How to maximize your time in retirement.

How to maximize your time in retirement.

Time is money, as the old saying goes.  If true, you may never be so wealthy (in time at least) as you are during retirement.  Gone are the days of having to trade your most precious commodity for whatever the market would bear.  More than ever, you are free to spend your days doing as you please.  As part of the new “moneyed” elite, however, you will want to spend your time wisely.  Otherwise you might find that another old saying applies: Easy come, easy go.  What are the best ways to maximize your new time windfall?

Shake up your routine

Retirement is a major transition.  That transition can be difficult and you’ll have a certain amount of inertia to overcome as you attempt to move from your normal daily routine into your new plans for retirement.  To help jump start the process, it’s helpful to have big, new plans—like moving, traveling, or volunteering—that will force you to steer off the well-worn path you’ve become accustomed to and proactively pursue your new goals.  If you don’t have specific new plans, it’s easy to fall into a routine that doesn’t look much different from your working years, save for sleeping in a little bit and having more time to run errands.

More than ever, retirement is a time to throw caution to the wind.  As Mark Twain said, “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.  So throw off the bowlines.  Sail away from the safe harbor.  Catch the trade winds in your sails.  Explore.  Dream.  Discover.”

Simplify

If you’re going to shake up your routine and head off in a new direction, there will be certain activities and commitments that are no longer relevant to your plans.  Just as it’s important to make a “To-do” list to keep track of things you need to get done, it’s important to make a “Stop doing” list as you transition into retirement in order to free more of your time to focus on new pursuits.  Prior to retiring, make a detailed list of all of your commitments and responsibilities.  Go through each one and decide which you plan on continuing into retirement and which need to be stopped or handed off to someone else.  Once finished, your schedule will be much less cluttered and you will be able to use your time more efficiently.

In addition to simplifying your schedule, simplify your investment accounts.  The average person changes jobs several times over the years.  That could mean multiple retirement plans at former employers as well as a number of IRAs and other investment accounts.  This account proliferation makes monitoring your investments more time consuming and drawing income from them during retirement much more complicated.  If you have multiple 401(k)s, roll them into an IRA.  If you have multiple IRAs, consolidate them into one. Doing so will help to reduce fees, simplify your distribution strategy, make your investments easier to monitor, and free up more of your time to focus on other priorities.

Focus on milestones, not maintenance

No matter how effective you are at streamlining your schedule, you will still have a good many maintenance type activities that pop up on your calendar every day or every week; things like sleeping, eating, paying bills, going to the doctor, getting groceries, mowing the yard, and cleaning the house.  While important, these things don’t really add much significance to your life.

To find meaning, you will want to focus on milestones.  Those are the things that, when done, give you a sense of purpose and accomplishment.  Milestones tend to fall in areas like family, relationships, education, adventure, community, hobbies, travel, and health.  When reflecting on your life, the milestones will be the things that stick out.  They will be the things that you are most proud of.  The maintenance will just fade into the background.  Because of that, do everything you can to condense, consolidate, minimize, or (if financially able) outsource the maintenance so you can be free to spend more of each day focusing on milestones.

As you can see, by effectively managing your time in retirement you can make the most out of what will surely be one of the most fulfilling and rewarding periods of your life.

I originally published this article at www.fpanet.org.

Traveling?  Should you buy travel insurance?

Traveling? Should you buy travel insurance?

Note: I originally published this article in the AARP Bulletin.

Carla McDowell has always loved to travel.  She’s toured the Soviet Union, Germany, the Netherlands, Switzerland, South Korea, Costa Rica, England and Alaska.  And like a growing number of Americans, she always purchases travel insurance.  “No one wants to get sick and cancel a trip,” says McDowell, 64, of Omaha, Nebraska, “but insurance gives me peace of mind that I won’t lose a lot of money if something unexpected happens.”

Travel insurance has been around for decades, but the industry has grown rapidly since the terrorist attacks of 2001, reaching sales of more than $1 billion.  Before 9/11, only about 10 percent of Americans taking cruises, tours or international trips bought travel insurance.  Today that number is around 30 percent, according to the U.S. Travel Insurance Association (USTIA).

About 80 percent of those policies are “per trip” policies that cover the three most common sources of trouble: canceled or postponed trips, medical emergencies, and lost or damaged baggage.

Should you buy travel insurance to protect your travel investment?  Here are several points to consider before you decide.

