by Joe Hearn | May 15, 2012 | Retirement
There is perhaps no more revered institution in America than that of Sport. Baseball is our national pastime. The Super Bowl is our most watched television program. Popular franchises have billion dollar price tags. Phrases like “The Miracle on Ice” and “The Dream Team” still illicit emotion decades after the games that spawned them. Our heroes are people like Jordan, Ali, DiMaggio and Armstrong. Go to the most remote nation on earth and you will likely find many people who can’t name our President, but they can recognize a picture of Tiger Woods or LeBron James.
Why are people so drawn to sport? Is it the passion of the players? The thrill of victory? The hometown pride in the team? Those are all good reasons, but I think somewhere near the top of the list would have to be the life lessons we can draw from organized competition. Whether it’s little league or major league, there are things we can all learn from games and the players who play them.
That is probably why I recently found myself wondering, as I watched fans yell advice to Tiger at the tee box, what advice he would have for us if the tables were turned. Since my beat is retirement, I pondered what wisdom guys like Tiger, Tebow and Tyson would have for those planning their golden years.
Tiger Woods (Have a plan)
In Hank Haney’s new book The Big Miss, Tiger’s former coach reveals that he always played his best golf when he had a plan for improvement, structured practice sessions and a clear goal that it was all pointing to. If Tiger were to look at how most of us are preparing for retirement he would probably ask, “What’s the plan?” How much do you need to save? Where will you live? What are you going to do? Our plan should answer all those questions and should be a step-by-step guide to get us from where we are to where we want to be.
Coach John Wooden (The importance of team)
John Wooden was the first person to be inducted into the basketball hall of fame as both a player and a coach. As great as his talents were, he understood the importance of team. A favorite saying of his was, “The main ingredient to stardom is the rest of the team.” Are you going it alone with your retirement planning or do you have a team? Partnering with trained professionals like a financial planner, estate-planning attorney, and accountant can bring a level of expertise and discipline to your planning that greatly increases your odds of success.
Andy Murray (Focus on fundamentals)
Andy Murray is a great tennis player. Unfortunately, he hasn’t won a major yet because he happens to be playing the game at a time when it is dominated by three of the greatest players to ever pick up a racquet: Federer, Nadal, and Djokovic. To rise to the challenge, he is returning to the fundamentals of the game. He has hired a new coach (tennis great Ivan Lendl) and is working tirelessly on the key building blocks of his game like the forehand, backhand, serve, spin, placement and power. He has a special diet and trains for endurance, strength, explosiveness and agility. His advice for us would likely be “Focus on the fundamentals.” For retirees, that means things like a retirement budget, debt reduction, asset allocation, distribution strategy, health care, Medicare and Social Security.
Cal Ripken, Jr. (Stay healthy)
Cal Ripken, Jr. broke a record in baseball that many thought was unbreakable: Lou Gehrig’s record for consecutive games played. As if to put an exclamation point on it, he exceeded Gehrig’s mark by 501 games. How did he do it? He stayed healthy. “Early in my career I decided I never wanted to get out of shape,” he said. To make the most out of retirement, you should follow Ripken’s lead. Taking care of yourself and staying healthy will not only allow you to be more active during retirement, but it will also lessen the strain on your nest egg.
Mike Tyson (Don’t sabotage yourself)
Iron Mike won over $300 million in prize money during his career. Unfortunately, he also elevated bad decision making to an art form—horrible spending habits, jail time, biting off his opponent’s ear—and he was eventually forced to declare bankruptcy. Don’t be like Mike. One bad decision can ruin a lifetime of good ones. One of the earliest lessons in life is that actions have consequences and boy is that true in the final third of life. Don’t do anything that would derail your retirement dreams.
Lance Armstrong (Deal with adversity)
Things don’t always go according to plan. Markets can fall. The government can change the rules on things like Social Security or Medicare. There can be an unexpected illness. Being retired doesn’t mean that everything magically goes your way. After facing cancer, no one would have blamed Lance Armstrong if he’d decided to quit racing. Instead he fought through the adversity and eventually won the Tour de France seven times. Why didn’t he quit? “Pain is temporary,” he said. “It may last a minute, or an hour, or a day, or a year, but eventually it will subside and something else will take its place. If I quit, however, it lasts forever.”
