Retirement lifestyle planning looks beyond numbers. Beyond money there is the question of how to spend and invest a more precious resource – time.
The normal approach to retirement planning is to start with the amount of savings. Then ask for an idea of how much income those savings will produce. Conversely a retirement lifestyle plan starts with describing what you need, want, and wish for. Then ask for an idea of how likely it is those savings can get you there.
Some people need help coming up with their wishes. It might not have occurred to them before to ask what will bring meaning and fulfillment to them in that chapter of life. For some this is a more difficult decision than figuring out an investment plan or tax strategy.
If you come up short on your goals, the plan recommends what can be done instead. If you come up with excess, the plan asks what you might have left out.
People who engage in the retirement lifestyle planning process understand that there is only so much that money can do. The rest is up to you.
The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.
2021 Book Reviews: Last year I read or listened to 48 books. That's not a number particularly worth bragging about (I think my bookworm mother probably read twice that many). But, it was enough that I felt like I was learning, re-learning, or being entertained from other authors constantly. Of the 48, below are those selected for recommendations this year, arranged by topic. For past recommended books, check the Resources page. It includes other recommendations for finance, lifestyle, and life improvement books. Fiction 19 of the 48 I read were fiction. Of those, The Dictionary of Lost Words, by Pip Williams, was my favorite. Taking place in Oxford, England in the late 19th and early 20th centuries, it chronicles how certain words were left out of the original Oxford English Dictionary. Told from the point of view one of the original editors' daughters, it reveals the subtle dismissal of women, of the poor, and the uneducated through leaving out their vocabulary. The daughter, who starts out as a youngster underneath her father's working table, makes her own collection of "lost words" that were literally left on the cutting room floor. Ultimately she becomes a respected scholar, though still with the inferior rank of being a woman in a man's profession. Women in male-dominated professions everywhere will relate well to this story. Psychology of Money I always include this topic in the annual book review list. Last year finally saw the publishing of a book with the actual title The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness, by Morgan Housel. Housel reviews the many different tricks our minds play on us when it comes to money, why, and what we can do about it. The field of behavioral economics, upon which the book is based, is difficult to explain in layman's terms, but Housel does an excellent job. Finance Reverse Mortgages, by Wade Pfau, Ph.D. Dr. Pfau upended the financial planning profession nearly 7 years ago when he published research saying, "Financial advisors are not doing their jobs if they aren't at least considering reverse mortgages." Initially brushed off, subsequent independent studies have confirmed his findings. Regulations have tightened and these products have evolved into a legitimate option for many different financial goals. His book outlines the details, which can be quite complex, but understandable to non-professional readers. It's now a reference book on my shelf. I am including it here for the second year in a row because I referenced it enough in 2021 to have read it again. Life-Improvement: (also known as "self-help") Deep Work: Rules for Focused Success in a Distracted World, by Cal Newport, was a perfect segue from reading "Rest" two years ago. Both books emphasize the importance of pausing, rest, and breaks in doing work that requires great focus. Newport begins by listing all the ways that society and our screens keep us distracted. We end up working mostly on superficial tasks. To get into the deep work space, most people require…
Monthly money dates sure don’t sound very romantic. However, it’s said that money and sex are the two biggest reasons for divorce*. Could it be just a coincidence they are also two of the most difficult topics for couples to discuss? So perhaps it might make sense to figure out how to talk about them. Making regular times to talk about a difficult topic can often break down walls within other relationship areas. In fact, a money date doesn’t have to last that long. Probably at most 15 minutes. (Unlike that other difficult topic, quicker is better.) One suggested format for a money date has 3 parts, with each partner taking turns: For Part 1: “Here’s what I contributed this month.” And Part 2: “Here’s what I see for major expenditures coming up.” Then Part 3: “How are we doing?” Money Date Part 1: What You Contributed First, telling what you contributed, no matter how big or small, starts the conversation with recognition for your efforts. If one partner stays home or is out of work, find a way to recognize other ways you contribute – whether it’s nurturing the kids or searching for that next great job. Money Date Part 2: Upcoming Expenditures Second, talking about what’s coming up, or could come up, leaves little room for unpleasant surprises. While this may be the hardest part of the conversation, it’s placed here for a reason. Psychological studies show that thinking about how much we spend or have spent can induce the same emotions that lead to depression. On the other hand, counting what we have induces the same emotions that lead to happiness and fulfillment. That’s why the spending question is sandwiched between the other two. Money Date Part 3: How Are We Doing? Third, how well you are doing? Ask, what goals are worth tracking? If you are unsure where to start, try the following four indicators: retirement accounts; savings levels; debt levels; and charitable giving. Rather than constantly comparing to an ideal number, find a way to recognize progress from where you were at some point in the past. No matter where you might see room for improvement, walk away with at least one thing you can both point to and be glad or hopeful about. Money Date Wrap-up: What Next? Sharing your hopes and working through challenges about money decisions, even for 15 minutes, can be an intimate couples exercise. If you follow this formula successfully, you might find you're a little more interested in that other intimate topic that’s hard to talk about. (And feel free to take longer than 15 minutes for that one.) For more tips on the psychology of money, subscribe to the award-winning monthly e-letter, "The View From the Porch," at https://bit.ly/3t2uwfn, check out Holly's book, The Mindful Money Mentality: How To Find Balance in Your Financial Future, or sign up for the online Retirement Readiness course. *see Dr. Dae Sheridan's Tedx Talk, "Real Talk about 'The Talk'"
