More choices/options are available with each passing year in almost every aspect of life. When I was a kid, there may have been 10-15 options for popsicles in the frozen food section; now, there are hundreds. What was once a small array of office chairs at the local furniture store is now an endless horde of seating options for all body types and comfort goals. What were once 30-50 channels on TV are now thousands of channels and streaming options. Inflation applies to everything, not just the costs of goods and services!
Now, I’m not trying to date myself here but rather just remark upon the ever-expanding diversity of options available to all types of people these days for just about every service or consumer good; this is a good thing; I consider it progress.
Why Retirement Planning is Important
While we have near-endless options in our day-to-day lives, most people still have a limited view of what retirement looks like. The public’s viewpoint on retirement has remained unchanged for one hundred years. You work until 60-something, and if all has been planned properly, you can sail into the sunset, happily ever after, with Jimmy Buffett serenading every sunset. As a retirement planner in Greater Boston, the story of retirement rarely goes this way, and guess what? That’s ok.
Retirement is not the bookending most imagine when they’re younger, but perspective and circumstances change. It’s all about being able to comfortably/happily pivot with the flow of life to enjoy retirement to its fullest.
Retirement or Retirements? It’s a Spectrum
Retirement looks different for everyone, but I have found in my experience as a family financial planner there are three buckets that most retirees initially find themselves in when they enter into typical retirement age; within those buckets, infinite particulars separate our retirement experiences. There are the “unfulfilled,” the “unprepared,” and “great savers, bad spenders.”
- The Unfulfilled: You Can Only Walk the Dog So Many Times a Day
The first, historically more common, retiree bucket is the “I’m unfulfilled in retirement” type. For this person, retirement is not the freedom that it’s sold to be but quickly becomes a shell of boredom because their job kept them active and connected with other people. I had a client say something profound that has stuck with me; he said, “Scott, you know, there are only so many times you can walk the dog and think that’s your entire day. You need to do something to mix the day up.” We can all agree that sitting idle in retirement would eventually lead to feelings like this. Notably, within the past year or so, a certain famous quarterback retired and unretired, only to retire again.
Retirement offers many surprises once it finally arrives. One of the most common occurrences is when retirees feel a loss of purpose/need and feel unappreciated. As much as we’d like to picture that final Friday of work being a blissful release, we can never fully understand how that first Monday will feel once the dust settles.
I use a mantra to describe the ideal retirement: “Retire to something rather than from something.”
- The Unprepared: Retirement Isn’t Cheap Ya Know
On the other side of the retirement spectrum, some people never do much, if any, future planning for retirement and are left working well past the ages of expected retirement. Sadly, this is more common today than it was in decades past. Fewer companies offer retirement pensions, and the average person moves from job to job much more than in the past. Along with several other factors (inflation woes), some struggle to save appropriately for retirement.
A lovely rideshare driver in her 60s told me this when I asked about her retirement plans “I can’t tell you how many different jobs I’ve had since I retired. Retirement isn’t cheap, you know.”
- Great Savers, Bad Spenders: Live-on vs. Leave-on Assets
A common retirement planning mistake is this: people worry tremendously about how much they’ll have for retirement; they become great savers and horrible spenders. People reach their twilight years without hobbies, passions, or plans to enjoy their money because it’s only ever been a commodity to save. When I consult with clients, this is one of the most difficult habits/life philosophies to change, but no one should look back and regret missing out on opportunities.
Great savers are sometimes the worst spenders. I’ve had countless clients who reached retirement and didn’t know what to do with their savings. Currently, the IRS requires people the age of 72 to withdraw money from their retirement accounts or face penalties; this is called Required Minumum Distributions (RMD), and while you may be thinking, “I’ll never have a hard time enjoying my savings,” you’d be surprised at how many do.
See the required minimum distribution details below:
In late 2022, the passage of the SECURE ACT 2.0 changed how that age is determined using a sliding scale:
- If you turned 72 in 2022 or earlier, you start taking RMDs at 72.
- If you turn 72 after 2022 and 73 before 2033, you start taking RMDs at 73.
- If you turn 74 after 2032, you start taking RMDs at 75.
*If you turn 72 in 2023, your RMD is due in 2024, with no RMD for 2023.
Would you rather live on your saved assets and share the wealth with family and friends while you can? Or, leave your assets to your grandchildren to enjoy without you?
Why Retirement Planning is Important – Finding the Correct Balance
While we can’t know exactly what the future has in store for us, we can prepare as best we can to find the desirable balance on the retirement spectrum. Being overly cautious or unconcerned can yield undesirable results, and It’s my job to help steer my clients in a direction that meets comfortably in the middle; the Jimmy Buffet soundtrack is completely optional.
To start the conversation about your retirement, please schedule a call.
