Why Retirement Planning Needs To Be Done Differently

“I see retirement as just another of these reinventions, another chance to do new things and be a new version of myself.

— Walt Mossberg

The Golden Years?

Ah….Retirement. Time to kick back, do nothing and let the world go by after a lifetime of hard work, sacrifice and savings. Sounds familiar, doesn’t it? Well, if you watch most of the advertising from the majority of “financial services” companies or speak with a typical financial advisor, according to them, that’s what everybody should try to achieve. That vision of retirement (ideally at age 65) has become the dream of millions & millions of people. This strategy may have worked for our parents or grandparents generation but is it the best way to do things today? I would argue that it’s not and that it’s time for a “new” take on retirement and retirement planning. Here’s a few reasons why:

  1. We’re Living Longer: Back when retirement as we know it was created (in the 1930’s with the advent of Social Security) the age was “set” at 65. At that time the typical person who made it to 65 was expected to live another 12 years. Today a male born in 1952 (turning 65 in 2017) can expect to live 19+ years, ~58% longer than when Social Security was created! If you are a male who is 40 today your life expectancy at age 65 is more than 20 years. If you’re female your life expectancy is even longer. These numbers come from the Life Expectancy Calculator at the Social Security website.
  2. Pension Plans Are Disappearing: In the last 30+ years the percentage of workers covered exclusively by a company pension plan has dropped by almost 90%! (from 28% to 2%) This means that nearly all of us are counting only on ourselves for our own long term savings, instead of on our employers or the Government to save for us (that both have a large number of people to improve the odds). The result? Less and less of our “golden years money” is assured through the use of actuarially sound savings strategies and instead is subject to the success (or failure) of each of us and our own investing/savings habits (which are usually pretty poor). Source: EBRI website Add in the uncertainty of Social Security and things get even more “interesting”
  3. Work Is Changing: We are changing jobs or careers much more than our parents or grandparents did. Many of us will have multiple “careers” as we go through life and many of us will work farther into “old age”, either because we feel the need financially or we just enjoy the work that we do.

Old And New

Back in the day, “old skool” retirement planning was easier. Many workers had pensions, stayed at their jobs longer and died sooner once they did retire. That made the “math” easier from a planning perspective. When you combine a higher % of mostly-guaranteed pension income with Social security, some savings and a shorter lifespan, getting to the end with money in the bank was just a bit more predictable.

Today, things are much different but unfortunately many planners are still stuck in the past, trying to make the numbers work based on outdated assumptions and often coming up short. This leads to a whole lot of discouraged and depressed people who think that they’ll never be able to “retire” in the traditional sense. Conversation goes like this:

“Well Mr and Mrs. Smith, I have some bad news. We ran the numbers and it looks like you won’t be able to retire at 65, do nothing and sit on the beach. The numbers just don’t work…”

Under this paradigm, the choices often come down to:

  • Work longer
  • Live on less
  • Save a lot more

None which are appealing for most people

This is because most financial planners come from an investment only background. They earned their incomes from managing investments exclusively. So, every problem could be solved by investing. The other aspects that make our lives interesting and fun were looked at but not fully addressed or sometimes even considered. That’s what oftentimes happens when the question of “can I retire” is reduced to a math problem.

The New Paradigm

The world has changed and so must retirement planning. The new realities demand a new, more flexible method of retirement planning. The conversation with Mr. and Mrs. Smith will probably sound a lot different under this method.

The New Retirement Planning Framework:

  • Holistic “big picture” planning that considers all aspects, not just saving/investing
  • Re-imagining what retirement is
  • New realities of life (longer lifespan, more flexibility, higher costs)
  • Goal setting and prioritization
  • Retirement not a number but a lifestyle
  • Consider non-asset assets and how to best use them
  • Discovering your true passions and making them work for you
  • Planning for a long, active, involved life
  • Ongoing feedback, adjustments

Investments and savings are still an important part of the plan but not the entire focus. There’s much more to life and the question of “can I retire” than just money and that needs to be reflected in our planning. In order to get the answers you need in this new world of retirement planning you will probably want to work with a true financial planner who runs their business in such a way that they can take the time to work with you for the long term, no matter your net worth.

A Recurring Theme

Stay tuned for much, much more on the benefits of this model of financial planning. I’ll be expanding on many of the individual components of this new way of planning as we move through 2018. In the meantime, make the effort to start envisioning what your retirement, and your long term financial picture in general, might look like. If you don’t like what you see or want some help in refining your plan I would be happy to speak with you to see if I might be of service.

The Fun Money Segment-Mark’s Book Club

Ever since I was in grade school I’ve been a fan of science fiction books. I’ve read a lot of them over the years, books authored by everyone from Issac Asimov to Arthur C Clark to Larry Niven and a bunch of others. The thing I like about Sci-Fi books is that, if they’re well done, you can become totally immersed in the future, with all the technology, tools, gadgets and societies that “could” happen one day. Good science fiction takes today’s technology and extends it just enough that it’s completely new, yet still familiar.

Back in the Summer I was listening to the Security Now Podcast on TWit (which is hosted by Steve Gibson, a computer security expert). I find the podcast a great way to keep up to date with all of the security and privacy issues that face us as we use computers to navigate our world. He’s a voracious science fiction reader and he recommended that fans of the genre check out the “Frontiers Saga” series of books. The books are authored by Ryk Brown, a former EMT and computer repairman who has committed to an impressive goal of writing and self-publishing a total of 75 books in the series. The series is broken down into 5 “sets” of 15 books each. He’s through book 7 of the second set and I’m finishing up book 6 of the first set.

Here’s a summary of the series from the website:

“Throughout history, certain discoveries, inventions, events, and even people, have changed the course of civilizations. Occasionally, these elements come together to change the destiny of humanity. The Frontiers Saga is the story of such a moment.

The year is 3472. The Earth is recovering from 1,000 years of darkness and despair caused by a bio-digital plague that nearly destroyed her entire population. The discovery of the Data Ark, a repository of human knowledge left behind by their fallen ancestors, has advanced Earth technology the equivalent of 200 years in only a century. As a result, they discovered that they had long ago settled nearby star systems, many of which had grown into massive planetary civilizations that continued to settle further out into space. They also discovered that those worlds had been ravaged by the same plague, and that each had struggled to rise from the ashes and thrive again.

One world survived by taking what they needed from their neighbors, by force. Over the centuries, they have risen to become an interstellar empire, and have conquered every human-inhabited world within 50 light years of their home world… except one.

Now, the people of Earth rush to prepare a defense against the newly discovered threat. But the nations of the world that spawned humanity may not have the infrastructure, population, and political will necessary to meet such a task.

One discovery, one invention, one event, and one man… They all come together to create the spark that changes everything.”

I’m really enjoying the books. They’re well written and short enough (40-60000 words typically) that they aren’t ponderous reads. Each book has some closure to the story but leaves you wanting to find out more. If you enjoy science fiction, I recommend you check out the Frontiers Saga Episodes 1-3 on Amazon.  let me know what you think!

Contact And Connect

To leave me feedback, comments and suggestions on how I can make this podcast better. Just email me at mark@financialclaritypartners.com .

You can also find us on Facebook: https://www.facebook.com/FinancialClarityPartners/

Twitter: @PlanWithClarity

And Google +

Leave a Comment: