Planning for Retirement

Today we’re going to continue sharing thoughts from the book How to Retire by Christine Benz. It’s a great book and I highly recommend it. And as with the last article, I’ll be giving away a copy of the book at the end of this post.

We’ve already covered this book once in the post titled How to Retire. You may want to check that out if you missed it since this post builds on it.

Today’s chapter is Christine’s interview with my friend (and Millionaire Money Mentors member) Fritz Gilbert from The Retirement Manifesto. It covers an extremely vital part of retiring well: planning for your retirement.

We discussed this a bit when we covered chapter 1, but chapter 2 (this one) is completely about planning for a great retirement: first setting a date and then detailing what to do five years out, three years out, and so on.

I’m not going to walk through the chapter step-by-step like I did with the first one, but instead I’ll share each of Christine’s summary bullet points at the end of the chapter along with my thoughts.

It’s a Big Job

We’ll begin with this point on how overwhelming planning for retirement is for many:

Getting ready to retire involves lots of activities that, taken together, can seem daunting. Breaking it down into smaller, phased tasks-jobs at year three, jobs at year two, and so on, can make it more manageable.

My thoughts:

• If you take nothing else from this post it should be this: you need to plan for retirement. If you don’t, you’re simply rolling the dice with your post-work life and the odds of it being a disaster are as great (or greater) than the odds of it being a success.
• Another way of saying it is if your retirement plan is to just “go with the flow,” you will get go with the flow results. And no one wants to leave something so vital up to chance, luck, fate, or whatever you want to call it.
• Which is why I’m surprised how few people plan for retirement. It’s a multi-million dollar, decades-long decision and many people give it as much thought as they do what’s for dinner tonight. After all, who needs to plan for 24/7 free time? We all know how to do that, right? No, we do not. Not for weeks, months, and years on end. Some people can’t even manage a Saturday afternoon of free time — how do they expect to survive in retirement?
• When people do plan for retirement about 95% of it revolves around the financial side of the equation…do they have enough money to support themselves? If the answer is “yes”, then most stop planning at that point, leaving out the other big question for a successful retirement: what am I going to do with all my free time/life? Getting this right is just as important as having the money side handled.
• You can tell when people failed to plan for retirement because they are unhappy in it. They are bored, don’t know what to do with themselves, etc. Many go back to work simply because they don’t know what else to do. These are not failures of retirement itself but rather failures of not planning in advance for something they knew was coming.
• Breaking down any large project into bite-sized pieces is a great way to tackle it (after all, you eat an elephant one bite at a time, right?) and retirement is no different. In particular, you can test out all sorts of fun activities, side hustles, volunteering opportunities, etc. while you’re still working and keep the winners with you into retirement. This way you know you’ll have some well-tested, enjoyable tasks to fill your free time…which is a huge step towards having a great retirement.

Now let’s move into an area that’s not discussed much.

Not Just for Workers

In the next point Christine notes that there are some particular sub-groups who need to plan for retirement (though they might think they don’t need to):

Retirement isn’t just a transition for people who do paid work. People who have been caregivers for elderly parents, for example, might feel a loss of purpose when they’re no longer doing that “job.” They need a retirement plan just as much as the person who’s retiring from paid work.

Basically, anyone who’s doing something and moves into doing “nothing” (not that they literally do nothing but they have an abundance of free time in retirement) needs to think about and plan for what their life will look like in retirement.

My wife had to deal with this when she went from homeschool teacher to “retirement.” Back then we (and the world) knew less about planning for retirement, what makes a great retirement, etc., so my wife had to figure out what to do with the void in her life.

Fortunately she’s always had a lot of interests in life so when time opened up she expanded those and added a few others. But even so, it wasn’t as smooth of a transition as it could/should have been if she had planned for the change in advance.

Moving in Retirement

Next Christine broaches a topic that I’ve been living through the last three years — moving in retirement:

If you’re pondering relocation for your retirement, trial run it before you officially move.

Lots to say on this one. Having retired in one spot, lived there seven years, then moved to another city across the country, and didn’t like it so moved to another part of the country, I feel I am uniquely qualified to offer some perspective on this issue. Hahaha.

