I’m not going to get into religion—that’s your personal business—but it’s important to recognize that as humans living on earth, each and every one of us is aware of our mortality. Perhaps uniquely among all species of animals, because we have the blessing (or curse) of self-awareness, we know we’re going to die someday. Anthropologists say that since the dawn of time, about one hundred billion people have lived on the earth. Some lived short lives, some very long lives, but for all, the end has been the same: the Big Sleep. And so it will be for me and you and everyone else.
If you think too much about your own mortality, you might go batty, or run off and join a cult. But under these gloomy prospects, the vast majority of humans still manage to carry on, live day-to-day, enjoy their lives, and hope for the best.
As humans, we’re also keenly aware of the uncertainties of life. Either from personal experience or from reading the news, we know that at any moment, our existence could take a bad turn. Hurricanes, disease, conflict, earthquakes, accidents—lots of things can happen to derail our peaceful and enjoyable lives. One of the things we know will impact our lives, is old age… should we be so lucky as to reach it. Old age can mean a reduced ability to be productive, whether in the form of working for money or when it comes to one’s daily activities. Old age can mean illness, boredom, or loneliness.
Since this book is about your “retirement” (I use the word in quotes because it’s becoming increasingly meaningless, but there’s as of yet no replacement for it), if we’re going to make it better, we first need to see, and confront, the ways in which it can be terrible.
Here are some of the things that, when you’re thinking about retirement, just might make you feel underprepared (even if you’re not).
Not Enough Money
This is the big one.
Without enough money to pay for the life you want, old age can be scary. We all imagine ourselves being old and withered, unable to work, sitting in a chair in a boring, smelly old folks’ home, being bossed around by a grouchy nurse with no one coming to visit you….
I’m sure you have your own vision of retirement hell, and it likely starts with not having enough money.
For purposes of discussion, I’m going to assume that you’re currently a successful person who has a career and a good cash flow. You’re capable of saving for retirement. When it comes to money, what keeps you feeling unsure are the following three concerns:
1. I won’t be able to save enough to maintain my desired lifestyle.
As they near so-called retirement age, many workers suddenly realize that when they retire and need to depend upon their retirement fund and Social Security, their “comfortable lifestyle” may need to be downgraded. They realize with horror that they didn’t save enough, and now, being at retirement age, they think they can’t go out and get a job to earn more. The gauge on the metaphorical fuel tank is only going to keep going down.
In the roughest sense, not having enough money for retirement should be a preventable problem. It’s easy to calculate how much cash you’re going to need. You can go online and complete any one of a dozen retirement savings calculators offered by planners to get your email address for their database.
Just for fun, I used one of those online retirement calculators while writing this book. The process was very easy; I just moved the little slider bars as if I were a hypothetical client.
Here’s what I entered as an example:
And drum roll please…. The calculator says I’ll need $12,750 per month to retire in my current lifestyle.
I’ll be getting only $6,356 per month from my nest egg.*
Yikes! That result is quite a shock to the system, to say the very least.
Of course, this online tool is very crude and can’t quite take every “real world” factor into consideration. Let’s say though, that I increase my savings, including the securities that I own, to $1.5 million. That simple act would boost my monthly retirement income to $11,747. Whew, much better!
Then, let’s then say I push “retirement” (meaning total loss of earned income) back to age sixty-eight. Now the calculator says I’ll be getting $12,564 per month. Okay, now we’re getting close to the magic number.
And if I push the slider to retire at age seventy (again, this simply means my employment income goes to zero,) well, then I’ll receive $13,135 per month.
But let’s get even more nuanced. What if I retired at age sixty-eight, but remained employed in some capacity and earned 50 percent of my previous salary? This changes the formula drastically, but unfortunately the simple online calculator can’t accommodate for this possibility. It’s “old school” —you work and save, and then you retire and spend.
But does it have to be that way?
If you’re like Ted, our friend from the first chapter, and your job was nothing more than a grind from which you were happy to escape, then the “clean break” approach might seem appealing. This is because in your mind, work = torture.
I’d say you were doing the wrong kind of work!
