Confidence to Pretire: Know Your Levers

“Will I run out of money?” is the most prominent question people start their pretirement planning with. After pondering it for several years myself, and as a member of a married couple, I think it is a flawed question. A much better and more liberating one is, “What are the many ways we can adapt our lives so that we always have more than enough?”

Having a plan for pretirement is comforting and exciting but it can also feel constraining.  Our Vanguard Personal Advisor Services plan is adaptable but it can also feel like driving on a freeway to reach an appointment in another city with someone important who is expecting you:  Will traffic slow me down?  Do I have enough gas?  Will I take the wrong exit and get lost?

I find that using retirement calculators, though handy, is similarly stressful.  Each one seems to be different and none are able to incorporate all of the many variables in a person or family’s life.  It’s not possible.  Retirement calculators and professional financial plans have their place in the toolkit but should be kept in perspective.  The biggest tool we have is the flexibility to adapt.

What is different about your life from ten years ago, major changes that you didn’t expect to happen?  Are you living in a new city?  Did you have more kids or no kids unexpectedly?  Are you divorced?  Married to someone you didn’t know ten years ago?  Managing an illness you didn’t expect?  In a new career?  Back in graduate school?  The point is, life is not fully predictable, which makes financial plans and retirement calculators of limited utility.

One adapts to change.  “Embracing Change” is one of those workplace cliches but it is a mandatory mind and skill set.  I’ve known people who hunker down and ignore change as a coping strategy but they often end up worse off.  Rather than hunkering down and ignoring change, it is usually more successful to keep one’s antennae in the air, making small adjustments as change is warranted rather than waiting to be forced to make really big changes that have been ignored.

Happily, as in any other sector of life, we can anticipate and embrace change by adapting our pretirement plans.  Those documents and calculators can give the impression that we only have a binary choice:  Work until we don’t have to work at all anymore or quit sooner and watch all the money run out. The problem is plans and calculators cannot encompass the nearly infinite variety of options a person has across the next 30-plus years of pretirement and retirement in a changing world.  

After years of reading enjoyable financial blogs and books, listening to podcasts and playing with partially-helpful calculators, I’ve mentally broken through to viewing pretirement as an adventure, not a calculation. Adaptation is its key rather than a huge portfolio. I am no longer as concerned about running out of money as I was when I started this journey of self-education and preparation.  Rather than the simplistic and limiting “Will I run out of money?” output, the question has evolved for me to “What levers can I pull and when that will give me the income I need to foster maximum self-determination and happiness in my life?”

Levers To Pull in Pretirement

What are some of the tools at our disposal to ensure that we don’t just sit in our chairs until suddenly, in total surprise, the portfolio fails and all the money runs out?  Here is a very partial list:

