by Joe Hearn | May 17, 2013 | Lifestyle Design, Retirement
How retired are you? For most people, that question has one of two answers: They are either retired (100%) or not retired (0%). They associate retirement with a particular age (65+) or work status (not working) and if they can’t check those boxes, then they’re not retired. They see life as a timeline and retirement comes at the end, somewhere between Medicare and Forest Lawn.
If you’ve read much of my writing, you know that I think a bit differently than your average bear about retirement. I define retirement with one word: Control. I don’t view life as a timeline with retirement at the end. I view it as a pie chart, divided between time I control and time controlled by others. Retirement is a gradual transition from doing what I have to do to doing what I want to do.
The upside to my philosophy is that, for each and every one of us, retirement begins today. It is no longer some sort of “Promised Land” that we hope to survive long enough to see. Instead, it starts now, and evolves over the years as we gain more control over how we spend our days.
How much do you control?
Management guru Peter Drucker was fond of saying: “What gets measured gets managed.” In order to make something better, we need to be able to measure it. That way we can track progress and see what works and what doesn’t. This is why our world is so full of ratios like earnings per share, body mass index and miles per gallon.
With that in mind, I’d like to offer a new ratio for each of us to consider. I call it the HRAY Ratio (or ‘How Retired Are You’ Ratio). It is calculated by adding up the Time You Control and dividing it by Time Controlled by Others. The bigger the ratio, the more retired you are.
Your assignment for the weekend is to calculate your HRAY. Download the Time Budget Worksheet from the Retirement Planning Toolkit if you need some help figuring out how much of your time you control (Remember: Subscribers just enter your email address and hit submit and you’ll go straight to the Toolkit).
Once we all know our HRAY, then we can focus our time and energies on improving it (a.k.a. Becoming more retired). That will be the subject of a future post. Stay tuned.
Quick Favor: Can you (as Dennis Rodman might say) do me a solid? If you enjoyed this article can you forward it to a friend or two? More than just a blog, I’m trying to build a movement of people who are serious about living life intentionally. There are probably people in your circle of influence who would be a good fit for our little community and I’d love for you to send them a quick invite. Thanks!
Have a great weekend!
~ Joe
by Joe Hearn | May 7, 2013
Subscriber Toolkit Welcome aboard! The toolkit full of checklists, worksheets and other goodies is below. Enjoy. Checklists Retirement Countdown Checklist Annual Estate Plan Review Checklist Annual Retirement Review Checklist Financial Checkup Checklist... by Joe Hearn | May 6, 2013
Retirement Toolkit Get instant access to our Retirement Toolkit plus updates when I post new articles to the site. Subscribe for free below. What’s in it? 5 Page Retirement Countdown ChecklistRetirement Budget Worksheet8 Habits of Successful... 
by Joe Hearn | Feb 15, 2013 | Health, Medicare
It’s no secret that prescription drug costs can put a big dent in your retirement budget. What you may not know is that the cost of those drugs can vary (sometimes drastically) based on which pharmacy fills your prescription.
The assumption is that drugs have set prices and every pharmacy charges the same price for the same drug. The reality is that pharmacists charge what they want. If you have a high deductible health plan or you’re in the “donut hole” on the Medicare Prescription Drug plan, going to the wrong pharmacy can mean much higher out-of-pocket costs. Until recently, there was no tool to compare what different pharmacies were charging for a certain drug in your area.
Doug Hirsch and Scott Marlette have changed that. They were early employees at Facebook until eventually moving on to pursue other ventures. One day Doug had a prescription that he needed to have filled. The price of the drug at his regular pharmacy seemed really high, so he shopped around and found that the cost varied significantly. Long story short, they figured out a way to create a huge database of drug prices from all over the country and launched a new website called GoodRX where people can enter a drug name and their location and get a comparison of what pharmacies are charging.
To get an idea of the diversity of prices, I went to GoodRX and compared prices on a variety of different drugs. For some drugs, the prices were very consistent from pharmacy to pharmacy. For others, there was a huge difference. For example, I looked up a variety of drugs used in the treatment of colon cancer. The high and low for my area are listed below.