2. The money will run out because I’ll live too long.
You might lie awake at night imagining yourself and your spouse in your rocking chairs, blowing out the candles on your ninetieth birthdays, or even staring at a cake decorated with the number one followed by two zeros. While everyone around you cheers and says congratulations, in your heart you’re thinking, “My God, I’m almost broke! What am I going to do—move into state-assisted housing? Go live with my kid?”
If you were sixty-five, would you plan on a retirement that lasted until you were ninety years old?
I’d bet not.
But the statistics on living a longer life may be more favorable to you reaching old age than you think.
According to data from the Social Security Administration, averaged for both men and women:
If you live to be eighty years old, your odds of reaching ninety suddenly improve!
These statistics though, fail to account for two significant variables: your ability and willingness to earn some money in retirement, and your attitude toward getting older (the latter variable I’ll discuss much more about in the pages ahead.) Suffice to say, in our story about Dianne and Ted, of the two, which one do you think has the better chance of living until the age of ninety?
Yes, I agree—it’s Dianne.
3. Healthcare costs will take all of my money.
This is a serious concern for anyone who hopes to have an active and fulfilling retirement.
When you’re planning for life in your seventies and eighties, healthcare expenses are probably top of mind. Retirees can end up spending hundreds of thousands of dollars on healthcare alone, making it one of the most crucial costs to prepare for.
In paying for healthcare, the adequacy of retirement income—from Social Security benefits and other sources—is substantially reduced by Medicare’s high out-of-pocket (OOP) costs. According to a study from the Center for Retirement Research at Boston College, the average retiree spends about $4,300 per year on OOP healthcare costs, and that doesn’t include long-term care. Medicare will help cover some costs, but coverage costs money, and you’ll still have to shoulder some of the out-of-pocket expenses.
Additional findings from the study, “How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income?” by Melissa McInerney and others, include these dismal numbers:
- In 2014, after spending on OOP medical costs, the average retiree had only 65.7 percent of his or her Social Security benefits remaining. Of their total income, only 82.2 percent remained.
- After OOP spending, nearly one-fifth (18 percent) of retirees had less than 50 percent of their 2014 Social Security income remaining. Of total income, six percent of retirees had less than 50 percent remaining.
To make things more difficult for retirees, health insurance in retirement is widely misunderstood, which can lead to unforeseen expenses. A recent survey from the Nationwide Retirement Institute found that 72 percent of adults over the age of fifty, admit they don’t fully understand how Medicare works, and more than half believe that coverage is free. In order to avoid expensive mistakes, it’s important to understand what your insurance will cover, how much coverage will cost, and which out-of-pocket costs you’re responsible for.
In fact, the topic of Medicare is so bewildering to many people that we’re going to tackle it before we end this book. Fear not—many people have figured it out, and so can you.
For older people, healthcare costs are substantial. According to a report by Health View Services, a healthcare financial software company, the total lifetime healthcare costs for a healthy 65-year-old couple retiring in 2019 were projected to be $387,644 in today’s dollars. (In the years ahead, this figure was expected to rise to $572,960 in future dollars.) This includes premiums for Medicare Parts B and D (covering doctors, outpatient services and prescriptions,) supplemental insurance (Medigap), and dental insurance, as well as out-of-pocket costs related to hospitalization, doctor visits, tests, prescriptions drugs, hearing services, hearing aids, vision, and dental care.
In their July 2019 report, “Why Health Needs to Be a Part of Retirement Planning,” Health View Services noted that new retirees, who generally paid 25 percent of their medical premiums while fully employed, are often shocked by the high cost of healthcare in retirement, when they’re suddenly responsible for 100 percent of their premiums and expenses. And as the years pass, healthcare costs will increase. In the first year of retirement, the couple’s total annual premium and OOP expenses will be $12,286. In twenty years, at age eighty-five, they will need $34,268 to cover these same costs. This excludes long-term care. Driven by healthcare inflation, projected to be 4.41 percent over the course of their lifetime, health-related expenses for today’s forty and fifty-year-olds will be even higher.
