I’ve recently been to two retirement planning seminars (one I’ve already posted about in My Experience at a Direct Mail Retirement Seminar and the second coming soon). After thinking about what the events offered and how financial advisors use these seminars to solicit new customers, I think I have a great idea for planners looking to court the soon-to-retire crowd.
That idea, turns out, is also valuable for anyone who’s looking to retire in the next 10 years or less.
Please indulge me a bit while I begin with some background thinking to set the scene. Then we’ll get to the heart of the post — which I think will be quite valuable for pre-retirees. Those of you who have already retired can add your wisdom by reviewing the list and see if I missed anything.
But first, let’s talk about general perspectives on retirement.
Note that these are my opinions and you may have different feelings. I have developed them using a couple different (and valuable) skills:
- My background as a marketing executive. For almost 30 years I was paid to gather insights into what people thought/felt and make corresponding business decisions, so I have some skill at reading trends, perceptions, and patterns.
- My background as a financial writer and coach. I started counseling people on basic financial issues in the early 90’s and began writing about money in the mid-90’s (as a freelance magazine writer). The latter then transitioned into blogging in 2005 and I’ve been writing about money ever since.
Those said, I’m not foolproof (of course) and my conclusions below could be good or off a bit. I’ll let you decide whether I’m correct or not.
Let’s get to it!
What Americans Believe About Retirement
I think there are a broad array of feelings about retirement, but I believe these are some of the most common American perspectives:
1. Retirement is viewed favorably.
I think the vast majority of Americans like retirement and the concept of it.
Just look at the numbers showing how many people like their jobs (spoiler: not many). So who wouldn’t want to be financially free of so-so jobs, terrible bosses, and the ball and chain forcing you to be at a certain location for the majority of your waking hours?
Even if you like your job, wouldn’t you like freedom better?
And since “retiring” is what so many Americans are working for financially, it’s not a big leap of faith to think they like the concept.
But while most view retirement favorably, there are some snags along the way…
2. Most have no idea how to prepare for retirement.
While Americans like the concept of retirement, most have no idea how to make it a reality.
The situation is similar to that of general money management — the concepts needed to retire are simple to understand, but can be difficult to implement.
Unfortunately, most Americans haven’t gotten past the first hurdle — they don’t even know the basic steps to retirement.
Even if they did there’s the whole issue of would they have the self-control to prepare for it. Americans generally aren’t big on financial self-control.
As a result many end up simply “winging it” when they retire.
I once heard someone say, “Hope is not a retirement strategy.” While that’s true, hope does appear to be a leading option for many retiring these days.
3. Americans are afraid of retirement.
Yep, afraid.
I think there are a few reasons for this:
- They don’t know what they are doing. See point above.
- It’s a huge financial decision. Remember the first time you bought a house? Did you have feelings like “What the heck am I doing?” and “Am I signing my life away and making a mistake?” I sure did. Retirement is just like that — but multiplied by a million. Since people are both lacking in knowledge AND making a gigantic financial decision, it’s easy to see how it could make things frightening.
- They think they’ll run out of money. In the first retirement seminar we went to the planner said that the top fear among potential retirees was that they’d run out of money. As such, his job was to work with them to make sure they didn’t and had a plan that made them comfortable. It’s a valid concern given how much the average American has in savings these days. More on that below.
- It’s unknown. Even for those who are prepared to retire and have their finances in order, retirement is a big unknown and people tend to fear what they don’t understand. Most have spent 30 to 45 years doing one thing (working) and that’s all they’ve known for their entire adult lives. Now that’s going to change into something they aren’t familiar with. This is why my retirement interviews are so popular — they give a glimpse of what it’s like planning for and experiencing retirement. They demystify the unknown of retirement.
By the way, I’m always looking for more retirement interviewees, so if you’d like to volunteer, please contact me.
4. Most are inadequately prepared for retirement.
Look at the average American’s finances and you can see they are nowhere near where they need to be to retire.
They aren’t even close to having saved enough and for most time is running out. That’s why “work longer” is another popular retirement “strategy”. There’s no choice — they MUST work longer.
The Opportunity
Now wrap all those conclusions together and you get…
Retirement is something people like but have no idea how to achieve, are afraid of it, and are completely unprepared.
