We just wrapped up Labor Day Weekend here in the U.S. That is the unofficial end of summer and it
means we only have four months to go before we finish up this year and start a
new decade. That’s plenty of time to get
a few things done and finish the year strong.
Think about any financial, investing, lifestyle, relationship, health or retirement goals you had for 2019. How have you done so far? How can you make the most out of the next four months? Focus in on one or two areas where you’d like to make progress before year-end and get to work. Maybe that’s making a written retirement plan, increasing your savings rate or making a plan to finally get debt free. Maybe that’s repairing a relationship, starting a new workout program or learning a new skill. Maybe you’ve reached your health deductible for the year and it’s a good time to schedule that procedure. Or maybe it’s time to plan that trip (always a good idea). Think about how good it would feel to finish the year with a few major items checked off your To-Do list. Think about how much progress you could make in 2020 if you ended 2019 with solid momentum.
Part of my job here is to help people avoid
complacency. To push you to have a tough
conversation with yourself about what you really want out of life and to
encourage you to take those plans really seriously. Consider yourself pushed. Touch base if there’s anything I can do to
help. And props for everything you’re
doing so far. The fact that you’re
following along at this site tells me that you’re no slouch. Saving for retirement and being intentional
with life are not easy tasks. Most
people don’t do it. You’re in that small
minority of people who are laying the foundation for their future through
discipline, hard work and good stewardship.
Well done! Keep up the good
work. Finish the year strong.
Hi everyone. Sorry it’s been kind of quiet around here. I’ve been in summer mode and haven’t done much writing. I just got back from a hike with my daughter through the High Divide – Seven Lakes Trail in Olympic National Park (see above pic) and the hike got me thinking about some of the research I’ve read on surviving in the wilderness.
A common thread running through most survival stories is the
idea of decision drift. Most times you
don’t just make one terrible decision that puts you into a “Do or Die”
scenario. Rather, you make a series of
small decisions that get you further and further from where you need to be
until you come to the sudden realization that you are lost or in trouble. The sense of panic that accompanies that
realization often causes people to make more irrational decisions that get them
deeper into trouble.
Decision Drift and Retirement
Decision drift isn’t exclusive to back country hiking. It can affect you on your path to retirement as well. Most of us do a pretty good job avoiding those colossally bad decisions that can derail our life. We’re less good at those myriad small decisions that seem unimportant at the time but, when taken cumulatively, can derail our life or get us far from where we want to be. Those decisions can greatly affect our relationships, health, financial well-being and opportunities and we often make them without a lot of intention because:
We think they’re unimportant
We feel pressured or tempted
We’re temporarily willing to compromise
We’re unclear on what we want
We haven’t considered the consequences
We failed to decide so someone else is deciding for us
All of those little decisions/indecisions can quietly lead you away from the life you want to live. You wake up one day and realize you’re lost. You ask yourself: “Where am I? How did I get here? Whose life am I living anyway?” Avoid that sinking feeling by recognizing that those little decisions are big. Pay attention to them and course correct as needed. Never forget that most decisions – big or small – are directional. They lead you toward certain things/people/experiences/opportunities and away from others. Don’t take them lightly. Be intentional with your decisions so they take you where you want to go.
“The big question about how people behave is whether they’ve got an inner scorecard or an outer scorecard. It helps if you can be satisfied with an inner scorecard.”
The scorecard he’s talking about is how you measure success in any given endeavor. Are you playing your game or someone else’s? Do you compare yourself to others and try to win based on what they or the rest of the world think of you? Or do you focus on the things that matter to you and judge your success based on the goals and metrics that you’ve set for yourself (i.e. your internal scorecard)?
You can “succeed” with either scorecard. It’s just a question of whether or not that
success is likely to bring you happiness and fulfillment. Most people use a combination of both
scorecards, but during the first two-thirds of life the external scorecard
often wins. As a student, you had a
literal scorecard and it measured how well you did compared to the other
students and whether you reached the milestones of success set by the school. You likely focused on that scorecard to
please your parents or gain acceptance into college or a career.
During your working years there’s pressure to focus on the external
scorecard as well. Are you the top
salesman? How much money do you
make? What is your job title? How much is in your 401k? What professional designations do you
have? What industry awards have you
And since we use the external scorecard at work, we often
use it in our personal life as well. How
big is your house? What kind of car do
you drive? What brand of clothes do you
wear? Where do you vacation? Are your kids in private school?