Healthcare costs are a big deal and they aren’t going away, but being aware of what they are likely to be, and factoring them into your overall plan, can make a dramatic difference in your likelihood of successfully navigating their effects.
I Will Die… of Boredom
This concern of new and future retirees is very legitimate. As I discussed in the previous chapter, if you retire from your full-time job only to embark on a twenty-year program of doing nothing but being a consumer, statistics predict you will die earlier than if you had kept working. Running shoulder-to-shoulder with your fellow rats in the race will keep you alive longer!
The longer life expectancy is partially due to the fact that being at work can create powerful camaraderie. Many companies work very hard to provide a sense of community, because many company leaders believe that a tight-knit team, where everyone gets along, is more productive and more profitable than a bunch of individuals who aren’t cohesive.
It’s nice to share in a team’s successes—the new product, new market, getting the big account, or whatever the case may be. Success can be both fun and fulfilling.
Everyone has a desire to be part of a community. Most people want to be of service to others. I happen to believe that we can design a life, both today and in retirement, that allows us to spend time in the community and feel like our life has meaning and purpose.
When we have that deeper drive, we’re able to do things with passion, and it doesn’t seem like work. It’s in line with the old adage that says, “If you find a job you love, you’ll never work a day in your life.” I don’t know if that’s completely true, but I do know there are certain ways I’d prefer to spend my day, and I’ve seen many examples of people who’ve been able to create a work-life balance they actually love.
I knew an accountant who took maternity leave and then decided that rather than going back to work full-time, she would instead contract with her employer to work part-time from home.
I saw the successes of a marketing director who, after years of wanting to do her own thing, left her well-paying corporate job. Before she actually worked out her notice, though, she signed her company as the first client for her new endeavor. That particular person was able to continue to do some of the work for her former employer that she actually enjoyed, but with the flexibility to work from wherever and whenever she wanted, provided that she could get the job done.
I’ve seen teachers who’ve gone into the ministry and used their gifts to do trainings, seminars, podcasts, books, and lectures, and who’ve allowed themselves to take back some of their time and apply their finances accordingly. They’ve been able to have a large impact on their community.
To achieve the retirement remix, all you need is an open mind, the desire to make your dreams come true, and the financial and life skills to sustain yourself. In the pages ahead, I’ll talk much more about the importance of having a dream and a purpose in life. Suffice to say that unlike the cost of healthcare (over which you may have very little control) you have total control over your mind and your spirit. No retiree is ever bored because they’re forced to be bored. Retirees are bored because they choose to be bored, and that choice is one that is never good for your mind, spirit or health!
Bob Parsons Started GoDaddy Because He Wanted “Something to Do”
Some people love to work, or perhaps they manage to find the job they love. (It’s like what comes first—the chicken or the egg?) It goes without saying that if you love your job, you’ll probably be good at it, and you’ll also feel good. You won’t think too much about retirement. In contrast, if you loathe your job, you will probably be terrible at it, and you’ll feel physically and mentally lousy. You’ll eagerly count the days until you can escape from the salt mine.
Former US Marine Bob Parsons is clearly a man who enjoys his work, and the fact that he creates his own work may have something to do with it. He grew up in difficult circumstances; as he wrote on his personal blog, “I’ve earned everything I’ve ever received. Very little was given to me. I’ve been working as long as I can remember. Whether it was delivering or selling newspapers, pumping gas, working in construction or in a factory, I’ve always been making my own money.”
After nearly flunking out of high school, he joined the US Marine Corps. In 1969 he served in Vietnam, where in combat he was wounded and received, among other honors, the Purple Heart. In 1975, after obtaining an accounting degree from the University of Baltimore and graduating magna cum laude, he began his career in IT and the software sales industry.
In 1984, he founded Parsons Technology in Cedar Rapids, Iowa, and began selling MoneyCounts, a home accounting program. Remember, this was the same year Apple introduced the Macintosh, ushering in the era of the home personal computer. Riding the digital wave, Parsons Technology grew and became successful, and in 1994, Parsons sold the company to Intuit, Inc. for $64 million.
