Category: Retirement

With so much up in the air these days, the majority of Americans are worried not only about their health, but also about their financial well-being. But while virtually all of us are facing circumstances we haven’t seen in our lifetimes, as a wealth advisor, the concerns I hear about from my retired clients, friends, and family are akin to those I’ve heard throughout my career. More than anything, they are worried about outliving their money.

It’s certainly a reasonable fear, particularly when markets are volatile and daily updates on the pandemic only emphasize that there are no guarantees in life. But that doesn’t mean you don’t have control over what happens to your money. In fact, most of the time, it comes down to a somewhat unsexy—but essential—skill: budgeting.

Many people don’t have a good handle on how much they spend—especially those who have some discretionary income. Just think about it: Do you know how much you spend each week on coffee, takeout, the occasional bottle of wine? Often, those are just a few of the regular expenditures people make without much thought. Now, think about the bigger-ticket items: high-end gifts, vacations—even homes. If you have the cash—or credit—right now, it’s easy to make these purchases without considering their long-term impact.

But we know that people are living longer than ever before, and that means most of us will spend far more time in retirement than the generations that came before us. In addition, though our lifespans have increased, many of us will still face the health challenges that come with old age—from slip-and-fall injuries to cancer. Unfortunately, those challenges come with a price tag as well. If you’ve never looked at the cost of long-term care facilities or a home health aid, take some time to do so now. You’ll see that it may be more than you’ve bargained—or budgeted—for. And with constant reminders that we can’t possibly predict the future, the time to get a handle on your retirement savings—and a plan that prioritizes financial longevity—is now.

Some are comforted by the concept of an itemized budget, a document dictating exactly how much they should spend on the various aspects of their lives, from housing to happy hours. If that works for you, go for it! But for others who are overwhelmed or unenthusiastic about documenting the direction of every penny they have, creating broad strokes may be good enough. The goal is to have guidelines on how much you spend in different areas.

Look at how much you’ve saved to begin with. (if you’re still working, this may be a good time to consider adding more to your retirement accounts if you’re not yet maxing out your contributions). Next, think about the longest amount of time you may realistically live. From there, you’ll get a rough idea of what you can comfortably afford to spend each year. Again, keep in mind that you never know when an expensive issue may arise, so factor that into your allotted spending as well.

Now, it’s time to think about the categories into which your current and future expenses may fall: housing and utilities, food, entertainment, health care, travel, etc. Ask yourself approximately how much you currently spend on each, and how that may change in the future. For example, do you expect your housing expenses to be reduced because you plan to sell your four-bedroom home and relocate to a condo once your youngest child leaves for college? Do you expect travel expenses to go up when you retire from your full-time job and begin island hopping each winter? Will your health care expenses likely grow as your spouse’s degenerative disease worsens? Or are you planning to foot the bill for a grandchild’s private education, taking on a new financial responsibility? These anticipated life changes should be factored into your budget as well.

You may find, too, that your budget itself dictates a change. Perhaps you can’t indulge the way you once planned to during retirement, or maybe the opposite is true: you find you’ve been more frugal than necessary. The bottom line is, when you know where you are–and where you might be headed–you’re far more likely to arrive at your ideal destination. And if you’re unsure about where that is, check out my book, You’re Retired… Now What?

You don’t need me to tell you that these are uncertain and unprecedented times; I’m sure you feel it yourself everyday, as you talk to friends and family—virtually or from a distance, of course; watch the news and social media; and yes, check your retirement accounts. No one knows what the next few days, weeks, months, or even years may bring. Many signs point to an ongoing struggle as we face a novel foe in the form of COVID-19—at least for the time being.

The markets reflect much of our anxiety about what the future holds for our health, our safety, and our wallets. When you see the drop in value of your 401(k), caused by a COVID-19-driven market, you may feel all the symptoms of a panic attack coming on: rapid pulse, sweaty palms, an overwhelming sense of dread, and more. In times like these, many consider liquidating their investments and moving what they have into a money market account, hoping to just wait it out and hold on to what hasn’t yet been depleted. I know how common this rationale is among investors because they call me.

I’ve been an independent wealth advisor for three decades now. I’m used to talking panicked clients off a ledge in what seems like the worst of times. I did it after 9/11, and again after the Tech Bubble burst. And I’ll tell you what I tell those clients when my phone rings, their worry almost palpable: this isn’t the time to lean in to that feeling.

I know it may feel like the world is disintegrating in front of your eyes. It may seem logical to hunker down with the acorns you still have and hope and pray that spring arrives soon. That may be a fine strategy for squirrels, but it’s not good for humans who have to pay for things with money—often for twenty or thirty years after they stop working.

