Tag Archives: Retirement

Six Rules for Traveling in Retirement

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We have found that travel can be satisfying without being exhausting. But it has helped to follow these guidelines.

By Robbie Shell
Wall Street Journal, Aug. 20, 2024

Six guidelines that have made our travel a lot more fulfilling—and a lot less exhausting.

1. Travel offseason
Everyone knows that peak seasons aren’t ideal for traveling. But retirees have more of a commodity that working people lack—time for offseason trips. After all, you have flexibility for perhaps the first time in your life. Take advantage of it.

2. Choose ‘secondary destinations’
As retirees, we have found it easier to adopt a slower, more relaxed pace by focusing on destinations that aren’t always on the usual tourist grid.

3. Don’t be shy with strangers
One of the joys of traveling in retirement is unstructured time to enjoy casual, spontaneous conversations with people we happen to meet. Indeed, I find that impromptu connections with guides, drivers and even guards are often as memorable as the settings in which they occur.

4. Focus on just a few things
This might seem an obvious strategy for seasoned travelers, but it’s easy to slip, especially when enthusiasm for the day ahead is high after (in our case a substantial) breakfast. More can definitely be less when you’re traveling.

5. Stay at least three nights in each location
Packing and unpacking is a waste of energy. Cruises have the problem solved, but one way to approximate their advantage is to spend more nights in fewer places. By the second night, a hotel room or Airbnb is a moved-in place to rest. By the third night, it can become a familiar home-away-from-home.

6. Be prepared to improvise
When you travel in a la carte style, you are free to change the plans you made the day before for no particular reason. Maybe it’s the weather. Or perhaps you have a feeling that yesterday’s pace was too challenging or not challenging enough. Start the day whenever you want, and be open to impulsive detours to areas that aren’t on tourist bureau maps.

The travel experiences are a la carte approach which beats the prix fixe one. You are free to make tour own choices and find your own adventures as you look forward to where the next day will take you.

Just One More Year’

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When contemplating retirement, the scarcity mindset can lead to a common rationalization: If I work another year (or two, or three …), it will ensure that I have enough retirement assets to last in retirement.

The “Just One More Year Syndrome,” stresses that while retirees should continue work if they find it rewarding, but “each additional year of work only guarantees that you’ll die with more money.” More money to pass on to your heirs and the Internal Revenue Service.

You are trading life energy (which is limited) for money that you did not need. Will it be worth it?” he asked. More importantly, will working one more year ease your scarcity mindset and help you sleep better at night? What about more workplace stress and less time with your family?

Lessons Learned from Retirees

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Lessons from retirees on their biggest retirement regrets

Thousands of Americans retire every day short on cash, friendships and plans. Investing for retirement means more than just stashing money in a 401(k). It’s equally important to cultivate the interests, relationships and activities that will fill our days with purpose and satisfaction when we retire.

Many retirees say they realized too late:

  • Retirees could have prepared for a more financially secure and rewarding postwork life.
  • Retirees would have focused on saving more money to cover the higher cost of living.
  • Retirees would have put more time into building relationships, taking better care of their health or cultivating new pursuits.
  • Retirees frequently don’t realize how much their career provided a sense of identity and self-worth.

The best predictor of longevity, health and happiness in later life is the quality of your relationships. That is the finding of the Harvard Study of Adult Development, which has followed families for decades.

The life expectancy for a 65-year-old is 84 for men and nearly 87 for women, according to projections by the Society of Actuaries based on 2019 data.

Surveys suggest many Americans vastly underestimate those numbers. Of 1,500 adults ages 45 to 80 polled by the Society of Actuaries in 2015, 41% of preretirees and 37% of retirees underestimated their life expectancy by five or more years, while 14% of preretirees and 18% of retirees underestimated it by two to four years.

A person who postpones benefits until age 70 instead of 62 would have to live to at least 80 to come out ahead.

Last year, Social Security paid out $1.38 trillion in overall benefits and got most of its funding from payroll taxes that generated $1.23 trillion. Believing that Social Security will vanish is akin to believing that these taxes will vanish too, policy analysts say.

Still, if Congress doesn’t shore up the program’s finances, projections show that it could be able to pay out only 83% of scheduled benefits in 2035, when the combined contents of its two trust funds would be depleted.

Learning is another key strategy.

Strategies to ward off dementia include getting more sleep, exercising and eating a healthy diet to maintain brain health, said Rudolph Tanzi, a Harvard Medical School professor of neurology and co-author of “The Healing Self.”