Michael Jordan (Diversify your income streams)
During retirement it’s helpful to have income from multiple sources like Social Security, a pension, savings, a small business or part-time work. This reduces risk and increases your options. Having several sources of income was one of the reasons Michael Jordan could afford to walk away from basketball and pursue his dream of playing minor league baseball. The pittance a minor leaguer is paid was no worry when he still had millions coming in from Nike, McDonalds, and Gatorade. You and I may have fewer zeroes in our paychecks, but we can follow the same principle.
Muhammad Ali (Visualize the future)
Muhammad Ali once said, “I hated every minute of training, but I said, ‘Don’t quit. Suffer now and live the rest of your life a champion.'” Getting ready for retirement is hard work. It takes discipline and sacrifice. Experts in behavioral finance have shown that you can make it easier and improve your chances if you do what Ali did and visualize yourself in the future.
A recent study* showed participants pictures of themselves and then asked them to allocate money toward a hypothetical retirement savings account. Half were shown current pictures of themselves. The other half were shown “age morphed” pictures of themselves that depicted what they would look like in old age. Those shown the age adjusted photos allocated twice as much money to savings as did the others.
I could go on and on drawing parallels between athletics and retirement, but you get my point. Just like the athletes we adore, we all want to succeed and do our best. And like those athletes, if we work hard and keep our head in the game, good things will come. As Yogi Berra might say “Retirement is 90 percent mental. The other half is physical.”
Is there anything I can do to help? Don’t be a stranger. Touch base anytime.
Joe
Photo courtesy of Chase McAlpine. Used under Creative Commons License. I originally published this article at www.fpanet.org.
*—Ersner-Hershfield, H., Goldstein, D., Sharpe, W., and Bailenson, J. (2010). Future Self-Continuity and Saving Behavior. Working paper.
by Joe Hearn | May 8, 2012 | Estate Planning, Insurance, Investing, Retirement
The odds are extremely good that my wife will outlive me. Whatever the reason—genetics, a healthier diet, the fact that she uses our treadmill as something other than a clothes rack—there will likely come a day when she bids me adieu.
Most people know that women have a longer life expectancy than men, living about 81 years compared to 76 for the average male. But what they may not have considered is what this statistic means in reality: namely that the overwhelming majority of people in retirement are women.
In the U.S., women make up nearly 60 percent of the population over age 65 and nearly 70 percent of the population of those over age 85*. How should that reality affect the retirement planning of the fairer sex?
Investments
At a minimum, a longer retirement means the need for more income. All else being equal, funding a 20-year retirement will be more expensive than funding a 10-year retirement. That means more money will need to be set aside leading up to retirement and withdrawal rates will need to be sustainable (around 4 percent) during retirement in order to keep from running out of money.
Also, asset allocation will be more important than ever. The portfolio will need to be invested aggressively enough to overcome the ravaging effects of inflation that are sure to happen over a longer period, but not so aggressively that investment losses wipe out principal. Maintaining the proper balance is a key ingredient to making the money last.
Pension plans
A pension plan for a married couple can be an important source of retirement income, but what happens to that income when one of the spouses dies? If the husband dies and it was his pension, does that income go away? It depends. If the pension benefit was based on his life only, then payments will likely end when he dies. To avoid the negative financial impact that this would likely cause, couples should arrange with the pension provider to base the benefits on both of their lives. “Joint Life” benefits will likely be smaller than those based on a single life, but they will also minimize the financial impact on the surviving spouse.
Social Security
Women are more likely than men to leave the workforce at some point in their careers in order to raise children or care for aging parents. Some choose not to work outside the home at all. This, along with the fact that women still tend to earn less than their male counterparts, can impact their eligibility for Social Security benefits. Because of that, the Social Security Administration has special rules that apply to people who are widowed, divorced or still married, but with little in the way of earned benefits.
For starters, spousal benefits entitle everyone to either their own benefit or half of their spouse’s benefit, whichever is greater. In addition, those widowed or divorced are able to collect benefits on their former spouse’s Social Security record if:
- The former spouse is collecting benefits or is deceased
- You were married for at least 10 years
- You are 62 or older (60 or older if your spouse is deceased)
Getting remarried could affect your eligibility for benefits under certain conditions, so be sure to check with the Social Security Administration before heading back to the altar. For more information visit www.ssa.gov and download the brochure “What Every Woman Should Know.”
Life Insurance
The primary purpose of life insurance is to replace a person’s income in the event of his or her death (Note: It can also be an effective estate planning tool, but that is a discussion for another article). Because of that, many people keep adequate insurance coverage during their working years to protect their spouse and children, but then get rid of it when they retire. This could be a big mistake if a significant portion of a couple’s retirement income is attributable to just one of the spouses, say in the form of pension or Social Security benefits.
