We don’t even know what to call it. ‘Retirement’ sounds so…finito. It took Bret Farve two tries to…retire. Mick Jagger, who said he would rather be dead than singing ‘Satisfaction’ when he is 45, is 68 and still not…retired.
Bob Dylan set us up for this when he wrote ‘Forever Young’ back in 1973, when he was…young. So many years later ‘Forever Young’ likely brings to mind Alphaville and Jay-Z, not Dylan, who is 71 now, and still touring Europe and the U.S. this summer. Not…retired.
Forget about ‘senior.’ It was cool in high school, but now, well, you must mean really old people. And what is ‘semi-retired?’ Haven’t made up your mind yet? Still thinking one last rodeo? Just what the heck do you call it?
‘Second acts’ was used too long ago as a career-change book title, and conjures up bad theatre. Besides, some of us are into our third, fourth, fifth, and beyond acts. ‘Second life,’ which might make more sense, is an online game world (does anyone still go there?). Freedom years, living on my time, etc etc, just don’t do it—we may be stuck with ‘retirement’ after all, even if we don’t like it! Some little irony there.
Part of it is that there is no one-size-fits-all retirement model anymore. Each of us will take best advantage of where we are along the road and make our own way forward.
What kind of second act lifestyle suits you?
There are three basic retirement lifestyle approaches once you hit 66 (current SSA full retirement age):
- Kicking-back: Stop working altogether. Recreate. Take classes. Teach. Work out. Travel. Write. Read. Pursue the long postponed, with vigor. Or not so much vigor. Nobody is keeping score but you.
- Balancing act: Work part-time, start a part-time business, or part-time in a new career. Volunteer. Coach. Be a barista. A bartender. Paint houses or do odd jobs.
- Keep-on keeping-on: Keep on working as long as you can. Often, this is in your own business, but not necessarily. Who said you have to retire? Maybe if you work long enough, they’ll give you a big buyout kiss good-bye, maybe they won’t. Maybe you like your job, or you need the money. Or both.
‘Retirement’ is a catch-all for what happens next when you reach a certain age. Like all the other ages you’ve reached, it’s not totally predictable—life is what happens while you are making other plans. And you may in fact cross between these three lifestyles, even more than once. After all, 20-30 years is a long time.
In the same way, ‘retirement income planning’ probably sounds about as interesting as a trip to the dentist. It’s a mouthful. Depending on your lifestyle approach, you may have the impression it doesn’t even apply to you. And it might not, at least not as much.
If you’ve saved enough and you can kick-back without a care, then a modest amount of planning might be enough to keep things going throughout your non-working years.
If you’re still working full-time, or close to it, then retirement and retirement income probably do not enter into your thinking much more than they did 10 or 20 years ago. You may think of Social Security when you think of retirement income, and not the eventual income you will derive from your own savings. Regardless, planning now while you are still working can make the time when you do stop that much more rewarding and ensure your retirement income safe and secure. You might even be able to stop working sooner than you think.
If you’re doing the balancing act working part-time, especially if you feel forced into it because your savings are constrained (this also applies if working full-time because of tight finances), then planning may help relieve some of the economic pressure and help you enjoy this time of your life more.
In other words, retirement income planning, like retirement itself, isn’t one-size fits all. Often people become more involved with their finances when they stop working or working as much because they have more time. This is a good thing—no one cares more about your money than you do. And much of retirement household finance is as it was while you were working. There’s no reason you can’t handle it as well or better than you always have.
There are a couple of areas where a good planner can add value. One is helping you plan and adjust your spending to match your income over your remaining lifetime. One of the biggest fears people have entering retirement is spending too much and running out of money too soon. A good planner can help you plan out your cash flow for your life expectancy, which may be just the guidance you need to feel more comfortable about your household budget.
Another key area where a good planner can help is a setting up the approach that suits you best for converting your savings and investments into retirement income. The methods for saving and building an investment portfolio are quite different from the methods for converting it into secure, risk-free or low-risk retirement income. Even experienced personal investors often are not aware of the pros, cons and pitfalls of various retirement income approaches.
In fact, surprisingly few financial planners are knowledgeable retirement income specialists. This shouldn’t be surprising since they have spent their careers helping this generation save and invest, using ever more sophisticated and complex (and, we might add, recently not so successful) investment strategies and products. As with many of us, the financial planner often pushed off the details of retirement planning as something that’ll be easy to sort out when the time comes.
If it hasn’t already, the time is coming. And just when it was supposed to be easy, our futures have become fearsomely complicated by concerns about government policy, Social Security, Medicare, the economy, still being able to work, healthcare expense, health insurance, long-term care expense, inflation, sovereign debt, market volatility, rising taxes, and outliving our savings. Phew.
Makes you want to kick-back!
A good retirement income plan should address each of these concerns while providing you secure risk-free income matched to your expenses for the rest of your life.
Hopefully this post has set the stage by giving you some idea of the kind of ‘second act’ you’re about to begin. In the next post in this series (“Charting Your Retirement Lifestyle”), we’ll chart different retirement lifestyles and future posts talk about your income and savings and the foundation of your retirement income plan.
The previous post in this series on Lifetime Financial Planning was “Charting the Differences Between Accumulation and Retirement Income.”