Tag Archives: retirement

Do This Before Retiring

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I don’t care that my personal finance posts never resonate, I will continue to write about it when the spirit moves me. Deal with it.

Nick Maggiulli could teach me a lot about how to write about personal finance. His first book, Just Keep Buying, sold 400,000 copies. And his brand new book, The Wealth Ladder, is getting tons of attention on several of the pods I listen to.

The inspiration for this post is a friend, let’s call him, IE. IE is planning to retire in the spring of 2027. He appears to have his personal finance shit together. Good paying job. Lots of passive income. And he’s been riding equities up.

On the downside, he’s showing signs of irrational exuberance. He seems to think the stock market, near all-time highs, will continue its run. Or maybe he’s just trolling us in the group text?

His target retirement date was carefully determined based upon his normal “spend rate” combined with lots of planned post-retirement traveling.

I’m guessing he hasn’t modeled exactly what a market worst case scenario might do to his plan. Before retiring, model exactly what a market worst case scenario might do to your total net worth. Put differently, don’t tip-toe around “sequence of returns” risk, dive head-first into it.

How to do that? Calculate your net worth, excluding your residence(s)* because as the saying goes, you have to live somewhere. Adding in any home equity only makes sense if you plan to seriously downsize upon retiring.

Next, take the total amount of money you have invested in equities and divide it by two as if there was a 50% correction. So, in IE’s case, let’s make a wild ass guess and say he has a net worth of $3m, $2m in equities, $800k in fixed income, and $200k in cash.

IE would create a second spreadsheet showing his adjusted net worth after a 50% correction in the stock market. He’s “post-market correction” net worth would be $2m or one-third less than today. Print the “Bear Market spreadsheet” and let it sink in.

Only then can can IE determine 1) whether his asset allocation makes sense and 2) whether the spring 2027 timeline still makes sense.

Because he’s a friend, I will not be charging him for this advice. Some, no doubt will say, my advice is worth what I’m charging for it.

*plural if your DDTTM and have an extensive real estate portfolio

Phenomenon To Ponder

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Karen Kreider Yoder’s story perfectly captures 2024.

“It was a June afternoon in the Rockies just after I retired when we agreed that we must be turning into ghosts.

We had been cycling in the mountains since breaking camp before dawn, and we decided to splurge on a private room in a hostel. We checked in and headed through to the bike-storage area, walking our rig by young hostelers congregated in the common spaces.

We must have been a sight: two bedraggled 60-somethings pushing a tandem bicycle laden like a pack mule.

Except no one seemed to see us.

We crossed the living room, where 20-something hikers with ruddy faces studied their computer screens. No one looked up. We inched through the kitchen, where others were sautéing onions for a group meal. ‘Excuse us. Sorry to interrupt,’ one of us said as we squeezed through. ‘That sure smells good.’

They turned a bit, giving us space. But not a word. Not a ‘How’s it going?’ nor ‘Where’d you come from?’ nor ‘Cool rig.’ Nor eye contact.”

The Big Question In Retirement

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Who am I now that I’m not working? That’s the question Stephen Kreider Yoder, 66, and Karen Kreider Yoder, 67, reflect on in this Wall Street Journal essay.

Karen writes:

“I no longer have the career that was the dominant part of my identity. Instead, I have a many-faceted identity.

Sure, there are mornings when I feel melancholy, often when the coming day feels unstructured or without purpose. On rare occasions, I stay in my pajamas all morning and wish I were back to my routine of setting off before dawn by bike to the ferry, across the San Francisco Bay and back on the bike for the last leg to the university. It was an invigorating commute, and I had heady work building a department that made an impact in the community.

But the pressure and the stress? The sleepless nights preparing for meetings and classes? I am happy to have left that behind, and the place it had in my identity. Now, if I’m not satisfied with my day, it’s my own fault.”

I wonder though, is it her own fault?

I’m struck by the limited opportunities for retired peeps to share their unique skills and work/life experiences, insights, and wisdom. A cynical view would be that “society” just doesn’t care. That it has an ageist, “thank you for coming”, perspective.

