There are so many new books on money, investing and retirement being published that it’s hard to keep track. In many cases the advice they contain is nothing new; it’s just dressed up in a different way.
But every now and again a book comes along that genuinely does break new ground on a particular topic, while also neatly curating the essential information the reader needs to know.
Just such a book is by Kevin Grogan and TEBI’s Larry Swedroe.Originally published in 2019, the book has been fully revised and updated, and is an excellent one-stop resource for anyone prepare for life beyond work.
One of the main reasons why we like this book so much is that, unlike many other books on the subject, it doesn’t just focus on the financial aspects of retirement.
The authors and the publishers have kindly given us permission to publish a chapter of the book on TEBI, and the chapter we’ve chosen is Chapter 1, Retirement Planning Beyond the Financials. We’re running the chapter in two parts, and this is Part 1. Here, Grogan and Swedroe explain what they mean by a retirement life plan, and then set out ten key elements of such a plan.
Retirement is one of life’s significant transitions. Virtually everything changes. During your career, you merely need to show up each day to be exposed to many of the things that make up a fulfilling life.
Your work gives you a sense of purpose. You are nurtured by the relationships you have with colleagues. You are energised by the self-esteem you achieve because you are good at what you do and others recognise it. You attain a level of financial security from a regular paycheck. You are comforted by the predictable structure of your days, weeks, and years. You are intellectually stimulated by ever-changing circumstances.
One day, all of that is yours. Then, because of a decision by your boss, or “the organisation”, or by personal choice, you retire. The day after your retirement party, all that your career provided is gone. You must find your life’s meaning and basis of self-esteem elsewhere. You realise few collegial relationships are really lasting friendships. The security of a regular paycheck must come from other sources. You need to find a way to rebuild a daily, weekly, and yearly structure and to replace the intellectual stimulation that so readily came from your work. Despite being excited about your new phase of life, if you are like most others, you also approach retirement with a healthy dose of anxiety. You may be unaware of the challenges you may face, and you may not be prepared to identify and take advantage of the opportunities that will come your way.
Unless you replace what your career provided, understand and address the challenges, and recognise the opportunities, you and those close to you may not live the retirement you have worked so hard to deserve. Fewer than half of retirees enjoy their first year. Many experience symptoms of depression.
The segment of society with the fastest growing divorce rate is couples over 55, reflecting the difficulty of having to live together in new life circumstances.
It is not the intent of sharing all of this to suggest that your retirement will be a disaster. In fact, your retirement can be, and should be, fulfilling, satisfyingand successful. Rather, the intent of making you aware of what you could be facing is to begin a conversation about what you can be doing, starting now, to make your retirement what you want it to be.
As is the case with most endeavours, the best way to prepare for the transition, stave off the challenges, and identify and take advantage of the opportunities, is to develop a written retirement life plan before you retire, practise that plan while you are still working, and have the relevant crucial retirement planning conversations with those closest to you. We will address practising retirement and crucial conversations later in the chapter. For now, let’s get started on your retirement life planning.
As mentioned in the Introduction, a failure to plan is a plan to fail. And despite most people having extensive planning experience at work (such as business strategies, lesson plans, and customer meetings) and at home (such as vacations, home improvements, and entertaining), most tend not to plan for retirement. Of those who do plan, most focus solely on the financial aspects.
While doing so is critical — and we will spend the bulk of this book helping you create your financial plan — it is far from sufficient. In this chapter, we will build a framework upon which you can develop your retirement life plan — beyond the financials.
Importantly, doing so will also enable you to create an even more meaningful financial plan. Your financial adviser will tell you that he or she would prefer you to say, “Here is what I plan to do in retirement. Let’s work together to build a financial plan that supports my life plan.” A less-preferred statement goes something like, “I’m planning to retire. Make sure I do not run out of money.” The reasons, therefore, to have a written retirement life plan are to have a smooth and quick transition into retirement by replacing those important life components that your career provides, to increase the odds you live the retirement you deserve, to have a more robust financial plan, and to enable you to practise retirement while still working.
Why should it be a written plan? If you write your plan, you increase the odds that it will be well thought through and that you will actually live the plan. In addition, you will create something you can show to others, like family and friends, and your advisor, so that they can align it with your financial plan.
You have worked hard to earn a fulfilling retirement, and your investment of time and energy to develop your written plan will enable you to make the rest of your life the best of your life. Consider this vision of retirement.
