by Joe Hearn | Mar 28, 2014 | Lifestyle Design, Mini-retirements, Pursuits, Retirement
It’s no accident that this site is called Intentional Retirement.
Being intentional with this brief, but beautiful life is one of the things I’ve tried to weave into the DNA of the site since day one. I preach that sermon every chance I get and I work hard to practice what I preach. I know many of you do the same.
One side effect of being intentional is that you start to tackle big things. You look past the low hanging fruit of your daily “To Do List” and instead set your sights on those big, intimidating goals that you’ve thought about for years, but have never brought to the front burner of life.
Here’s an example from my own life. As many of you know, I’m in the middle of planning my first Mini-Retirement. One thing I’ve learned so far is that ditching your job and traveling halfway around the world for four weeks takes a lot of planning. I know. Who knew? Right?
I’ve spent months working on logistics like accommodations, rental cars, airfare, event tickets, reservations, train tickets and daily itineraries. This is to say nothing of other important details like figuring out a way to pay for it all (Donations accepted. Just kidding. I’ve learned a lot about traveling less expensively and I’ll detail that in a future post.).
As I thought about all this, I had a flash of insight relating to doing big things. It’s the universal secret to accomplishing anything big in life, whether that’s a big trip, writing a book, having a great relationship, building a healthy marriage, having a successful career, getting in shape or putting a man on the moon.
Here it is.
Ready?
The secret to doing big things is to do a bunch of little things. In other words, you don’t “write a book,” you write a little bit today, and then tomorrow and then the next day. You do that a few thousand times and then throw in a good dose of editing, pitching and publishing and Voila! You’ve written a book. This same process applies to anything big you want to do in life.
If I were to put that into an equation, it would look something like this:
Little things + Consistency + Time = Big Things
Application
As you think about how you can apply the above equation in your own life, keep one thing in mind: The clock is ticking. In other words, the “Time” variable in the equation is getting smaller each day. Why is that important? Because if “Time” is getting smaller, then you need to increase the “Little Things” and the “Consistency” in order to still achieve the “Big Things” that you have in mind. If you can’t do that, then you need to rewrite your equation to get rid of the “Big Things” and replace them with medium or small things.
That’s why I’m so adamant about not waiting until your 60s to retire. It’s why I’m so against saving the best for last. Too many people follow the “traditional retirement” path and when they arrive, they realize that their equation doesn’t balance. They do the mental math and realize that many of their plans and dreams require a crazy amount of effort and consistency because they’ve waited so long start. This results in no small amount of discouragement as they let those dreams go and settle on smaller plans.
So remember that equation above. Dream big, but don’t wait to start. Retire today.
Have a great weekend!
Joe
by Joe Hearn | Mar 14, 2014 | Distribution Planning, Income, Retirement
Will retirement be cheaper than you think? Maybe. A lot depends on your income replacement ratio. What’s that you ask? It’s the percentage of your current income that you will need during retirement to maintain your standard of living.
Some people will need 100% of their current income. Others will be able to get by on less. Ironically, the more money you make now, the lower your income replacement ratio will likely be. That’s because you probably aren’t using all of your current income for expenses that will still exist during your retirement years.
Here are three major expenses that will likely disappear from your retirement budget:
Savings: Retirement is a shift from the accumulation phase to the distribution phase. That means no more 401(k), IRA or savings account contributions. How much are you saving now? Five Percent? Ten? Fifteen? Once you’re no longer saving, you won’t need that income.
Payroll taxes: Looking at the glass half-empty, retirement means no more paycheck. Looking at the glass half-full, that also means no more Social Security and Medicare taxes on your earned income. Right now you’re paying a 6.2% Social Security tax on your first $114,000 in income and a 1.45% Medicare tax on all your income (7.65% total or twice that if self-employed). And if you’re a high-wage earner ($200,000 for singles, $250,000 for couples) you’re paying an additional 0.9% Medicare surtax. Those taxes go away when your earned income goes away.
Work expenses: Think of all the expenses you have that relate to your job: commuting, dress clothes, expensive lunches, a second car. Most of those expenses can be reduced or eliminated in retirement, which is probably the equivalent of hundreds of dollars each month that you can cut from your budget.
If I apply those three items to my own budget, I could eliminate more than a quarter of my expenses. How about you? How much could you get rid of? I’m guessing the amount is significant. If you’re able to pay off your house and retire debt free, you could eliminate even more. To be fair, you’ll also have some expenses that get added to your budget during retirement (e.g. travel, hobbies, etc.), but those likely won’t outweigh the cuts.
A common rule of thumb for your income replacement ratio is 85%. David Blanchett, head of retirement research at Morningstar, thinks that most people will be able to get by on less. Whatever the number, it is the primary driver of how big your nest egg needs to be. Shave 20% from your income replacement ratio and you’ll be able to shave 20% from your nest egg, which means you could save less and retire sooner.