Sure, retired people can volunteer for any number of non-profits, and some create “encore” careers, but for the vast majority it’s not easy to find the right fit. To be able to make similar contributions as they did when working, just in significantly less time, and with less stress.

I wonder if I happened onto a large part of the answer when I entered the crib last Saturday afternoon. The GalPal had just finished tutoring a recently retired lawyer-friend who is learning Spanish. Afterwards, she said she felt a sense of purpose that is decidedly more elusive in her post-teaching life.

I wonder. If for retired people struggling with their new, post paid work identities, the answer may be informal small groups where each participant contributes a unique skill.

Which leaves me wondering. How might we facilitate more grass roots, retirement, purpose making?

Thursday Required Reading

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1. Hiking Is an Ideal Structure for Friendship. Love stories like this.

“As soon as we complete one hike, we immediately establish when the next will be. We rotate the organization and planning duties, eeny-meeny-miny-moe style.

That person has complete authority and responsibility to organize the hike, select the location, provide the beer and other refreshments, and make any other side-trip plans. We’ve done breakfast, dinner. We sometimes hit various local watering holes, or we just plop down with a cooler in the woods somewhere. The organizer is responsible for setting up all the logistics, soup to nuts, and is not questioned on the decisions made.”

2. This game has surpassed League of Legends, Fortnite and Valorant as the most-watched gaming category.

3. 2021’s Best States to Retire. I know, I know, how can any state known for the blog ‘PressingPause’ be ranked 31st? Spurious methods.

4. Inside a Battle Over Race, Class and Power at Smith College. Don’t know where to start on this one.

5. Mean tweets may take down Biden nominee. If only Neera Tanden had shown the same tact and diplomacy as The Former Guy. Has nothing to do with “civility” and everything to do with political power. It’s a tad bit ironic that the R’s are channeling Malcolm X. “By whatever means necessary.” (credit: DDTM)

6. The most important Western artist of the second half of the twentieth century. (credit: Tyler Cowen)

Weekend Assorted Links

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1. Radical Survival Strategies for Struggling Colleges.

“Moody’s projects that the pace of closings will soon reach 15 per year.”

Sobering. How will my employer, Pacific Lutheran University fare? If it was a stock, I would not buy it because of the larger context, but I am cautiously optimistic about our future because our brand new president is as smart an entrepreneur as I’ve known. He’s quickly learned about the never ending peculiarities of academic culture and faculty-based governance. But the Warriors may not have much success this year even with Steve Kerr as coach.

2. Payne Stewart’s daughter writes him a letter twenty years after his tragic death.

“People say time heals all wounds, but I don’t believe that. Sure, as the years have gone by, I’ve learned how to manage my sadness in losing you. But the pain never really goes away. I think about you every day, miss you every day.”

3. It turns out there are (really) bad questions.

4. How to Travel Like a Local. Thorough.

5. Why Don’t Rich People Just Stop Working?

“Are the wealthy addicted to money, competition, or just feeling important? Yes.”

6. Song of the week. So effortless.

The Beginning of the End

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That’s how one pro football coach described the moment to his players right before game 9 of 16 this weekend. Hearing that, I thought it aptly described my present stage of life. Then again, life is fragile, so who knows, I could be a little or a lot closer to the End than I realize.

If it’s hard to figure out how to approach the End, it’s doubly hard when married because everyone thinks about the End a little, or a lot, differently. The Good Wife and I are thinking fairly differently about how to live at the beginning of the end. It would be a lot easier if she would start thinking more like me.

What We Get Wrong About Work and Retirement

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A fair number of my friends are in their late 50’s to mid-60’s meaning they’re heading towards the exits at work. Some who’ve recently retired are struggling to adapt to life without work routines. They werent enamored with their work all the time, but it provided a predictable structure for their lives.

Meanwhile, we continually read about how wonderfull everyone’s “Third Act” is, whether traveling the world, volunteering, consulting, or starting new careers which shouldn’t count as retiring at all. Retiring is like investing, we only talk about the most positive examples, thus painting a misleading picture. The truth of the post-work matter is, many people don’t know what to do when they don’t have to do anything.