  1. Part-time work of some kind, either self-employed or working enjoyably for someone else, or maybe both at the same time.
  2. Run our house as a vacation rental.
  1. Rent out our house long-term and live somewhere else.  That would be a break-even proposition right now, given our mortgage, so there’s little value in doing it.  Someday, the economics might make more sense.
  1. Downsize our house.  Lots of people live in smaller and less-expensive condos and apartments than the house we live in.  This 103 year-old house has two sets of stairs and a big yard that we might tire of working on someday.  If we sell and downsize, buying or renting a less-expensive place to maintain, clean and operate, several points are added to the confidence level.
  1. Refinance the house.  This doesn’t make sense now but we might like to leverage our equity in the future.  I don’t love the idea of reverse mortgages but it’s another viable way for older people to finance retirement.
  2. Sell the house and buy a duplex, living in half.  Such a move could help neutralize one’s mortgage.
  3. Co-housing is a mostly-European concept but is also practiced in America.  It’s a way to share expenses and create a community of human relationships, both of which are important for a comfortable and happy life.  I plan to explore this topic more in future posts, just because it sounds interesting.
  4. Move to the country or a smaller town.  We find lots of ways to spend money enjoying our city.  If we had to, we could move to a cheaper area.  Lots of people do, which changes their economic picture.
  5. Move to a different country.  We have friends who live much of the year in Latin America and I had an uncle who hit hard times and moved to Costa Rica, where he could afford to get on with his life.  There are lots of expats living adventurous lives in less expensive countries.
  6. Simply reach age 70 before we take Social Security.  Taking Social Security at age 62, as most people do because they choose to or have to, provides a subsistence level benefit.  Waiting until 70 allows the payment to increase by 8% for each year one holds off.  This additional 8 years of compounding makes waiting until 70 a whole other proposition and can allow an above-average income in retirement all by itself.  For someone who has not saved, simply figuring out ways to literally buy time until age 70 could be the way to go for their retirement.
  7. Buy adequate insurance.  We have lots of it:  car insurance, home insurance, long term care insurance, term life insurance, liability insurance, even smart phone insurance.  Nothing can solve all financial problems and protect us from losing all of our assets in any eventuality but we can dramatically reduce the odds of and damage from such an event.
  8. Avoid debt.  Eliminating all debt beyond a low interest mortgage in pretirement gives a person flexibility to pull many other levers elsewhere.
  9. Allow for financial upsides.  So much of financial planning is anticipating and managing risks that are downsides.  What if good stuff happens, too?  The financial markets might perform better than expected.  None of the experts ever predicted the creation of Facebook, Amazon, Apple, Netflix or Google or, for that matter, any other company in the S&P 500. Other transformational companies will surely appear. Also, is your city growing?  If so, your house might go way up in value.  You might get an inheritance you didn’t expect.  Who knows?  I once worked with a woman who kept some stock in a small company she helped found decades before.  One day, she announced her retirement, completely unplanned, because her former partners had sold the business for big bucks.  We wanted to throw her a retirement party but she said, “Thanks but nah, I’m good. Bye-bye.”  The point is, optimism is no more expensive than pessimism.
  • The “Will I Run Out of Money?” retirement planning mindset is too fear-based and suffocating.  However, once you inventory all of the levers you have to pull that could prevent you from ever running out of money, you might very well find that spending your last dollar actually becomes much less likely to occur than making some of the many moves at your disposal to keep going. Maybe you’ll have less money after full-time work, as will we, perhaps, but having lots of money isn’t what makes us happy. Freedom and more time for greater fulfillment are better rewards.
  • What are some of your own levers?

    Literally no one is going to sit in their chair in pretirement, look at their financial plan and say to themselves, “This says I will run completely out of money in five years.  Gee, I guess I’m doomed to having the lights go off.”  No, you’ll get up out of your chair when you start to feel concerned and will pull some of your levers to adapt.

    The inevitable changes in life and our adaptations to them imply adventure to me.  I see my inventory of levers as forms of power to manage my life.  I also like the thought of employing them to benefit our own lives a lot more than the usual American work-full-time-until-you-can’t model that serves many others’ economic interests.  I figure, perhaps the best thing I can do for others whom I love is to first try to be happy and engaged with maximizing my own one life.

     

     

     

     

     

     

     

     

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    Pretirement and Political Consumption: The Set-It-And-Forget-It Approach

    I think having a strategy toward elections and political “news” is particularly important for people in pretirement.  We pretired folks have a goal of abundant free time, which we will need to fill in healthy ways.  Politics and government policy are important to be informed about, but only up to a small point.  What is more important is our individual happiness.  We want to do things that cause thoughts that then release happy endorphins into our system.

    Whew!  The latest “most important election of our lifetimes” is finally over.  The country was stoked to the boiling point with fears that were blared across social media, in every newspaper and on every TV news channel.  Lawn signs littered the city and countryside.  More money was spent than ever.  The people finally had their say.

    Me?  I participated far more than most citizens, but in a way that kept me more sane than in prior elections, using an approach that I plan to hone in the future.  I call this civic engagement style, “Set it and Forget it.”

    I think having a strategy toward elections and political “news” is particularly important for people in pretirement.  We pretired folks have a goal of abundant free time, which we will need to fill in healthy ways.  Politics and government policy are important to be informed about, but only up to a small point.  What is more important is our individual happiness.  We want to do things that cause thoughts that then release happy endorphins into our system.

