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.
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.
The Retirement Answer? A Blank Stare I had just asked a 59-year-old, "You said you can retire in 3 years. How will you spend your time after that?" Expressionless, all he gave was a blank stare. "I never thought about it," he replied. Unfortunately, he wasn't the first 59-year-old with that answer. "I don't know" is a more common answer than most think. More To Retirement Life Than Money According to a study by United Capital, when asked about their financial life stories, most people talked about working and spending, not saving and investing. Over the decades of our working lives, we tend to follow a formula: Work. Spend. (Save). Repeat. We do this knowing one day those (savings we try not to think about or touch) should equal a nice sum, hopefully enough to reach the nirvana of "financial independence." Along the way, we can get trapped into planning meals and vacations, but not a potential 25-year chapter of our life. If nothing trips up the formula (divorce, premature death, disability), then a milestone birthday, the loss of a parent, or the arrival of a new boss may cause one to dial up a financial planner and ask, "Am I there yet?" Are You "There" Yet? To which the answer is usually, "That depends." That depends...on where "there" is. "There" = how, with whom, and where you will find purpose, meaning, and happiness in life after your Work-Spend-(Save)-Repeat chapter. Once that's known, "there" can be translated into real financial goals. If you don't know what "there" looks like, then attempts to answer the question are merely rough guesses. More importantly, if you don't know, you're not likely to enjoy that supposed nirvana time nearly as much. There are many thought leaders contributing to discoveries about the time of life past "Working" and before "Old." That time of life, which will be 25 or 30 years for a lucky few, goes by many names: Your Third Age. The Third Stage. The Encore Years. Your Life's Next Chapter. Examples of such leaders include Dori Mintzer and Mitch Anthony. According to experts like these, retirement planned well has the potential to be a time of peak fulfillment and meaning. Not planned well, potential paths lead to boredom and, in the worst cases, clinical depression. Real Retirement Planning Many people think "retirement planning" means "IRA investments" or "401K rollovers" or "pension options." Those are certainly part of it. But the best, yet sometimes the most difficult, kind of retirement planning is not found on your retirement account statements. It's found inside of you. Begin with a blank stare, and build your "There." That's real retirement planning. Not sure where to begin? Check out this free download: https://www.hollydonaldsonfinancialplanner.com/wp-content/uploads/2018/11/Beyond-the-Numbers-Whats-Retirement-Money-For.pdf for a questionnaire about what kind of retirement lifestyle choices are ideal for you. Or subscribe to the award-winning monthly letter, "The View From the Porch," at https://bit.ly/3t2uwfn.
5 myths about 401(K) rollovers: Should 401Ks (or 403bs, 457s, or TSPs) always be rolled over? Often, soon-to-be retirees are led to believe their impending retirement forces a deadline or urgency to “do something” about their retirement plan account. Several understandable myths surround the mystery of what actually happens to your money when leaving your employer. Below are five of them. Myth 1: When you separate from your employer, you must take your retirement plan account (401K/403B/457/TSP) with you. Actually very few employer plans require employees to leave the plan upon retirement. You have a choice to leave the account right where it is. This includes if you are widowed and your spouse was the employee. More than likely, you can stay with the retirement plan if you want to. The rules for your employer can be verified by checking with your human resources department, or obtaining a copy of your plan’s complete document, usually available at your account’s website. Myth 2: When you separate from your employer, it’s always best to take your retirement plan account with you. Some people might not have the greatest level of fondness for their employer and want to sever ties with anything having to do with the company. While understandable, it’s important to separate facts from feelings about your money. Due to tighter ERISA and Department of Labor regulations, it’s