He was forty-four years old, and he and his wife Renee could have lived in comfortable retirement. But Parsons likes his work, and he has the mindset to imagine the work he wants and then create it. As he wrote in his online biography, “In 1997, with time on my hands, I started Jomax Technologies, which would become GoDaddy.” This was at the dawn of the internet, and Parsons realized there was a need for a company to manage the registration of domain names. By 2018, GoDaddy had become the world’s largest web host by market share, with over 62 million registered domains.
Parsons had already moved on to new projects. In 2012, he founded the Scottsdale, Arizona-based YAM Worldwide Inc., to serve as the home of his entrepreneurship operations in the fields of power sports, golf, real estate, marketing, innovation and philanthropy. As he wrote, “Today I own and operate multiple motorcycle dealerships, a custom bike shop, a private golf course, a golf club company that manufactures the most technically advanced clubs you can find, an ad agency, a hedge fund, and numerous real estate holdings. Seems to keep me fairly busy.”
As of this writing, Bob Parsons shows no signs of slowing down. In your retirement remix, you don’t have to be an entrepreneur; you can be anything you want! All you need is an open mind, the desire to make your dreams come true, and the financial and life skills to sustain yourself in the manner to which you aspire.
Jill Tried Old-School Retirement… For Three Weeks
Some people give traditional retirement a test drive—and quickly realize it’s not for them!
Jill, a chief development officer, has successfully dodged Old School Retirement not once, but twice.
After graduating from Penn State University with a B.S. in Education, her first career was teaching school in the New York area before moving to South Carolina, where she continued to teach until she realized that the classroom was not where she wanted to be. She made the transition to manufacturing and human resources, becoming the vice president of a global manufacturer. She then served as the North American vice president of a Swedish industrial company.
In 2008, Jill needed a change of direction in her life and career. In August of that year, she accepted the position of vice president of institutional advancement and special projects at a technical college.
Jill loved her work and stayed at the college for nearly ten years before retiring.
But she was ambivalent about the idea of retirement.
“When I left,” she told me, “I felt I really did not want to retire. I had no use for it. I didn’t want to enter an old-school retirement because I suspected it was going to be no fun for me.”
But still she wondered… what would it be like to have no alarm clock, no meetings, no emails to answer, no project deadlines?
Thus, began her three-week retirement test drive.
“I had a three-week stint,” she said, “during which I said to myself, ‘Okay, you’re going to see how it feels to not get up at four o’clock in the morning. Take a couple of weeks and see how you like it.’ And honestly, I hated it. After the first week of being home and ‘retired,’ I knew I was going to go back to work, but I was pretending that I had made the right decision because I just couldn’t figure it out. I hadn’t planned correctly for an old-school retirement, and I just never wanted to be there.”
Jill says you can make a list and test out some of the things you have in your head. Do that before you make a permanent decision. “It’s a little bit like renting a car before you buy it. The reason I could test it out was because whenever I take a vacation, while I’m enjoying my time off, my mind is on what’s waiting for me back at work. I’m constantly calling in and checking on things. If you’re like me, you’re never really totally away. You still have that sensation of having a term paper due, where you know you’re going to get back and you have projects waiting for you. For three weeks, I didn’t have any of that. I felt like I was testing retirement, and that’s when I made the absolute right decision to go back to work.”
After that three weeks, Jill joined our team at Signature Wealth Strategies. “I thought at the beginning it was not going to be a nine-to-five job,” she said. “Well, it’s not. It’s more like seven-to-seven, because I’m so involved in so many things in the community, and I enjoy doing that because it makes you feel like you have a purpose and you’re helping people lead better lives,” Jill said.
Jill attests to the old saying that “if you really love what you’re doing, it doesn’t seem like work.”
Lessons About Retirement
“If you’re considering retirement,” Jill told me, “one of the things I was taught early on is to make a list of the pros and the cons. What are you really looking for when you finish your work life? What’s going to make a difference to you? And how are you going to work with that so that you enjoy what you’re doing? And again, as long as you enjoy it, it’s not really work.”
