As originally appeared in The Jerusalem Post on Thursday, January 26th.
I don’t even think about a retirement program because I’m working for the Lord, for the Almighty. And even thought the Lord’s pay isn’t very high, his retirement program is, you might say, out of this world. George Foreman
Most people look forward to the day they no longer have to show up for work. After working hard for decades, retirement has been well earned. While as a financial advisor it’s often my job to help individuals fund their retirement, I have found that more and more the job entails getting them to start planning and thinking about how they want to spend their time when they no longer need to punch a clock. You better think long and hard before you retire, on how you plan to fill up 24 hours a day, 365 days a year, for what could easily be 20-30 years!
Joanne Kaufman wrote in the New York Times about those taking early retirement. She describes a man who retired at 42 years old, “For the first few months after Jon Helmuth retired three years ago, he slept late, acquired a tan and showered at odd times. Actually, some days he didn’t bother to shower at all. After that pleasantly aimless interval, Mr. Helmuth, a divorced father of four who is now 45, began organizing his five-bedroom house in the woods of Vandalia, Mich., a village near the Indiana border. But once he alphabetized the spice rack and finished making an easy chair out of castoff designer jeans, “I started running out of things to do,” he said.”
I recently met with a couple where the husband plans on retiring in May and the wife in December. I asked them how they plan spending their retirement. Without hesitation they answered in unison that they want to travel. I asked how often they plan on flying and they said they really would like to spend 2 months abroad every year. I then asked what they plan on doing the rest of the time and they both looked at each other and shrugged their shoulders. Assuming that they will travel 2 months a year the big question is how they plan on spending the other 300+ days of the year?
Spending more time with grandchildren, volunteering are the most common answers I receive by retirees as they explain how they spend their time during retirement. But the most honest and intriguing answers that I get are given by those who never thought about how they will spend their time post-career. They tell me that they are bouncing off the walls! They were so used to having a set schedule while they were working, now that they have so much free time they just don’t know what to do with themselves. I know that personally, while not a workaholic, when I take a day off, I go absolutely stir crazy. For those of you like me who struggle to fill 1 vacation day, multiply that feeling by 7,000! That’s about 20 years of what your retirement is going to be like. Yikes!
A few years before retirement start to plan. How to fill up the day in a meaningful way is very important. Realize that travel for 99% of the population isn’t a full retirement plan. Part-time work and volunteering are popular options. Speak to other retirees to understand how they made the transition from working to this new chapter in their life. I use the phrase “new chapter in life” on purpose. I have found that those who have succeeded in this transition looked at retirement not as the beginning of the end, but rather as a new chapter in their life. I have found that this attitudinal approach is crucial in creating an optimism which helps give a meaning a purpose to this stage of life.
Now you will need to figure out how much money will be needed to fund your retirement.
The most important aspect of planning you can do vis-à-vis your retirement is to try and figure out your estimated expenses. As I have written numerous times, leisure = money spent. The more free time people have, the more money they will spend. Whether it’s going out with your spouse for breakfast, travelling a few times a year, or picking up grandchildren every Tuesday and feeding them pizza and Bamba, the early retirement years can be costly.
If you can figure out how much money you will need, then you can figure out how much income you will need to generate to supplement your pension, social security and any other income sources you may have (part time work etc).
Speak with your financial advisor to make sure your asset-allocation is in line with your expense requirement during retirement. In addition, an experienced financial advisor can be an excellent resource and soundboard for you when starting to make your plans. They have worked with many individuals in similar situations as you and can draw from their experience to point out issues that you never even thought about.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates. Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.gpsinvestor.com or email firstname.lastname@example.org.