Defining “Retirement”

What does retirement mean to you?

The truth is, it means a lot of different things to people.  At times I’ve been surprised by the reaction that word gets from one person to the next.

Even couples, perhaps unsurprisingly, have drastically different views about retirement.

I’ve had people get visibly angry at the suggestion that they would ever stop working, as though that would an admission of diminished usefulness…

While I’ve had others who couldn’t wait to retire so they could sit around and do nothing at all.

So one of my first suggestions to people with regard to retirement is to try and visualize, and be able to communicate to their advisor, as close to reality what their ideal retirement will look like.

Now, when I say “ideal”, it means within your grasp, not the lottery type answer I sometimes get (I’d buy the island of Maui if I could).

Because that information, what your ideal is, is critical to an advisor providing you with the best advice possible.  Of course, plans do change.  People who retire with a very tight budget do occasionally win the lottery.  Others that expect to live and be active until age 100 do occasionally get ill despite a family history of above average longevity.

Your advisor should be discussing with you what I call the “most likely scenario”.  Your most likely scenario should include things like a realistic expectation for longevity.  For some people this can be challenging.  In my case, my father passed away at the young age of 56 while my mother is alive and well at 81.  My plan includes a contingency for the unpleasant possibility that I die younger rather than older.  Of course I am also planning to live to 90 or beyond, but only time will tell.

And what about all that money you’ll be spending in retirement?  Some traditional recommendations are to assume you’ll need 85% of your working income in retirement.  Well, maybe, but maybe not…

I’ve known plenty of retirees who ended up spending more money in retirement than they did while they worked, simply because they were healthy and active and had 50 – 60 hours each week no longer occupied by commuting and working.

But I also have known people who spent far less in retirement, living at a very minimal financial level quite happily.  I had a client who retired at 40 years of age.  He was unmarried, had no kids, and could live quite happily on $10,000 per year.  That’s not me for sure, but it can be done.

So you really need to know yourself.  Your advisor’s advice is often only as good as the quality of the information you provide. Advisor’s can “guesstimate” when their clients withhold information, but you may be disappointed with the results.

It you withhold information in a misguided attempt to “protect” yourself it would be like going to the doctor and asking for a recommendation after simply saying you don’t feel good.  Can the doctor accurately provide advice to resolve your malady with so little information?

And if your advisor is the type of person that makes you feel like you need to withhold information I suggest you start looking for a new one…

And not unlike a doctor, financial advisor’s sometimes have to deliver bad news.  You know the old saying, “Don’t kill the messenger”? Well, I’ve gotten looks that made me think my life was in danger when a client didn’t get the answer he wanted…

If your advisor tells you you don’t have enough financial resources to retire, don’t get mad, get a second opinion.  Remember that the advisor is probably being honest and trying to help.  What you don’t need is a “Yes Man” who will tell you everything is great even if it is not.

If you are honest with your advisor, and yourself, about your wants and the reality of your situation you will have the best chance of retiring successfully and creating a lifestyle that will meet or exceed your ideal.

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