Even people who don’t have Alzheimer’s show cognitive changes with aging, so it is important to keep learning to keep your brain healthy, said Yaakov Stern, professor of neuropsychology at Columbia

References:

  1. https://www.brownleeglobal.com/wp-admin/post-new.php
  2. https://www.wsj.com/articles/your-401-k-isnt-enough-to-invest-for-retirement-build-friendships-and-hobbies-11672269861

Non-Financial Aspects of Retirement

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Most Baby Boomers need to prepare for the profound personal and life changes retirement involves.

Retirement has changed dramatically since your parents’ generation. Being ready to retire means much more than financial matters. It also means being mentally, emotionally and socially prepared for your later years of life.

People are living far longer and in far better mental and physical health. Instead of slowing down, they leave their jobs feeling ready to take on the world. They’re financially independent, active, and capable, write authors Ted Kaufman and Bruce Hiland in their book “Retiring?: Your Next Chapter Is about Much More Than Money.”

Yet, people are less prepared for the rigors of living during retirement. Although financial planning and knowing your “magical number” remain essential prerequisites for retirement, a successful retirement requires equal, if not more, attention to non-financial issues.

Addressing non-financial issues seemed to be the key to a satisfying retirement, but only financial matters seemed to get the necessary attention.

Most individuals approaching retirement have practically no real-world experience with what people actually do after they retire, not to mention how their lives change, so they ignore planning for retirement.

Those approaching retirement need to learn more about how retirees live day-to-day or what issues they face other than aging. They do not have much to go on.

Paying attention to fears, feelings, and relationships regarding retirement can be uncomfortable, and planning the next chapter of your life without a roadmap can seem daunting.

According to an experienced psychotherapist, denial is the likely explanation for people’s failure to plan for the non-financial aspects of retirement. Denial is people’s unconscious psychological defense mechanism to avoid a problem or issue.

However, successfully retired people describe retirement as a “new chapter” or “journey.” They see their retired life as a “new adventure.”

The fundamental questions to ask yourself include, “When should I retire?” “What will I do?” and “Where will I/we live?”

Also, you should think about how you will care for your body, your brain, your heart, and your soul, or, said differently, your physical, intellectual, emotional, and spiritual well-being, wrote Ted Kaufman, a former United States Senator from Delaware and Bruce Hiland, formerly McKinsey & Co. and was Chief Administrative Officer at Time Inc.

Source:

  1. https://www.nextavenue.org/retirement-is-about-much-more-than-money/
  2. https://bookshop.org/p/books/retiring-your-next-chapter-is-about-much-more-than-money-ted-kaufman/16291203

We need to start counting our blessings, be grateful, rejoice over the most minor matters, and enjoy the simplicity of life!

Also, it’s important to value human connection, the opportunity to add value, and the ability to help others realize their potential through small but thoughtful and intentional gestures.

Qualifying Longevity Annuity Contract (QLAC)

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A qualifying longevity annuity contract (QLAC) is technically a deferred income annuity purchased by a tax-free transfer of a portion of your tax-qualified accounts, generally made after age 55. That transfer, in addition to adding a QLAC to your plan, reduces your account to determine taxable required minimum distributions (RMDs).

So, if you used 25% of a $400,000 qualified account, your $100,000 purchase of a QLAC would reduce your RMDs by 25%. And the income from a QLAC could be deferred until as late as age 85.

Retirement Isn’t An Age

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Retirement isn’t an age. It’s a point at which your finances are where you can permanently leave the workforce. ~ USAToday

Retirement refers to the time when someone permanently leaves the workforce, usually in their later years.

Retirement is often synonymous with the idea of financial independence, which is when your savings and investments are sufficient to cover your living expenses and support you for the rest of your life.

Many Americans think of retirement as a certain age. And certain retirement benefits are indeed associated with a specific age. For example, the minimum age to start collecting Social Security benefits is 62, but you’ll have to be 66 or 67 to collect your full benefits.

However, retirement isn’t an age. It’s a point at which your finances (the magic number) are where you can more than cover your monthly living expenses and permanently leave the workforce.

The “magic number” rule of thumb for retirement is to have 25 times your annual expenses or to spend only 4% of your portfolio per year during retirement.

Source:  https://www.usatoday.com/money/blueprint/retirement/what-is-retirement/

The Magic Number Rises

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More Americans say they don’t feel financially secure…rising inflation and incomes that aren’t keeping pace get most of the blame. ~ Northwestern Mutual

The “magic number” for retirement has surged in recent years thanks to high inflation. According to Northwestern Mutual’s 2024 Planning & Progress Study, Americans now believe they need $1.46 million in savings and investments to retire comfortably.

