As a new year approaches, you are one year closer to retirement. Congrats! Depending on your definition of retirement, this could be really awesome, kind of stressful, or completely unknown.
What if, regardless of your age, you looked at your retirement possibilities through a different lens this coming year? Starting at retirement, and working backwards, how might clarity influence your behavior today and get you closer to what you want?
Work, both hours and location, have changed significantly in the past four years. It’s natural that your definition and timeline to retirement has changed considerably too. Traditional planning for retirement seems to obsess around account values and spending rates. Today, financial plans can be narrowed down to one page or include an appendix and definitions that stretch many. Ironically, neither may provide the answers or knowledge you are seeking.
So much of retirement readiness seems to be defined by numbers and commas in your account instead of where you may choose to spend your time. Why is that? Why have we become so data dependent on spreadsheets, graphs, and forecasts when planning for retirement? I’m guessing here, but I think it’s our discomfort with uncertainty. We crave more certainty in all our choices. When we have this, we feel more confident and tend to act with purpose on all decisions, both big and small.
The problem this creates when strategizing for retirement is the lack of certainty when investing our money. If certainty existed in all our investment choices, we’d have what we want and lots of it. Comedian and actor, Jim Carrey, has a great quote around wishing everyone could be rich, wealthy, and have everything they want. Only to discover that’s not the answer or key to happiness and fulfillment. Having guided investors across all wealth spectrums for the past twenty-eight years, I know this to be true.
Ok, is there an alternative to framing retirement? I believe it begins by imagining where you want to spend your time. Redefine the word “retirement” into something more digestible and relatable. Perhaps thinking of this chapter as just controlling more of your time. When you set your schedule, you only spend it with people and activities that are important to you. This increases your engagement (and happiness) as you’re only doing what you want, when you want, with those people you care about.
You don’t have to have all the answers ahead of time or fret if you’ll be retiring next year and are just getting around to this. It’s helpful to have some ideas on where you’ll spend your time so you may narrow down your choices. It’s also beneficial to have a trusted counsellor to bounce ideas off so you continue moving in the right direction.
What exactly do you want to be doing Monday through Friday once you’ve repurposed your time? What you choose to do with your time matters. The art of planning is not about being right today, just being less wrong overtime. This may lead you to reconsider how you spend your time.
In addition to time, another challenge is defining yourself beyond what you do. I’m a partner, owner, principal, etc. So much of our identity is in the work we do each day. When we begin thinking about our time in the later years and working backwards, we can ask ourselves who we want to become beyond the work we do each day.
This is scary! Reimagining who we are after decades working at the firm or in that industry is not easy. Many simply choose to keep working so they don’t have to answer this question. That’s unfortunate in the long run, as it robs you of time for activities and with people you enjoy.
Applying the skills and knowledge you have accumulated in your working years to an encore career or new venture can be very rewarding. There is nothing wrong with working later if you enjoy what you’re doing. Having structure to your days is important, as is socialization and overall wellbeing with a sense of purpose.
Adding a workout routine to your schedule will keep you physically and mentally fit too as more time becomes available. Your health and wellness routine will never show up on your balance sheet, or in your account values, and that’s unfortunate. Your lifestyle choices and health will define your later years to a much greater extent than your financial wealth ever will.
Yes, your accumulated wealth does matter as you manage cashflows through the later years. Too often our focus sticks to a number, or income level, or watching account values zig and zag and allowing that to define who we are and what we do. Your investments are a tool to help you live your life, so you have choices. You shouldn’t let them define your time or who you become.
Instead, take a different approach by contemplating where you may spend your time in retirement and work backwards. Direct energy towards inputs you control and let the chips fall where they may. This less traveled path is much more enjoyable and rewarding in the long run.
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Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Flowerstone Financial are not affiliated.