As appeared in The Jerusalem Post on 05/18/16
“‘Retiring’ – within that word is ‘tiring’, and I’m not tired. I don’t believe in retirement, really.” – Theodore Bikel
I recently met with a couple where the husband plans on retiring in two years and the wife in three years. As our meeting progressed, I asked them how they plan on spending their retirement. Without hesitation, they answered in unison that they want to travel.
I asked how often they plan on travelling and they responded about two 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 two months a year the big question is how they plan on spending the other 10 months of the year?
Often times, spending more time with grandchildren and volunteering are the answers I receive from retirees as to how they plan to spend their time during retirement. But the most honest and intriguing answers that I sometimes 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 working schedule and now that they have so much free time they just don’t know what to do with themselves.
I know many workaholics who retired, went cold-turkey and are miserable. They spend their days sleeping. You know it’s bad when the highlight of their day is visiting me to discuss their account! I can’t stress enough the importance of planning your retirement holistically. Obviously, the financial aspect of retirement is critical to plan for, but filling up the day in a meaningful way is even more important. It can be very beneficial to 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 and purpose to this stage of life.
A few years before you are set to retire, start speaking with your spouse about how you view retirement. Realize that travel for 99 percent of the population isn’t a full retirement plan. You will need to figure out a plan on how to spend your time. I would think about continuing to work part time, or volunteering with an organization where you can use the skills that you acquired over your work career. After addressing that issue, you will need to figure out how much money you will need to fund your retirement.
For investors of modest means (defined broadly as $200-500,000 in investments, home owner, current income in the $50-70k a year range, and expecting to receive social security and some modest pension) the most important aspect of planning you can do vis-à-vis your retirement is to try and figure out your estimated expenses. The more free time people have, the more money they will spend. Whether it’s going with your spouse to a café for lunch, traveling a few times a year, or pampering grandchildren, the early retirement years can be costly.
If you can figure out your expenses, then you can figure out the amount of income you will need to generate to supplement your pension, social security and any other income sources you may have (part time work etc).
Once you have a handle around your income needs, you should go ahead and create an income stream.
Speak with your financial adviser to make sure your asset-allocation is in line with your expense requirement during retirement. In addition, an experienced financial adviser can be an excellent resource and soundboard for you when starting to make your plans. They have worked with many individuals in similar situations and they can point out many issues that you may not have 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.