Quick note: This past week I’ve been up in Sequim, Washington visiting family and enjoying the great outdoors. Today we meet up with some friends and drive south toward California where we’re going to be hiking and camping along a rugged section of coastline called The Lost Coast. Cell reception will be spotty, but I’ll try to post some pics and videos to our Facebook page and (newly created) Instagram page. Tune in if you want to see some beautiful scenery or are just interested to see if I get eaten by a bear. Now on to today’s post.
The traditional definition of retirement contains 4 key elements:
- Age (65+)
- Work status (not working)
- Money (you need millions)
- Idealized pursuits (take those millions and buy a vineyard)
Not surprisingly, I’m not a huge fan of that definition. Among other problems, it puts you on the deferred life plan. You push your dreams off until “Someday” rather than living life to the full now. Not only that, but it doesn’t give you much time. If you retire at 65 and stay healthy and active until 75 (a stretch for many) then you’ve got 10 years to do everything you’ve been putting off for the last 40. Ten years is not enough.
Seneca did a good job pointing out these shortcomings over 2,000 years ago:
You will hear many men saying: “After my fiftieth year I shall retire into leisure, my sixtieth year shall release me from public duties.” Are you not ashamed to reserve for yourself only the remnant of life? How late it is to begin to live just when we must cease to live!
A better definition
My definition takes a different approach and attempts to deal with the problems I mentioned earlier. It has evolved over the years and will likely continue to do so as I live, learn, test and refine. Here’s my 10 word definition of retirement:
A system for living that optimizes for freedom and fulfillment.
Let’s unpack that for a minute:
It’s a system… I mean two things by this. First, it’s a system in the sense that it’s a set of connected parts forming a complex whole. Retirement has a ton of moving parts that need to work together to produce the results that you want. Those parts include things like money, relationships, pursuits, Social Security, Medicare, health, housing and insurance to name a few. Those parts work together in a complex system. If the parts work, the system works. If one or more parts isn’t functioning properly, the system breaks down.
Second, retirement is a system in the sense that it involves a set of principles or procedures for doing something. Your retirement should involve actions that you do on a regular basis with a reasonable expectation that doing them will get you closer to the life you want. Read this for more.
For living… There are no qualifiers here. It’s not a system for living once you hit 65 or have a certain amount of money in the bank. It’s a system for living now. Today. Retirement is not a life stage that you automatically arrive at after a certain number of birthdays. It’s an iterative process that starts today and evolves as you proactively work to gain more control of your time and then use that time in very intentional ways. Read thisfor more.
That optimizes… Your system should be optimized to produce the results you want. Otherwise it’s a bad system. It should move you efficiently and effectively toward the life you want. Fortunately, optimization is a natural byproduct of the iterative process described earlier. Rather than waiting until “retirement age” to figure out what you really want out of life (and wasting some of your best remaining years in the process), you’re testing and refining now.
For freedom… You can have all the plans in the world, but if you don’t have the time and money to get your dreams off the drawing board, then what’s the point? So yes, money is an important ingredient to a successful retirement to the extent that you use it to buy your freedom. Just remember that your goal isn’t to have more money for money’s sake. Your goal is to have a better life. Ralph Waldo Emerson said it well: “The desire of gold is not for gold. It is for the means of freedom and benefit.”
And Fulfillment… Retirement is more than a math problem. Yes, you need money (as we just discussed), but don’t forget about meaning. Money will help you sleep at night but meaning will get you out of bed in the morning. You need both to have a fulfilling life doing the things you want with the people you love. So decide what you really want out of life and then get very intentional about making that vision a reality.
How about you? I’d love to hear how you define retirement. Feel free to share in the comments. Have a great weekend!
Retirees are Unretiring in record numbers. You read that right. After decades of work and anticipation, people are entering retirement only to reverse course and head back to work. The RAND corporation conducted a survey in 2017 and found that almost 40 percent of workers over age 65 had previously been retired. That’s a lot of people. What’s going on here? Why do so many retirees unretire and how can you avoid the same fate?
It’s not usually about money
First, let’s look at what is NOT driving the trend: It’s not usually about money. The research shows that most of the people returning to work did so not because they didn’t save enough or because they experienced some sort of financial shock, but for other reasons. What were those reasons?