We can turn to an old Wall Street adage for a better approach: Buy low and sell high. Why? When you sell low, you lock in any losses that you’ve experienced—permanently. Meanwhile, long-term investors know that volatility is an inherent part of investing. Markets go down, and they go up; it’s the nature of the game. Investors make decisions with this in mind. And now, when markets are down, is not the time to sell your equity investments. What should you do instead? Give your retirement investments time to recover.¹

When your worries start to rack up and you feel an itch in that mouse-clicking trigger finger, consider taking a break from your regular media channels—and from checking your account retirement balances. I often tell clients that a little dispassion in a volatile market often helps their case, especially if they’re nearing retirement. Everything is temporary, and the more you can do to remind yourself of that, the better off you’ll be.

And though it may seem counterintuitive, this may actually be the perfect time to continue adding to your investments (something that happens automatically when you set up recurring payroll deductions), rather than pulling money out. Why? The drop in the market means you can get shares at a cheaper rate. In times like these, you end up getting more for your money—which could be a real boon when we return to some semblance of normalcy, sending moods and markets alike higher.

In addition, if you’re working with a competent advisor, he or she has taken steps to protect what you’ve worked so hard to acquire. Plus, while there are no guarantees in life, history has shown us time and again that economies operate cyclically. Lows are par for the course—but so are highs. In short, don’t panic. Eventually, we’ll get to the other side.

With that in mind, we can look to those acorn-hoarding squirrels for one important lesson worth noting: Oftentimes, a long, cold winter makes for an even sweeter spring.

First featured on Forbesbooks.com

Successful retirement planning is as much about your goals for your golden years as it is about the legacy you want to leave behind.

I ask my clients a whole slew of questions as part of the retirement planning process, from how much money they believe they would need to feel financially secure, to what they would like to accomplish in retirement, and what they would do after their last working day if money were no object. Another crucial question: “Do you want to leave an inheritance?”

I get a broad range of answers to most questions I ask, and this one is no different. Some clients respond that they have already provided their children with so much—putting them through private school, a host of expensive extracurricular activities, and the best colleges. “I’ve already given them everything,” they say. “The rest is up to them.”

They are certainly not alone. Even Warren Buffett has said he is not leaving his kids jaw-dropping inheritances. Though I’m confident they’ll never be uncomfortable, he is insistent that they do something meaningful with their lives—on their own terms.

But leaving an inheritance doesn’t necessarily mean you’ll be encouraging your beneficiaries to live below their potential or to be irresponsible. Many people do it prudently, which, for many, is key—because they still have lives to live.

For most people, the amount they want to leave behind directly affects how much they can spend in retirement. For example, I have a retired client who is 50 years old, and takes 5 percent a year. She could live to 100 and be just fine. But if her goal were to leave each of her kids a half a million bucks, we’d be doing things very differently.

What if she wanted to leave her wealth to a cause she believed in, like a local animal shelter or a charity that provides families with clean water in developing countries? That plan would shift again, and we would address her spending with her legacy in mind.

When it comes to inheritance planning, there are so many things to consider, and my book, You’re Retired, Now What? can help you identify them, so that you can fulfill your goals in life—and beyond.

What would you like to accomplish in retirement?  It’s a question I always ask my clients. My goal is to help them create a plan that feels both emotionally fulfilling and productive. Retirement offers incredible potential. For many people, it’s the first time in their adult lives when they don’t have a full slate of responsibilities—a desk to report to or kids to shuttle to and from school. And that means they can pursue wilder dreams than they may have had time for previously: building a non-profit to support the cause closest to their heart, traveling to exotic locales, or mastering the art of béchamel in a French culinary program, for example.  

But more often than not, when I ask about what they’d like to accomplish once they clock out for the last time, the response I get isn’t very… ambitious. Instead, most clients respond with, “Absolutely nothing.” They picture themselves spending their days lazing on a beach, putting in long hours on the putting green, or sailing into the sunset—perhaps with a grandchild or two by their side. And I don’t blame them. 

It makes perfect sense to fantasize about endless hours of rest and relaxation when you’re in the thick of your working years. But what most people don’t realize is that just a short time in, all of that R&R becomes a little routine—and that routine quickly turns to boredom. It’s then that a key truth becomes evident: When it comes to retirement, purpose is crucial. 

What does purpose look like? It’s different for everyone. But many find that integrating a little pro bono work into their regularly scheduled retirement programming makes a tremendous difference in their lives. 