I recall Wes Moss noting in his book on happy retirees that moving in retirement was associated with an unhappy retirement. I think his point was more around buying a new home with a mortgage (adding debt in retirement), but perhaps some of it was for a few of the reasons noted below.

Moving in retirement is complicated. As in all things in life, it’s not just about you (if you have a family). I had my wife’s preferences to consider in our moves as well as those of my daughter and son-in-law (we lived near them in Colorado and wanted to be close to wherever they were).

My wife was done with winter…at least any substantial winter. She grew up in Erie, Pennsylvania, we lived in Grand Rapids, Michigan for 14 years, and we lived in Colorado for seven years. So she had her fair share of cold and snow. She wanted to move somewhere warmer.

The kids were “done” with Colorado Springs as they felt they had experienced everything there they wanted to do — plus it wasn’t close to anything new they wanted to try (like other major cities, attractions, etc.) In addition, they felt the city was declining over the past few years. They apparently were on to something as US News dropped The Springs from third to 406 on their list of best places to live. Crime, affordability, and job opportunities were listed as the reasons for the decline.

I was up for trying something new. Since we’d been to The Villages for three months the year prior and my dad had moved there, that seemed like a good place to consider. The kids had some plans that looked like they would end up in Florida as well, so it appeared to be a great choice.

Given all that, let me share a few tips for moving in retirement:

• Don’t visit your perspective new location at its best time of year and then compare that to your current home’s worst time of year. Try the new place at its worst too so you can see how bad it gets.
• Try out the new location for at least six months. Three months is not enough. You can live almost anywhere new for three months, especially when the weather is terrible at home. The longer you can try out your new potential home, the better.
• Remember that plans are just that…plans. They can change, and in our case they did (for our kids). It turned out to be for the better in our case, but it could have easily gone the other way.
• Some thoughts on how to do research on a possible new location: talk to locals, watch YouTube videos (there’s a channel on everything these days), and read as much as you can about the place. Live there a good amount of time during different seasons as well.
• If you don’t have to, don’t sell your home in the old city until you are 100% sure that the new place is a winner. That way you can always go back if you want to.
• Consider very carefully the impact of what you give up when you move: relationships with friends, organizations (church, gym, etc.), doctors, and so on. You likely built those over years or even decades and they aren’t easily replaced.

It eventually worked out for us as we all ended up in a place we (as a group) prefer to Colorado Springs, but it was a rough two years to get here (especially for me.) But who knows if we would have ended up here if we hadn’t gone through what we did — it’s hard to say. Everything happens for a reason, but if I had to do it again, I’d follow the tips above more closely.

Next we move on to a money issue…

Retirement Budgeting

Christine offers this thought next:

Be ultra-specific about what you expect your in-retirement budget will look like and consider trying to live on your projected spending amount. Is it realistic?

My thoughts:

• We had a budget the first 10-15 years of our marriage. We needed it when we wanted to pay off debt and lay the foundation for growing our net worth. And I recommend one for anyone just starting out — to get a handle on their finances.
• During this time it got progressively less detailed as we got a better and better handle on our finances (especially spending). I started by updating it every month, then it was every quarter, and then twice a year.
• Eventually we just went to an annual estimate (which we always met because we had established our lifestyle and didn’t deviate much from it.)
• But even then, we still tracked everything in Quicken. So we knew down to the penny what we were spending and where.
• When I decided to retire, I created a budget and reviewed/managed it for a year or so. I developed it using all the data I had from Quicken, then adjusted it for various changes we wanted to make in retirement (more travel costs, no “costs” for saving, etc.) Once we lived it that first year, I knew we were good, so I stopped creating an annual budget (though we still track everything to this day.)
• If you have been tracking your finances like we did and/or if you have been living on a budget in the years prior to retirement, you shouldn’t have any problem setting up a retirement budget. That’s why I recommend you begin tracking your money five years out from retirement (if you haven’t been doing so) if you can or at least two years out at a minimum. Otherwise you’re going to create a budget that might not be even close to accurate.

