How to Create a Great Retirement

When we attended our first retirement planning seminar, the presenter recommended the book What Color Is Your Parachute? for Retirement as a great book to plan an awesome retirement.

Obviously, I couldn’t let a comment like that pass me by, so I got a copy and started to read.

I’m so glad I did!

Today I’ll take you through the book’s main messages and share some of my thoughts.

Table of Contents Overview

Let’s begin by reviewing the table of contents which includes both a title and a few summary sentences for each chapter:

• Chapter 1: Retirement is Dead — Long Live Retirement. The retirement we knew is disappearing. Do you want a finish line or a marker on your journey? Ten ways to customize your transition.
• Chapter 2: The Retirement You’ve Always Wanted but Forgot About. What we all want in life. Six fields of knowledge that support well-being. What are the elements of your ideal retirement?
• Chapter 3: The Life You Can Live (Right Now). How we make big life decisions. Are you buying a “lifestyle” or creating a life? Ten steps to activate your core values.
• Chapter 4: Retirement Economics is More than Personal Finance. A family approach to retirement economics. The original pyramid scheme. Your three-legged stool is wobbly. The spending-saving seesaw.
• Chapter 5: A New Approach to Retirement Security. Five Pillars are better than three legs. How to use automatic systems for saving, investing, and income. Where to find a fiduciary advisor.
• Chapter 6: The Nature of Space and Time. Four layers of retirement geography. Is your dream home a nightmare? Calling it a community doesn’t make it one. Your essential region.
• Chapter 7: Medicine — Who’s in Charge? How much medicine will you buy? Your medical philosophy, and what it costs. Choose medical relationships before you need them.
• Chapter 8: Health from the Inside Out. Our biology plus medicine equals health. What’s your biological age? The longevity class reunion. Three practices for biological vitality.
• Chapter 9: A New Chapter in Psychology. Are you trying to fix your weaknesses? Three paths to happiness. Staying engaged in work — and retirement, too! Your greatest strengths.
• Chapter 10: Happiness is Real Only When Shared. Work connections wither and die. Build relationships in advance. Your three levels of social connection. Retirement with that special someone.
• Chapter 11: The New Retirement — an Undivided Life. Connect your life circles for well-being. Do you have a calling? Don’t wait for retirement — start living your ideal life now!

As you can see, this book is about waaaaaaaay more than the money aspects of retirement. It’s a holistic look at the subject and how to plan for a successful post-work life.

If you subscribe to the notion that many fail at retirement because they don’t have a plan to address the various parts/challenges of it, this is the book for you (or them)! As you’ll soon see, it looks at retirement from several important angles and suggests ways to think about and plan for each of them.

The Definition of Retirement

The book begins by looking at the evolving definition of retirement, something the retirement police would not approve of! LOL!

Like me, the authors agree that the definition of retirement is changing. Some of their thoughts:

At all levels — individual, organizational, and societal — [the old definition of retirement] is dying. And it’s dying sooner than we thought. The successor is a new, unknown, and quite different life stage — which will also be called “retirement.”

Because it’s so different from the original idea of retirement, some people don’t even want to call this new life stage retirement. They’ve come up with labels to try to articulate what a huge shift it represents.

[Soon] the original idea of retirement of all leisure, all the time will have faded away, and this revolutionary new approach won’t even need an alternative name. This radical new life stage will eventually come to be called, simply retirement.

I think you can already see why I like this book. It begins with the notion that the definition of retirement is changing, something I’ve said previously multiple times (plus I’m living through — LOL!). The English language is fluid and definitions adjust over time, and that’s certainly what’s happening with retirement.

So, now that the definition is changing, what should people do about it?

That’s the heart of what this book seeks to answer.

Three Parts of Retirement Well-Being

The book begins by asserting there are three parts of retirement well-being as follows:

• Happiness
• Prosperity
• Health

It then breaks down these three into six areas, splitting each of the three into two parts:

• Happiness: Psycho-Social
• Prosperity: Geo-Financial
• Health: Bio-Medical

It connects these six parts to your overall values (more on this in a minute). This is imperative, the book claims, if you want a happy retirement.

The rest of the book then describes in detail each of the seven areas (including values) and takes the reader through exercises to think about and create a great retirement.

I know that’s a very broad overview and trying to understand it is probably like drinking from a firehose. Don’t worry, it should all become more clear as I summarize each section so you get a feel for what they are talking about.