    It’s great to experience, whenever possible, happy, healthy endorphins.  It’s bad to be addicted to cortisol, the fear and stress hormone.  Politics and the “news” media today, and maybe since the beginning, are based on getting your attention by tripping your inner alarm system.  In other words, politics and the “news” industry function by addicting you to unhealthy, unhappy cortisol.  Who wants to take a bad drug?

    Some of the symptoms from excess cortisol exposure, are:

    • Severe fatigue.
    • Muscle weakness.
    • Depression, anxiety and irritability.
    • Loss of emotional control.
    • Cognitive difficulties.
    • New or worsened high blood pressure.
    • Headache.
    • Bone loss, leading to fractures over time.

    Sounds a little like what many people encounter in older age, doesn’t it?  It also sounds like our reactions to partisan “news”.  Well, I want a healthy pretirement, which requires making choices that reduce my chances of experiencing all of those feelings and by creating conditions that help me experience the opposite of everything on that list.

    I left Facebook and I never went on Twitter specifically because I realized that time spent on social media makes me feel worse, not better.  The post-Facebook feeling was much like the feeling an hour after eating a big gourmet doughnut, which is to say unsatisfied and slightly regretful for the binge, yet also wanting a small additional hit of fat and sugar.  Whenever I happen to mention that I’m no longer on Facebook, nearly every single person says “Yeah, I don’t spend much time on Facebook anymore, either, but I like seeing pictures of our friends’ and families’ growing kids.”  Right.

    Even if that’s partially true, I’m not here to judge anyone but myself.  Social media’s effect on society, though, is of course worrisome.   How does looking at pictures of my cousin’s new baby contribute to further national tribalism and hacked elections by foreign dictatorships?  I take responsibility for having occasionally found myself on Facebook arguing with people whom I haven’t seen since high school (and really never knew all that well even then).  Those online “debates” seemed to become competitions for who had the best grasp of soundbites in the media, never once led to anyone’s perspectives changing by one inch, and always left me more frustrated, unsatisfied and distressed about the world than before.  We used words with each other online that we’d never use in person with them, making it awkward sometimes when we actually saw the person.  I found Facebook to be a cortisol shower, so I left it.  A couple of years later,  I do not miss it.  I can report that I have just as many real friends and family, and am happier and more productive.

    Cable “news” is a business model built on generating cortisol in you.  The stereotype of an older person sitting in their chair shouting at their set as they watch only the cable opinion shows that reinforce their preexisting views, is a little too accurate for comfort.  I do not want to be a person who frees myself from full time work, only to fill the extra hours with some corporate-induced sugar high of anger due to provocation on TV.  I saw a study recently that measured some 40-plus “breaking news alerts” from the major cable news channels per day.

    In addition to ditching Facebook, we cut the cord on cable television many years ago.  Now we curate what we watch, looking for shows on Netflix and Prime TV that we think will be satisfying to watch.  I don’t watch much TV but, when I do, I want that powerful medium to stimulate thoughts that fill me with happy endorphins, not make me unpleasant at cocktail parties.

    It is also important to be an engaged citizen, right?  If the older guy shouting at his TV stereotype is unflattering, so are those we all encounter who never seem to come in contact with a newspaper and would have a hard time telling you who their own governor is and probably couldn’t find England on a map.  No one should want to be that person, either.  Citizens who so un-engaged are also probably so passive and unread in their general approach to life that they, too, are probably not much fun at cocktail parties.

    So how can a person approach elections and politics in a relatively healthy way that doesn’t lead to them becoming either an angry or a boring variety of pretirement couch potato?  I do not claim to have perfected a method in the face of the $16 billion duopoly that is the American political industry designed to provoke my outrage and keep my attention on the perpetual campaign.  However, I am pushing back on it in a couple of useful ways.