No one wants to run out of money in retirement, so this is a very important part of creating a successful retirement.

Now we move to a very common retirement “problem.”

Moving from Saving to Spending

Christine shares this next:

Transitioning to spending from your portfolio after a lifetime of saving can be psychologically difficult. Start the process by steering new investment contributions to cash in the two to three years leading up to retirement.

My thoughts:

• This is a HUGE issue — even for people who have way more than enough resources. We talk about it often in the Millionaire Money Mentors forums (where everyone gets a lot of encouragement to spend on things that bring them joy.)
• It’s an issue because no one becomes wealthy and is able to retire comfortably (and especially retire early) without having been good at saving. It’s just not mathematically possible. So you have a habit (keeping spending in check) that has been developed over decades that now needs to be relaxed at least a bit (if not more). It’s difficult to reverse those tendencies after all that time.
• In addition, you have a hard time even thinking what you might spend extra money on. That’s because most people who are successful financially have become content with what they have. Which leads me to this point…
• While encouraging others or ourselves to spend more in retirement, we shouldn’t make the false assumption that all additional spending will make you happier. It could, in fact, make you less happy. It’s common in America for people to try and buy happiness by spending more — on everything from technology to trips to designer clothes to new, fancy clothes. But we’ve seen again and again that this never fills whatever void the person has in their life…and it just makes them broke. So if some spending doesn’t make you happier, why do it?
• My best example of this is getting a new car. I could easily afford one and sometimes it seems like a great idea, but in the end I think it would make my life worse. It might not be as comfortable as my current car. I certainly would worry more about nicks and dings on the paint by other cars — and now I couldn’t care less. And would it have the room and style I like? I’m not sure if I could even find something close to what I have. So why buy a new car if it makes life worse?
• Those who retire with less than a boatload of money have other worries — about running out of funds. This is why you see them working “just one more year” (which often turns into 3+ more years). They want to be extra careful with spending to avoid draining their savings too quickly.
• There are two things that help cushion the blow and make the transition from saver to spender easier: cash and income.
• Cash makes it better because you’re not spending your investments…those are left to grow, so people feel like they are still making financial progress. That’s why many suggest retiring with 2-3 years of spending in cash (as well as being a buffer for sequence of returns risk). Even today, we keep a few years in cash as a cushion should we ever need it.
• Income is great because it’s a renewable resource (compared to spending out of your assets). You spend knowing that you’ll be earning more in the future. This is yet another great reason for a part-time job or side hustle in retirement.
• I’m not sure there’s a great way to get past this issue other than to try and make higher and higher spending commitments (assuming you can afford them), basically walking yourself up the spending ladder as you learn to flex that muscle a bit.

And now to one of my favorite topics…haha.

Working in Retirement

Here’s how Christine ends her summary of this chapter:

Paid work can bring relationships and purpose, but so can pursuing a passion project like the charity that Fritz and his wife started. If you don’t need to continue working for money, brainstorm about what other activities can replace the things you enjoyed the most about your job.

My take:

• I’ve said a lot about the benefits of work or work-like (volunteering) activities in retirement. If you’re interested in my thoughts, read The Top Seven Retirement Activities, Part 3.
• Both jobs (either part-time or side hustles) and volunteering opportunities can be tried out prior to retirement so you know what you want to take with you into retirement.

Lots of great stuff from this book again today!

For the next post in this series, see Strong Relationships Make a Successful Retirement.

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As I said above, I’m giving away a copy of How to Retire on every post I do about the book. Here’s how to you can enter:

• Leave a comment below telling me what you liked best about this post, what you think you can use, or something you learned from it. Basically just share anything meaningful related to the content above (note: “please enter me to win” and similar comments will not be considered out of pure weakness! At least put a bit of effort into it!) This should be fun!
• Be sure to leave your email address when you leave the comment so I will know how to reach you if you win (the email address will not be visible to anyone other than me).
• The winners will be selected by me at random a few days after this post goes live. I’ll announce who wins in my own comment.
• I’ll email the winner, get their address, and send them a book from Amazon.

As with most giveaways, there are rules. Here they are.

Good luck!!!!