Living in Retirement
You made it.
You’ve worked so long, you don’t even remember the
beginning. But the beginning doesn’t matter, now, because
you’re done with the race and you couldn’t be happier…if
you’re ready for retirement, that is. With some planning,
everything really can fall into place, and these really will be
some of the most extraordinary years of your life.
Up to this point in your savings career, you’ve focused
on the accumulation aspect of investing: you knew that you’d
retire, eventually, but that was such a long way away. Until then,
you wanted to save, you wanted to save a LOT, and you wanted those
dollars to earn as much for you as possible.
Now that you’ve retired, your savings (or accumulation)
habits are going to change into spending (or distribution) habits,
and these are just as important if not MORE important than anything
else.
Chances are, you’ll be drawing from three different pools
of investments that you’ve built over the years:
Savings. These are the non-qualified, or
taxable, investments that you’ve been able to save above
and beyond those assets within your employer-sponsored retirement
plan. Mutual funds, stocks, bonds, certificates of deposit, EE
bonds, money market investments…all can be found and used
within these types of accounts.
Pension. These are the assets you’ve
accumulated and acquired during your employment career. Pension
dollars can come in the form of a defined benefit plan (a true
pension account paid out to you via employer contributions) or
a defined contribution plan (dollars saved within a 401k, SIMPLE
IRA, SEP-IRA, etc. via your own salary deferrals over the years).
Typically, these investments are tax-qualified in that they’ve
grown tax-deferred over the years; any withdrawals or distributions,
now, must be reported on each year’s tax returns.
Social Security. You’ve paid into it
for years. Now, some of those dollars may be making their way
back to you. Coming monthly in the form of a check or direct deposit
into a checking/savings account, these payments will supplement
your additional, individual savings.
A happy and relaxed retirement is what most of us desire. As
we approach retirement, we have a lot of anticipation: of travel,
of hobbies, of just doing what we want to do and having fun.
There are three broad phases of retirement, and they tend to
blend into each other over several years. Each of the three places
different demands on us as retirees - one phase may pull a little
more from our investments, while another phase may pull a little
more on us spiritually. Being able to recognize the three phases
is not as important as realizing there ARE three distinct phases
to which you must ultimately adapt.
The first phase is the most fun.
You travel. You have fun. You might even spend a little more
of your investments in this phase. Above all, you should take
complete advantage of this phase and do and play as much as you
possibly can. Why? You will never feel any better than what you
feel right now, and you will never have as much freedom as what
you have right now. Before your body begins to give you trouble;
before your mind slows down to the point where you don’t
feel like doing anything; before you begin to worry about travel,
this first phase of retirement is the ideal time to live the dreams
you have planned for so many years.
The second phase is not quite as much fun.
It’s in this phase that you realize your body is not going
to respond as quickly as it used to. Things start to “break”
and you tend to spend a lot more time with various doctors and
specialists as you get your body tuned-in to medicines and remedies
for the onslaught of the aging process. (It’s in this phase,
too, that you find yourself becoming friends with several different
receptionists in doctors’ offices and hospital labs.) This
phase many times overlaps the first phase, although it’s
just a bit more difficult to consider yourself as “free”
because of the doctors’ appointments.
The third phase is clearly the most spiritual.
In this phase, we each begin to truly recognize that we are in
the closing chapters of our lives. We are making peace with our
own mortality, we are becoming closer to our family, and we are
communicating more regularly with our God. This is not a phase
of life that is depressing - rather, it becomes very enjoyable
in little ways: that quick phonecall from a grandchild; a weekday
lunch with friends or family; going out for a movie with your
spouse.
Each week at the end of “Investing Sense,” Denny
reminds listeners that:
“Money isn’t everything, it’s just that having money
makes things so much easier in life. Truly it’s the people
in your life that are worth a million bucks, and just don’t
forget to tell them so.”
Maybe it’s in this third phase that we realize just how
special all of these people truly are. Just don’t wait through
these first and second phases to tell all of them just how true
this is.