As a result you have (as a planner) a great opportunity to be a tremendous help in solving a major problem for millions of Americans. You can help them overcome their issues and achieve a dream. Think you can make money at that? I bet you can!
What if a financial planner looking for new clients offered a free seminar that addressed these concerns? It could briefly cover the most vital retirement issues, get people nodding yes and liking what you were saying, then you could follow up with free (people love FREE) consultations to discuss their specific finances in person.
Sounds like a winner, right? It does to me!
I would call it something like “The Top 10 Factors to Consider Before Retiring: The Key Issues Everyone Needs to Address for a Successful Retirement”.
This is something I’d like to attend myself!
The only problem — what issues would be covered?
I’m so glad you asked…
Top 10 Retirement Issues
I’ll take a stab at the top ten retirement issues, then you can chime in with your thoughts — giving me feedback on what I may have missed and/or gotten wrong. From there we’ll develop the ultimate pre-retirement checklist admired by millions worldwide. Hahaha!
Anyway, here’s my list — written in question form (I think it’s more compelling this way though making each of these simple statements would work as well):
1. What are you going to do in retirement?
THE major question IMO.
How will you spend your time, who will you spend it with, what activities will you do and which will you eliminate, and on and on.
We addressed these issues in How to Prepare in Advance for a Great Retirement. I also bought What Color Is Your Parachute for Retirement since I heard it was a great “what do you do in retirement?” book. If it’s good, I’ll be doing a write up about it.
This is an in-depth topic, of course, but a planner could offer some suggestions and/or distribute a handout for attendees to review/consider later.
2. What are your retirement spending needs?
Step one of preparing financially for retirement is determining what you plan to/can spend.
Obviously, the more data you have here, the more accurate your estimate will be.
This is why I’d recommend creating a budget and tracking spending for a few years before retirement. Then you’ll have a solid handle on what you’ll spend and can know with relative certainty what your requirements are.
Otherwise you will have no idea. And retiring without any idea of what you’ll spend is a recipe for disaster.
3. How do you plan to fund retirement?
The other side of the retirement financial equation — how will you afford it?
As I note in my retirement email series — there are three methods of funding retirement:
- Income — Setting up assets and/or working in some capacity to produce income.
- Asset withdrawal — Liquidating assets to cover spending.
- Combination of the two — Part income, part asset drawdown.
We are using the income strategy for now since we make more than what we spend. But my guess is that most people use the combination method — even if it’s simply Social Security for income and asset withdrawal from the small savings they have.
This is (obviously) an important topic and I think people would LOVE to hear a planner’s thoughts on it.
4. How can you maximize Social Security?
The first three questions were more big picture in nature. We’re getting into the details from here on out.
Social Security is like most other government programs — massive, complex, and fraught with the potential of making a bad move. As such, most retirees will want to know how to handle Social Security to get the most out of it.
Should they take it early, on time, or late? What about spousal implications and strategies? What about this? What about that? Tons of questions and options exist. It’s another unknown as well as a huge financial decision, a second opportunity ripe for someone to come in, answer the questions, and be a financial hero.
By the way, after I wrote Why Taking Social Security Early Might Be the Best Option a reader sent me this post. The highlights:
The problem with traditional breakeven analysis is that it doesn’t reflect the time value of money. That might not matter so much for the many retirees who need to spend their Social Security as soon as they get it. For those who can invest their benefit checks, however, the time value of money makes a huge difference, because investing early benefit checks provides a longer time horizon for investment growth.
We are still in the process of deciding what to do, but the above illustrates that there are a lot of moving pieces and people can be overwhelmed — making this a perfect issue to address.
5. What’s the optimal strategy for withdrawing assets from various accounts?
I was going to call this “Developing an Optimal Decumulation Strategy” or something similar, but I thought that would be like speaking French to most Americans. So I dumbed-down the financial jargon.
I’m not sure how many people have a host of savings vehicles like IRAs, Roth IRAs, etc., but 1) this is an important topic for those who do and 2) even those who don’t have multiple options will be impressed that someone even knows about/is addressing this, so it makes my top 10 list.
6. How can you minimize taxes to keep most of your assets?
One of the top expenses for retirees are taxes — or could be — especially for those sitting on large IRA/401k balances.