“When I made my list of the pros and the cons, I found that everything was a ‘pro’ to continue to work. There were no ‘cons.’ Sure, I may want to get up a little later in the morning! But if you’re really involved and engaged in what you do, then you find your social life is better and your health is better. Everything that you do supports your independence. Even if it’s not as much money as you were making, you’re still independent and you’re not using as much of your retirement funds, because you’re still bringing in money that you can use for extras,” Jill said.
“One of the biggest things is being active and relevant. As long as you can keep moving forward, then you are worthwhile, not only to yourself but to the community and to your family. It’s crucial to have a happy, healthy life in which you’re feeling worthwhile,” she continued.
“Feeling as though your life has meaning is important to your mental and physical health. Most of my friends in my age group have found things to do that make them feel worthwhile, and they are out of the house, working at something. I honestly don’t know many people who at the age of sixty-five, turned in their keys and said ‘goodbye,” Jill said.
In the old days, when you reached retirement age, you would most likely sit around a card table or stroll the golf course, and you would talk about your children and your trips. But Jill says that when she gets together with her peers, they discuss retirement innovations and new ideas about what somebody in their early seventies can do to remain active in their chosen arena through work or consulting.
“People who retire have a huge amount of knowledge,” she said, “and I will tell you that coming out of my field of human resources, you’re not ready to lose that knowledge in the workplace. Many workplaces are asking people who are considering retirement to come back as consultants, so they’re not going to work a huge number of years, but they are consulting,” Jill said.
Mentoring can be a key activity for senior executives. Sharing is what makes the world go ‘round, because you can train people without them even knowing that’s what you’re doing. That’s why mentors are so important in this society. And if you’re lucky enough to have a mentor, they’re usually the older people who are still active and want to be a part of something bigger and give back.
Jill’s Fears About Old-School Retirement
“My biggest fear about Old School Retirement,” she told me, “was that I would be bored to death.”
Carefully consider that phrase: “bored to death.” It’s funny because that’s exactly what can happen to a human being. Science confirms it.
Most retirees surveyed said they spent their time reading, watching television, and hanging out at home with their significant others. Researchers found the most common downsides of retirement were not earning enough money, boredom, and lack of social interaction.
Numerous studies have found that instead of a fun, carefree life in retirement, many who abruptly leave the workforce and walk away from their productive careers suffer from the “four D’s and a B”: death, divorce, disability, drunkenness, and boredom.
“My second biggest fear,” Jill said, “was that if you don’t have a professional finance person helping you plan your life, you’re not going have a very good life, because people are living longer, and their money has to last. And if you stay healthy, then ironically you may not have enough to last you for the rest of your life,” she said.
This is another reason to extend your earning life, downsize earlier, and live on less—or do all three.
“Finally,” Jill said, “medicine and medical costs have escalated to the point where you have no idea what is going to come down or what you may have to pay for later in life. Some of these medical conditions and their costs are catastrophic. Of course, that worries people because you really don’t want to take your entire nest egg and spend it just to keep yourself alive,” she continued.
“These days, most people don’t have a pension. I think about my grandparents. When they retired, the two of them got the vast majority of their income from Social Security and their pensions. One of the concerns that I hear often—really, the biggest question we ever get asked by anybody—is this: ‘Will I have enough money?’, Jill said.
“The key is to find ways that you enjoy to continue to do those things and maybe also earn an income from them. By working even part-time, you reduce the amount that you need to draw from your savings,” she said.
Jill often thinks back to when she was younger, and about what she would’ve done differently if she knew everything then that she knows today. For young adults, she would have ensured they were trained to understand basic financial planning. If a person thinks they would like to have a new house or a better car by the time they’re fifty, a professional advisor can create a financial plan for them, so they have a goal to strive toward. That doesn’t mean they have to follow it to the letter. But if they have a goal and they can see the big picture, they can figure out how they can buy what they want at a particular age.
Jill says that once you’ve decided on your retirement remix, it takes expertise and talking to the right people to get where you’re going!
*This is a hypothetical example for illustration purposes only. Actual investor results will vary.
The above article originally appeared as a chapter in The Retirement Remix and is reprinted with permission from the author Chip Munn. No parts of this article may be reproduced without correct attribution to the author of this book.
You can find the full book here.