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).
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.
How are those 2020 plans working out for you? In crazy and uncertain times, it’s easy to get sidetracked. To feel helpless and stressed. To give up or get discouraged. To ask: “What’s the point?” To pick up bad habits. And even to actively do things that reduce your odds of long-term retirement success. Things like:
- Not being intentional with your time and money
- Not exercising
- Eating badly
- Drinking too much
- Not learning new things
- Having too much debt
- Neglecting your marriage
- Not investing in your friendships
- Associating with the wrong people
- Allowing yourself to get bitter over circumstances
- Taking life for granted and assuming it will go on forever
- Getting stuck in routine
- Comparing yourself to others
- Not taking some “at bats.”
- Letting the headlines derail your investment strategy
- Doing nothing instead of doing what excites you
- Not taking care of your mental and emotional health
- Caring too much about what others think
- Mimicking others rather than deciding what you really want out of life
- Having an external vs. internal locus of control (i.e. “Everything is out of my control.”)
Are you struggling with anything on that list? If so, what’s one thing you can stop doing this week because it is holding you back and harming your chances of a successful life and retirement? What’s one thing that needs to go because it doesn’t align with what you want your life to be? Don’t let a difficult year derail all your hard work. It’s time to weed the proverbial garden.
Hi everyone. Below is a quick summary of the COVID-19 legislation that affects retirees. Before jumping into that, a quick apology. Sorry I haven’t written much lately. January and February are normally very busy months for me as I meet with clients for annual reviews. Just as that was wrapping up, the world (and markets) went haywire with the pandemic and I’m just now coming up for air.
New Rules That Affect Retirees
The coronavirus stimulus packages contain something for (almost) everyone: businesses, individuals, students and yes, retirees. I won’t bore you with a comprehensive list, but I’ll give you a quick overview of the elements that impact retirees.
Changes to Required Minimum Distribution (RMD) rules: The CARES Act allows you to suspend RMDs for 2020 from 401(k)s, 403(b)s and IRAs. If your IRA took a hit and you don’t need the money, it’s probably a good idea to skip your 2020 RMD. That will hopefully give your account time to recover from the recent downturn. If you have your RMD set to happen automatically each year, you’ll want to call your adviser or IRA custodian to stop it. If you’ve already taken it for the year, there is a provision that allows you to put it back. Certain restrictions apply, so check with your IRA custodian for details. Also keep in mind that Congress made another change to RMDs at the beginning of the year that pushed the required age from 70 ½ to 72.
Penalty waived for early retirement withdrawals: Normally, you have to pay a 10% penalty if you take a distribution from your IRA prior to age 59 ½. That penalty is waived for 2020 on amounts up to $100,000 for anyone affected by COVID-19 (e.g. sickness, job loss, reduced hours, etc.). You’ll still owe taxes on the distribution, but you can spread the taxes out over three years. And if you end up not needing some or all of the money, you can put it back into your IRA within three years and that contribution won’t count toward your annual contribution limit.
Stimulus checks: Even if you’re retired and not working, you may still be eligible for a stimulus check. The CARES act provides one-time payments of $1,200 for individuals and $2,400 for couples. The benefit begins to phase out at adjusted gross income of $75,000 for single filers and $150,000 for those married filing jointly. They phase out completely at $99,000 for singles and $198,000 for married filing jointly. Initially, people were required to file a 2018 or 2019 tax return in order to receive the benefit, but many retirees are not required to file a tax return, so the government now says it will look at SSA-1099 benefit statements. If you are receiving Social Security and are eligible for the benefit, the government will send out your stimulus check automatically in the same manner that you receive your regular benefits (likely via direct deposit).
Expanded loans from qualified plans: If you have a 401(k) or other qualified plan, you can now borrow 100% of your vested account balance, up to a maximum of $100,000. The deadline to initiate the loan is September 23, 2020. If you already have a loan outstanding, you can delay repayments for up to one year.
Delayed tax filing deadline: The due date for filing federal income tax returns (and paying any balance due) has been moved from April 15, 2020 to July 15, 2020. This extension applies automatically to all taxpayers and you don’t need to file any additional forms to qualify. The delay applies to 2019 returns as well as estimated tax payments for Q1 of 2020 that would otherwise have been due on April 15. If you’re still unable to file by July 15, you can file for a normal extension using Form 4868. Keep in mind that the regular rules still apply to that second extension (i.e. it extends the due date of your filing, but not the due date of any taxes due). Not all states extended their filing deadline, so be sure to check your state’s deadline to make sure you file on time.
Delayed mortgage payments: The CARES Act allows certain borrowers to delay their mortgage payments for up to a year. Be careful with this provision, however, because depending on who owns your mortgage (your bank or another servicer), you may be allowed to tack the payments onto the end of the loan or you may be required to pay all of your back payments in a lump sum at the end of the forbearance period. Check with your mortgage provider for details.
Medicare and COVID-19: Under earlier legislation (the Families First Coronavirus Response Act), health plans are required to cover COVID-19 testing at no cost to the patient. If you’re already on Medicare, it provides coverage as well. Medicare will cover COVID-19 testing and also covers hospitalization and treatment. In addition to these benefits, Medicare has expanded its coverage of telehealth benefits. For more information on all these things, visit https://www.medicare.gov/medicare-coronavirus.