There’s nothing inherently wrong with any of those things,
but if the only reason you want them is to please others or win some foolish
game of status or achievement, then you’re winning at the wrong game. It’s possible to look totally successful on
the outside and be a mess on the inside.
The internal scorecard and retirement
When you retire, you buy yourself the freedom to design your
own game and set your own rules. You get
to decide what constitutes a success.
This is a much more rewarding game to play and it is more likely to
result in happiness and fulfillment, because the metrics you’re focusing on are
the things that are important to you. It
takes work, however, because you need to create the game and set the
rules. That means deciding what you
really want out of life and then holding yourself accountable to achieve it
using your internal scorecard. Your scorecard
will look different than mine, so I can’t tell you what to do, but I can give
you some general ideas on how to do it. Below
are a few resources that can help.
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.
Deciding when to retire isn’t always easy. Most people just base it on their birthday, but there are other factors you should consider as well. In the video below, I’ll give you seven signs that you’re ready to retire.
I’ve worked with many clients over the years who decided to retire early. Sometimes that was a great decision, other times it resulted in some unexpected challenges. Below are some of the pros and cons I’ve seen with early retirement. Consider them carefully as you decide when to retire.
Time control. During your working years, you don’t control large chunks of your day. If you retire early, however, you shed those demands and have much more flexibility and opportunity to use your time to do the things you really want to do.
Health. Generally speaking, the younger you are, the healthier you are. If you retire early, you get to take advantage of the fact that you’re still healthy and active.
Open doors. In The Funny Thing About Time, I discussed how time closes doors as we get older. The kids grow up and move away. You lose a spouse or other loved one. Your physical health changes and you’re not able to do that trip you always wanted to do. Retiring early means that more of those doors are still open.
Better relationships. One of the advantages of having more time is that you can prioritize relationships. During our working years, we’re less proactive with relationships. It’s a side effect of less time and more obligations. Early retirement changes that calculus. And since relationships are key to a happy life, retiring early can be a huge advantage.
Less stress. This one is pretty self-explanatory.
Potential opportunity for a second career or passion project. Some retire early because they are ready to leave work/career behind. Others still want to work, they just want to do something they enjoy or are passionate about without having to worry about what it pays. Retiring early can give you that opportunity.
Age difference with other retirees. I have a client who retired early and moved to a private community in Florida. He was the youngest resident by several decades. You can feel a little out of place if you’re 50 and everyone around you is 70. This is obviously more of an issue if you move to a destination geared toward retirees.
Guilt. I wrote about this in 4 Unexpected Emotions in Retirement. If you retire early, you can sometimes feel guilty because you’re doing fun stuff while your friends and family are still working. This can make conversations awkward as you talk to each other about your day, priorities, etc.
Money. The sooner you retire, the less time you have to save and the longer your nest egg needs to last. If you are considering early retirement, be sure to work with a trusted adviser to create a detailed retirement plan with a high probability of success.
Comparison with peers. Alas, comparison with others continues even in retirement. Your friends and co-workers will likely be a little jealous of your newfound freedom and you’ll likely feel a bit green when you hear about their promotions and raises. You might even second guess your decision to walk away from the challenge and status your career. The best way to guard against this is to do things in retirement that provide purpose and meaning.
Social Security. Your Social Security benefits are based on the assumption that you will continue to work until full retirement age. If you retire sooner, your benefits will be a little lower. Likewise, if you decide to claim your benefits early (rather than waiting until full retirement age) they will be reduced. You can retire early and still wait to claim your benefits, but that means that your portfolio will need to do the heavy lifting until you file (see my point on money above).
Health insurance. If you retire before becoming eligible for Medicare at age 65, you’ll need to get a health care policy that bridges the gap between your employer policy and Medicare.
Timeline vs. Pie Chart
Regardless of when you retire, you’ll be faced with tradeoffs. If you wait, you get more money, but you lose time and health. If you retire early, you sacrifice a bit of money, but you’ll be healthier and have a much longer runway to enjoy retirement. You need to decide what’s most important to you.
One piece of advice I can give you: Don’t save the best for last. Retirement should not be a timeline where youth is 0-20, working years equal 20-65 and retirement is 65 plus. Instead it should be a pie chart divided between time you control and time you don’t. Retirement is using whatever time you control now (whether that’s 10%, 50% or 90%) to live the life that you want to live.