What’s covered? Terrorism?  How about hurricanes?  The answer, of course, is maybe.  Some policies may exclude terrorism or “acts of God” altogether; others offer broader coverage.  For hurricanes, your policy may apply only if you purchased it before the storm was named and then only if your destination is under a mandatory evacuation order.

Bottom line: Read the fine print carefully before you buy, and make sure that the risks you want to cover are, in fact, covered.

Cost. A travel insurance policy can add anywhere from 4 to 8 percent to the cost of your trip, depending on your age and how much coverage you want.  Websites such as www.insuremytrip.com can help you compare policies and prices.  For McDowell, cancellation coverage for her $3,600 Alaskan cruise cost her an extra $280.  “It was worth it,” she says.  “Without the insurance, getting sick would have meant deciding between staying home and losing the money or going and being miserable.”

Is it worth it? Travel insurance often makes sense on very expensive trips or on trips that require large, non-refundable deposits or advance payments for hotel stays or special-event tickets.  Cruises can fall into this category because most of the cost is paid upfront and canceling even 30 days in advance could mean no refund.

But there are also instances where insurance does not make sense—for example, if your trip doesn’t include high prepaid expenses or if your prepaids, such as airline tickets are changeable for a small fee.  If you rarely get sick, cancellation coverage may not be worth the added expense.  Most trips go off smoothly or with minor hassles that tend to affect your mood more than your pocketbook.

Credit card coverage. Some credit card companies provide certain travel assistance when you pay for your trip expenses using their card.  While helpful, these extras are typically not as comprehensive as travel insurance.

For example, Mike Cimino of Southern Pines, N.C., was traveling in the Canary Islands when he fell and broke his kneecap.  His credit card company connected him with medical personnel in the area, facilitated consultation with his doctors back in the United States, and arranged for him to be flown home on a stretcher after his surgery.  While this logistical help was welcome, the medical bills were his to pay.

If your credit card company already provides certain coverage, you may be able to save some money by buying a policy to fill in the gaps.

Sources. If you book your trip through a travel agent or cruise line, you likely will have the option to add travel insurance at the time you purchase.  In some cases, insurance may be included in your package.  For example, Elderhostel includes certain kinds of coverage, including emergency medical evacuations, in each trip at no additional cost.  You can also buy policies from a number of companies such as Access America or Travel Guard.

Medical Care. Medicare will not cover health care expenses outside the United States.  Likewise, some private health plans limit coverage for those traveling outside the plan’s network.  Travel insurance can bridge this gap but you should check with your plan provider to make sure you’re not paying twice for the same thing.  Also, some travel policies may exclude pre-existing medical conditions unless you obtain a waiver or purchase the policy far in advance.  If you have recently had a heart attack or have diabetes, for example, check with the provider to make sure you’re covered.

Medical evacuation. Travel insurance can pay for evacuation to your home or to the nearest suitable medical facility, important if you become injured in out-of-the-way places.  Such evacuations can run into the tens of thousands of dollars, according to Clif Carothers, president of U.S. Air Ambulance.

“We once evacuated a couple whose vehicle had overturned while they were traveling in Africa,“ he says.  “We arranged to have a bush pilot fly them from where the accident occurred to an airstrip where our jet could land.  They were in pretty bad shape, so we then flew them to Frankfurt, Germany, for care and, eventually, back to their home.  The total cost of the evacuation was about $115,000.  To make matters worse, they had no travel insurance, so it was all out of pocket.

The odds. According to a recent survey, 17 percent of people who buy travel insurance actually wind up filing a claim.  That’s fairly high compared with other types of insurance, considering that one of the fundamental tenets of insurance is that most people won’t use it—if they did, policies would be unaffordable.  For some, however, travel insurance can turn out to be a wise investment.

Al and Jodie Goldberg were traveling to Australia from Washington, D.C., via Charlotte and Los Angeles.  Because it was a trip with many connecting flights, they opted to pay $269 for insurance.  Their policy covered trip cancellation up to $9,000 (the amount of their prepaids), medical expenses up to $10,000 per person and medical transportation up to $20,000 per person; it also had an assortment of coverages for delays or lost baggage.

The trip got off to a shaky start.  The couple became stranded in Charlotte when their flight to Los Angeles was canceled due to heavy smoke from California forest fires.  Their travel insurance paid for a hotel in Charlotte, meals during their delay and cab fare to and from the airport.  It also reimbursed them for a prepaid hotel room in Sydney they were unable to use because of their late arrival.  They eventually got another flight, but one of their bags didn’t make it, and the insurance paid to replace Jodie’s formal dress for their night out at the opera.