These are definitely unprecedented times. Stay safe and touch base if you have any questions or if there’s anything I can do to help you.
How healthy are your friendships? The answer will have a huge impact on your retirement. Research shows that friends (or lack thereof) can affect your health, happiness and even your habits. Let’s look at the findings, examine some of the challenges your friendships will face as you age and discuss a few ways to make and maintain friendships during retirement.
How Friends Affect Us
According to the Mayo Clinic, friendships can affect your
health and happiness in a number of important ways:
- They provide support in tough times.
- They help you find belonging and purpose
- They reduce your stress and increase happiness
- They give self-confidence and self-worth
- They can help you through difficult times like
death, divorce, illness or job loss
- They provide accountability and positive peer
- They help reduce the risk of things like
depression, high blood pressure and unhealthy BMI.
In addition to the benefits above, friendships can help keep
your mind sharp. Several studies have found
that there is a strong connection between loneliness and cognitive
decline. For example, a 2018 study in
the Journals of Gerontology found that loneliness was associated with a 40%
increase in dementia among study participants.
In another study, researchers in the Netherlands found that people who
feel lonely are about 1.6 times more likely to get dementia.
There’s also evidence that the importance of friendships
increases as we age. Dr. William Chopik
at Michigan State University conducted a study on how our relationships affect
our health and happiness as we age. The results
showed that the benefits we get from healthy family relationships stays level
throughout life, but the value of good friendships has a greater impact on our
health and happiness as we age. According
to Dr. Chopik:
“Friendship quality often predicts health more so than the quality of other relationships.”
The Problem + The Solution
So the benefits of friends are huge, but there’s a
problem. Making and maintaining quality
friendships gets harder as you age. In
mid-life you have competing priorities like kids and work. As you age, caring for your parents often
gets added to the list. And life isn’t
static. Circumstances change and
friendships ebb and flow. Major life
events—death, divorce, job loss, moving and retirement—can derail even the best
of friendships. So if you want to enter
retirement with good friends that have a positive impact on your health,
happiness and cognitive function, you need to be intentional.
That means investing time, effort and often money into your friendships. It means being kind, likeable and trustworthy. It means listening and being transparent. It means being reliable and available. It means celebrating victories and being there when life is challenging. It means being loyal and avoiding drama. It means being proactive about spending time together. All those things have a compounding effect over time. They deepen friendships and give them a solid foundation. And as we saw earlier, those deep friendships take on added meaning as you age.
A Few Practical Applications
The primary takeaway is this: Don’t underestimate the power of friends. They can make or break your retirement. Start working on them now. If you’re looking for a good place to begin, forward this article to one or two of your friends and start a conversation. Ask how you can be a better friend. Plan an adventure or fun outing. Start a new tradition. Discuss ways to deepen your friendship. Compare retirement plans and make sure they overlap in ways that will allow you to maintain your friendship. All of this takes effort, but it’s worth it. The payoff is a healthier, happier life for both you and those you care about.
Read this quote from Jeff Bezos and then let’s apply it to retirement.
“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. In our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ [or] ‘I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.”
What won’t change in retirement?
Bezos was talking about business, but you can just as easily apply his idea to retirement. Most people spend decades preparing for retirement. If you’re going to do that, you want to make sure that the time, money and energy that you’re investing will get you to where you want to be and will pay dividends for years to come. So, what won’t change? What is likely to be just as true 10 or 20 years from now as it is today? Here are three ideas:
You’ll want to be healthier. I have yet to come across the retiree who doesn’t care about their health. Everyone wants to be as healthy as possible for as long as possible. I’m sure the same will be true of you. So the time and effort you spend on improving and maintaining your health will be well spent. That could mean making a long-term commitment to eating better. Or hiring a personal trainer. Or buying better quality food. Or going to your doctor for regular checkups. Or going to a physical therapist to finally treat those aches and pains. Or flossing (seriously…new research links gum disease to Alzheimer’s). Or getting that knee or hip replacement surgery that you’ve been putting off. If it’s an investment in your health, it will pay dividends for years to come.
You’ll want to be happier. That was true when you were 2. It was true when you were 20. It will still be true if you live to be 200. So think about the things that make you happy and invest in those. Here are a few suggestions based on happiness research. Invest in relationships. Learn new things. Focus on experiences rather than things. Work on something bigger than yourself. Exercise. Meditate or pray. Spend time outdoors. Help others. Get enough sleep. Forgive. Stop comparing yourself to others.
You’ll want to be more financially secure. I’m sure everyone has dreamed of winning the lottery, but that’s not what I’m talking about. Financial security simply means you’re not worrying about money at night. It means having enough to buy your freedom. Enough to control what you do with your time. Enough to do the things that you want to do. Enough to help those you care about if they need help. Enough to take care of yourself if/when your health changes. Enough to design the kind of lifestyle you want. The desire for financial security will not change, but it takes most of us a long time to get there. So be a good steward of your assets. Save diligently. Pay off debt. Invest wisely. Calculate how much you need to fund the retirement you want and make a plan that will get you there. Hire an adviser if you need help. Get your finances in order and it will pay dividends (literally) for years to come.
Step 1: Decide what won’t change.
Step 2: Invest in those things.
Step 3: Reap the rewards for years to come.
Touch base if I can help.