How do you know if you need life insurance during retirement? Ask yourself this question: “Would my death create a significant financial hardship for my spouse?” If not, then you probably don’t need life insurance. However, if the death of either you or your spouse would result in significant loss of income for the other, then life insurance can be a good way to protect against that loss.
Long-term care insurance
Long-term care insurance can help cover a variety of costs including home health care, respite care, adult day care, care in an assisted living facility, or nursing home care. This type of insurance can make sense for women for a variety of reasons, but two stand out. First, if a woman is predeceased by her husband, there is a good chance that there will be some large medical bills related to his final illness and care. These bills can take a big chunk out a couple’s nest egg and impair its ability to provide income to the surviving spouse. Long-term care insurance can help preserve those assets by covering expenses not usually covered by health insurance, Medicare or Medicaid.
Second, if a woman lives 5, 10 or even 20 years longer than her husband, there is a good chance that she will need some type of long-term care services during her life as well. And because her husband died first, she will have fewer options if she becomes sick or disabled and needs someone to help. A long-term care policy can provide peace of mind, minimize burden on friends or family, and help her get into her choice of facilities or be cared for at home as long as possible.
Estate Planning
Married couples typically create their estate plan (e.g. wills, powers of attorney, etc.) together, but it is the wife who tends to see that plan in action. Because women live longer, it is the wife who will likely be the one to use the powers of attorney for finance and health care if her husband becomes disabled or incapacitated due to illness. She will also need to handle his estate when he dies. When that occurs she will need to update her own planning and make sure that it passes her property to the correct people and names the people she wants to handle her affairs in the event that she is no longer able. Because of that, women should pay particular attention to their family’s estate planning and make sure that it is up to date and accurately reflects their wishes.
Living a long, healthy life definitely has its benefits. It means more time with friends and family. More time doing the things you love. More time enjoying life and experiencing all that it has to offer. Unfortunately, it can also mean outliving those you love. By planning ahead, you can create security and peace of mind for yourself and your family and keep your retirement on track.
Photo by Mark Brooks. Used under Creative Commons License. I originally published this article at www.fpanet.org.
by Joe Hearn | May 4, 2012 | Social Security
I’m back from the land of the midnight sun and trying to get caught up on any retirement news I missed while on the road. One item that caught my eye was the Social Security Administration’s decision to provide online statements for estimated retirement benefits. You may have noticed that they quit mailing the paper statements last year in a bid to save about $70 million a year in mailing costs. Saving money is good, but being in the dark about your potential benefits is bad, so I’m glad they’re making the change.
To access your statement, go to www.ssa.gov and create a secure account. Once done you will be able to see your complete earnings history as well as the total Social Security and Medicare taxes paid over your career. More importantly, you can see the retirement benefits you can expect to receive at different ages (i.e. 62, full retirement age, and 70) so you can factor that information into your planning.
For more information on Social Security, just scan through the list of related posts below. Have a great weekend and touch base if I can ever help.
Joe
by Joe Hearn | Apr 25, 2012 | Pursuits, Retirement
Think back to Bill Gates in his Harvard dorm room when he first conceived of the idea for Microsoft. Did Windows come out fully formed, with all the functionality that it has today? Of course not. He started with Version 1.0. I’m sure the features and functionality of that first version would look positively pedestrian to us today. And yet Microsoft continued to build on in it and improve it; continued to learn new things, make new discoveries and design new features. Version 1.0 lead to Version 2.0 and so on.
Call it what you want—versioning, iteration, incremental progress—this same process can be seen when we look at any significant discovery or undertaking. The airplane didn’t stop at Kitty Hawk. Apple didn’t stop innovating after the original iPod. The first person to take a stab at Everest didn’t make it to the top.
Retirement: Version 1.0
What if we applied this idea of iteration to retirement? What if, instead of waiting until 65 to have the retirement of our dreams, we started with a Version 1.0 at 45? A version that doesn’t quite have all the “freedom and control” functionality that we hope to have in future versions, but one that allows us rich experiences nonetheless.
Then we could take what we learned and apply it to creating a Version 2.0 in our 50s. With a little more money saved by that point and the knowledge and experience gained from testing and implementing Version 1.0, we could likely design a fairly robust “product” that included things like mini-retirements, travels and learning new things. Even though work would likely still be a part of the equation, it would be done in service to an existing lifestyle rather than as a pre-payment of dues for a club we hope to someday be invited to join.
