Pretirement Disrupts Retirement

The largely-outmoded On/Off Retirement Model world was about earning and saving so that, eventually, loooooong into the future, you could quit and not work anymore. As I look around at those I know who, like me, are in or around our 50s and 60s, hardly anyone seems to actually do that. We wonder if our lives would be more enjoyable if the paid work we did offered more of a creative challenge, while also allowing us more free time. We’ve achieved a certainly level of mastery in our professions and have crossed many of the goals off our list that used to motivate us. Are there many remaining rungs on the ladder before we reach the final one: Freedom from the ladder itself?

The largely-outmoded On/Off Retirement Model world was about earning and saving so that, eventually, loooooong into the future, you could quit and not work anymore.  As I look around at those I know who, like me, are in or around our 50s and 60s, hardly anyone seems to actually do that.  We wonder if our lives would be more enjoyable if the paid work we did offered more of a creative challenge, while also allowing us more free time.  We’ve achieved a certainly level of mastery in our professions and have crossed many of the goals off our list that used to motivate us.  Are there many remaining rungs on the ladder before we reach the final one:  Freedom from the ladder itself?

The traditional retirement model is not an ancient concept.  It was fully a product of the Industrial Revolution, with its production quotas, shift whistles, typing pools and lunch pails, whatever those were.  Like most outmoded systems, products and services, whether carburetors, taxi cabs, or making hotel reservations, traditional retirement is similarly ripe for disruption, technologically and socially.  I haven’t figured this new era all out for myself yet, much less for others, but I want to explore pretirement, sharing what I experience while learning from similarly-inclined people.

The traditional retirement model was full of carrots at the finish line, most prominently pensions (remember those?), mythical gold watches and, eventually, when you are nearly spent, the full corporate endorsement to go play shuffle board in Florida.  Those things have largely gone the way of leaded gas.  Unfortunately, our society hasn’t yet embraced a clear replacement model for how most of us actually live post-full-time work.  There is literally no established structure or language around dialing work down in our society, no gradual staircase from full-bore career to more self-determination that is understood and accepted as fully legitimate.

Few workers seem to understand those who “give up a really good career” in their 50s or even earlier.  That’s the time when we’re supposed to be in full Benjamin-stacking mode and demonstrating the mastery of our professions, grooming the next generation climbing the ladder.  We managers might have finally become one of the people everyone else is working for.  How could we just quit and do something else when we finally have all the brass rings in hand or nearly-so?

It helps to consider how insecure our position as even a senior professional really is.  We mostly work today for corporations and organizations that call themselves “At-Will Employers” (see your Employee Handbook.)  Employers have all of the power to hire and fire you, which they certainly do without any hesitation when they choose to.  An individual has no power in that arrangement, except to exercise the other half of it, which is to build some assets and skills while working full-time so that we could ultimately fire the employer “at-will.”  That language is also in your employee handbook, though few of your colleagues are prepared to exercise it as ruthlessly as your employer is.  What if we had an acceptable, honorable language for today’s vast ranks of people our age who have put themselves in a position to exercise their half of the At-Will-Employment equation?

Pretirement Power

If our employers, explicitly and in writing, feel no obligation to help us descend the escalator from full time work to something else, what can we do for ourselves?

What if we learned how to hack our financial assets in non-traditional ways before age 59.5 to support the pretirement lives we want to build for ourselves right now?

What if we didn’t fear the loss of employer-provided health insurance anymore, because we can now use Health Savings Accounts and health insurance exchanges and other methods to bridge us to age 65 and Medicare? Our country is finally, fitfully, joining the rest of the rich, advanced world toward more rational and high-quality health care delivery.  We can finally come out of the cave of dependency on At-Will employers for our very medical care, blink in the daylight and chart our own paths.

What if we got out from under oppressive mortgages and expensive house upkeep and, instead, leveraged our accumulated home equity to generate income, pursue travel or engage in more creative, smaller-scale and perhaps international or even cooperative living arrangements?  Many, many people explore the infinite variety of housing arrangements that are better for them and provide significant financial relief from the expensive 3BR/2BA, two car garage model.  Their housing choices make their pretirement budgets work really well.

If we pursue for ourselves a creative and practical toolkit for pretirement, using words that are more nuanced and useful than On/Off “retirement,” then five or ten years from now, most people we meet will know instantly what a person means when they say “I’m pretiring.”  Pretirement could be a fully-respectable, accepted and understood phase of life.

Pretirement is already practiced by perhaps a majority of people.  Our commercial society just doesn’t fully understand and recognize the concept as legitimate yet.  To many, it still seems a little flaky or unfortunate to just abandon the earning and spending treadmill early.  “Oh, does she have a health problem?”  “Did he get fired?”  “Their kids are out of college and his wife comes from money so, sure, he can quit and travel.”  Quitting seems”crazy” and/or “irresponsible.”  It’s been said that every job, no matter how good, comes with it’s own bucket of manure.  Perhaps the people who make those comments and who can’t fathom your choices will be able to understand once their bucket finally overflows, too.