With your bills paid and kids out of the house, retirement can be the perfect time to lend the skills you’ve honed over the course of your career to a worthy cause for little to no cost—particularly if you love what you do. 

I’ve watched so many clients find fulfillment through pro bono work. Attorneys who take on cases for people in need. Accountants who offer tax advice to organizations dedicated to the public good. Contractors who collaborate with other members of their community to build houses for the homeless. In the end, they found that it was about more than just doing good. It also gave them an opportunity to connect socially and use their minds and their bodies. It gave them a reason beyond early tee time to get up in the morning. And that is just priceless. 

For more information on how to build a meaningful retirement, check out my book, You’re Retired, Now What?

Building a retirement plan is not a one-shot deal—at least not in my office. Crafting a plan that fits my clients’ needs takes multiple conversations, careful observation, and a personalized approach. But for that first meeting, I have a primary goal: to understand what peace of mind means to them. 

I don’t use the financial services industry’s generic risk profile questionnaire to do that. Why? Those questionnaires don’t account for the fact that emotions drive decision making. Without that important insight—along with the potential for clients to misunderstand some of the questions—it’s all too easy to end up with an incorrect risk profile, and thus, an inadequate plan. 

Instead, I apply a set of metrics that I have developed over more than three decades in this business and meetings with literally thousands of potential clients. My metrics provide me with everything I must know to do the best possible job for the client, whatever their circumstances may be. They take into account the reality that, while clients’ concerns are often similar, their situations are seldom the same. 

To determine how to establish peace of mind, I start by asking about their biggest fears.  When I know what keeps them up at night—the thought of running out of money, health issues, the cost of fulfilling their bucket list, and more—I can determine how to address it. 

Next, I ask how much retirement savings they would need to feel financially secure. Often, people don’t know. They have a number in their minds, but it’s not based on anything concrete. When we drill down and look at lifestyle, purpose, family obligations—the whole nine yards—that amount may be more or less than what they quoted. But here’s the thing: we actually figure it out. 

Another crucial question: What amount of income do you need to live comfortably? This can be tricky—we’re not talking about how much they need while they’re still working and contributing to a 401k. We’re talking about how much they need in retirement, when their circumstances may be different. 

Without answers to these questions, I can’t devise a plan—not a good one, at least.

Of course, that doesn’t stop many firms from doing so anyway. Some even use robots. Answer those generic questions, push a couple of buttons, and voila: your retirement plan is done. That may be just the right solution for a fast-food drive-through, but it’s certainly not the way to go for retirement planning—particularly if peace of mind is the goal. And it should be. 

My book, You’re Retired. Now What? provides more insight on creating a retirement plan that prioritizes peace of mind and personal success. You can learn more about it here.

Bringing, as I do, a contrarian point of view to wealth management helps me encourage my clients to have a clear-eyed approach to investing. It is that kind of unbiased, honest assessment that holds the key to remaining committed, long-term, to market-driven investment strategies—which, if you see them through, can help fuel purpose-driven retirement planning.

So what is a purpose-driven retirement, anyway?

The answer will be as different as each person you ask, but among the majority of clients

I serve, three objectives underlie their retirement planning:

• Never running out of money during their lifetimes
• Providing for survivors after they’ve passed
• Preserving and expanding their contributions (both monetary and physical) to philanthropic pursuits aimed at making the world a better place.

Don’t assume that only the last of those serves the “purpose” part of “purpose-driven retirement.” In fact, all three do.

After all, you must first be secure yourself in order to extend a hand to others.

Providing for your survivors, meanwhile, sets an important example: That caring for others begins at home. If you couple that example with encouragement that your beneficiaries too help others, you’ll be pursuing one of the most important indirect forms of philanthropy, passing the ethic along.

With these first two objectives satisfied, philanthropic retirees can then turn their attention directly helping those in need. I believe that the cause(s) one chooses to assist is no less important a decision than the form their help takes. No single need is more pressing than any other; the question is, what touches your heart?

I’ve opted to put my philanthropic efforts into a school for orphaned children in India, a hospital in my neighborhood, and a homeless shelter in the inner city. Does throwing your weight behind efforts to help addicts speak loudest to you? Or is it the battle against workplace bullying? Perhaps you’ll join the Peace Corps, or collect clothing to spur micro-enterprise in poor communities abroad, or start a brand-new effort addressing an issue you believe is being largely ignored at society’s peril.

Where you choose to do good is a highly personal decision. That you choose to do good, and preserving your ability to do so, I believe, is the greatest gift of our golden years, both to those who receive what we give, and of all the gifts we give ourselves.