Then when we actually reach that stage in life where our saving and circumstances allow us complete control over our time we would be infinitely better prepared to implement a feature packed, real-world tested Version 3.0. Rather than struggling with inertia and trying to figure out what we really want out of life (and wasting some of our best remaining years in the process), we would be ready to hit the ground running.
Think different
“Once in awhile it really hits people that they don’t have to experience the world in the way they have been told to.” ~Alan Keightley
The purpose of this post isn’t to provide all the answers, but to get you thinking about the process. Your retirement doesn’t need to look like the “Retirement” that our culture has defined. It can and should be something that is uniquely you. Grab a piece of paper and spend five minutes writing out some of the key things that you want out of life. Jot down the plans and dreams that have up to this point been reserved for “someday.” Now ask yourself this question: “Do I want to wait until the final third of my life to do these things?” If the answer is no, then start thinking about what you can do today to design Version 1.0.
Thanks for reading. I’m on the road exploring Sweden (call it beta testing Version 1.0), so updates at the site may be a little more sporadic than usual. Have a great week and touch base if I can ever help out or answer questions.
Joe
by Joe Hearn | Apr 18, 2012 | Learning Challenge, Pursuits, Retirement
In the recent post “How (and why) to be a lifelong learner” I wrote about how constantly learning new things makes for a rewarding, meaningful life (and retirement). Lucky for us, we live during a time when it is easier than ever to teach ourselves how to do just about anything.
With that in mind, I announced that I would be doing periodic “30 Day Challenges” where I will learn about something that interests me and then write about it here at the blog. Hopefully all of you will follow along at home and each month we’ll be able to add something fun and interesting to our “life skills resume” like how to make a great omelet, plan a round-the-world trip or light a fire by rubbing two sticks together (hat tip to my friend Niel for that one).
The first challenge I undertook was to learn all the countries in the world. To do it I downloaded an app from Brainscape called Learn Geography. I usually learn best by repetition, so the flashcard format worked well for me. I also used an app called National Geographic World Atlas and a website called www.PurposeGames.com which has quizzes so you can test your level of mastery.
The results? I did pretty well. After 30 days I can tell you where just about any country is located. I still struggle with some of the tiny islands in Oceania (I’m looking at you Tuvalu), but I’ll continue to work on it until I have them down.
What are some of the things I learned as part of this particular challenge?
First, I learned how much of the news actually relates to countries that I know nothing about. Just for fun one Saturday I read through the Weekend Wall Street Journal and made a list of all the countries mentioned in that day’s news stories. I didn’t read every article, but here’s a list from those I did read: Turkey, Myanmar, Equatorial Guinea, Afghanistan, Spain, China, United States, Sweden, Switzerland, Mexico, Germany, Ireland, Greece, Portugal, United Kingdom, Scotland, Syria, Japan, Iraq, Pakistan, Brazil, Argentina, Falkland Islands, Peru, Czech Republic, Denmark, Norway, Finland, Poland, Vietnam, Iran, South Korea, North Korea, and El Salvador. Simply knowing where these countries were located helped me notice stories I probably wouldn’t have otherwise noticed and also gave those stories some context.
Second, I learned it’s fun to do the challenges with someone else. My friend Mike and the daughter of my friend Kelly did the challenge along with me. Not only did this provide accountability (nothing motivates you like losing a challenge to a 13 year old), but it was fun to have people to talk to and gain tips and insight from.
Finally, I was reminded of how fun and rewarding it is to learn something new. Constantly challenging yourself is a great way to keep your life from getting stale and boring.
What’s next?
So what’s the next challenge on the list? I’ve got two that are on the drawing board. Since a trip to Paris a few years ago, my wife has wanted to learn how to make croissants. She and I will start working on that and I’ll let you know in a month how it turns out.
Also, we have a trip scheduled with friends this summer and the guys want to do some scuba diving. One small complication: None of us have ever done it before. Never fear. We’re talking to a local company called Diventures about getting certified. That probably won’t come together until sometime in May, however, so I’ll keep you posted.
How about you?
How about you? Is there anything you’ve always wanted to learn? Hopefully these posts will be inspiration to start a 30 Day Challenge of your own. Better yet, email me about what you’d like to do and we can work on it together.
Thanks for reading! Have a great week.
Joe
Page 50 of 65
«<...49505152...>» 