Yes, you’re right, this is a nice “first world” problem to have. Too many people can never afford to retire, but solving that problem is well beyond the reach of my pea-brain, so here I focus on those fortunate enough to soon pull the work plug.

Maybe the best way to think about the challenge is to consider the experience of a friend of mine in his late 40’s because I think his experience is fairly typical.

“Tom” works 60 hours a week, 49-50 weeks a year. In the limited non-work time he has, he watches reality t.v. and his kids play sports. Despite being friendly, he has few friends because he spends almost all of his time working. He assauges his guilt for working so much by spending all of his non-work time with his family. Consequently, he doesn’t have any independent interests or hobbies. In a few years his kids will be gone and he’ll wonder what to do with that little bit of non-work time. I hope I’m wrong, but I predict that In fifteen years, when he stops working, he’ll be completely lost.

Our typical way of thinking about work and retirement, work too much for several decades and then throw a switch and completely stop working, is seriously flawed. It’s unrealistic to expect anyone to succeed at reshaping their personal identity overnight.

My working friends who make time for their friends right now and love things like cycling, gardening, and traveling, will fair better than my friend who has decided to sacrifice personal interests on the alter of exceedingly long work weeks.

Of course, the closely related challenge is creating a lifestyle that doesn’t require decades of overwork. If Tom’s children decide to live more simply, like many Millenials seem to be, maybe they’ll strike a better work-life balance. One other important “dot” to connect is one’s wages. Obviously, the more specialized and sought after one’s skills are, they better they are compensated, meaning the fewer hours they HAVE to work.

Instead of throwing a retirement switch, more Baby Boomers are gently turning a dimmer switch, choosing to work half time for example. Gradually transitioning from the world of work to the world of non-obligatory work makes real sense. If you can afford it.

Life After Work

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As is often the case, I’m confused. One day last week Ron Lieber, a Times blogger, summarized research from The Journal of Consumer Research that finds older people often draw as much happiness from ordinary experiences—like a library visit or an afternoon spent gardening—as they do from extraordinary ones. Then, on the same day, with stories of extended trips to exotic locations, the Times David Wallis’s published a contradictory article titled, “Increasingly, Retirees Dump Their Possessions and Hit the Road”.

Wallis writes that between 1993 and 2012, the percentage of retirees traveling abroad rose to 13 percent from 9.7 percent and about 360,000 Americans received Social Security benefits at foreign addresses in 2013, about 48 percent more than 10 years earlier. Wallis illustrates this trend through examples of people like Lynne Martin, 73, a retired publicist and the author of “Home Sweet Anywhere: How We Sold Our House, Created a New Life, and Saw the World”:

Three years ago, Martin and her husband sold their three-bedroom house in Paso Robles, Calif., gave away most of their possessions, found a home for their Jack Russell terrier, Sparky, and now live in short-term vacation rentals they usually find through HomeAway.com. The Martins have not tapped their savings during their travels, alternating visits to expensive cities like London with more reasonable destinations like Lisbon. “We simply traded the money we were spending for overhead on a house and garden in California for a life in much smaller but comfortable HomeAway rentals in more interesting places,” Ms. Martin said by email from Paris.

Another couple in the late 60s sold their house, bought a Recreational Vehicle, and started volunteering full time for two nonprofits. So far, they’ve repaired damaged homes in 28 different states.

One of the older vagabonds, or Wallis’s term is better, itinerant baby boomers (IBB), said, “I used to dream about all the places I would go as soon as I was old enough to get away. But then. . . life happened.” That’s probably the key variable, whether older people have pent-up wanderlust.

Wallis explains that many IBB’s are traveling on the cheap, volunteering for nonprofits and organic farms in exchange for room and board or finding free places to stay through Couchsurfing.org which puts its membership of people 50 and older at about 250,000. Given the manner in which most retirees are traveling, maybe the two pieces aren’t completely antithetical after all.

The common thread is that retirees are choosing experiences over material possessions. Listen carefully everyone under 50 and you’ll hear the collective, “Ah shit, why did we accumulate all this crap?!” Personal finance researchers tell us one-third of seniors have nothing saved for retirement. It’s a good thing ordinary experiences prove so fulfilling in later life.

