The Greatest Wealth is Health
“Retirement is not an age, it’s a financial number.” Chris Hogan
- Financial freedom is the ability to live the remainder of your life without outside help, working if you choose, but doing so only if you desire. It’s the ability to have the things you want and need, despite any occurrence other than the most catastrophic of outside circumstance.
- It’s about knowing what you always wanted to do in the future for the people you love the most. We are not working just to work; we are working toward some dream, goal and destination. It’s important to see and know your dream in high definition once you have the dream you’re either going to works towards the dream or work against it.
- Retirement no longer necessarily means slowing down after leaving your onetime career.
- A sense of purpose — along with health, family and finances — is a pillar of wellness in retirement.
- The role of money in retirement is to provide security and freedom.
- “We should be getting better with age. We have the opportunity to gain experience, and from experience comes judgment, and from judgment comes investment wisdom. So we try to learn from the mistakes,” says fund manager Chris Davis
Retirement is no longer simply defined as the end of work, but the beginning of a whole new chapter of life, with new choices, freedoms and challenges. Retirees derive the greatest sense of purpose from time with loved ones, and that’s the case regardless of the level of financial wealth.
However, 1 in 3 retirees say they have struggled to find purpose and a personal mission in retirement. While only a quarter of retirees have volunteered in retirement, nearly 9 in 10 wish there were more ways for them to help their communities.
Finding ways to effectively navigate life in retirement is one of the most important challenges facing Americans today.
The intention/action gap between what retirees want and what they are doing.
It’s essential to keep retirement fun and to engage in activities that are both rewarding and energizing. When you’re officially retired, it’s a good time to focus on completing your life-long bucket list, that list of items you want to accomplish before you die or become incapacitated. It’s a collection of unique ideas and activities you’d like to accomplish in your lifetime.
Today’s retirement lifestyle is more active—and will likely last longer. Meaning that your retirement will likely be quite different from that of your parents or earlier generations. Today’s workers retire earlier, are more active, expect to live longer, and will need to rely more on personal savings for cash flow and to cover essential expenses.
For generations, retirees have relied on pension plans and Social Security as their primary sources of income in retirement. Today, fewer workers can count on a pension, and the future of Social Security is uncertain. Additionally, the cost of health care in retirement is rising—a couple retiring at age 65 is expected to incur $280,000 (in today’s dollars) in health care costs, excluding long-term care, on average during their retirement years.
Retirement isn’t all about managing personal cash flow, taking daytime naps or aging in place. Instead, it’s a time for you to expand on your hobbies and interests, reinvent your lifestyle and nurture important relationships.
Some retirees take off on adventures, such traveling the country in a RV or trotting the globe, while others have created an “activity jar,” where each spouse writes down something they want to do for a date or day trip and then each week picks one or two out. Whatever you do, enjoy the heck during this time in your life.
Retirement can have many meanings for Americans. For some, it will be a time to quit work, travel and spend time with family members. For others, it will be a time to start a new business or begin a charitable endeavor. Regardless of what approach Americans intend to take, there are a few key financial, health related, and emotional aspects about retirement that can be challenging.
Yet, many Americans, as they enter retirement, wonder how they might replace all or a portion of what their paycheck provided with a new source of predictable income. Stock market volatility and downturns can make it difficult to maintain steady investment income and cash flow in retirement.
Challenges
“If you are what you eat, then your portfolio is what you invest.” John Graves
“Knowledge of your financial reality is the starting point for all investment decisions.” John Graves
Do your own research and realize that you have to own your retirement.
The responsibility for most aspects of your financial life will fall squarely on your own shoulders. The paychecks you once earned will now be replaced by the paychecks you create. For most, those paychecks will need to last for years and cover various expenses throughout your retirement.
Tony Robbins pointed out that you should beware of advisors that bet with your money, where they have nothing to lose, if you lose, but they gain, if you gain.
Few people know exactly what their retirement will look like. The majority of Americans intend to figure retirement out as they go along. Then, there are many people whom are simply not emotionally ready to retire, even if they’re financially able. Their job is their identity.
Financially, multiple studies reveal that Americans are not saving enough to ensure that they do not run out of funds and are able to maintain their lifestyle and live with dignity during thirty years of retirement. The longer you can postpone retirement, the lower your savings rate can be. That’s because delaying gives savings a longer time to grow, you’ll have fewer years in retirement, and your Social Security benefit will be higher.