Start Today
One of the benefits of the exercise above is that it shows the direct link between expenses and retirement. The less you need, the sooner you can retire. Remember that your ideal retirement is not about age or work status. It’s about control. It’s a gradual shift from doing what you have to do to doing what you want to do. One way to speed that shift is to save more, but equally effective (and often overlooked) is to need less.
~ Joe
by Joe Hearn | Feb 25, 2014 | Retirement
I’d like to take a moment to thank the good people at Merriam-Webster and Oxford English Dictionaries.
Each year they faithfully add hundreds of new words in an effort to help us all communicate more efficiently and effectively. After all, without those additions, how would we know the difference between fracking and twerking?
I mean seriously. How did our ancestors survive without acronyms like MOOC and YOLO? And without words like selfie, how would we describe carefully choreographed, deceptively flattering photos of ourselves? Vanity photo? Ego pic? Those sound so…narcissistic.
So in the interest of a more perfect lexicon, I have a few submissions I’d like to make for 2014. Below are 15 retirement words that don’t exist, but should (feel free to suggest your own in the comments section below).
1) Jobby: noun. plural jobbies. A hobby that you enjoy and are passionate about that you turn into a job or second career during retirement. Running the bed and breakfast is a jobby of mine.
2) Benboozle: verb. See also benboozled, benboozling. To deceive retirement savers into believing that they have enough money, only to make it incredibly difficult for them to generate retirement income due to financial repression and a policy of zero percent interest rates similar to that instituted by Ben Bernanke. I thought my nest egg was adequate until Bernanke came along and benboozled me.
3) Moneymoon: noun. That brief period after you retire when you’re more concerned about having meaningful experiences than you are about running out of money. The bills from our African Safari came in today and unfortunately, the moneymoon is over.
4) Casabanka: noun. A house that is used to fund one’s retirement via a reverse mortgage. If our nest egg isn’t big enough, we may need to withdraw money from casabanka.
5) Boomerboomerang: noun. A person who retires, but misses the challenge and social interaction of their job, so they return to work either full or part-time.
6) YOLHO: slang. You Only Leave Home Once! Acronym used by empty nesters to discourage their adult children from moving back home when the latter are struggling with the poor economy or bad job prospects.
7) Refire: verb. See also refired, refirng. When a person retires sooner than they expected because they got fired, downsized or laid off. Matt refired from his job at the factory when they brought in a machine to do his job.
8) Someday Window: noun. The wonderful window of time during life when you are retired, healthy and able to do all the things that you’ve been putting off until “someday.” [Note: See “Someday is Here!” for ideas on making the most of your someday window.]
9) Maximalist: noun. A person who lives life thoroughly and to the full. Similar to how a minimalist will structure their life around minimizing possessions, a maximalist will structure their life around maximizing experiences.
10) Globetalker: noun. A person who talks frequently about the globetrotting and travel that they have done or plan on doing.
11) Taxile: noun. A retiree who leaves their home state due to an unfavorable tax structure. I haven’t always lived in Florida. I’m a taxile from Nebraska.
12) CRLP: slang. Cash Rich, Lifestyle Poor. Acronym used to describe a person who treats retirement solely as a math problem. They have enough money, but don’t use it to enjoy life.
13) Doughphobia: noun. An abnormal fear of outliving your money.
14) Fibflation: noun. A false estimate of the general rise in prices used by the government to justify an unfair cost of living adjustment in Social Security.
15) To-Don’t List: noun. A list of tasks, activities or obligations that you plan to quit doing once you retire, usually organized in order of priority. This is my last year as club president. Once I retire, it’s totally going at the top of my To-Don’t List.
Bonus word: I originally wrote this article for Dow Jones and they published it yesterday at their MarketWatch website. Not surprisingly, several of my word suggestions didn’t make it through the editing process for one reason or another. Just for fun (and because my editorial standards are a bit looser than those at Dow Jones), I thought I’d share my favorite word that ended up on the cutting room floor.
F**ket List: noun. The most dangerous items on your Bucket List that you’re saving until you’ve lived a long life and no longer care if you die in an adrenaline filled wipeout. On his 90th birthday, Sam crossed wingsuit flying off his F**ket List.
Hope you’re all doing well. Have a great week!
~ Joe
Photo by gadgetgirl. Used under Creative Commons License.
by Joe Hearn | Feb 7, 2014 | Health
Last summer we visited my wife’s grandma in Oregon. Even though I’ve known her for nearly 20 years, I had to introduce myself because dementia has slowly erased her previous memories of me. Dementia affects millions of people as they age and often robs them of an active, independent retirement. Are there things you can do to minimize your risks of developing it? New research offers encouraging results, but before getting into that, let’s look at a quick definition of dementia and how it affects people as they age.
What is dementia?
