Who knew retirement was so complicated and messy?
It’s unclear whether German Chancellor Otto von Bismarck, when he established the first government social insurance program and effectively invented the concept of retirement, worried about whether retirees had enough social connections and purpose in life.
But Christine Benz does in “How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement,” and she may well be right to do so.
Benz is Morningstar’s director of personal finance and retirement planning, but she’s written a book that evokes Viktor Frankl as much as Bill Sharpe, aiming to go well beyond the mathematics of saving for, and living in, retirement.
Planning for what we recently stopped calling your “golden years” (baby boomers may not like that phrase) is no longer as simple as “sav[ing] like crazy for three or four decades, slap[ping] a 4% withdrawal rate on the accumulated savings, and then head[ing] off for a life of fun, fun, fun.” That’s how former Wall Street Journal personal finance columnist Jonathan Clements put his youthful view of the subject in his excellent foreword to the book.
If saving in your younger years and middle age, and then distributing your assets to yourself in your old age weren’t difficult enough, Clements learned that “after a decade of semi-retirement. . . . retirement is not just a practical financial issue but also a topic chock-full of intellectually fascinating questions about risk, purpose, happiness, family, peace of mind, legacy, and more.” These are the themes to which Benz’s book is dedicated.
Clements recently announced that he has terminal cancer, making his foreword to the book more poignant.
People & Purpose
Retirement (for perhaps the luckier third of the country) can now last 30 years or more, and there’s only so much binge-watching Netflix that’s possible before boredom and existential angst set in, especially for people who’ve had successful careers at demanding jobs.
The book addresses taxes, Social Security, healthcare, housing, estate planning, annuities, and investment management. But its unique angle is that many of its 20 chapters, which are in the form of interviews with personal finance experts and luminaries, are related to the risks of people losing connectedness with others and purpose in a long retirement.
Chapter titles include “Nurture Your Relationships” and “Visualize Your In-Retirement Lifestyle” along with more traditional retirement topics like “Set an Asset Allocation for Your Retirement Portfolio.”
All the chapters conveniently conclude with a useful takeaway section and links to sources where readers can learn more about the interviewees.
To be sure, “until your financials say you’re ready, [the rest] doesn’t even matter,” says Fritz Gilbert to Benz in an interview titled “Lay the Groundwork.” Gilbert, despite having no background in finance, “writes one of the most useful retirement blogs out there, ‘The Retirement Manifesto,’” according to Benz.
Once the financials say it’s possible, Gilbert’s advice is to set a date, and find purpose and friendships: “Brainstorm about what other activities can replace the things you enjoyed the most about your job.”
Working in some capacity, for monetary compensation or not, to feel useful and to replicate relationships from one’s employment years, turns out to be important for many retirees.
Gilbert also has a series of exercises to tackle in the five years leading up to retirement including considerations about location, tracking asset levels, forecasting income, and considering long-term care insurance. He even recommends taking a vacation and treating it as a mini-retirement before the actual event to see how you’ll feel about spending your assets.
The last point is important because a lot of retirees have been diligent savers, but struggle emotionally to flip into spending mode.
The chapter titled “Nurture Your Relationships” features Laura Carstensen, head of the Stanford Center on Longevity. She makes the strongest case for relationships and happiness as the most powerful predictors of longevity. The quality of one’s relationships and overall happiness are related, and they can be so powerful that they trump genetics regarding longevity.
Social networks may change over time, but we’re wired as human beings to develop healthy physiological responses to “being a part of something, being loved, being cared for, being part of a community,” said Carstensen.
Aging often means there are fewer structures, including — but not simply — work, for relationships, and it becomes more important in retirement to make extra efforts to cultivate community.
We may also become more selective about our friends as we get older, but that’s not necessarily a bad thing, as long as you’re not isolated and you maintain a strong inner circle of friends.
A book about risks in retirement risks veering into the morbid. But the last chapter, titled “Leave No Regrets,” where physician-turned-writer/podcaster Jordan Grumet talks about his experiences as a hospice care doctor, is uplifting.
His lessons are that some regrets might be inevitable, but it’s never too late to try at least some things that you’ve wanted to, or get better at things that are already part of your life. If you can’t start a foundation, you can work at becoming a better spouse, for example, or repair relationships that suffered some rupture. There’s usually time to eliminate at least some regrets or have some do-overs.
Benz says she knew when she conceived of the idea of the book that it would conclude with the Grumet interview because it shows that time is everyone’s most precious resource.
Advisor Aid
The book isn’t necessarily written for advisors, but woe to the financial advisor who doesn’t appreciate its more psychological tendencies. Full disclosure is in order here: Your correspondent is an advisor and a former Morningstar colleague of Benz, who, despite having an interest in behavioral finance, humbly, but gratefully, saw his weaknesses as an advisor pointed out to him indirectly in every chapter.
Investors have to think about what they’re going to do in retirement, and, more than ever, may want their advisors to be partners in helping them find meaning in retirement as much as having competence with numbers. An advisor doesn’t have to be a licensed therapist (yet), but it’s clear after reading the book that failure to connect with clients on a human level is a recipe for business failure.
Even the chapters dedicated to a financial or investment theme have psychological components to them. In one chapter, Morningstar’s Susan Dziubinski interviews Benz herself about her “bucket” approach to constructing retirement cash flows. The buckets represent money earmarked for different purposes and time frames — from immediate spending to long-term growth and everything in between.
Although some have called it gimmicky, the approach is likely underappreciated for its ability to imbue retirees with equanimity when their long-term bucket — invariably more aggressively invested than the others — fluctuates. Most advisors know anything that calms clients in the face of volatility is worth a lot.
Missing Matter
Finally, it’s difficult to read a book about finding meaning in retirement without remembering that only slightly more than half of U.S. workers have a 401(k) plan and that the median 401(k) account balance for people aged 55 to 64 is less than $90,000, according to NerdWallet. It’s debatable whether that median balance owes to irresponsibility or meager income.
Benz avoids politics, which is reasonable given the deeply personal issues she addresses. Still, given the large number of U.S. workers heading into retirement with less-than-optimal assets, one wonders after reading the Grumet interview if those with the time and money available for the foundation option he discusses could consider forming institutions dedicated to encouraging economic and 401(k) reform and education.
John Coumarianos is the managing member of Mindful Advisory, LLC in Northern New Jersey. He is a former Morningstar analyst.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
Read more articles by John Coumarianos
Who knew retirement was so complicated and messy?