Health care costs are increasing, and so is longevity—which means workers today don’t just have more responsibility for saving for their own retirements, they also have to make those savings last, on average, for longer periods of time. In short, the new retirement landscape makes planning for retirement significantly more challenging than it had been in the past.
Research shows that adjusting to retirement is difficult for people whom are not emotionally ready to retire. They tend to report more boredom, anxiety, restlessness and feelings of uselessness. Yet, many see retirement as a time to reinvent themselves and pursue what they’ve always wanted but never dared to chase. Increasingly, older people are doing just that.
Retirees often face a loss of identity and many experience a void with the loss of structure in their lives, feel useless or unwanted with little meaningful engagement in society, or suffer feelings of isolation once they lose the social network that came with their job. Emotional identity, relationships, purpose are the things that change as Americans retire.
Keys to Successful Retirement
Retirement can be a reward for decades of daily work—a time to relax, explore, and have fun unburdened by the daily grind. For others, though, retirement is a frustrating period marked by fear of running out of money, lost of identity, declining health and increasing limitations.
“It is health that is real wealth and not pieces of gold and silver.” Mahatma Gandhi
The keys to a successful retirement are to stay healthy, have the money to live the lifestyle you have chosen and keeping busy and engaged emotionally. For a successful retirement, it is imperative to plan and prepare early, like in your twenty’s and thirty’s, for the lifestyle you want to live in your sixties and seventies, and the start saving the funds required to support that lifestyle.
Financially, a comfortable retirement is largely a function of wants, needs and how much money stands between the two. Surprisingly, most people do not know how much money they will need for a comfortable retirement, according to the Employee Benefit Research Institute’s 2008 Retirement Confidence Survey.
As a rule of thumb, personal financial experts say that retirees can expect to live on 80 percent of their preretirement income. So the first step is to do a cash flow analysis to figure out how much money will be needed each month to pay for basic expenses.
On the health front, Stanford Center on Longevity Research found that a very small number of factors can make a big difference a person’s overall health. This probably will not come as a surprise: whether you smoke, how much you drink, your weight, the quantity of refined sugars, carbs and processed foods you consume, and your exercise routine makes a substantial difference. And, just 2½ hours of moderate exercise a week can make the difference, according to the Centers for Disease Control.
Social engagement is extremely important for people’s emotional wellbeing, regardless of their age. Yet, it’s most vital for retirees because older adults and retirees are sometimes more susceptible to social isolation than younger people. Building and maintaining social relationships can have a huge impact on retirees overall emotional wellness. Social activities are important for retirees because they help ward off loneliness and prevent feelings of isolation.
Essentially, the keys are to remain physically, mentally and socially active once retired. And, to prepare for retirement, Americans should get involved in other things before retirement (hobbies, church, volunteering, travel, etc.). Having an active and fulfilling life outside work will make the transition to retirement easier and seamless. Key aspects to develop prior to retirement include:
- Financial Security – Financial security is important in retirement. To achieve financial security in retirement, it is important to start with deciding on your long term goals and creating an investment plan. That way you can set yourself up towards a specific savings goal. A person should save 15% to 20% of their income beginning at age 25 or earlier, strive to invest more than 80% on average of their savings in stocks over their lifetime, expect to retire at age 67, and plan to maintain their preretirement lifestyle in retirement.
- Physical Health – Good health is the essential key to a successful retirement. And, good health can be seen as a three leg stool consisting of proper nutrition, exercise, and rest. More than 80% of current retirees say health is the most important ingredient for a happy retirement, even more than financial security. So, the best retirement involves staying mentally and physically healthy.
- Emotional Wellbeing – Emotional well-being is as important as financial security in retirement. After retiring, people missed the social connections they had through work more than they missed the regular income. Indeed, research show that retirees who felt satisfied with the number of friends they had were almost three times more likely to be happy than those who felt they came up short on the friendship front. Along the same lines, retirees who volunteered or attended some form of worship were likely to feel more content than those who rarely or never volunteered or attended religious services.
To be able to afford and live with dignity in retirement, retirees often must delay their retirement date, save more, reduce their standards of living, or take more risks with their portfolios. According to the Kauffman Index of Startup Activity, entrepreneurship in the U.S. is growing fastest among people over age 55. Instead of being the end of the book, retirement has become an added chapter.
Older adults are a growing segment of the U.S. entrepreneurial population. Individuals ages fifty-five to sixty-four have gone from making up 14.8 percent of new entrepreneurs in 1996 to 25.5 percent of all new entrepreneurs in 2016. THE KAUFFMAN INDEX
What to do?
