure, high cholesterol and diabetes. In short, take care of yourself and you’ll greatly increase your odds of having a healthy, happy retirement.
The Observer Effect is the tendency for people to change their behavior if they know they’re being watched. The interesting thing about it is that it seems to work even if you’re both the watcher and the watched. In other words, monitoring what you do seems to change what you do. Management guru Peter Drucker said it this way: “What gets measured gets managed.”
Intuitively this makes sense. If you weigh yourself regularly and track what you eat, it will likely impact what and how much you eat. And it works with more than just diet and exercise. It can have a positive impact on your finances and lifestyle as well. What do you think would happen if you started to consistently track what you spend? Or how much you save? Or your progress toward paying off your debt? Or how close you are to your retirement goals? Or how much progress you’re making on that particular hobby. Or how intentional you are with your holidays and time with family?
At Intentional Retirement, we help clients with money and meaning. The money helps them sleep at night. The meaning gives them a reason to get out of bed in the morning. Since those two things are part of our DNA, we’re always looking for ways to not just educate and inform, but to actually prompt people to make positive changes in their lives. We want you to take action. To change for the better. To become the person you want to be. To have a secure, meaningful life doing the things you want with the people you love. The Observer Effect might just help. Give it a try. Start watching yourself. Decide what you want to do or what you want to change and start tracking your progress. I think you’ll find it will help you be more disciplined, focused, consistent and…yes…intentional.