How much of life is dependent on luck? Personally, I consider myself very lucky. I’ve had good personal relationships, I’ve managed to live a productive life, my wife of 5 decades is still with me, our children are grown and have given us grandchildren. Life is good.
Many of my days are spent sharing insights with others about retirement. One of those is to recognize that with retirement, new risks appear that threaten our ability to function as before.
The most obvious new risk is about health. While it’s normal to get sick and then get healthy thanks to modern medicine, there are new risks that have no medical solution. For many reasons we become limited, sometimes incapacitated, when it comes to performing the normal everyday things we’ve done all our adult lives.
These are called Activities of Daily Living, or ADLs. Things like preparing a meal, taking a bath, getting dressed and undressed, getting from one room to another by yourself. There are more of them but you get the idea.
The risk this presents is that if we cannot perform some of these ADLs and need help, who is available to give us that help? In many cases we’ll rely on family members, but as you can imagine, that will only go so far. Those folks have their own lives to live and can only spare so much time, effort and love. The alternative is to get someone else to help if you have enough money.
Where will that money come from? Do you have enough? Keep in mind your other expenses will probably continue, meaning you have to draw down your financial reserves faster than is reasonable. If you live another 10 years, how will your bills get paid?
The ADL issue can be both a function of physical and/or mental disability. Typically, it’s something few of us are prepared for. The challenge for all of us is to anticipate the financial pain that follows and to take steps in advance to mitigate that pain.
A serious risk for which there is little known answer is longevity. We do know that average life expectancy is increasing, and that the largest segment of the population, in terms of a percentage, is of people living well into their 90s and beyond. Will you be one of those people?
Recently, I saw an assertion that for a husband and wife today, both age 65 and in good health, the odds are roughly 93% that one of them will still be alive when age 93 arrives.
Society frowns on not looking after the elderly. No one is going to suggest that if you are old and cannot pay your way, either by yourself or with help from society, that you be taken out into the woods and left to die. There’s little risk of that happening.
But there is a risk that you’ve not paid attention along the way and not properly managed whatever money you saved to pay for all this. Remember, at some point in your life you transitioned from the accumulation phase of your life to the distribution phase. That transition demands a different skill set when it comes to managing money.
With reduced earning capacity comes the need to make choices in how you spend your money and how you manage it.
I like to describe retirement as having three fundamental phases. The first is the GO GO years, followed by the SLO GO years and finally the NO GO years.
An existential risk that surfaces as you transition to retirement is spending too much in your GO GO years. It’s an easy mistake to make. You have no idea how long you’ll live, you now have lots of time for leisure and are healthy enough to enjoy yourself and do those activities you put off for years. Things like travelling. Even if it’s domestic travel, you might treat yourself to a new car to get better gas mileage or a travel van or trailer.
Will this impact your ability to pay your bills when you reach age 85 and are well into your SLO GO years? There’s no way to know.
The financial risks you faced when looking forward to retirement are now similar, just more immediate. Running out of money at age 50 while you’re still in your earning years is very different from running out of money at age 80.
Market crashes, spending shocks, compounding inflation all add up to unknowns that have the potential to cause severe financial pain. And that in turn leads stress, unhappiness, and health issues.
None of this is meant to scare you but to rather make you more aware of how life changes after you retire. Your ability to earn money shrinks which threatens your chosen standard of living. If you haven’t thought about retirement income planning, and you are not yet retired, you need to pay attention to it.
There are strategies to follow that will minimize the financial pain that is likely to follow. There are tools to use that will help stabilize investment risk and keep your life from going off the rails.
I risk making you think these words are just a sales pitch from me. They are, but hopefully much more than that. If I can somehow help you live a happier life long after I’m on the other side of the grass, that’s a good thing as far as I’m concerned.
I’ve prepared some free videos and tools to help train your brain about all this. Find them here at the website I created: Successful Retirement Secrets.
Tony Kendzior \ 9 JAN 2020