“I think Murphy’s Law was written with international travel in mind.” Says Al.  “The travel insurance helped us to smooth out the rough spots and still have a great trip.”

 

 

Maximizing retirement: Time vs. Tasks

Maximizing retirement: Time vs. Tasks

In his wildly popular book The 4-Hour Workweek, Timothy Ferris told the story of Vilfredo Pareto, an economist who lived from 1848 to 1923.  Unless you’ve read that book, you’ve probably never heard of Pareto, but you’re probably familiar with his most famous economic theory, the “80/20 Principle.”  Also known as “Pareto’s Law,” it basically says that 80 percent of the outputs result from 20 percent of the inputs.  It can be applied almost anywhere.  80 percent of the people produce 20 percent of the wealth.  80 percent of the profits come from 20 percent of the customers.  Basically, 80 percent of the results flow from 20 percent of the effort.

How can we apply this to retirement?  After working a 9 to 5 job for the better part of forty years, there is a real temptation to measure your daily progress by hours spent as opposed to tasks completed.  If you don’t have a “full day” there is a latent guilt that is carried over from your days of trading time for money (I give my boss forty hours and he gives me a paycheck.).  To avoid that feeling many retirees fill their days with busywork.

If you’re going to have a meaningful retirement, you need to embrace the idea that your goal is not to have a busy day or a full day, but a day spent on things that produce results (e.g. meaning, fulfillment, purpose, fun, happiness).  In other words, don’t focus on time.  Focus on tasks.  Ask yourself, what part of your day is done simply to busy yourself and what part is actually going to get you closer to your goals and give you a sense of accomplishment and purpose.  If Pareto’s law holds true, you should be able to cut about 80 percent of the busywork from your retirement schedule and focus on the 20 percent of tasks that are actually worthwhile.  The payoff comes not only in the form of a more relaxing retirement, but a more meaningful one as well.

Maximizing retirement: Maintenance vs. Milestones

Maximizing retirement: Maintenance vs. Milestones

No matter what exciting plans you have for retirement, you will still have a good many maintenance type activities that pop up on your calendar every day or every week; things like sleeping, eating, paying bills, going to the doctor, getting groceries, mowing the yard, and cleaning the house.  While important, these things don’t really add much significance to your life.

To find meaning and significance, you will want to focus on milestones.  Those are the things that, when done, give you a sense of purpose and accomplishment.  Milestones tend to fall in areas like family, relationships, education, adventure, community, hobbies, travel, and health.  When reflecting on your life, the milestones will be the things that stick out.  They will be the things that you are most proud of.  The maintenance will just fade into the background.  Because of that, do everything you can to condense, consolidate, minimize, or outsource the maintenance so you can be free to spend more of each day focusing on milestones.

 

Maximizing retirement: Assets vs. Experiences

Maximizing retirement: Assets vs. Experiences

As you move toward retirement, consider the merits of building a life that is light on fixed assets and heavy on experiences.  When younger, most people want a bigger house to fit the kids and keep up with the Joneses.  They want to live in a great neighborhood with great schools. The same logic is used when purchasing cars.  Bigger and more expensive is better, safer, etc.

Unless you have enough money to fund both, retirement should be focused on the experience, not the asset.  The wisdom of age should have taught you that life isn’t all about who has the most square footage or the biggest car collection. Contrary to popular belief, he who dies with the most toys does not, indeed, win. In all likelihood, he who dies with the most toys is a bit of a jackass.  A life spent in dogged pursuit of rich experiences and meaningful relationships can be infinitely more rewarding than one spent focused on the acquisition of more stuff.

Be specific with retirement plans

Be specific with retirement plans

At the risk of sounding obvious, you have a much greater chance of accomplishing a goal if you know exactly what it is you want to do.  Someone committed to going to Harvard has a much greater chance of ending up there than does someone who just wants to go to college.  Someone committed to climbing Mount Everest is much more likely to reach the summit than someone who just wants to climb mountains.

How about you?  When it comes to retirement, how specific are your plans?  do you want to “save” or do you have a specific dollar amount in mind?  Do you want to “retire as soon as possible” or do you have a specific date in mind.  Do you want to “travel” or do you have a goal to visit five countries a year?  A decided person is a productive person.  Being specific allows you to aim at a target.  Not surprisingly, aiming at the target improves your chances of hitting it.