Leuprolide—High: $436.17, Low: $188.52
Taxotere—High: $640.61, Low: $275.12
Flutamide—High: $50.14, Low: $29.20
As you can see, those are some pretty wide swings. If you visit the site, you’ll notice that there are coupons available for many drugs and there is also a mobile App available so you can check prices while you’re actually in the pharmacy.
Have a great weekend!
Joe
Photo by Wil Taylor. Used under Creative Commons License.
by Joe Hearn | Jan 3, 2013 | Debt, Estate Planning, Retirement, Taxes
Well, another year is in the history books. Where does the time go? It seems like just yesterday that I was singing along to Prince’s “Party Like It’s 1999” and worrying that my coffee machine was going to be a victim of Y2K and here we are a “Baker’s Decade” into the new millennium.
As the years go by, I, along with millions of others, find the idea of retirement morphing from a vague concept to an impending reality. The signs are subtle at first. An AARP magazine in the mailbox. A “take this job and shove it” daydream at work. A lingering glance at the orange and red sections of the USA Today weather map. If retirement looms large on your horizon, then there’s no time to waste. Below are 7 resolutions for the New Year to make sure that your planning is on track.
Recalibrate after the “Fiscal Cliff.” As the dust settles in Washington, there are several variables in your retirement plan that you may want to review. In particular, any changes in your tax bill can affect everything from your planned retirement date to your distribution strategy. Entitlement reform was delayed (color me surprised!), but any eventual changes to Medicare and Social Security will also affect your retirement. Schedule a meeting with your adviser to factor in these new variables and make sure that your plans are still realistic.
Increase your contributions. Are you getting a raise in 2013? Sure you could use that to upgrade your iPad or buy tickets to the soon to be announced Rolling Stones tour, but a third option would be to route that extra cash into your retirement accounts. Contribution limits for 2013 are increasing to $5,500 (plus an additional $1,000 for those over 50) for IRAs and $17,500 (plus an additional $5,500 for those over 50) for 401(k)s.
Create a debt payoff plan. If you subscribe to the 4 percent withdrawal rule, then for every $1,000 in income you need to generate during retirement, you’ll need $25,000 in assets. Doing some simple arithmetic, it’s easy to see that retiring with a mortgage, car payment or other debts can add hundreds of thousands of dollars to your “Number.” Reduce that burden by committing to a plan to retire debt free.
Get on the same page with your spouse. Try this experiment. At the dinner table tonight say “I can’t wait to retire in 2016 so we can move to San Carlos, Uruguay and I can realize my dream of becoming a real life gaucho.” The response that you get will show you how important it is to be on the same page with your spouse when it comes to your retirement planning. Now that the conversation is going, spend some time talking through your hopes, dreams and plans so that you can iron out any differences and compromise on a plan.
Take a mini-retirement. You wouldn’t want to get all the way to Uruguay only to second guess the whole gaucho thing. As you get closer to retirement, you should start using whatever vacation and sick time you have to test drive your plans. A mini-retirement is a great way to learn more about a place or to experiment with your retirement budget. Use what you learn to refine and improve your plans.
Set aside your first year of expenses. In case you hadn’t noticed, the financial markets have been a bit—what’s the word?—schizophrenic the past decade or so. If retirement is just around the corner, you run the risk of having to withdraw money from your nest egg at a time when your investments are performing poorly. Experts refer to this as sequence risk. To avoid that problem, set aside one year of your retirement expenses in cash. If the markets are doing well, you can draw income from your investments. If markets are doing poorly, you can draw from your cash and give your investments a chance to recover.
Update your estate plan. Estate and gift taxes were scheduled to change drastically in 2013, but got a last minute reprieve with the deal in Congress. The estate tax rate increased to 40 percent from 35 percent, but other than that, most existing estate tax rules were made permanent. Work closely with your attorney and financial adviser to make sure that your plan is up to date and designed to minimize taxes. Also be sure to have a strategy in place to cover any potential liability (e.g. life insurance) and make sure that your beneficiary designations and powers of attorney are up-to-date and reflect your wishes.
That list of resolutions makes me long for the days of simpler goals like “join a gym” or “quit smoking.” But hey, no one said retirement was going to be easy. If it was, the world would have more gauchos.
I originally published this article at www.marketwatch.com. Photo by Sacha Fernandez. Used under Creative Commons License.