Let’s dive in…

Determining Your Retirement Values

As noted above, everything ties back to your values. While many people might want to rush past this section thinking they know what their values are, I would suggest pausing and taking some time with this. If you get this wrong, the rest, which is built upon it, will not be that good either.

Here’s how the book summarizes the values section:

What are your three most important core values, or guiding principles? Enter them in this Life Circle. If you’d like some help deciding what to enter, use the Values Universe exercise beginning on the next page. You’ll also use them for your One Piece of Paper in Chapter eleven.

The book then spends 16 pages helping you determine your values including separate questionnaires for men and women.

This exercise is very similar to the one I wrote about in How to Prepare in Advance for a Great Retirement.

Once you have your values down, you then enter the sections where they cover the six areas anyone must address to have a great retirement.

We’ll review each of them in the order the book shares them. Thankfully, they begin with the money stuff. 😉

Financial Plans for Retirement

This was the section I was most interested in, so I’ll spend extra time on it.

The book actually takes two chapters to cover money in retirement while allocating one for each of the others.

In chapter 4 the book discusses how retirement has been managed historically (and the pros and cons of each option). In chapter five it gets into the financial aspects of retiring today (which is what I’ll focus on).

The solution to preparing financially for a great retirement is what the book calls “Retirement Autopilot”. They describe this as “[turning] the myriad details over to automatic external systems that keep us on course.”

I guess they borrowed the concept from The Automatic Millionaire and expanded it. The idea is simply as follows:

• Retirement is fairly easy to understand and plan for financially.
• The hard part is execution — actually taking the right steps towards retirement.
• Instead of trusting yourself to make the correct steps (which many won’t if left to themselves), automate the execution so the right things get done no matter what

Of course if you have the discipline to manage your money proactively, you may not need to automate (or automate as much). But if you want to save time, you may anyway. It’s your choice.

I autopiloted my 401k savings/investing for over two decades and managed the rest of my money on a more hand-on basis, but that’s just me.

The book breaks Retirement Autopilot into four key elements:

• Sources of Income. Five pillars, or PERKS, provide more stability than the old three-legged stool.
• Financial Education. Both rational agents and nonrational agents make better decisions when they know more.
• Automatic Systems. Automatic systems for saving, investing, and distributing money are more reliable and efficient than humans are.
• Fiduciary Advice. Experts free from conflict of interest can improve decisions at key points in time.

Let’s review each of these briefly…

Sources of Income

The book recommends fives sources of income (it calls them pillars) represented by the acronym PERKS standing for:

• P is for Personal Savings
• E is for Employer Plans
• R is for Real Estate
• K is for Keep Working
• S is for Social Security

Some thoughts on these:

• The book notes that you should “take really good care of your largest pillars [and] at the same time build up additional pillars [to] give you more stability.” Sounds like a no-brainer to me.
• Obviously the first two are key — saving money yourself as well as socking it away in a 401k or similar plan. In fact, Everyday Millionaires found that most of the “regular” wealthy became that way through consistent 401k savings/investing.
• I like that they recommend real estate, but their focus is wrong IMO. They emphasize the advantages of your home and how you might be able to turn that equity into income during retirement. Yikes! I prefer recommending getting to know a bit about real estate and owning a rental property or two as a solid option. Or even checking out REITs. “Investing” in your home seems like an idea from 1950.
• It certainly is the new retirement when you must keep working. LOL! The difference for me is that if you must keep working, you’re not really retired. If you don’t have to keep working but choose to, you are retired. Semantics perhaps. Anyway, I highly recommend a side hustle you enjoy over working at any job for The Man.
• I like what they say about Social Security: “We’re willing to pay for professional services to maintain other valuable assets such as our home or investment accounts. But we don’t think about getting advice for Social Security benefits. With boomers becoming eligible to apply for benefits, more advisors will turn their attention to strategies for maximizing benefits.” I have to agree. There are so many options and such a large amount of money at stake, I think paying an expert to work through a Social Security strategy is likely to be added to the list of financial services I’m willing to pay for (along with a CPA to do taxes and a lawyer to do an estate plan.)

Financial Education

Here are their thoughts on this:

The idea is to finally get serious about increasing peoples’ knowledge to make good decisions. It’s about using education to turn nonrational agents into rational agents. It’s a great idea. In the coming years, you’ll see more efforts and programs from many entities on a variety of financial topics, including preparing for retirement.

I agree, it is a great idea.

But are people who have ignored a lifetime of financial education all of a sudden going to buckle down and learn about money? I doubt it.