Mastery of life and retirement planning requires both impatience and patience.
- The impatience to have a bias toward action, to not waste time, and to work with a sense of urgency each day.
- The patience to delay gratification, to wait for your actions to accumulate, and to trust the process.
- When making plans, think big.
- When making progress, think small.
A simple emotional well-being strategy that will save you so many headaches: don’t care about winning trivial arguments.
- Did someone say something you don’t agree with? Smile, nod, and move on to more important things.
- Life is short. Learning to not care about having the last word will save you so much time.
“Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works… We’re all biased to our own personal history.”
Source: Morgan Housel, Ideas That Changed My Life
One key to a successful retirement is rebuilding a network of friends to replace or supplement the ones you had at work.
You will find that you must work at rebuilding a network of friends. And, most of the time when you reach out, people will respond. You have to work even harder to stay in touch with friends. But it also gives you a reason to call and find out how they are doing.
Enjoyable Retirement
Health, emotional happiness and wealth all rely on each other, so it’s important to not let your finances take priority over your overall wellbeing. There are many factors that make retirements emotionally enjoyable, healthy, and rewarding. Here are four key elements:
- Forge a new rewarding social network. You don’t just retire from a job—your retire from daily contact with friends and colleagues. Establishing a new social network is good for both mental and physical health.
- Play. Activities such as golf, bridge, ballroom dancing, traveling, and more can help you let go a bit while establishing new friendships and reinforcing old ones.
- Be creative. Activating your creative side can help keep your brain healthy. Creativity can take many forms, from painting to gardening to teaching a child noun declensions in Latin. Tapping into creativity may also help you discover new parts of yourself.
- Keep learning. Like being creative, ongoing learning keeps the mind active and the brain healthy. There are many ways to keep learning, from taking up a new language to starting—or returning to—an instrument you love, or exploring a subject that fascinates you.
Income in Retirement
“Once you retire, you need to be prepared to generate income and use it to pay your essential and discretionary bills and expenses.“
Retirees have specific financial concerns when living on a fixed income. Of special interest to retirees are generally issues such as whether Social Security benefits are taxable at the state level, what property taxes will be levied and how retirement account and pension withdrawals are taxed. Additionally, income taxes on retirement account withdrawals vary widely from one state to the next.
Many retirees depend on their savings as the primary source of income. As a result, they simply cannot endure high taxes or do not have the luxury of ‘riding out’ market crashes or corrections. Therefore, retirees need to utilize strategies that protect their savings and income from taxes, and during times of economic crisis or high market volatility.
It is important to understand and stress test to determine if your retirement savings could endure a meaningful hit at an inopportune time. It is important to assess if it could cause significant harm to the retirement lifestyle one expects and hopes for.
Most advisors create a probability-based approach to income distribution where it is difficult to demonstrate the impact of economic crises, hyper-inflationary periods, and/or unforeseen personal medical events.
Summary
Helping others live a life and a retirement worth living, which is financially, emotionally and physically healthy.
If you want to enjoy a rewarding retirement, you need to figure out and define what that means to you financially, health wise, and emotionally. It is imperative to conduct some life planning for retirement, to find your purpose, to set goals and to create a plan that allows you to achieve exactly the lifestyle you want. It comes down essentially to retirees achieving financial security, maintaining good physical health and nurturing emotional wellbeing during thirty years or more of retirement.
To live your best years in retirement
First, understand that health, family, purpose and finance are highly intertwined in shaping your overall quality of life. It’s not that you can’t have one without the other, but the most confident, content and fulfilled retirees embrace all four areas and work to strengthen each in unison. Well-being always encompasses a variety of factors, and retirement is no different.
Second, check your action/inaction gap. Are there gaping holes? Or with a little reflection and work, can your actions be brought more in line with your aspirations?
Finally, don’t go it alone. Sound financial, emotional and physical engagement is invaluable at any stage of life, but one can argue that the stakes are even higher in retirement.
References:
- Want To Have A Good Retirement? 50 Tips For A Healthy, Wealthy And Happy Retirement, April 4, 2018
- 2017 Kauffman Index of Startup Activity, Ewing Marion Kauffman Foundation, pg. 5
- How much do I need to retire?, FIDELITY VIEWPOINTS, August 21, 2018
- 2019 Retirement Confidence Survey Summary Report, Employee Benefit Research Institute, Greenwald & Associates, April 23, 2019
- Graves, John H., The 7% Solution: You Can Afford A Comfortable Retirement, https://read.amazon.com/kp/embed