A big part of this is how to deal with required minimum distributions to reduce taxes. Do you take distributions early or late? There’s a lot of debate on this both ways. And most people have no clue what to consider in making the best decision. Thus they would likely appreciate some guidance.
7. What’s your plan for healthcare?
Not as much of an issue for those who qualify for Medicare (though there still are issues) but for early retirees this is a MAJOR issue.
As I say often, if millionaires are concerned about affording healthcare in retirement (see item #12 in 13 Surprising Facts from 100 Millionaire Interviews and What We Can Learn from Them), we all should be.
For now we are using a healthshare and so far it’s been a good option. But this is a political hot potato issue, so I expect changes. Then again, if our government (Congress) remains divided, change is unlikely no matter who’s elected president.
8. What do you plan to do about housing in retirement?
Taxes, housing, and healthcare are among the top expense categories in retirement. That’s why they are all on this list.
Some of the housing-related retirement questions that need to be addressed:
- Where will you live (what city)?
- Will you stay in your current home?
- If so, do you need/want to remodel?
- What about your mortgage — will you still have it in retirement?
- Should you consider downsizing?
I could go on but these are the major ones IMO.
9. Is your insurance plan ready for retirement?
The list of possible insurances is long. Will you need them in retirement?
In particular, people probably at least want a perspective on long-term care insurance — who needs it and who doesn’t.
But there’s a whole host of other insurances that need to be considered and discussed as well.
10. How do you plan to distribute your estate after you pass?
Do you have an estate plan? How about the proper documents to distribute your assets? What about the right papers for your care if you become incapacitated?
There are a host of estate planning questions that people likely want addressed.
Retirement Honorable Mentions
Here are a few issues that I left out but either could be covered under one of the items above or replace them:
1. How should you deal with major, one-time expenses in retirement?
Some big-ticket costs that people might have to face in retirement:
- College for kids
- Wedding(s) for kids
- Helping kids get established post-college
- Caring for aging parents
- The costs of caring for themselves in old age
Just to name a few…
2. How should you mange debt in retirement?
I mentioned mortgages above and hopefully that’s the only debt (if any).
But just in case it isn’t, it’s worth discussing.
3. What giving do you plan to do in retirement?
Maybe zero, maybe a ton, maybe volunteering, maybe something else.
4. How should your investments change in preparation for and into retirement?
This could be part of #3 above but could also be important/compelling enough to make the list on its own.
It’s a big, important question that is critical to get right, especially for the majority of Americans who have limited retirement savings.
So that’s the sort of thing that runs through my mind when I attend a retirement seminar and see opportunities for a better presentation.
What do you think of my list?
One of my concerns in early retirement was “what will I do?” I had seen numerous people retire, go home and sit on the couch watching TV, and Die within 3 years. For that reason, I spent the last 1 1/2 years of my working life looking for things I wanted to do in retirement. When I actually did retire I found myself over programmed and busy. It turned out to be an easy transition as a result. I found I could (had to!) reduce my activities/commitments. It worked great. Since retirement I have been able to selectively add other things I care about.
Incredible comprehensive post and it really does highlight some of the things that concern me as well.
Healthcare is probably the biggest issue. Hard to anticipate costs from when I hope to retire and when I qualify for Medicare.
Decumulation I think is going to be much harder than the accumulation phase. In the accumulation phase you are allowed to make some mistakes as you can always add more from earnings. In Decumulation you only have one pot to work with. Once it’s gone it is challenging to refill it.
Great thought-provoking post, ESI. You mentioned the important consideration of whether there will be a mortgage or not. Would like to take that a step further.
In my opinion as a financial coach, a focus on paying off the mortgage in those pre-retirement years is of utmost importance. Regardless of ones preparation financially for retirement, entering that new chapter without a mortgage (and no other consumer debt) is the biggest game changer that I see on a routine basis. Given the historical short-term volatility of the market, I often recommend folks focus on zeroing out their mortgage once past age 50, as the guaranteed risk-free return on mortgage rate is tough to beat from the market in that next 10-15 year period (from a historical perspective).