And is learning the key issue anyway? Isn’t taking action once they know what to do an even bigger challenge?

Yes, they address this in the next point (by making as much as possible automatic), but color me skeptical in the area of financial education.

Don’t get me wrong — I’d LOVE it if financial education worked. But I don’t think most people 1) want to do it, 2) are interested in financial education, 3) are willing to spend any sort of effort studying it, and 4) think the issues are way more complex than what they are (and thus give up before they begin).

Automatic Systems

The book lists three areas that can be addressed by autopilot systems: savings, investing, and distributing retirement money.

The first two are standard and were detailed in The Automatic Millionaire: take money from your paycheck and have it invested automatically every pay period.

It’s very easy…as long as people have the initial drive to set up the systems. Whether they will or won’t is up for debate. Personally, I doubt many will.

Yes, 25+ years of financial coaching and writing has made me skeptical/jaded.

As for making retirement income autopilot, the book breaks options into autopilot products (like annuities and reverse mortgages) and autopilot systems (like dividend stocks, bonds, and CDs).

To be fair, they couch the annuities discussion in terms of “it’s expensive but if you can’t control yourself, it’s probably worth it.” They also only recommend immediate annuities.

That said, the fact that annuities and reverse mortgages are the two options here makes me sick. Annuities can be ok in the right circumstance, so maybe that gets a pass. But do you remember the planner at our first retirement seminar saying that he thought reverse mortgages were “a backup plan to a backup plan” and should be used very, very rarely? It seems like such a bad idea for the vast majority of people, why even bring it up?

And not to let the cat out of the bag too much, but Retire Inspired, another great book I’ll be covering in a future post, destroys any thought of a reverse mortgage being even an “ok” idea.

For the autopilot systems ideas they suggest readers look at various options tailored to their specific circumstances. The book also recommends getting outside help from a calculator and/or a financial advisor.

Overall, this part is pretty vague and not that helpful IMO. In fact, I’d go so far as to say that the financial advice in the book is only so-so, while the non-financial advice is excellent.

Anyway, their comments in this section then move seamlessly into the next topic…

Fiduciary Advice

Their point of view is that “many decisions related to retirement are complex and only come along once in a lifetime…you don’t get to learn by trial and error; you need to make a good decision the first time around.”

And since you’re too stupid to make these decisions for yourselves, you need to hire a financial advisor to counsel you.

People are not too stupid to do most retirement planning tasks themselves IMO. But since most neglect a financial education (as noted above) and even more have the discipline of a caterpillar to actually make the right steps, they don’t really have any option but to turn their financial lives over to a planner and hope he 1) knows what he’s doing and 2) doesn’t take them for a financial ride.

Sorry to say it, but that’s the reality faced by most Americans.

The book then adds several pages to help people work through choices they’ll have to make to do the best job possible.

The chapter ends with a fill-in-the-blank stating: “My ideal retirement includes managing these financial pillars:” along with three blanks for you to list your top three pillars.

For me, three is too little. I prefer multiple streams of income and consider the more the better to give me added margins of safety.

Geographical Plans for Retirement

The next chapter deals with all the issues around where to live in retirement.

The book recommends thinking about any retirement place in terms of four layers represented by the acronym SALE:

• S is for sense of place.
• A is for aging in place.
• L is for livable community.
• E is for essential region.

The authors spend about 20 pages explaining and helping the reader determine which options are best before asking them to list the SALE criteria for an ideal retirement place.

This is a HUGE decision, even if you eliminate the cost implications (which for many people are massive in and of themselves).

I know because we’ve been wrestling with it for quite some time.

I can’t say the book gave us much new to consider, but for most people the framework they suggest is pretty helpful IMO.

Medical Plans for Retirement

Here’s another huge issue that most people give little thought prior to retirement.

The key questions:

How much retirement medicine are you planning to buy? A lot or a little? What kind?

The book spends 15 pages talking about various medical issues to consider and offering a plan for helping the potential retiree make a decision.

This chapter alone is likely worth much more than the cost of the book.

Biological Plans for Retirement

Chapter 8 is about “biology” in retirement which is basically a way for you to work with your body to make it as healthy as possible in retirement.

