“If income wasn’t a factor, how important would it be for you to keep working?” As reported in the March issue of Zoomer magazine (everythingzoomer.com), this question was asked to readers as part of their “Zoomer Census”. Perhaps surprisingly, 71% of respondents chose “I can’t wait to retire”, with the remaining 29% selecting “If I slow down, I’ll die”. I say “surprisingly” because the media has been telling us that more and more people are postponing retirement – or should do so – because “work” challenges them mentally. Could it be that the real reason for postponement is a financial one?
Let’s look at the smaller group first, those who fear slowing down. We often hear this comment from business owners or professionals. Our guess is that this group has worked hard all of their lives and continues to enjoy their work, are in reasonable health, and perhaps identify themselves more by their occupation than any other part of their lives. They may be well-prepared financially for however they define “retirement” — if they even have that word in their vocabulary. On the other hand, they may have all of their wealth tied up in their business with little or no exit strategy. Or, more likely, perhaps they do not want to give up the lifestyle that continuing to work provides them with. (Alternatively, perhaps they’ve been all-consumed by their work over the years that they have no outside interests).
If you’re in this group, don’t fall into the trap that you can go it alone and have no need for a Certified Financial Planner® (CFP®) professional. You have some unique challenges, particularly if you are a business owner or practicing professional. Your “business” may represent a disproportionate amount of your net worth. How will you, your family, or your heirs realize that value? What if a change in health forces you to “retire”? Do you have an “exit” strategy, whether the triggering event be voluntary or forced? These are all “risks” that a CFP® should delve into with you.
“I can’t wait to retire “. How should we interpret the 71% who agree with this statement? Are they folks who would retire tomorrow if they had the nest egg they needed? Are they people who are dissatisfied with their jobs, but still years from retirement? Is health a factor? Let’s for the moment assume that this group of Zoomer readers is primarily 55+, and that most of them will need to tap their retirement savings and/or pensions in the next 10 years. And that for some of them “I can’t wait to retire” has an underlying meaning – “I want to retire but I don’t know whether I can afford to“.
Our message to this group is simple — start focusing more on the future. Ask yourself this question. “If I want to “retire”, what has to happen over the next 3 years for me to feel happy with my progress?” Am I on track financially? Do I need to save more? Understanding the progress that you’ve made to date and how it all ties together to produce retirement income is often the puzzle that a CFP® specializing in retirement income planning can solve for you. But, recognize that for many of you it will also mean making a choice between immediate gratification and saving for a comfortable retirement. Time becomes a precious resource when you’re in your 50s or 60s and in that period between accumulating a nest egg and relying on it for cash flow. Save now or pay for it later.
So what should those of you in this latter group do now? Again, get professional help from a Certified Financial Planner® professional. The initial stages in our Worry-Free Retirement Experience™ involve us getting a snapshot of your current situation, then assisting you in developing a vision of the future. Focus on the “3-year question” mentioned earlier, and start making progress. What do you want “retirement” to look like? What will it cost?
In his book “How to Retire Happy, Wild, and Free” (VIP Books, 2012), Ernie J. Zelinski illustrates “The Get-a-Life Tree” in which he suggests breaking down “Options for My Retirement” into 4 parts. It’s a very useful, practical approach.
1. “Activities that turn me on now” (eg. Work, social contact, intellectual stimulation, travel).
2. “Activities that turned me on in the past” (eg. Golf, photography).
3. “New activities I have thought of doing” (eg. Volunteering, wine tasting, educational or general interest courses).
4. “Activities that will get me physically fit” (eg. Cycling, aerobics, hiking)”.
You’ll find when you do this exercise that not only will you visualize a fulfilling retirement, but you’ll also be able to tie in the financial cost. All of these activities come at a cost, some more so than others. By developing your personal “Get-A-Life Tree” as Zelinski recommends, you can also work towards a budget for discretionary spending in retirement. Most of us know what it costs us to operate or rent our homes, but have we thought about the potentially larger expense associated with our leisure activities? Planning ahead and understanding the end result will give you a track to run on.
Choose to be Worry Free!