    Set-It-and-Forget-It Political Engagement:

    1. Vote in every single election, whether primary, general or special
    2. Give a little money to candidates and causes but put it on monthly auto-pay.
    3. After that, focus on happier subjects than the “news”, such as being a pleasant cocktail party guest.

    We really do exist in a Coke vs. Pepsi kind of world when it comes to most of the choices on the ballot.  That analogy is a little unfair, because policy is a lot more impactful than our choice of chemical sugar waters.  On the other hand, some of the insult that emanates daily from the perpetual campaign duopoly and “news” industries is unfair to chemical sugar waters.  Exactly like Coke and Pepsi, however, the fundamental marketing machinery of our two major political parties is identical.  Also, for all practical purposes, we only have those two choices if we want our votes to occasionally be for a winner.  Sorry, third party enthusiasts, but I’ve given up on those.

    I try to be a realist so, realistically, I am a member of one of the tribes that the system has served up to me.  That’s a given, so a whole lot of worry and decision-making, stress and cortisol is avoided by voting for my tribe.  I vote in every single election, primary, general and special, and I vote for my party’s candidates 100%.  Judge me, if you will, but I can’t really conceive of voting for the other tribe’s values, philosophy or candidates and I don’t see that other parties’ candidates making any effort to come in my direction.  Neither wants to be “New Coke”, so they stick to their tribe.  That part has been set and forgotten, so I don’t need to spend my time being a political junky or policy wonk.

    We don’t live in a direct democracy.  We live in a republic.  That means we each have one vote, which we can apply toward our favored candidate.  If they win election, policy and the “news” media is really their problem at that point, not mine.  I can’t help them anymore.  They spend their term voting on policies to run our government, then we have an opportunity later to vote for or against them.  That’s really it.  We can choose to vote and consider it set and forgotten, then do other enjoyable things between elections and let the elected representatives do their jobs.  Or, we spend the interim consuming media, ranting on Facebook, raging against the machine looking for the next cortisol hit.  It doesn’t matter to how well our government works because our main role is to vote once per term.  I vote for my tribe in every single election, which is whole lot more than most people do, then I try to set it and forget it.

    Sometimes, a candidate comes along who either impresses or shocks me enough that I want to help or hurt them.  In other times, because my wife and I are engaged in the community, we feel obligated to attend political fundraisers we are invited to.  We want our neighbors to experience happy endorphins when they see us, so we go to these dull, crowded things but least there is always beer and snacks.

    We cut checks at those fundraisers but, in the past few elections cycles, I’ve gotten more enamored of auto-payments to selected candidates and get-out-the-vote-for-my-team organizations.  I can budget our spending better this way, which lets us give more over many months than cutting a check.  Best of all, my campaign contributions have been set and forgotten.  When I get the urgent weekly texts amounting to “OMG! I am campaign staffer Julie and something has just happened/or might happen, so please send in a gift RIGHT NOW!” I stay relaxed, knowing that my $20 for the month for the cause is already in motion so, when it arrives, Julie and her team can all look up from their computers, give each other high fives, raise a cheer to me and take the rest of the day off.

    Whether you like it or not, if you’ve read this far, you are probably already part of one political tribe or the other.  To your tribal leaders, your vote is taken for granted has been already set and forgotten.  Sorry to break it to you.  That’s because the elections industry duopoly expends all of its capital on trying to persuade the people supposedly in the middle. those who have managed to reach adulthood without choosing either Team Coke or Team Pepsi.  If an electric prod can occasionally get them to the polls, they are likely drink either flavor.  That’s the entire game.  On these swing voters every election hinges.  It doesn’t matter how much you or I spend our valuable pretirement hours reading the front section of the paper, obsessing on every outrage, yelling at the TV, door knocking, putting signs in our yard or otherwise bathing in cortisol like we’re taught to.  We might as well just vote every time, give a little money here and there, then focus on happier subjects.  Do that, and we’ll be much more active citizens than the vast majority yet we’ll be happier, too.

    How do you stay sane in face of the $16 billion permanent campaign duopoly, social media toxicity and the relentless industrial “news” cycle?