It’s about choice…
The study found that for many people, returning to work was planned. For example, they quit their full-time job to go part-time or they quit a high-stress job to take something more low key. This likely explains why younger retirees return to work in much higher numbers. They retire early with every intention of re-engaging in the workforce under different circumstances.
It’s no secret that people are living longer, healthier lives. That, along with the fact that jobs are less manual than in years past, can open the door to longer careers. In other words, returning to work in your 60s and 70s is an opportunity that exists today that didn’t necessarily exist when most job opportunities consisted of things like mining coal and riveting together skyscrapers. The data reflect this. Those with less education and more manual jobs tend to unretire at lower rates than those with more education and less physical jobs. Still, choice and opportunity don’t entirely explain the trend.
…But also about disappointment and unmet expectations
If you retire and then return to work by choice or to take advantage of a great opportunity, that’s a win. You want to do it and you’re able to. Where unretiring is a problem is when you either have to because of the money or you decide to because you find retirement unfulfilling. Unfortunately, the latter group accounts for a large number of Unretirees. They have their finances in order, but retirement is less fulfilling than expected. This problem can often be traced back to poor planning. If you don’t do a good job figuring out what’s next, you’ll likely drift back to what’s familiar. How can you make your transition successful? Here are several thoughts and takeaways that I had, both from the Rand study and from my 20 plus years of working with retirees.
Takeaways and Applications
Answer the right question. The retirement question most people seem intent on answering is “How am I going to pay for it?” That’s an important question, but retirement is more than just a math problem. In my opinion, we spend too much time thinking about how to get there (math) and not enough time thinking about what we’re going to do once we arrive (meaning). If you focus solely on finances, you risk having a retirement that is cash rich and lifestyle poor. Not surprisingly, that can be unsatisfying and can cause you to miss work, if only because it added structure and purpose to your day. To avoid that fate, put some serious effort into defining what you want to do during retirement.
Don’t just subtract. If all you do is subtract things—work, obligations, commitments—you will create a void in your life. That void can open you to self-doubt, regret, lack of purpose and boredom. Nature abhors a vacuum. If you take something out, you need to replace it with something else. If you subtract your career, you need to add in other things that will provide purpose, challenge and social engagement.
Avoid the temptation to do nothing. The temptation to do nothing can feel pretty strong after years of drinking from the fire hose of daily life. Unfortunately, doing nothing is not a good strategy for long-term fulfillment. It can be rejuvenating for a while, but it will get boring.
Your goal should not be to do nothing. It should be to do what excites you. If you’re feeling spent and burnt out after 40 years of work, by all means take some time off and recharge your batteries. But after that, you need a plan that will keep you challenged and provide meaning and fulfillment.
Practice. Not surprisingly, the better you are at something, the more you tend to like it. How likely is it that you’ll be really good at retirement on Day 1? Not very likely, right? You’re going from something that you know how to do really well (i.e. your job) to something that feels awkward and unnatural (e.g. travel, hobbies, more time with family and friends). There is a learning curve that can be frustrating and intimidating. But the more you practice, the better you’ll get and the more you’ll enjoy it. Acknowledge ahead of time that it will likely feel a bit unnatural, but keep practicing until you improve. Ideally, you should start this practice before you even retire. Start early with whatever portion of your time you control and practice, practice, practice.
Become an intern. This summer I have a young man interning with me. He has an interest in the financial industry, but wants to get some exposure to it before jumping into a 30 year career. Working as an intern will give him a chance to learn about the financial field, gain some experience, develop skills, make connections and evaluate his interests and abilities in a hands-on way. Why not do something similar before you jump into a 30 year retirement? Chances are that you know some people who are already retired. Ask them if you can shadow them for a bit. Spend some time talking to them about the experience. What is going well? What took them by surprise. What advice can they give you?
Consider partial retirement. Remember that work is a totally acceptable option in retirement. Maybe you don’t want to work 60 hours per week, but that doesn’t necessarily mean that you don’t want to find some sort of meaningful work where you can use your skills, make a difference and have some social interaction. If that’s the case, consider partial retirement.