In particular the book focuses on three types of biological practices designed to help you become and stay healthy. As you know by now, there’s an acronym involved and this time it’s REM which stands for:

• Relaxation
• Eating
• Movement

A summary of each:

• Their idea of relaxation is meditation, prayer, visualization, self-hypnosis, tia chi, yoga, and some forms of walking. Or they say you can make up your own.
• Personally, I would equate “relaxation” with “entertainment” but that’s a no-go for them because they define relaxation as “a specific activity that elicits what Herbert Benson identified as the relaxation response in the famous book of the same name” (Google it if you want more info). But never one to follow a path I don’t think is right, I like movies, video games, board games, and a few other options that relax me.
• It’s true that “you are what you eat”, so if you want to be healthy, eat in that manner. If you don’t care and are willing to crash and burn, cookies and soda it is!
• Exercising is a must, of course. It can be the standard weight and cardio training or something like swimming, bicycling, or golfing (the book’s suggestions). Could also be pickleball, of course! 😉

Psychological Plans for Retirement

This section highlights three approaches to happiness including:

• Pleasure
• Engagement
• Meaning

Some thoughts from me:

• Pleasure is where they lump in entertainment, though I also find pleasure to be relaxing in many cases, so I think it can do double duty.
• Another word for “engagement” is “involvement” which the book claims “involves challenge, and it demands something from you, so it’s not a simple as pleasure.” They don’t give a lot of examples as to what this could be, but do spend several pages helping you think about your strengths since this is where they say you should engage. From what I can tell, any activity can be engaging — it just goes a step deeper than pleasure and introduces the issue of challenge. I guess for me that blogging or chess could qualify.
• Meaning is doing something related to your values. Helping others in a way you like would deliver meaning.

Social Plans for Retirement

Chapter 10 is titled “Happiness is Only Real when Shared” which is a quote attributed to Christopher McCandless in the book Into the Wild. If you’ve read the book you know things don’t go so well for Christopher, so maybe take his quote with a grain of salt.

This chapter is about being socially connected with others, something the book sees as a key part of being happy in retirement.

It notes that “there is no automatic relationship generator in retirement” (like work), so you have to be more intentional in building and cultivating relationships.

The chapter goes into a psychology book’s coverage of how relationships are developed and cultivated, hopefully something most people have learned by the time they reach retirement.

They then break down retirement relationships into the same groups used above:

• Pleasant relationships
• Engaging relationships
• Meaningful relationships

The book eventually asks the reader to list possible relationships that fit into each of these as well as offering places where there are relationship-building opportunities (some examples: alumni organizations, athletic teams, charitable organizations, faith communities, and extended family.)

As an only child who spent many years growing up alone (and liking it), I don’t need a lot of social interaction, but I understand that most do (my wife for example). Anyway, here are some of my connections in retirement:

• My wife. We spend several hours together each day — talking, walking, watching TV, and doing any given activity we both enjoy.
• My kids. Both are away from home now, but with technology we keep in close contact.
• My mom. I chat with my mom a few times each week and see her and my dad a few times a year.
• Gym friends. Lots of casual acquaintances here.
• Church friends. I see these people every week and have developed some close friends here, especially among those we serve with.
• Online friends. This includes fellow bloggers as well as several ESI Money readers, many of whom I’ll probably never meet in real life.
• Friends (here and away). This is a hodge-podge of friendships I’ve accumulated over the years — from college, work, social activities, and so forth.
• Extended family. Aunts, uncles, cousins, etc. Facebook makes it so easy to stay in touch.
• Business connections. This includes ESI Money connections, those for my rental properties, and so forth.
• Pickleball friends. This is a pretty large group. I probably know 100 people by face, 50 people by name, and 10 or so really well as we play together a lot.
• My cat. Does he count? I do spend a lot of time watching TV with him on my lap. And I like him better than I like most people. Ha!

Tying It All Together

The last chapter is about bringing together all seven areas discussed above into one cohesive group.

It asks the reader to list all of these, and their plans for each, on One Piece of Paper (yes, they name it). The book says that “seeing a visual representation of these connected elements helps create a compelling vision of the retirement life that you really want.”

It then wraps things up with a summary, a suggestion on who else to involve in this process, and some additional resource recommendations to review.

My Review

Overall, I really liked this book. Not because it was a great read or had useful information on each page. Many sections weren’t compelling to me nor were they very useful (since I had thought of them already).

But in the end this is the best book I’ve read on dealing with the various aspects of having a great retirement. Even if a reader didn’t take any action after reading the book, simply knowing about the issues and being prepared to address them at some point makes this book worth the read.

As such, I give it my whole-hearted endorsement — which is why I included it in my list of 12 books you need to read to become a financial expert.

Those are my thoughts on this book. Anyone else read it? What did you think?