very unwise for employers to have their employees’ retirement plan limited to only high-fee, high-risk, or self-serving fund options. Chances are that what’s available there is worth taking a more in-depth look. On the question of where you are best served with your retirement funds, here is where you will get a wide range of answers. You can ask friends, family, the internet, co-workers, and even ChatGPT and go in circles. Whether rolling over your retirement plan account is in your best interest depends on a few different factors. Keep reading to myths 3, 4, and 5 to find out more. Myth 3: Retirement plan accounts have no impact on the ability to do a Roth conversion. False. This particularly applies to people who have IRAs outside of their employer retirement plan. If you are considering converting part of an IRA you already own outside of a retirement plan to a Roth, the amount you can convert is subject to an arcane concept called the “pro-rata rule.” In general, under this rule, the amount you can convert is subject to a ratio that includes all IRAs, but does not include monies in employer retirement plans. Therefore, if you roll over your retirement plan before doing a Roth conversion, you will likely limit the amount of outside IRAs you can convert. For many people retiring in their 60s and delaying Social Security, Roth conversion opportunities abound. It might very well make sense to wait to roll over at least until age 70 so that you can leave the Roth conversion option more open. Conversely, if all of your retirement money is in the employer…
Using a retirement income buckets approach: One of the most common questions financial planners receive from soon-to-be-retirees is, "What's the safest way to give myself a paycheck once I quit working?" The question often stems from the knowledge that needing to withdraw funds in a down market can be both ill-advised and scary. Those who have been around long enough probably know someone who retired close to a particularly bad market year, like 2001, 2007, 2008, or now 2022. Because that someone had to, or chose to, sell some investments at that terrible time, they ended up living off of much less than they originally thought. This can be a scary thing to watch. It makes one wonder, "How do I make sure that doesn't happen to me?" A Buckets Approach Enter a buckets approach to retirement income. Below is a link to a video excerpt from the online course, "Retirement Readiness," outlining the approach in more detail. (A link to the course can be found at the bottom of this article and here.) A description for each of the buckets follows below. https://youtu.be/mkeqzgJfeFc Bucket 1 - Cash and Money Market Accounts The first bucket will provide your paycheck. Here is how it works. Calculate any retirement income you will have (pension, Social Security, dividends, interest, rental property, for examples); Figure your annual recurring expenses (do not include one-time expenses such as replacing a car, roof, or paying for a special trip or wedding); Subtract 2 from 1 to come up with the difference; and Keep 1 to 2 years of that difference in Bucket 1. For example, Justine retires at 65. She expects to live past age 82 so she is waiting until 70 to claim Social Security. She has a pension of $800/month ($9600/year). Her recurring expenses are $70,000 annually. The annual difference is $70,000 - $9,600 = $60,400. To start retirement, she decides to keep 1.5 years of the difference in Bucket 1 so $60,400 x 1.5 = $90,600. She puts that in a high-yield money market account and sets up an automatic transfer of $5833.33 monthly to her checking account. Voila - she has a new paycheck. When she turns 70, she will collect $45,000 in Social Security. At that time the annual difference will fall to $70,000 - ($9,600 + $45,000) = $15,400. She decides to keep 2 years of the new difference in Bucket 1, so $15,400 x 2 = $30,800. She reduces the monthly transfer from the money market to $1283.33 per month. Bucket 2 - Bonds, CDs, and Bond Funds The second bucket replenishes Bucket 1. As the paychecks come out, the principal in the money market account will naturally decrease. Eventually it will decrease to a level that makes you say, "Yikes! I only have xx in my checking and money market." Everyone has a different level of "Yikes." When the balance approaches your unique Yikes level, a transfer is made from Bucket 2 into Bucket 1. Bucket 2 is comprised…
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.