Those in the non-profit sector, like my wife and me, face an additional challenge, because we are supposed to be about improving a society that needs us.  We feel some inherent guilt pondering changes to careers dedicated to addressing the needs of the homeless/environment/sick people/children/other serious problems of society.  I am part of some professional organizations full of people my age and older who seem to remain genuinely fully-motivated to work-until-they-can’t on behalf of their organizations’ missions.  It’s awesome to see the ones who are still positive going strong for four or even five decades or more of full-time work for a better society.  I am in a good place at the moment, career-wise, though I know some others who are no longer happy in their work but who stay year after year.  I do not want to become one of those folks and I won’t ever let that happen.

Sometimes you hear that someone is “semi-retiring”, “going part time” or “retiring early.”  Those words, along with the less-common “pretirement”, are part of the lexicon of this phase of life and are descriptive for many people’s routes through it.  As I said, I might be eventually done altogether with my demanding profession and not be interested in going part-time or semi-retiring from it.  I don’t know yet so I am working to make sure my choices, including working longer, are totally optional.  If I do change the type and volume of my paid work, preretirement seems a better fit for me than those other descriptors.  It’s hair-splitting semantics, perhaps, but it’s more apt for my mindset and probably for a lot of others out there.  It’s important to have the right word for what we’re each doing.

I understand and respect that responsible people do what they have to do in the total context of their lives.  Many people just need to work to provide for others who depend on them.  I am sure that many other people still really like working at what they’ve been doing.  I read recently about a 107 year-old barber – who drives to work.  Fine, though also a bit terrifying as a fellow driver.  I’m not judging others’ choices and situations.  Some people still have a pension dangling out there, which seems to both entice and torture them.  There is no one-size-fits-all, only individual journeys that each person navigates as best they can.

I’m the type who takes action when I need to.  As I face up to my own situation and feelings using whatever assets I have to create flexibility to make changes easily if my wife or I choose, perhaps others like us will obtain some benefit if I write about it.  I want to use my blog as part of my personal toolkit to explore alternative work and a lifestyle for always keeping myself happy, challenged and engaged throughout my one life.

How are you thinking about pretirement?

Advertisements

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?

Pretirement Money Management: Why We Use Vanguard Personal Advisor Services

Vanguard owns a planning subsidiary, called Vanguard Advisors, Inc.  It exists solely  to help Vanguard clients, like my wife and me.  Vanguard’s Personal Advisor Services (PAS) program runs the gamut from simply consulting with clients to create investment plans that clients implement themselves to completely managing a person’s portfolio with an assigned Vanguard Personal Advisor.  This is the route we have taken in pretirement, and we are happy we did.  Here are some key reasons why:

The pretirement or FIRE community seems to be mostly a do-it-yourself culture, regarding personal finance.  I enjoy sharing notes and learning from the avid posters on Early-Retirement.org and the Bogleheads Forum.  Many of those folks are highly knowledgeable and skilled investors who know what they are doing.  These smart people know that, despite the Hollywood trope of the successful stock trader as a hyperactive workaholic, usually the best way to make money in the markets is to do…absolutely nothing.  Multiple studies show that investors do better when they create long-term plans, set an intelligent highly diversified asset allocation, then leave it all alone to compound.

If you are a person who knows a lot about investing in stocks and bonds in all of their flavors and yet can set your asset allocation and then not touch it for one or two decades, then hats off to you.  That is not me, however.  The more I learn about the markets, the more I am tempted to fiddle with my asset allocation in an attempt to optimize my portfolio based on the latest book I’ve read or piece of knowledge I think I’ve learned, which is exactly how mistakes are made and sub-par investing results earned.

I don’t want to make mistakes, which is one of the main reasons we’ve chosen to use a financial advisor to manage our assets.  However, we haven’t chosen just any advisor on the street, because the investing world is full of bad advice.  I’ll probably write multiple posts about my strong belief in The Vanguard Group, which is a coop  owned by its mutual fund shareholders, rather than owned by some rich family or a financial conglomerate that is primarily responsible to Wall Street.  No, Vanguard is responsible to my wife and me.  That makes it unique.  Thanks to its shareholder-focused model, it has also become the largest mutual fund company in the world.  I am in no way paid to say any of these favorable comments about Vanguard but, they are different. If you don’t already know about Vanguard, do yourself a favor and study them.

Vanguard owns a planning subsidiary, called Vanguard Advisors, Inc.  It exists solely  to help Vanguard clients, like my wife and me.  Vanguard’s Personal Advisor Services (PAS) program runs the gamut from simply consulting with clients to create investment plans that clients implement themselves to completely managing a person’s portfolio with an assigned Vanguard Personal Advisor.  This is the route we have taken in pretirement and we are happy we did.  Here are some key reasons why:

  1. My investor psychology is simply different during this new Spending Phase.  When my wife and I were just working and saving, investing was pretty easy.  We each contributed automatically at our work places in funds that had really high allocations to stocks and then we basically did nothing but watch the balances grow.  My wife and I are now tiptoeing into the Spending Phase and it feels completely different to actually need to consume some of the milk our herd of mutual fund cows produces.  Earlier in this phase, I found myself checking balances constantly instead of annually, worrying more about daily swings in the market and, worst of all, making some modest changes in our portfolio due to my emotional reactions to global events, like elections or my perception of where the economy lies in the business cycle.  That’s certifiably dumb.  Even though I made no huge mistakes, I know I shouldn’t fiddle. I found that I was becoming an active investor, convincing myself that I was smart enough to time the markets here and there.  Turning over our assets to an objective manager, who is in regular consultation with us, made the fiddling stop, which is to say my potential for making mistakes was removed.  Our portfolio is a globally diversified, low cost stew of about 55% stock index funds and 45% bond index funds.
  2. Vanguard is smarter than me.  Vanguard spends millions and millions of dollars to provide its clients the optimal investing experience with regard to asset allocation, tax-efficiency, fees, projecting how much we can spend sustainably from our portfolio, and a myriad of other factors.  I could spend all of my free time becoming expert in those and many other disciplines, as many people on the above-mentioned forums seem to enjoy doing, yet I still wouldn’t be nearly as smart about any aspect of investing as Vanguard’s people and software.  I’m at least smart and humble enough to know that.
  3. Rebalancing is assured.  Rebalancing is not difficult to do.  I could, and did, rebalance our asset allocation before we hired our Vanguard advisor to do it for us.  We have all recently been living through one of the longest bull markets in history, when investing mistakes have actually been difficult to make.  But here’s the thing I have significant self-doubt about:  When our stock funds inevitably tank again when the business cycle changes, and when the economic news is terrible, with people losing their jobs, businesses imploding and our portfolio shrinking, will I be able to do the annual rebalance?  Meanwhile, as stocks are in retreat, our bond funds will likely remain content as a patch of flowers finally enjoying their day in the sun, maybe falling a little at first as panicked investors sell everything and move to cash, but then perhaps growing as the Fed cuts interest rates to stimulate lending to spur the ailing economy.  In that emotional environment, will I have the guts to do what I need to do, which is sell my bonds to buy more stocks?  Maybe.  I’ve invested right through sharp bear markets before and didn’t flinch that much.  However, we now have a lot invested and, as I said, we’re depending on it more.  I know myself well enough to question whether I would do what needs to be done when the tide next turns.  My Vanguard advisor, however, won’t hesitate to aim right for the jugular of those big fat happy bonds and trade them for scary, depressed stocks, right on schedule.  That certainty is worth paying him for.
  4. My wife is more included than ever before.  “I trust you to manage our money” was the blessing and curse of my days taking the lead financially while we built our nest egg.  She has saved up about a third of what we have, so it never felt quite right to me to make our financial decisions all on my own.  Now we have a friendly, patient and neutral third party in our discussions, whom she and I both respond well to, married couple that we are in all of the usual complications. It feels really good to be on the same page with her, finally.
  5. Help if something bad happens.  I also really like knowing that, if I am somehow incapacitated, Vanguard PAS will be calling her at least quarterly, as usual, to make sure the money she depends on is there for her.  Vice versa, too.
  6. We will know, with high confidence, exactly how much we can spend safely.  Vanguard Advisors has spent a lot of money to create its Dynamic Spending Model.  It is very powerful and very cool.  Using Monte Carlo analysis of all of the known investing history of every asset class that we own, our advisor will be able to tell us with some 95% confidence how much we can spend, sustainably, through age 100.  If things happen, as they do in life, we will adjust the plan, aiming to stay above the 85% confidence threshold. Our plan includes every input we want to add, such as how long we think we want to work full and part-time, how much we think we’ll earn, when we think we’ll buy cars next, some home renovations we want to do, when our mortgage gets paid off and when we think we’ll start taking Social Security.  Annually, our advisor will tell us how much we can safely spend for the coming year.  That amount will be indexed to inflation but won’t go up more than 5% or down more than 2.5% in any single year, which is totally manageable.  Doing what Vanguard’s Dynamic Spending Model tells us to do beats the heck out of arguing on the online DIY forums over whether the vaunted  “4% Rule” or some other % is sustainable or not, as seems to be the constant discussion online.  I don’t worry about that stuff anymore, which feels great.  Bonus News:  We get to spend significantly more than 4% with 95% confidence.  We will be able to live well in pretirement while sleeping well at night .
  7. The costs are pretty reasonable.  We pay .30% of the assets Vanguard manages for us, plus the normal super-low expense ratio of the underlying Vanguard mutual funds we own, for a total of approximately .4%.  Those numbers sound tiny but they have real impact over many years.  On the bright side, such management and advice service at most any other firm is going to cost 1 to 2% per year.  If planning wisdom says that an investor should aim to spend no more than 4 or 5% of their portfolio each year to sustain it, 1 – 2% is a huge, stupid bite out of one’s pretirement lifestyle to fork over to an advisor.  Vanguard’s PAS fees aren’t nothing but, in an investing world that is designed to separate you from your money through fees you don’t understand, Vanguard is on the side of the angels.  I’m happy to pay Vanguard’s relatively small fees for all of the service we get.
  8. I have stopped all fretting and fiddling with my portfolio, providing a lot of new time and mental space for other pursuits, like blogging!