Yet, this number reveals more about Americans’ anxiety than precise planning. We often overestimate our financial needs

This ‘magic number’ figure has leaped 15% in a year and an astonishing 53% since 2020. Meanwhile, retirement savings have dwindled to a mere $88,000.

The “Silver Tsunami” of retirement approaches, with millions of Baby Boomers riding the waves into retirement.

Track and prioritize your spending is vitally critical. This involves prioritizing the spending that’s most important to you and letting things that are less important fall off. You’re saying no to some things so that you can say yes to others. You might even want to employ loud budgeting.

Loud budgeting gives you permission to say no to social engagements by saying you don’t have the money for it. To put loud budgeting to work, you commit yourself and share that you’re doing it. Loud budgeting lets you spend money on true priorities while skipping things that won’t really provide or align with your values and priorities.

Loud budgeting can be a simple way to push back when you’ve spent too much. But it works best when it starts with a solid budget and a financial plan that helps you balance future goals with what you need for today. The idea isn’t to say no to everything, but loud budgeting should help you say no when needed.

Ultimately, your financial goal is to have more income coming in each month than expenses going out.

But make sure that you’re thoughtful about your spending so that you feel good about what you’re getting when those dollars leave.

Source:

  1.  https://news.northwesternmutual.com/planning-and-progress-study-2024
  2. https://www.northwesternmutual.com/life-and-money/what-is-loud-budgeting/

Changing Retirement

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“The traditional idea of retirement, where Americans stop working altogether, is more the exception than the rule these days. The majority of Americans continue to work in some capacity, whether or not they get a paycheck. They’re active, involved, and full of things they want to do for themselves and for others.” ~ Carrie Schwab-Pomerantz, SVP, Charles Schwab & Co., Inc.

Retirement Planning

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Planning for retirement is a way to help you maintain the same quality of life in the future.

You should start retirement planning as early as financially and emotionally possible, like in your early twenties or thirties. The earlier you start, the more time your money has to grow.

That said, it’s never too late to start retirement planning, so don’t feel like you’ve missed the proverbial boat if you haven’t started.

Keep in mind, every dollar you can save now will be much appreciated later. Strategically investing could mean you won’t be playing catch-up for long.

Additionally, retirement planning isn’t merely about counting the days until you hang up your work boots and calculating your magical financial number.

It’s about ensuring that your golden years exudes comfort, financial security, personal relationships, meaning and purpose. Here are five financial steps to guide you as you prepare for career and life transition:

  1. Know When to Start: Determine when you want to retire. Will it be an early retirement at 62 or a grand finale at full Social Security benefits age (around 67)? Remember, the earlier you claim Social Security, the less you will receive monthly, but delaying it can enhance your benefits.
  2. Calculate Your Magic Number: Calculate how much wealth or nest egg you need to sustain your desired lifestyle. Consider living expenses, healthcare costs, and the joys you wish to indulge in during retirement.
  3. Prioritize your financial goals: Pay off debts, build your savings, downside if necessary, and calculate your monthly expenses.
  4. Choose Your Accounts: Explore retirement accounts. Will it be a 401(k), an IRA, or both? Each has tax advantages, contribution limits, and investment options. Mix and match wisely.
  5. Invest Wisely: Your investments must propel you toward your financial destination. In your youth, invest aggressively. As you approach the retirement, dial back to a more conservative mix.

Whether you’re a few decades or a few years away from retirement, having a plan can help you feel confident that you’ll be prepared when the time finally arrives.

Source: https://www.nerdwallet.com/article/investing/retirement-planning-an-introduction

Financial Advisers Reported That 40% of Their Clients Were Forced to Retire

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People are retiring today, but they’re not slowing down — it’s the new retirement.

A survey by financial services firm Edward Jones found that 40% of financial advisors said their clients retired not at a time of their choosing, but when life circumstances “forced” them to do so.

Almost all financial advisors surveyed (97%) agree that retirement involves more surprises and challenges than their clients expected while an equal number (98%) agree that preparation, flexibility and willingness to adapt are key to success in retirement.

The majority of financial advisors recommend that retirees obtain supplemental health insurance (52%), secure long-term care insurance (48%) and adopt a more frugal lifestyle (48%) for financial stability.

References:

  1. https://www.prnewswire.com/news-releases/financial-advisors-report-40-of-their-clients-were-forced-to-retire-edward-jones-survey-finds-301877073.html