We’re going to have a discussion on this issue in a future post. Stay tuned. 🙂
One of the areas that we didn’t consider was “ Friendships”. My Husband and I were able to retire early (58) but many of our friends won’t be retiring until 65. We stay in an over 55 community in the Winter and it is hard breaking into the existing groups. We are called the youngsters.
Just a few random thoughts!
-As a Federal Government employee, there are tons of free and Agency sponsored retirement seminars that help us plan our retirement. I think we are better prepared than the average person. Our issue is most employees don’t take these seminars until they are within 5-10 years from retirement and then find out they have either under saved or allocated their savings into the “too conservative” fund in our 401k (TSP). Although we get a pension, most employees have no understanding of how the determination of the pension amount is determined.
-Thank you for that Social Security section! I think the issue is further muddied for those that financially planned for retirement by factors such as doing roth conversions before claiming SS, Income impacts on taxes, medicare rates, etc.
-I’d love to see you write about “How much is enough”? I’m 9 years away from retirement and think I have more than enough saved+my pension+my social security. How do you determine if you have enough, and if you do, should you scale back?
Have you gone through my retirement email series (it’s free)?
It tells you how to set your retirement number and prepare for it. Once you do that, you’re there.
Great post.
The tax issue has been a concern of mine so glad RMD dont have to be taken until 72 now.
Social security I will take early and spouse will take when 70.
Would be interested in your email series. How do I sign for your email series
I, too, was a Federal Government employee (Air Reserve Technician in the Air National Guard) and agree that the Agency sponsored retirement seminars were very helpful in preparing for retirement. I didn’t attend my first seminar until about 5 or 6 years prior to retirement. Fortunately for me, I had started saving for retirement when I was 23, so was in pretty good shape. I did my best to convince younger workers to attend these seminars well before retirement to assess their own situation. I also felt that these seminars focused mostly on the complicated (to me) federal retirement system, which was helpful, but didn’t spend much time on other issues like asset draw-down, Roth conversion, and when to start taking Social Security.
I’m currently 58, my wife is 59 and still working and I work part-time, so we haven’t really experienced the “true” retirement lifestyle yet. We still have time to ponder a lot of the retirement questions discussed in this post.
Check out this calculator that ESI has made available concerning the question “How much is enough?”
https://esimoney.com/when-can-i-retire-when-will-i-be-financially-independent-a-retirement-calculator-guide/
Thank you ESI, for another great post.
As usual, you’ve come up with a well thought out article. I’ve recommended this site to quite a few people now, usually when you write on a subject that I think will resonate with one of my friends or family members like I think this article will.
As I contemplate retirement, I wonder what percentage of people go back to work, even when they don’t need the income? I’m guessing it’s a low percentage, but an option none the less. At least that’s what I keep telling myself.
Prior to my planned retirement from the Military in 1982 I consulted with a military friend who retired two years prior to me. The jolt I received from him was that I was totally unprepared for the journey I was preparing to commence. This planned retirement happened, however I was financially required to find gainful employment, needed to return to school and get creditable training and certifications for employment and adjust my lifestyle to accommodate an immediate 60% drop in income. The bottom line, I needed a plan which would tackle all these obstacles placed before me, a bewildered, married, with children, 38 year old Marine. I leaned upon the 7P theorem, “Piss Poor Planning produces piss poor performance. Developing new planning, bringing family members online, accepting realities, as they were encountered, and in five months gainfully employed with higher income, instituted a fundamental emergency fund and savings programs, we survived. Morale of this story Plan, Plan, Plan, and when you think you’ve got the right plan, review and plan for changing times and conditions. Been retired now, from gainful employment since 2003 and we are enjoying everyday. You don’t need a million dollars, but you need enough to satisfy your lifestyle in retirement. Military pension, Social Security, Investments and Savings, a loving spouse and children gone, can provide a modicum of happiness. Fulfillments come from helping others understand what is ahead. Thanks ESI for your thoughtful and informative posts.
