There’s a big difference between wanting to retire early and actually retiring.
Hey, everybody! I’m ready to join the party! I’ve been told by bossman that I’m now going to be writing here once a month. You ready? I certainly am. Rather than an extended post on who I am and what I’m about, let’s just jump into it, shall we?
When I was an advisor (16 years in the trenches), clients commonly presented two different retirement scenarios:
– they were 30 years old and wanted to know how to retire by the time they were 40.
or
– they were 55 and wanted to know how to avoid a complete retirement disaster.
Both of these groups missed out on big parts of life. The “retire early at all cost” group rarely seemed to enjoy themselves “today.” They were so busy plotting fun in the future that it nearly devoured them. The “oops” group never was able to enjoy their later years because they’d partied so hard they were surprised when the day arrived that they realized should have saved a few nickels.
It seems there should be a middle ground, doesn’t it?
The key to a successful retirement is to actually plan. I’ve been told by people that the words “retirement plan” make people run for the hills. Why is that? If we say “plan your family vacation” people are all for it, aren’t they? Yet, “plan your retirement” sounds like such a HUGE task that people put the blinders on and want nothing to do with it.
No Retirement Regrets
USA Today last week posted a piece entitled Learn From Retirees’ Biggest Regrets. If we avoid focusing on retirement planning and just try to not have any regrets, would that help? Let’s tackle each of the regrets in the article:
I didn’t save enough for retirement, and I spent more than I should have in my peak years. Contrary to the article, I don’t think there’s anything wrong with spending more in your peak years, as long as you know that you’re putting away enough for later. Calculating this number is easier than you think. Use one of a billion online tools to make sure you’re in the ballpark and then spend the rest. To me, that’s an obvious retirement planning step. Agree?
I leveraged myself too much during my peak earning years. “Leveraging yourself” means “getting into debt.” Avoiding a huge house or monster car payment that you can’t afford is easy if you know how much you need for retirement.
I retired too early. ….hmmmm…..how could we solve that problem? Maybe by figuring out how much we should have in the piggy bank each year?
Why did I take that money out of my IRA or 401(k)? I originally thought when I read the article that they were talking about more complex tax planning topics….but no. What they mean is that people often remove money that they don’t need from their tax shelter.
I thought Social Security was supposed to provide for me. Yeah…..not so much.
I was a picture of health in my middle age. This one may be the first point that could involve some complex planning solutions. Everyone should decide early on how to tackle a health care crisis in retirement, and unfortunately, there aren’t any easy answers. Buying a long term care policy could cost you a ton of cash flow. Avoiding LTC insurance and self-insuring could cost you a monster pile of money. What do you do? It might be easier to tell you what NOT to do: don’t assume that your health will be similar to that of your parents. When I was an advisor everyone would tell me about their family history. LTC isn’t your parents’ issue. It’s changing fast with medical advances. Base your decision on your net worth and ability to fight the long battle. Do you have enough money without insurance to pay for four years of coverage? Why four years? the average person have a two and a half year experience with LTC. If you have four years of coverage, you’ll easily be able to handle it without worry.
What’s the big picture here? To me, it’s easy. I’d rather plot out how much money I’m going to need for retirement—a task that might take a couple of hours a year—than make some absolutely monster mistakes with my money down the road around debt, tax shelters, or decisions whether to vacation or not.
Sure, you probably aren’t interested in “retirement planning,” but are you more interested in living with a pile of regrets?
Right. Neither am I.
Joe Saul-Sehy is the co-host of the laid-back financial podcast Stacking Benjamins.