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.
The markets had a great first half of the year. Stocks were up. Bonds were up. Both U.S. and International markets were up. Everything seemed to be working. Unfortunately, the second half has had a rockier start. And given the headlines (e.g. trade war, weakening international economies, excess debt loads, inverted yield curve, etc.), that volatility could continue for a while. Given that, I thought it would be a good time to scroll through the archives at Intentional Retirement and review a few past articles on how to deal with volatility, keep your emotions in check and make sure your retirement plans stay on track. Even though they were written during past periods of volatility, the lessons are just as relevant today.
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.
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.
When it comes to retirement, you absolutely want to dream big. Just don’t forget how important it is to eventually get those dreams off the drawing board. Here’s a simple framework that can help. It’s called the 4 Disciplines of Execution (4DX for short) and was developed by several people at FranklinCovey and discussed in their book by the same name.
Discipline #1: Focus on the wildly important
The authors of 4DX write: “The more you try to do, the less you actually accomplish.” It you try to do too much, very little gets done and the things that you do, don’t get done well. Concentrate your efforts on a few wildly important goals so you can do them well.
It’s up to you to choose what “wildly important” things to
focus on when it comes to retirement. Here’s
my suggestion, informed by almost 25 years of helping people plan for
retirement: Focus on money and meaning. The
money will help you sleep at night (and fund the type of retirement you want). The meaning will give you a reason to get out
of bed in the morning.
Discipline #2: Act on lead measures
Once you identify your wildly important goals, you need to
measure your progress toward achieving them. The authors of 4DX suggest there are two types
of metrics you can use to measure your progress: lead measures and lag
measures. Lag measures track the thing
you’re actually trying to achieve. In our
example above, having enough money to fund your retirement was one of the
goals. A lag measure would look at
whether you’ve reached that goal.
Unfortunately, that comes too late to be helpful. Instead you want to track lead measures. Those are the behaviors that eventually lead
to successful lag measures. So in our
example of money, lead measures could be things like 401k contributions,
savings rates or investment returns.
Discipline #3: Keep a compelling scorecard
“People play differently when they’re keeping score,” the
4DX authors write. The scoreboard brings
out our competitive spirit, drives us to stay focused on lead measures and
gives encouragement when we see progress toward the ultimate goal(s). Returning to our example, maybe your scorecard
tracks each pay period that you were able to save a certain percentage of your
income. Or if you’re tracking meaning,
maybe your scorecard tracks every time you have a date night with your spouse,
take a trip or work at learning a new hobby.
Whatever your lead measures, keep a scorecard to track how you’re doing.
Discipline #4: Create a cadence of accountability
In the final discipline, the 4DX authors say that you need to put in place a “rhythm of regular and frequent meetings of any team that owns a wildly important goal.” Depending on your goal, that “team” could just be you or it could include others like your spouse, financial adviser, friends, children, etc. Meet regularly with whoever has a vested interest in the outcomes you’re trying to achieve so you can track your progress and hold each other accountable.
Dreaming without doing is a recipe for disappointment. The 4 Disciplines of Execution will help you
turn your retirement plans into reality.
Quick Note: I recently posted a video to YouTube on the 8 Habits of Successful Retirees. If you haven’t seen it yet, you can click the link to watch it and click “Subscribe” to see future videos.