What's a holiday spending style? It's the approach you take to spending money on others. How do you decide what to spend at the holidays, and on whom? In her program, Money Habitudes http://www.moneyhabitudes.com, Dr. Syble Solomon breaks down our money habits and attitudes into several different styles. Here are how a few of those styles might apply to holiday spending. Spending Style: Status After earning my first real money at 15, I made a list and a budget for each person on it. A few years later, at age 20, I looked at the list of names, each with a dollar sign beside them, and thought "Yikes!" It could appear as if each person had a price tag. At the time, I didn’t know it, but I was operating under one of Dr. Solomon's six spending styles, the one involving “status.” In other words, I was too concerned what other people would think about my spending decisions, and as a result, I spent too much. So next, I made a “total” budget, and tried to keep track as I went along on how I was doing. Yet that didn’t work very well, since I could always find an excuse to break the budget on something to keep it “fair.” Spending Style: Security If you spend very little on others, and on yourself, because you are concerned you may need it for an emergency, you might have the "security" spending style. You might do the bare minimum necessary to get invited back to next year’s turkey dinner. Or you might find ways to celebrate other than spending money. Spending Style: Idealist Idealist – If you reject the materialism of the holidays, then you might give everyone something home-made, like cookies, or your own artistic creation. You have the hardest time of all styles making a spending plan, because you despise handling money matters. Spending Style: Spontaneous This style can’t wait to see what great ideas are presented each year by retailers. Perhaps you make a spending plan, but you have a tough time sticking to it because of all the fun temptations and opportunities to purchase the perfect gifts presented to you right before checking out. Spending Style: Caretaker Caretakers see gift-giving as a way to show how much you care about people. Your spending plan might be more generous than other spending styles (but hopefully not more generous than is financially wise). Spending Style: Goal-Oriented Your most important concern is staying within your spending plan. It may take you longer to get your shopping done in order to find the right gift-cost combinations. What's Your Style? If you exhibit more than one holiday spending style, that is a good thing. The key is not to take any one style to an extreme. If you can make a spending plan that is wise for your situation, shows your love and affection for others, and still allows for some guilt-free spontaneity, you have probably found the combination that will bring you,…
Letting go of money self-doubt is one of the best gifts you can give yourself. Sometimes these messages operate in the background, quietly driving decisions when we don't realize it. Other times they're front and center. What does money self-doubt sound like? "I knew I'd screw it up." "I'll never be good with money." "If I can't manage my own finances, I'm a failure." "Why am I so stupid with money?" Painful statements, these are. While sometimes spoken out loud, they are spoken silently far more often. Money Self-Doubt Origins Where does money self-doubt come from? It could be one traumatic event or a repetition of harmful moments that lead to flawed beliefs about our financial capabilities. Without counterbalancing mantras like, "You're still good. You just made a mistake," or "You can do this," the message delivered can be, "You're a screwup. You're a failure. You will never get it." Sondra (not her real name) is a highly educated and accomplished professional. Her parents came from Depression-era families where money was tight in their younger years. Money was never talked about in Sondra's home, although she was given everything she needed. She grew up with the belief that her parents didn't discuss it with her because they believed money was something she was not capable of handling. Money Self-Doubt Results Without realizing these beliefs exist, we allow th to influence what actions we take or fail to take. It can affect who we allow into our lives, and who we don't. It can affect our choice of career. Or how we spend, or choose not to, on our own needs, wants, and wishes. Ironically, money self-doubt can lead to overspending with some people, and deprivation with others. Sondra chose a career where she was assured a salary and the chance of a bonus if she worked hard enough. She worked longer hours than she wanted to. She lived minimally, foregoing many comforts and rewards of her hard work. Her dreams of having more work-life balance were put on hold because she never felt financially secure. In her personal life, she chose friends and partners who also didn't talk about money, leaving a gap in her closest relationships. Letting Go of the Messages If you've been operating under flawed assumptions, and now you know it, you've taken the first step to reset your relationship with money. What else can you do? Here are two suggestions to start: 1) Be aware of those who are too willing to reinforce doubt-based messages - family members, partners, friends, or even (especially) financial professionals. Instead, seek the company of those who say, "I am confident you can handle this," and will work alongside you, not put themselves ahead or above you. 2) Be aware of body messages. Self-doubt, sometimes manifesting as shame, has a feeling to it - it might be tightness in the chest, nausea or butterflies. Breathe through the feeling and redirect your thoughts to positive truths. You are smart. This is something…
