The 6 Not-So-Secret Keys to A Happy, Secure Retirement

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Over my 28 plus years as a financial advisor I have had the honor and privilege of helping many folks plan, implement strategies and transition to retirement. I have clients in their 80’s who are happy and excited for each day and others in their 60’s and 70’s who are sad and depressed.

Many years ago, when I first noticed these differences, I began to look for the differences in what the happy folks were doing versus what the others were missing. This has led me to pursue the “Retirement Income Certified Professional” designation from the American College. This course of study is looking beyond the nuts and bolts of setting up investments and insurance strategies for retirement, to what does it take to have a happy fulfilled retirement phase of one’s life. After all, many of us will live nearly as long in retirement as we spent in our working lives. That is just too long of a time to be depressed.

What Does Retirement Really Mean in 2017?

Not that many years ago, people just looked at retirement as the end of work. When you were done working, you retired and that meant stopping work. And for many, their days were filled with television, early bird dinners and matinees at the movies. While that can sound attractive to someone “stuck” in a job they hate, a lot of people who fill their time this way become despondent and depressed after a while. Every day is the same and there is little to look forward to. That was ok years ago when people didn’t live as active lives as we do today.

The #1 Retirement Misconception

The other widely held misconception about retirement is that, once you get into your 80’s (or sooner, based on your perceptions) life is no longer worth living. In my experience, once someone is in their late 70’s they definitely want to live well into their 80’s and beyond.

The 6 Not-So-Secret Keys to Living a Full Retirement Life

If you want to live a full retirement life, here are 6 things that I have learned to help you get there. I call them ‘not-so-secret’ as they are the things you have heard your whole life, but you might have been ignoring them. Now that you are reaching the point in your life to retire, these 6 points need to be paid attention to.

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Not-So-Secret #1: Eat Right and Keep Moving

Think about how many obese 85 year olds you have ever known. Research shows you must “move it or lose it!” Not just that, the health complications of heart disease, cancer and diabetes to name a few, will sap your strength, energy and enthusiasm. Start now and keep walking, riding, swimming, lifting or hiking. This combination will give you the strength and stamina to enjoy your retirement and be happy.

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Not-So-Secret #2: Let Your Life Proceed by its Own Design

This is a line from one of my favorite songs. My happiest retired clients have plans, activities and avocations that compete for time. It is amazing how important it is to wake up and know what you are going to do that day. You will especially not want each day to look like the last, which can get old in a hurry. I encourage clients to first figure out what they want to do with their life. Do you want to travel, garden, start a business, or go back to school? Once you decide what you want to your life to look like, other decisions become much easier.

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Not-So-Secret #3: You Must Know What it Costs

You don’t go shopping at the store and not look at prices, so why should you “buy” a retirement that you can’t pay for? So many clients come to me trying to figure out what kind of income they can produce from their assets, which usually will provide a lower income than figuring out what they want to be doing and then arranging their portfolio in a manner that will produce the income they require. The most important considerations about your income are whether it is reliable and will the income last as long as you do (your lifetime). Failing to do this usually, leads to stress and anxiety over whether or not you will run out of money before you run out of life!

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Not-So-Secret #4: Where Will You Live?

When I ask this question to my clients during our planning process, they respond that they want to stay where they are currently living. The conversation usually includes something like this, “I have lived here for 30 years and I don’t want to leave. Unfortunately, many figure out too late that this isn’t the answer that works for them. I have written before about a fairly common situation here in California and elsewhere, people who are house rich and income poor.

It’s More Than Just What Will it Cost

There are other considerations besides affordability. Are there stairs? Davi and I moved 12 years ago from a home on the hillside with 2 stories and a steep lot, to a single story house with only 4 steps to the front door. This is now a house we can retire in. We are now taking care of landscaping so that it will require minimal maintenance and expense as well. Is your home one that you can enjoy when you are older or will you find trouble with maintenance and stairs? It is much harder to move when you are 80 than at 70.

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Not-So-Secret #5: Do I Worry About My Investment Portfolio?

This is probably one of the most difficult things to adapt to for folks preparing for and transitioning to retirement. They have spent their entire working life trying to build wealth. They buy investments that will grow in value over time. The time horizon was such that it was ok when the markets sold off in 2000 or 2007, after all it came back, right? Well, it wasn’t ok for the person who planned to retire in 2009, or worse, for the person who retired in 2006. After all, many portfolios were down 60% or more in value at the time and many were forced to reluctantly go back to work in order to pay the bills. According to the Prudential Retirement Red Zone study, in the 5 years immediately before and after retiring it is critical not to suffer any significant losses. This is also referred to as “sequence of return risk,” which simply means that the order of returns in investments is more important than the average return. If you encounter significant losing years during the red zone period, it can almost guarantee retirement financial failure. Please make sure that any funds you expose to any significant loss of principal won’t be needed for the next 10 or more years, otherwise prepare for the stress and anxiety that come with market fluctuations.

Wealth Building vs Income Generating

Remember to use the right tools for the job. Some investments and strategies are great for wealth building (e.g., dollar cost averaging, pretax retirement contributions), but lousy for income generation. Don’t think that you will just make withdrawals from your stock portfolio each month. You will be far too influenced by emotions and you will need to prepare for some lean years when the market corrects. Use assets and strategies that are designed for income creation (think income property with positive cash flow, bonds, and annuities, etc.). If you aren’t sure what kinds of tools might be available or if you are looking for options, we may be able to help you clarify options.

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Not-So-Secret #6: Have a Tax Plan

It is surprising to me how many people don’t know that once you pull your money out of an IRA, 403b, 401k or other pretax savings plan, those withdrawals are fully taxable as ordinary income! The sooner you come up with your retirement tax plan, the more choices you will have and the less likely you are to be negatively impacted by changes to state and federal tax code. After all, what difference does it make if your investments earned an extra 2, 3 or even 5% if congress raised tax rates by 30% in the future. This will wipe out all of the extra earnings and then some!

Know the Tax Code

Back in the 1980’s the tax code was changed in a way that makes retired people pay the highest effective tax rates of any segment of our population! Capital gains, tax free income and investment sources and small businesses are just some of the ways that you can create the flexibility to make adjustments to where your income is generated, so you won’t have to make undesirable changes to your lifestyle. We like to help clients, especially those who primarily are accumulating wealth in one or more of those plans, come up with strategies that are taxed in different parts of the tax code.

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Bonus: Not-So-Secret #7: Work with a Specialist

There are many considerations that must be included in the design, planning, and implementation of your transition to retirement. For over 28 years I have been helping couples and individuals reach the retirement they have always dreamed of. With a few hours invested now, your happy retirement is just around the corner.

I encourage you to take advantage of my free first meeting offer. We’ll take a look at how you envision your retirement and what it will take to get you there. This will be time well spent. Give my office a call at 415-331-9030.
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