June 2017 IssueLong scroll reading

Planning a Rewarding Retirement, Part 5: Wealthy Living in Retirement

By Robert Cochran

The fifth in a series of articles

For me there has always been a disconnect between the concept of wealthy living and the size of a person’s bank account, retirement account, or other traditional measure of wealth. Enjoying a wealthy life should not be determined by how much money one makes or has amassed. Wealthy living is doing those things that make life inspiring, rewarding and worth living – helping young people improve reading skills, assisting at a food pantry, sorting clothing at a resource center, collecting gifts for underserved children at holiday times, volunteering at a hospital or hospice, having a part-time, fun retirement job that is totally different from a career, using expertise to help serve on the board or help raise money for an arts organization, doing the physical activity that was always put off because of career demands – the list can be endless.

One bit of advice I have received from a number of retired clients is to not make any quick decisions when it comes to time commitments. As one client recently suggested, “Treat retirement as the sabbatical you never had.” As the door to my career closes, I fully expect several others to open for consideration. For those who do not know, my undergraduate and graduate degrees are in music, so I suspect I will be spending more time performing classical music, something I deliberately limited the last 30 years.

Planning for a wealthy life can help it become a reality. A number of the truisms I discussed in the first article in this series, if followed, can make a large difference. Unfortunately, our society today is one of instant gratification, and we are bombarded with ads telling us how we need to have this gadget, that thing, or those items now.

In more than 30 years of helping clients plan for retirement, seldom was it just about money. Occasionally the planning involved helping people visualize what it was that retirement meant to them. We all know individuals who are so obsessed with their career that they have no life outside work. For these people, even discussing retirement is difficult. What will they do with all those hours? Even avid golfers soon realize at retirement they need more than a tee time to make them happy.

Another aspect of retirement I have seen more often than not is the difficulty savers have in spending money in retirement. The many years of putting money away for the future is over, there is no regular pay check, and there is concern they will somehow run out of money. Folks should know that it is relatively easy to set up a monthly, quasi-paycheck from a retirement nest egg, and it doesn’t require buying an expensive annuity product that only benefits the salesperson.

A recent study found many U.S. retirees keep saving even after they retire. The average American over 60 cuts spending 2.5% per year, or about 20% over a 10-year period, according to a University of Michigan survey. I well remember a widow client who remained in the small but well-maintained home in which she and her husband raised a family. She had a portfolio worth a million dollars, and her retirement income was more than she could spend, but she called me, asking for permission to buy a new microwave oven. Perhaps you see yourself in this description.

Even conservative lifetime-income-projections (low assumed return on investments, higher-than-average inflation, and more-than-actual spending) that show no chance of running out of money can have little impact on the savers among us. Of course there are also those who have always lived way beyond their means, and retirement for them can be disastrous. Saying they can live comfortably on 30% of what they now earn is unrealistic at best. For savers and spenders alike, it is often difficult to flip a mental switch when it comes to spending habits.

My advice to those nearing retirement is to not delay doing things on your bucket list if your finances allow it. We all know people who planned to do things someday, but the onset of health issues meant never being able to live their dreams. My older brother, who appeared to be as healthy as anyone, passed suddenly as a result of an aortic aneurysm. Several friends have passed at a relatively young age following bouts with cancer. These things speak not only to bucket lists, but also to making sure important documents are current – wills, powers of attorney, any advance directives, trusts.

Retirement today is much different than it was in my father’s day and his father’s day. For one, life expectancy when my father was born in 1906 was just above 50 years. Second, Social Security retirement benefits were less. Third, many companies offered pension plans. For his father, there really was no retirement. Having lived through the Great Depression, he worked right up until his death. As a bona fide baby-boomer, I recognize my fortune in being able to retire at a time of my choosing, of actually having a list of things I probably will be able to do, in having choices as to how I spend my days, and in being able to do those things that make life inspiring, rewarding, and worth living. I hope others will have an opportunity for their own version of wealthy living.

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About Robert Cochran

Robert Cochran is the now retired lead portfolio manager, Chief Compliance Officer, and principal of PDS Planning in Columbus, Ohio and a member of the Board of Directors of Mutual Fund Observer, Inc. Bob’s been a financial professional for the past 31 years, writes thoughtfully and well, and had a stint teaching at Humboldt State in Arcata, a lovely town in northern California. He also serves on the Board for the Columbus Symphony (and was formerly their principal bassoonist) and Neighborhood Services, Inc., one of Ohio’s oldest food banks.