Consider mini-retirements. With traditional retirement, you defer the good stuff to that 20-30 year period at the end of life when you have more time and money. The idea of mini-retirements takes some of that 20-30 year period (say 5 years), breaks it up into 1-3 month chunks and spreads it out over your working years. A mini-retirement is longer than a vacation, but shorter than…well…retirement. As you might imagine, there are a number of benefits to taking these extended periods off. You have time to actually experience a place rather than just visiting the touristy spots. It allows you to enjoy some of the benefits of retirement while you’re still young and healthy. It rejuvenates you and can help you come back to work more engaged and more productive. For more on mini-retirements, read this, this and this.
Retire to something, not from something. All the previous points can be summarized by this: Retire to something, not from something. Retiring to escape a job is a recipe for misery and discontent. Retiring to pursue things that you are passionate about is a recipe for meaning and fulfillment.
I did an interesting exercise this week. If you’ve ever looked at a copy of your Social Security statement, you know that page 3 shows how much you’ve earned each year throughout your life. As I looked at mine, I was suddenly curious about something, so I grabbed a calculator and added up my lifetime income. Then I opened my financial plan to get a quick snapshot of my net worth and I divided my net worth by the total of what I’ve earned. The result was a rough calculation of what I have to show (financially at least) for twenty plus years of work.
This was at once both encouraging and discouraging as well as illuminating and thought provoking. Encouraging because I’ve managed to hang onto a decent percentage of that income over the years and then invest it in a way that has caused it to grow. Discouraging because there’s a larger percentage that we didn’t manage to hang onto. Sure, part of that went to feed and clothe us and part of that went to fund experiences and memories I wouldn’t trade for the world, but I know that a not insignificant portion went to a category I’ll charitably describe as “non-essential.”
The interesting and enlightening part of the exercise came when I widened the aperture a bit and rather than just thinking about my lifetime earnings, I thought about my lifetime instead. Or more succinctly, my time. How have I spent, saved and invested my time? I’ve been “paid” 45 years of time. How much of that have I used wisely and intentionally? Alternatively, how much have I just allowed to slip through my fingers? Have I used my time at work to create a career that is enjoyable, rewarding and useful to others? Have I used my free time to invest in my family, develop my friendships and pursue interesting things? Have I used my time and attention to invest in my health so that I can “earn” more time? The answers to those questions aren’t necessarily as black and white as a bank balance, but if you put “time wasted” on one side of the scale and “time well spent” on the other, you can get a pretty good idea of which way it leans.
Similarly to when I did the financial exercise, the time exercise was both encouraging and discouraging. Much of my time was well spent and much (either by omission or commission) was poorly spent. If I’m being honest, there are days, weeks and even years where I wish I could get a do-over. There’s nothing I can do about that now, however, except learn from it. So I’ll internalize those lessons and do my best to be a better steward of my “time wealth” going forward. I’ll try to be a good steward of my finances too, but I suspect that the closer I get to the end of my life, the less I will care about how I invested my money and the more I will care about how I invested my time. You too? Then do something about it so when you come to the end of your years, you’re not left wondering, “Where did it all go?”
“It’s not that we have a short time to live, but that we waste a lot of it.” ~ Lucius Seneca
Every year the flu kills about 36,000 people in the United States. Those who die typically have an immune system that is already compromised in some way, such as by age or illness. In other words, it’s not necessarily the strength of the flu that is so dangerous, but the weakness of some immune systems.
In the same way that the flu virus can disproportionately affect those with weakened immune systems, a financial virus can disproportionately affect those with compromised financial health. The virus could be something as simple as an unexpected car repair or something a bit more serious like a market crash, job loss, divorce, disability, illness or unexpected death. How well you’re able to respond to those things depends on how financially healthy you are and how well you’ve immunized yourself against those threats.
Some people are fragile and at risk. Others are financially resilient. The closer you get to retirement, the more resilient you want to be so that something unexpected doesn’t derail decades of planning. Below are five things that, financially speaking, will either make you weak or strong, depending on how you handle them.
