Financial and FIND Planning for Later Life

 Anyone who read my latest book, Flipping a Switch, knows that I am not a fan of the “R word,” retirement. To me, it implies that people focus exclusively on leisure and are no longer productive. 

As I wrote in the book, many older adults want to continue making contributions by using valuable knowledge, skills, and contacts that took decades to build. The “R word” simply has too many negative perceptions (e.g., irrelevance, diminishment, and bored people endlessly watching television).

In Flipping a Switch, I coined a new term as an alternative to FIRE (Financial Independence, Retire Early). It’s FIND (Financial Independence, New Directions). By avoiding the “R word,” FIND encompasses many possible life options- whether financial independence occurs at ages 30 to 45 or 55 to 70. 

Unlike FIRE, FIND does not imply the automatic end of someone’s working career but, simply, that people have the freedom to live their best possible life on their own terms.

 

Regardless of how you view the “R word,” there is lots of information out there about planning for happiness and financial security in later life. Below are eight insights that I gleaned from recent webinars and podcasts:

 

Plans Don’t Always Pan Out- According to the 2021 Retirement Confidence Survey (RCS), people don’t always leave the labor force when they plan to: 46% exit earlier and 6% work longer than planned. Workers in the RCS said they plan to retire at a median age of 65 and retirees said they did at 62. Once they retire, most people stay retired. It is generally a “full stop.”

 

Income Certainty is Important- Studies have found that knowing you have a sum of money in an annuity to last the rest of your life is more valuable to most people than having that same amount of money (e.g., $500,000) in an account that you have to manage and take withdrawals from. Building “floors” of retirement income with a pension and/or annuity helps lessen stress about having enough money and having to actively manage it.

 

Past Practices Help Predict the Future- Some people are well prepared for financial security in later life and others, not so much. In one recent study, 41% of Americans said “it’s going to take a miracle” to be ready for retirement. The savings habits and retirement savings accounts (e.g., Roth IRA and 401(k)/403(b) plans) that people start in their 20s and 30s will inform their “future self” in their 60s, 70s, 80s, and beyond.

 

It’s Not All About Money- A traditional “full stop” retirement does not work anymore for many people. Two big challenges are feeling “lost” and disconnected and filling approximately 2,500 hours a year that were previously spent working and commuting. Many new retirees go from a brief “honeymoon” period to feeling that something is missing as a life of leisure gets old fast. Experts recommend focusing on things that make you happy and “reasons to get out of bed every day.”

 

Some People Like to Work- Ironically, people with the most savings and capacity to choose leisure are choosing labor instead. Why? Jobs and work provide identity, self-esteem, a sense of purpose, and a sense of community. Older adults should live life their way and not the way marketers and other people think that they should (i.e., a “default life”).

 

It’s All About Balance- Retirees need to have some equity assets (e.g., stock and mutual funds) for growth to hedge inflation but not too much money in equities to increase sequence risk (i.e., the risk of market downturns early in retirement). Many financial advisors recommend a “three bucket” approach with equities in Bucket 3 for long-term growth. Today’s low interest rates decrease the probability of success (not outliving your money), especially for conservative investors.

 

Plan for Getting Older- When people plan for retirement, it is easy to “forget” that they also need to plan for getting older (i.e., their 70s, 80s, and 90s). Pre-retirees tend to focus their plans solely on the years immediately after leaving a long-time career and mentally “see” themselves looking and acting like a 60-year old in their 80s. This is a common cognitive bias.

 

The Three M’s- Older adults need three things to be happy in later life: Money, Medicine (health), and Meaning. Every newly-minted retiree is “an experiment of one.” People who have a reason to get up in the morning and continue to grow live longer. Getting older is not a choice but growing older is. Three financial issues that older adults tend to underestimate are longevity (you could live to 95 or 100), later life health care costs, and home repairs if they “age in place.”