The Retirement Answer? A Blank Stare I had just asked a 59-year-old, "You said you can retire in 3 years. How will you spend your time after that?" Expressionless, all he gave was a blank stare. "I never thought about it," he replied. Unfortunately, he wasn't the first 59-year-old with that answer. "I don't know" is a more common answer than most think. More To Retirement Life Than Money According to a study by United Capital, when asked about their financial life stories, most people talked about working and spending, not saving and investing. Over the decades of our working lives, we tend to follow a formula: Work. Spend. (Save). Repeat. We do this knowing one day those (savings we try not to think about or touch) should equal a nice sum, hopefully enough to reach the nirvana of "financial independence." Along the way, we can get trapped into planning meals and vacations, but not a potential 25-year chapter of our life. If nothing trips up the formula (divorce, premature death, disability), then a milestone birthday, the loss of a parent, or the arrival of a new boss may cause one to someday dial up a financial planner and ask, "Am I there yet?" Are You "There" Yet? To which the answer is usually, "That depends." That depends...on where "there" is. "There" = how, with whom, and where you will find purpose, meaning, and happiness in life after Work-Spend-(Save)-Repeat. Once that's known, "there" can be translated into real financial goals. If you don't know what "there" looks like, then attempts to answer the question are merely rough guesses. More importantly, if you don't know, you're not likely to enjoy that supposed nirvana time nearly as much. There are many thought leaders contributing to discoveries about the time of life past "Working" and before "Old." That time of life, which will be 25 or 30 years for a lucky few, goes by many names: Your Third Age. The Third Stage. The Encore Years. Your Life's Next Chapter. Examples of such leaders include Dori Mintzer and Mitch Anthony. According to experts like these, retirement planned well has the potential to be a time of peak fulfillment and meaning. Not planned well or planned at all, potential paths lead to boredom and, in the worst cases, clinical depression. Real Retirement Planning Many people think "retirement planning" means "IRA investments" or "401K rollovers" or "pension options." Those are certainly part of it. But the best, yet sometimes the most difficult, kind of retirement planning is not found on your retirement account statements. It's found inside of you. Begin with a blank stare, and build your "There." Not sure where to begin? Check out this free download: https://www.hollydonaldsonfinancialplanner.com/wp-content/uploads/2018/11/Beyond-the-Numbers-Whats-Retirement-Money-For.pdf for a questionnaire about what kind of retirement lifestyle choices are ideal for 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.
One of the key assumptions in any financial plan is life expectancy. We are all living longer. Some studies have shown that if a married couple both reach their 65th birthdays, there is a 15% chance one of them will celebrate their 100th. To some people, living to 100 sounds a bit scary. They imagine a not-so-great quality of life at that age. Several say bluntly, "I don't want to live that long." In one respect, that's an understandable response. There aren't a lot of communities reaching out to the elderly, supporting them with social activities, easing the navigation of the health care system, or just plain caring about who they are and where they've come from. The follow-on question then becomes, "And what will my health be like?" The good news is that modern medicine has expanded our life expectancy by preventing a lot of the ailments that take lives too soon. Sometimes the not-so-good news is that we then have more years to manage a slow decline. What factors determine whether we live, not just a long life, but a long vibrant one? I recently discovered a new app and research that is helping to answer that question -Blue Zones. The twist to Blue Zones' life expectancy calculator is that you get, not one, but three life expectancies - 1) Your "healthy" (without chronic conditions) life expectancy; 2) Your actual life expectancy; and 3) Your potential (if you follow their suggestions) life expectancy. The difference between 1) and 2) is the length of time you can expect to live with some sort of chronic condition like cancer, diabetes or heart disease. The recommendations are based on research by the author, Dan Buettner, who spent years finding the common threads among societies where people live very long, vibrant lives. In my own case, the difference between 1) and 2) was 10 years. Translation: Even though my life expectancy is 91, for the last 10 years of my life, I am likely to have a chronic condition to manage. Yikes. I don't like that answer at all; so I feel motivated to implement Blue Zones' tips about my diet, social life, stress management, spirituality, and exercise. None of them are new ideas; I just didn't realize their impact until I used this app. Those last 10 years, played right, have the potential to be some of the most fulfilling. Due to the Baby Boomer generation's size, and their tendency to reinvent every age-decade they enter, I am optimistic our society will begin to embrace the contributions of the elderly, to support aging, and dignify the end of life. Rather than dreaded in financial planning discussions, long life will be something to welcome and embrace.
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.…