Due to increased life expectancies, today's 65-year-olds will need on average close to $200,000 to cover long-term care costs. (Long-term care refers to care that is not covered by Medicare - typically assistance with Activities of Daily Living, such as cooking, dressing, bathing, toileting, and transferring.) Many don't and won't have this much money. For others who do, it could still leave their spouse or partner with very little to live on. For the extreme cases of dementia or Alzheimer's diagnoses, costs could go even higher over many years, making a significant dent in even a wealthy person's bank account. Few people have that kind of money set aside. Only 11% of Americans have long term care insurance. This article outlines a Bipartisan Policy Center report on solutions to the long-term care issue. Thanks to ReunionCare for tweeting this link. http://www.nextavenue.org/long-term-care-bankrupting-us/?utm_source=sumome&utm_medium=twitter&utm_campaign=sumome_share Want to know how your state ranks in terms of quality of life in your 80s and 90s for you and those who may be your caregivers? Visit AARP's state scorecard for long-term care and end-of-life quality here: http://www.longtermscorecard.org/ What are your thoughts on long-term care? Do you have long-term care insurance? Why, or why not?
Many assumptions go into any kind of financial plan. One of the biggest nowadays is the amount needed to cover healthcare expenses. Lots of financial planners, and retirees-to-be, approach with a law-of-averages angle: if there are no chronic conditions present, simple assumptions about average Medicare or insurance premiums, average out-of-pocket costs, and average healthcare inflation rates are made. When you think about it, though, few people are actually "average" when it comes to buying healthcare. Jerome Groopman and Pamela Hartzband, M.D., wrote the book Your Medical Mind: How To Decide What's Right For You, to explain wide variations in how we choose to purchase medical goods and services. A thorough financial plan would take into consideration one's general level of health, first, but also focus on two questions: 1. Are you a healthcare minimizer or maximizer? Healthcare minimizers get basic minimum preventive care. Maximizers are looking to healthcare providers to address nearly any symptom that arises, and some symptoms even before they arise. 2. How much do you favor alternative over conventional medicine? If we were to take the extremes of each answer, we would have 4 results for your medical mindset: Conventional minimizer - Getting basic preventive care through the traditional healthcare system. Conventional maximizer - Seeing many practitioners, frequently, in the traditional healthcare system. Alternative minimizer - Preferring to get preventive care through non-covered providers such as acupuncturists, shamans, non-traditional therapists, or care in foreign countries Alternative maximizer - Seeing many alternative (non-covered) practitioners or purchasing many alternative medical products. Most people are some combination of each. For planning purposes, though, a conventional minimizer is going to need very little set aside compared to the alternative maximizer, who will have very few expenses covered. Some estimates are that the alternative maximizer may need as much as $300,000 more set aside to cover their lifetime medical expenses at retirement. Before I knew better, I was one of the professionals making average assumptions for all of my clients. After asking more about their preferences and choices for their care, I have learned everyone is different. Practically no one is "average." Make sure you have a plan, and a planner, who don't assume you are.
I knew a man who couldn't wait to retire from his government job. Because of decades of hard work and wise money decisions, he was able to call it quits at 55. Thrilled with his newfound freedom, he immediately took to cooking, golf, dating (he had divorced at 49), traveling, fishing, and having fun. For the first few years, every time I saw him, I could see the lack of work responsibilities had lightened his step and his heart. After about ten years, he moved to a Florida retirement community where the roofs and mailboxes are almost identical and one of the few ways to stand out is by the cover on your golf cart. It seemed to outsiders that everyone looked the same, dressed the same, exercised the same, but seemed happy with their life in the sunshine. Yet one day on the phone he said, “Y’know, I really like talking with you. I don't have anybody to talk to here." I was shocked. "What? Surely there are some retired CEOs, executives, people that think like you, that play golf, and that you have a lot in common with." "Nah," he said, "I don't have that much in common with anybody here." I thought that was crazy. He looked like all the rest of them, dressed like them, played golf and pickleball like them. He probably was just as well off, financially, as any of them. How could he not have someone to relate to? Unfortunately at that time, I was unfamiliar with the signs of depression. Five years later, it took his life. According to writer Mitch Anthony, there are three myths about the “ideal” retirement: “This part of my life is going to be about ME." Anthony says, “This is a formula for emptiness." "I am going to surround myself with people like ME." Anthony’s reply: “This is a formula for stagnation." "I am going to do nothing but relax." Anthony: “This is a formula for boredom.” Emptiness, stagnation, and boredom. Doesn't sound much like the ideal retirement. A Mayo