Envision a time in your life when you have the freedom to choose what to do, when to do it, and with whom you want to do it. It is a time in your lifewhen you are full of energy and contented at the same time. Your life is full of close relationships with family and friends; you are contributing your time and resources to helping others; your days, weeks, months, and years are filled with activities that you love, that help you grow, and that are just plain fun. You awaken each day with a sense of purpose and a positive attitude. You have the resources and general well-being to live the life that makes you happy and can foresee living it well into your future. You take advantage of new-found opportunities and you deal well with life’s inevitable setbacks, because you are resilient and have a plan that helps guide you through them.
Is that the retirement you would like to create and live?
KEY ELEMENTS OF YOUR RETIREMENT LIFE PLAN
In their book, , which we highly recommend, Alan Spector and Keith Lawrence identify what they refer to as the “10 key elements of a fulfilling retirement.” These components are the building blocks of your retirement life plan. We will review each key element, and as we do, consider two things:
1. How are you positioned to transition into retirement for each key element? Candidly assess which of these statements apply:
— I have never thought about this key element before, or I have considered it but haven’t really done anything about it.
— I have positive aspects of this key element in my life, but I certainly have room for improvement.
— This key element is already a fulfilling part of my life.
2. What would you need to begin doing, or perhaps stop doing, to make each key element a more fulfilling part of your life, especially as you transition into and through retirement?
Many of us characterise our identity by the role we play: teacher, executive, doctor, engineer, pastor... When you retire and that role ends, how do you establish your new identity? What is your purpose in life?
There are a number of online approaches to help you craft your life purpose or life mission statement. And you can be guided by your answers to the following questions:
1) Envision a time when your 15-year-old grandchild asks you, “What has your life been about?” You could answer, “I was an attorney,” but, I am not one any longer. What would you answer that grandchild in language he or she would understand?
2) If you had complete freedom and were told you had a year to live, what would you do with your remaining time and, importantly, why? Create a purpose statement that is meaningful to you and then align your activities to be consistent with that purpose. We discuss this further in the next chapter in the Life Discovery section.
Just as it is important to identify your life purpose and align your activities to it, it is important to identify your passions and pursue them. What are your passions?
What do you love to do? What excites you to look forward to, learn more about, tell others about? What are you doing that makes you lose track of time? What makes you want to jump out of bed in the morning and get started? What are you good at?
If you are still struggling to identify your passions, try asking yourself thequestion, “What did I love to do when I was ten years old?” When you were 10, you were old enough to make choices about what you enjoy doing, but at that age, other aspects of life had not yet gotten in the way of pursuing them. Many retirees find that those ten-year-old’s passions trigger something for them — fulfilling childhood dreams without parental supervision.
The research consistently shows that having a positive attitude makes a difference in both quality of life and longevity, as much as a seven-year difference.
Many believe that attitude is hardwired into their personalities. This is not the case. You can positively affect this key element. As examples, work on gratitude — begin and end your day by expressing appreciation for all that is right in your life. Sincerely say “thank you” more frequently. Surround yourself with people who have a positive attitude. Look for or, better yet, create opportunities for random acts of kindness. Act like Tigger instead of Eeyore.
To learn more about how you can positively impact this key element, we recommend reading by Shawn Achor.
Financial security is but one of the ten key elements of a fulfilling retirement, but it is critical for two reasons. It is important in its own right. And if done well, it will enable you to focus your time and energy on the meaningful non-financial aspects of your retirement. Consider these three facets of what it takes to achieve financial security:
1) Matching your lifestyle (budget) to your available resources. It’s not about the size of your nest egg, but about managing spending.
2) Developing a support team with the necessary expertise and co-ordinated by your financial adviser.
3) Ensuring you and those closest to you (such as your spouse, partner, and adult children) are understanding of, and in alignment with, your financial plan.
Why should helping others be an integral part of a fulfilling retirement? Certainly, if you apply your time, talent, and treasure to help individuals and organisations, it’s good for your community. But let’s be selfish for a while — what’s in it for you? Research has shown time and again that the person giving back actually gets more from the experience than the person on the receiving end. For instance, retired volunteers greatly benefit from lower mortality rates, higher functional ability later in life, lower stress, and better morale. Essentially, volunteering can add years to your life and life to your years. That sounds like a win-win situation, and it is.
When asked if they plan to volunteer in retirement, 70 percent of baby boomers answer “Yes”. Yet, less than 30 percent actually do. Those who do not are missing an opportunity for a more satisfying retirement.