Both pieces were short so an important subtopic was left out, just how similarly retired partners think about how to spend the last chapters of their shared lives. I know many couples think differently about their idealized post-work lives. What to do when one person wants to see the world, and the other, the backyard?

I’m the opposite of the IBB who dreamed about all the places to go. I’ve been very, very fortunate to travel and live all over the U.S. and on three different continents. Don’t tell the Good Wife, but I’m content to walk, swim, run, cycle, and drive throughout our hood, our state, and the Western United States and Canada. She wants to travel to Spanish speaking countries so I should probably renew my passport. I will take one or two or three long distance trips for the team. But I’d be just as content taking the labradude for a walk in the woods.

 

 

 

 

 

Continuous Improvement

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A bullshit workplace notion. Midway into artistic or athletic activities, jobs, careers, relationships, life, we plateau. Shortly thereafter, energy ebbs, and our performance erodes.

We improve for a bit, we plateau, we decline.

I observed a good second year math teacher today at the independent middle school. Then we conferenced. After listening to him reflect on the pre-algebra lesson, I listed his many strengths. Then I made a few suggestions. Call on Ben as soon as he puts his head on his desk. Give Robin your marker, take her seat, and have her teach everyone her prime factorization method by illustrating it on the board. Have two more students explain and illustrate their methods and then ask, “Which is most efficient and why?” Let the kite string out a bit and “guide from the side” for awhile. Remember, the educative effect is greater when students do something than when something is done to them.

He told me he likes it when I observe because he’s reminded of effective teaching methods that he has let slip. He’s a good second year teacher who has started to plateau because he’s rarely observed, and rarely gets to observe other, more accomplished teachers.

A small number of the very best teachers, artists, athletes, and people continue improving considerably longer than their peers by seeking out expert, critical feedback; by investing progressively more time and energy; and by surrounding themselves by other positive, hardworking people, who are trending upwards.

And the wisest teachers, artists, athletes, and people have a sixth sense for both when they’ve plateaued and when their performance has begun to decline. And then the wisest, most selfless, most financially secure of them, step aside to provide the next generation opportunities to improve, plateau, and decline.

When to Retire?

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Most people retire as soon as they think they can afford to. Every week personal finance periodicals run stories about people delaying retirement due to the housing correction, health insurance inflation, and in the end, insufficient savings.

Look around and you can’t help but see older workers. Prepare to see more and more. A boatload of sixty, lots of seventy, and even some eighty something half or full-time employees.

While tossing the majority of my mom’s office files last week, I came across a remarkable memo my dad wrote on December 3rd, 1990 to the two owners of the major corporation he was running at the time. Here it is:

The three of us should sit down and have a talk. I’m 65 in 1991, and as we have discussed pensions around the office we’ve used 12/31/91 as my retirement date. We should discuss the future leadership of S&E. I find myself ambivalent about retiring or staying on.

He then listed the “PRO’s for staying” including “we are an organization that works and we have good sales and profit growth.” Then he shifted gears:

The CON’s are: I will have been at the helm for 7 years, and a change in leadership could bring fresh ideas, a different approach and faster sales and profit growth.

Age slows one. It’s something none of us avoid. I find myself like the aging ballplayer—I don’t want to stay on when new leadership could take S&E forward more effectively. Others see the slow down before you do.

I feel too strongly about the company and its future to become an impediment. What are your feelings?

The more I reflect on this memo, the more unique I find it that he’s putting the company’s interests before his own. No one enjoyed his work more than my dad and no one out worked him. Yet, he acknowledges “new leadership could take S&E forward more effectively.” That’s like President Obama saying someone else might have a better working relationship with Congress and accomplish more on behalf of the American people. Or an aging college professor saying students might benefit more from an energetic, 30-something academic.

I don’t begrudge any older, moderate income person their decision to work past their prime, but for older, financially secure people, my dad provides a selfless example worth emulating. The question isn’t just what’s best for me, but what’s best for the company or even the community.

Footnote to the story. The owners did sit down with my dad. Shortly afterwards they extended his contract and also named him Chief Executive Officer of a second corporation they owned.