Dementia is not a single disease, but rather is a general term used to describe a loss of brain function or decline in mental ability severe enough to interfere with your daily life. It affects memory, thinking, attention, language, judgment, problem solving and behavior. As it worsens, it can affect your ability to take care of yourself and can often lead to further problems like depression and anxiety.
Dementia was referred to as far back as Aristotle and Plato and has long been considered to be an inevitable sign of aging. Only recently has the “inevitable” part begun to change, which brings me back to the research that I mentioned earlier. It points to two key ways to slow, minimize or even prevent dementia.
Exercising your body
A pair of studies out of the U.K. reveal that exercise seems to play a significant role in reducing the risk of dementia and improving cognitive function later in life. In other words, what is good for your heart is good for your head.
In the first study, researchers tracked the exercise habits of 9,000 different individuals between the ages of 11 and 50. They interviewed each person about their workouts at ages 11, 16, 33, 42, 46 and 50 and then tested their cognitive functioning at age 50. The results? The more intense and regular a person’s exercise was throughout life, the better they performed when tested on things like memory, learning, attention and reasoning.
In the second study, researchers tracked 2,235 men over 35 years to see how things like regular exercise, not smoking, low bodyweight, healthy diet and low alcohol intake affected their probability of getting different diseases. People who followed at least four of those variables had a 60% decline in dementia rates, with the number one factor being exercise. As a bonus, they also had a 70% decline in diabetes, heart disease and stroke compared to the other participants who weren’t following any of the five variables.
Exercising your brain
Exercising your body seems to be an effective way to stave off dementia, but what about exercising your brain? Companies like Lumosity offer “brain games” that purport to keep you mentally sharp, but do they work or are they just expensive computer games? The National Institute on Aging just released a major study that finally provides some concrete evidence.
The study was published last month in the Journal of American Geriatrics Society. It followed 2,800 people in their early 70s and gave them both computer based and pencil and paper tests. The volunteers were divided into a control group (which received no training) and three test groups, which received training in either reasoning, information processing speed or memory. Immediately following the training, the three test groups were performing significantly better in their particular area of training compared to the control group. Those benefits were still evident five years later when all four groups were retested. Ten years later the reasoning and speed groups were still showing significant benefits, but the effectiveness of the memory training seems to have faded.
Still, study coauthor Sharon Tennstedt, said that the training “helped participants carry out everyday activities as if they were about 10 years younger, allowing someone at 80 to function more like a typical 70-year-old.” Interviews with participants seemed to back this up. Most reported less difficulty than the control group with everyday activities like shopping, cooking and handling their money. The bottom line? Brain training won’t prevent dementia, but it can delay its arrival.
Focus on what you can control
You’ve heard me say before that you should focus on what you can control when planning your retirement. That includes things like saving, reducing debt, deciding when to take Social Security and planning meaningful pursuits. We now know that minimizing your risk of dementia is on that list as well. Do what you can to keep yourself physically and mentally fit and you will greatly increase your odds of an active, independent, rewarding retirement.
~ Joe
by Joe Hearn | Jan 22, 2014 | Happiness
Greetings from frigid Omaha. One upside to this comically cold weather is that I’ve had a little more time than usual to just sit by the fire and catch up on my reading. As I worked through my “articles to read” pile, the results of a recent study caught my eye and I thought it would make a worthy edition to our How To Be Happy series.
When money buys happiness
You’ve heard me say before that when spending your money, you should focus on experiences instead of stuff. The idea being that a life spent in dogged pursuit of rich experiences will usually have a much better payoff than one seeking the latest gadget or gizmo.
Of course, it’s easy to dismiss that as just one person’s opinion. After all, some people would prefer a trip to Hawaii or a day at the ballpark, while others prefer a flat screen television or a Louis Vuitton handbag. Now there’s actually research that shows that you should probably choose the trip over the handbag.
The study, conducted by Ryan Howell, assistant professor of psychology at San Francisco State University, shows that buying experiences instead of possessions leads to greater happiness. Why? According to Howell, experiential purchases satisfy higher order needs by making us feel alive and connected to others. “Purchases that increase psychological need satisfaction will produce the greatest well-being,” says Howell.
Not only that, but buying experiences tends to provide more lasting satisfaction (regardless of your income or the amount spent) because they provide what Howell describes as “memory capital.” In other words, experiences come with memories and those memories accumulate and contribute to your happiness for as long as you’re alive.
Just to be clear, I have nothing against stuff. I like nice things just as much as the next guy, but I think our society has the ratio wrong. There’s so much pressure to buy things that people are often tapped out when it comes to buying experiences (if only I had a dollar for every time someone told me “I wish I could afford to travel” right before climbing into their $40,000 SUV).
So as you think about your budget this year, keep Howell’s spending study in mind. Stuff is fine, but experiences will probably make you happier.
~ Joe
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