Clinic gerontologist told Anthony, “A life of total ease is two steps removed from a life of total disease.The first step is that they get bored, the second step is that they grow pessimistic, and then they get ill.” This is what writer Robert Laura termed the "dark side" of retirement. For some who don't think about how to bring meaning and purpose to their life after work, serious mental health maladies, like depression and addiction, await. Florida retirement communities have some of the highest suicide rates in the country, particularly among white males over 65 years old. Women seem to fare better. Anecdotally, several women I know have vibrant lives in retirement communities, filled with volunteering, teaching others, and various circles of friends. South Dakota financial planner Rick Kahler responded to Laura's article with several wise suggestions: Ask yourself how much of your identity is tied up in what you do, rather than who you are.…
"I'd really like that, but I don't deserve it." "It would be wonderful to visit there, but I can't do it in the foreseeable future." "That will be really fun when I'm retired, if I have enough money then." Delayed gratification. It's the mantra of the Puritan work ethic. Sacrifice today so there will be enough tomorrow. (And if you don't, there won't.) Our culture rewards those who sacrifice - to extreme. It seems like our jeans can't be too skinny and our accounts can't be too fat. These messages, ingrained in some childhoods and reinforced by media in adulthood, leave little room for good, old-fashioned splurging. What's your definition of a splurge? For too many people I meet, it's the extra week of summer camp for their child. It's the flight to visit the grandparents, or grandchildren. It's a toy or exotic trip they've dreamed about for decades. It's the alternative and mental health treatments that nourish their soul. If these messages are speaking to you, then the message I am hoping you will consider alongside them is, "Trust yourself." If you don't have a history of racking up unmanageable credit card debt, chances are one trip or toy is not going to send you there. If you don't regularly run out of month before money, the occasional treats or therapy for yourself have little danger of becoming your new uncontrollable habit. In a media world filled with messages about Americans' overspending and undersaving, there are more than a few who have the opposite problem. And as admirable as it may seem, it has costs - in regret, in relationships with others, and in integrity with ourselves. How can we know? Ask someone over the age of 90, or who has been given a limited time to live. Our focus on what mattered most to us sharpens considerably when we are told our time and health are now more precious resources than our money. So if you haven't taken care of your current self lately because you think your future self will be "poor," lighten up and strike some spontaneity in your budget. I, Holly P. Thomas, CERTIFIED FINANCIAL PLANNER(TM), and recovering obsessive compulsive money addict, hereby give all Puritans permission to live more than a little. And for more on "mindful splurging," check out this recent article by Susan Johnston Taylor, https://www.headspace.com/blog/2016/05/20/how-to-splurge-mindfully/.
I had just finished giving a talk on the psychology of money to a group of professionals, and a participant waited in line to speak to me afterwards. The person before him took quite a while, so I figured whatever he had to tell me must be pretty important to him. With a passionate look in his eye, he approached me and said, "I don't think any of this emotional stuff about money is my job. I am not a psychology professional, and I don't want to pretend to be one. In fact, I think I am asking for liability problems if I start bringing up things I don't know about. I am bound to get myself in trouble, and maybe make it worse for them. Clients come to me for investment and financial advice. That's what I'm good at, and that's what I'll give them. End of story." If you work with financial advice, and especially couples, long enough, emotional issues come up. Many financial advisors tread lightly with, or even avoid, confronting emotions behind clients' spending, investing, and sharing decisions. What if a couple brings up something the advisor doesn't know how to handle? What if it produces a big ugly argument? What if somehow they get blamed for starting it? How does a quantitatively-skilled financial professional understand when they are being helpful, and when they might be causing harm? The best thing I have learned to do is simply help with awareness. There are two possible outcomes from it: 1) the awareness and talking out loud with a third party helps the couple come to their own compromise and resolution; or 2) the awareness and talking out loud helps the three of us realize that resolving it might require more help than I am able to give. In other words, I never presume I have an argument's answer, but I am willing to explore whether they have the answer within themselves. The worst that happens is that I'm wrong, but at least then we all know it and own it, rather than ignore it. How do we get to this place of awareness? Trying these questions: 1. Is this normally how the conversation goes when you talk about this issue? 2. How does it normally end up? 3. What have you considered doing about it? 4 (If necessary). It sounds like this is a place where you might be stuck, and could use some outside help to work through. How would you feel about doing more work on it with a counselor? With two clients in the room, the importance of bringing up these issues is more than doubled. If a couple is handling money disagreements in an unhealthy way, studies show the relationship itself is at great risk. And breakups and divorces cause way bigger money problems than the typical argument subject. Keeping this fact in mind means financial advisors might have a vested interest in helping couples face difficult money issues. Focusing only on the numbers may seem easier, but in the long run, the story for all three…