One of the most overlooked but critical aspects of savings or achieving any financial related goal is determining why you want to save. That may sound simple, but let me give you an example.
Client: I want to retire at 55.
Client: I hate my job.
Me: What will you do in retirement, especially one that could last a long time?
Client: I don’t know.
The client’s last response is precisely where people begin to run into problems. It’s not that this person wants to retire early, but instead, that she hates her job. Not knowing what she would like to do in retirement could be just as miserable as her current job.
When is the last time that you allowed yourself the time to think about what you would like to do now or in the future?
Retirement Could be a Hard Transition
I believe that a professional, no matter what profession they have built a career within, will have a hard time transitioning into a full-time retirement role. My reasons why include;
- Slowing down can have negative consequences.
- Newton’s First Law of Motion states that a body at rest will remain at rest unless an outside force acts on it, and a body in motion will remain in motion unless acted upon by an external force. I have seen several people who hit retirement and stop have massive and sudden health issues.
- Unless you already have developed a strong network of friends who can enjoy retirement with you, most of our strong relationships besides family come from our careers.
- While work can be frustrating, it is also rewarding to work with people you like and respect. Who would you turn to if people such as that were no longer in your life?
- You may end up living much longer than you currently think.
- Old age isn’t what old age used to be. Going back to Newton’s Law of Motion, more people stay active, which helps contribute to them living longer. A married couple age 65 has a 72% chance that one will live to age 85 and a 45% chance that one will live to age 90. (Source: Vanguard).
- Financially, based upon the previous point of living longer, people may not be able to swing a 30-year retirement plan.
How does this tie back to the earlier conversation with the client who wanted to retire because she hated her job?
A Hybrid Structure
The hybrid retirement plan solution that I help clients to develop goes something like this;
- Rather than staying on in a job or career that you hate until your mid to late 60s, what is a second act career that you could begin when you are 60 and work comfortably and enjoy until 70 or even beyond?
- I recommend to clients is to try new things and determine what other areas of “work” may not feel like “work.” For example, I have several clients who could make a decent go as home remodelers. They enjoy building things, are good at it, and have excellent attention to detail that people would gladly pay for.
- Structure your wealth management plan that allows you to live the lifestyle you want without making withdrawals from your retirement accounts.
- Continue to allow your assets to grow tax-deferred or tax-free that provides for a potentially long “full-retirement” period.
Your hybrid retirement solution is a transitional period from being in a full-time profession that doesn’t support what you really like to do to a profession you would like to do. This period also helps to persevere your retirement assets and make them last for a more extended retirement period.
Where to Begin?
So how does a person begin? Your solution starts with having a conversation with your advisor, letting you know your thoughts, concerns, and ambitions. These conversations are part of the intangible value that your advisor should bring to the table.
Notice how the conversation does not start with asking what your income is or net worth. It’s having a conversation and trying to be of value, which means offering insights that you may not have previously considered.
People must begin to allow themselves to think differently about themselves, their careers, and what retirement, in general, could and should look like.
The TAMMA Family Office is more than wealth planning, portfolio management, and tax preparation. We help people figure out how they can have a life that they want by having one conversation at a time.