I like the post for the soon to retire crowd. But to me you touched on the real problem early on in your post for most people in general, particularly those under 40. That problem as I see it is societies mindset about the word “retirement”. Let’s face it, for most younger Americans, “retirement” is still thought of being for old people. Their parents, grandparents, etc. need to worry about it, they don’t, they are young and they have so much to do getting out there and starting work, starting relationships, etc. so to most retirement is far off and something they aren’t really considering until they are in their mid to late forties, which we all know is part of the problem. So for most people who don’t really think about retirement and setting anything up for it, they are paying their bills, having fun on vacations, hanging with friends, doing exciting things which often includes buying stuff or experiences. Retirement is not “exciting”. That is why I really like the Financial Independence side of FIRE and typically push that. No matter what someone thinks of retirement, no one I’ve ever spoken with has rejected the idea of FU money, because that is fun to think about. No one has argued that it wouldn’t be nice to set up to be able to work or not work as they please at some point in the future preferably before traditional “retirement”. I don’t even mention retirement to someone under 40 anymore (like the bulk of my kids’ friends or younger coworkers) if we are talking about “the future”, instead I talk about getting financially independent and I paint the picture of freedom, ability to be set for life, do what you want, work how you want, etc. as the goal. After all, traditional retirement past age 65 is simply FI when you are older. So IMHO much of the conversation should shift in the community, and with many of these planners, from retirement to financial independence.
I don’t know how prevalent this issue is but another potential interesting topic of discussion would be the issue of spouses or partners retiring at different times and the challenges/opportunities that can present.
Both my wife and I have been a dual-career couple since we married nearly 27 years ago. I retired at 57 from my corporate career and became involved in a startup on a part-time basis. She continues on with her own corporate career as a Sales VP. I am now 62 and she is 58. Right now, she plans to work another 5-7 years. This has been an interesting adjustment for both of us and not one we planned for initially since we thought at some point we would be retiring together.
There are a lot of pros and cons and I have to believe with men and women now about equal percentages in the workforce, couples where an age gap may exist, certainly face some interesting challenges and planning decisions along these lines.
This is an interesting topic for me as well. I’ve listed it as a question in my retirement interviews for just this reason!
I like the bit about healthcare. Most people do not know about the costs of healthcare and with the silver tsunami coming up, it will likely become worse. Millionaires have the right to be afraid of this.
I’ve got almost 8 years before I retire (date is Friday, October 1, 2027). The goal is to get the investment property in San Francisco paid off. This should replace about 60+% of my W-2 income. Distributions from my 401(k)s, IRAs, inheritances should make up about 25% of my W-2 income. Social security is about 40% of my W-2 and the shedding of negative cash flow is worth about 15%. I’ll probably need help with investments and handling inflation, but should be good beyond that. Also can live very frugally if it comes down to that. Have also figured in a part time job (15 hrs/wk) to bring in some hobby money and take up some time during the day.
I’m in that planning stage right now so I love this stuff about planning. I learned the 7Ps as “Proper Prior Planning Prevents Piss Poor Performance” and I think I’m doing OK with the finances. My issue is the mental disconnect from my career and current job – I’m one of those that, for the most part, loves what I do (teaching) so looking at stepping away from that is the most frightening aspect for me.
I am right there with you Kelz1136, I like the way you put it, the mental disconnect. My 2nd biggest fear is not having enough for nursing home care or assisted living if one of us becomes incapacitated. I did not buy the Long Term Care Insurance my employer offered because……it was pricey and I would have to buy it for 2 people, because you don’t know which one of us will need it. It can go up in price as the years go by, and I have seen that happen to my SIL’ s plan… I guess there is no limit to how much they can increase the premiums. There is alot of red tape to get them to actually pay… that happened to my Mom, her’s didn’t pay a dime and she was in assisted living, she really felt ripped off. Also, the plan my employer offered was capped at $300,000, and that didn’t seem like very much to me. And there is no guarantee the company you buy from won’t fail and you lose all your money. That happened to my brother’s life insurance company. So I didn’t buy it, but I may regret it some day.
Like your comprehensive list a lot. Perhaps another retirement readiness area to consider is having pre-retirement conversations with family members about your retirement plans, preparations, and wishes. These conversations (and corresponding documentation) are intended to ease family concerns about my retirement decision, my general financial condition, my anticipated retirement activities, and my general final wishes. I basically want to address my family’s valid concerns and discuss what we expect to happen. It is hoped these conversations lessen everyone’s uncertainty, as well as generate understanding and support for my retirement decision.