Research has shown that low social interaction — not having healthy relationships — has the equivalent effects of smoking 15 cigarettes per day or being an alcoholic, is more harmful than being inactive, and is twice as harmful as obesity.
But what is a healthy relationship? It is spending real face-to-face personal time with friends and family. It is being a part of networks of people with common interests. And it is having many, some say as many as 10, two-o’clock- in-the-morning-friends. These are the people in your life, family or friends, who you would have no qualms calling in the middle of the night to ask for help and know without hesitation or question that your friend would be on the way, and vice versa.
Many retirees struggle to replace the intellectual stimulation that came naturally in the workplace. Keeping mentally active is critical as we transition into and age through retirement. We are inundated with information about the value of keeping the mind active, and unfortunately, most of us know someone who is dealing with, or has dealt with, dementia, either personally or as a caregiver.
“Use it or lose it” is but one of the reasons growth is key to a successful retirement. It is all too easy to find ourselves settling into a small comfort zone. Yet, what if instead of limiting your activities to what you are comfortable with, you use your new-found freedom to stretch yourself? What if instead of passively sitting in front of television or social media, you engaged in new, exciting activities?
There is nothing wrong with watching television or engaging in social media, unless they dominate your time. The things you can do to stimulate your brain and get you fully engaged in life can be big things, like taking a class at a local community college, getting involved in a new volunteer project, learning a new language, or traveling to a place you’ve never been before. Or they can be small things. The next time you drive to the grocery store, take a different route. Brush your teeth with the opposite hand (seriously, try it). Eat dessert first. Read different genres. Expand your comfort zone. Keep your mind active and sharp. Enjoy new and different opportunities. Use it or lose it.
Your career may be something you love to do, and it can be fun... at times. But, regardless of whether you view your career as fun or not, as you look forward, do you know how to build fun into your retirement? And will you?
It is noncontroversial that fun and the more frequent laughter that derives from it has health benefits. It improves the body’s immune system, helps stave off the physical and emotional characteristics of stress, has a positive effect on blood pressure and heart function, and decreases pain. It strengthens relationships, helps reduce conflict, and promotes group bonding. “Laughter (and fun) is the best medicine.”
You can plan fun into your life, or you can take advantage of being spontaneous. In either case, will you have activities in your retirement life that are just plain fun to do?
A holistic approach to thinking about well-being is to follow the daily habits that create the personal energy you need to do what you want to do now, and that will sustain your energy into your future. Energy derives from four components: physical energy, emotional energy, mental energy, and the energy of purpose.
Sound familiar? Attitude, healthy relationships, growth, purpose, and the other key elements can and should be your sources of energy. Add in the right daily habits of nutrition, exercise, and sleep, and the right attention to your medical health, and you have a formula to create and sustain energy.
You would not expect to be successful in your career without a plan. The same applies in your retirement life. To be successful, the plan should be “holistic”. in that it includes all of the key elements. As we will discuss, one of the tenets of a robust financial plan is to ensure you have a diverse portfolio of investments.
To be holistic, your life plan should also have a diverse portfolio of meaningful activities. The tools we will cover shortly will help you create that holistic plan.
Crucial conversations about retirement life planning are intended to make your plan even better and ensure that those closest to you have been involved in its development. This is not only about discussions with a spouse or partner. Consider who else in your life will significantly affect your retirement and who your retirement will significantly affect. It might be ageing parents, adult children, other relatives, or close friends.
The objective is to have these sometimes-difficult conversations upfront to avoid surprises later. Some possible subjects to discuss are whether your plans, both life and financial, are mutually understood and agreed to, when is the right time to retire, where will you live, who else should you be involving in the retirement life planning discussions, what financial and caregiving commitments will you make to parents, children, and grandchildren.
When you have your life plan developed, it will include those activities you are looking forward to doing in retirement. The concept of practising retirement is to bring those activities into your life while you are still working, even if in a small way.
There are a number of reasons to do this. You may find that something you thought would excite you does not have that effect, enabling you to change your plan prior to your retirement transition. Your life plan informs your financial plan. Practising retirement can help you confirm what you want your finances to support and work with your advisor on that basis.
The most compelling reason to practise retirement is that if you’ve identified those things you are excited about doing in retirement, why not bring as much of that as possible into your life now? Why wait? The best time to begin is now.