How much you owe. There are many tell-tale signs of a person who is financially fragile and having too much debt is often the most obvious. When you take on debt, you are bringing future consumption to the present. That gives creditors a legal claim on your future earnings, which reduces your cash flow, increases the risk that you will run out of money and limits what you can afford to do. Get rid of your debt, however, and not only will you be more financially resilient, but you can also retire sooner. Unfortunately, years of low interest rates have encouraged exactly the opposite behavior. What’s a good level of debt for a retiree? Shoot for zero.
How much you spend. If you live at or above your means, you are financially fragile. That’s true whether you make $50,000 per year of $500,000. Here’s the good news. Most of the people reading this likely have the ability to live significantly below their means. What if you spent 10% to 50% less than you made every year? Would that give you a certain resilience? You wouldn’t be worried about an unexpected car repair, I can tell you that much. So take a stand against lifestyle inflation. Just because you will earn more money this year than you did last year doesn’t mean you have to spend it. Set a lifestyle cap and save the rest.
How much you’ve saved. If you spend less than you make, you’re able to save. That savings not only protects you in the short term (i.e. emergency fund), but it allows you the financial freedom to live the life you want to live in the long run (i.e. retirement). In other words, savings is the secret sauce in both security and independence. How much should you have saved by now? This article will give you a rough idea.
How well you’ve planned. Most people don’t have a plan for retirement. They don’t know what they want to do, how much it will cost or whether or not they are on track to save enough to pay for it. Not surprisingly, that creates a great deal of anxiety, uncertainty and—you guessed it—financial frailty. If you are among the 88% of people who don’t have a written plan, your retirement will probably fall far short of what it could be.
A plan can also help inoculate you against bad decisions. Sometimes a financial virus takes the form of fear and uncertainty. When we’re scared, we tend to make unwise and irrational decisions. To navigate those waters, it’s good to have a North Star. The wind can blow and the seas can rage, but when you look up, it will be there. A detailed retirement plan can act as that North Star. If you have a long-term plan—you know where you are, where you want to be and how you’re going to get there—you can inoculate yourself against short-term fear and uncertainty. When you have context and you understand the big picture, you’re less likely to be blown off course or panic and make a mistake. For help with creating a plan, check out my Ideal Retirement Design Guide or touch base with me if you want some one-on-one help.
How well you’ve prepared for the unexpected. What if something happened to you or your spouse? Would that derail your finances? Are your legal and financial affairs in order? Life is unexpected. The more “What if?” planning you do, the more resilient you will be in the face of tragedy. Here are two articles and a guide that can help:
That’s five ways to boost your immunity, harden your defenses and make yourself more financially resilient. But they only work if you take action. Modern medicine has given us many miracle vaccines, but they only work if you take them. So too, financial vaccines are either contagion or cure, depending on what you do with them.
I’ve heard it said that the best way to spot a counterfeit is to be an expert in what is genuine. The Secret Service knows this well. When training their agents, they don’t start by giving them samples of fake bills. Instead they provide them with genuine bills and train them in every conceivable detail of those bills. The look. The feel. The ink. The borders. The serial numbers. The spacing. The portraits. The holograms. The seals. The details of Grant’s beard. The shading on Ben Franklin’s face.
Once the agents are experts in the details of genuine bills, spotting fakes is no problem. The slightest deviation from what is genuine is enough to expose the bill as fake.
Genuine vs. Counterfeit
Think about your life. Do you know what your “genuine” is supposed to look like? Do you have a clear understanding of what you really want out of life? The things. The people. The activities. The experiences. The priorities. How you spend your time.
If you haven’t done a good job defining your “genuine,” then counterfeits will slip by and begin circulating through your life. The more counterfeits you have, the further you’ll get from the life you actually want and the less happy and fulfilled you’ll be. Left unchecked, the economy of your life could become overwhelmed with counterfeits, at which point it ceases to function properly, just like a normal economy would.
How to find your genuine life
The application? You need to decide what you really want out of life and take those plans very seriously. That’s a theme I’ve touched on before. It’s a core element of Intentional Retirement. Below is a list of several resources and posts that take a deeper dive on this topic. Use them to help define your genuine and become an expert at spotting it. Then be diligent at tossing the fakes before they can take root.
Guides and eBooks
Have a great weekend. Be intentional.