I am really amazed about how things work out in life. For one, we spend so much of our lives mulling over money that when you think about it, it is kind of scary. I’m not claiming here that I don’t, hell I always have and now even in my retirement I spend hours every day writing and thinking about it. But the time I devote to the subject these days is much more balanced than it was all the years that came before. Know why? It’s because as I have aged, I have learned and re-learned the ups and downs, the trial and tribulations, and the financial knowledge that makes money make much more sense to me! I’m not claiming I have all the answers but I can say at least this: I know most of the questions. And that’s something.
One of the good things in life is that I have lived long enough (69.833 years) to have learned stuff and yet one of the great mysteries is why all of that financial knowledge is wasted on the retired?
Here Are Some Facts – and You May Not Like Them
One, most Americans do not understand even the most elementary basics about money and debt. There are reasons for that, and when you stop for a split second to consider them, they are pretty obvious.
No one really spends any time teaching you about money and debt. Sometimes all you get is sort of some form of “Indian style” English language like Tonto might have uttered to the Lone Ranger such as “Money good – debt bad, kemosabe!”
The fact is that even today we don’t learn much in school about it and whatever we know comes essentially from what we observe. And let’s face the facts here. When you are under age 18, you aren’t paying that much attention to it. That comes a little later like when you have to think about paying back student debt or when you need a car and have to try to pay for it on your own. Until you are out there self-supporting, you don’t really concern yourself with debt or money. Money is for fun when you are a “child” and if you worry about it, it’s usually short term worries like how you are going to pay for that date next Saturday night.
Too Many Opinions?
Two, if and when you do seek to learn anything about finances, it can be confusing and dare I say it, strangely unrealistic and even just plain wrong! Sometimes the number of options and lessons about money overwhelm you and leave you not exactly sure what you should do. Take the internet, for example. There are thousands of bloggers like me writing thousands of articles every day and many of them don’t agree on what they say. Opinions are like noses. Everyone has one and some of them are funny looking.
Even though we are different superficially, we all seem to have the same problems when it comes to money. We all want more and we all want to know how to get it and how to use it.
The problem is that if you ask 100 people these questions, you’ll probably get 89.327 answers. That’s especially true if you ask anyone under the age of 67. You see, retired folks have been through all of that and on the way they have figured some of it out. That’s not nearly as true to those still making that journey regardless of any financial gains they might have already achieved by the ripe old age of 30 or 40.
F.I.R.E. (Financial Independence/Retire Early)
Thirdly (and this one really gets me), sometimes, the stuff that people say about early retirement (and early retirees) is just plain terrible. It’s true that some people have this completely figured out, but for some, it is assumed that early retirement is the end of your money worries and that even when you are swimming in million(s) in cold hard cash, early retirement is always the “be all end all” goal! That just isn’t true and here’s why.
Your finances can and will change, sometimes for good and sometimes for bad. If you are still relatively young and retired and a devotee of F.I.R.E., you’d better have a plan in place to cover your lifestyle when you no longer work at a full-time job. You need to find some way to limit the erosion of your money and oh, by the way, there may be things like health costs or other bound-to-happen-to-you events when you are age 40, 50, 60, or 70 that you may not have given any thought about. Investment income is cyclical so having a big portfolio today may not translate well into tomorrow—or 20 years from tomorrow.
Today, I’d like to point out some of these most common issues about retirement, which also happen to be the ones that I hear most often. Early retirement may not be all that it’s cracked up to be, so before you round third base and head for home plate to celebrate, spend a few minutes thinking about these things!
1. It’s a remarkable feeling being retired, but…
It doesn’t take long before you lose a huge dependable predictable chunk of your regular earnings (income) coming in. That part may matter. Even if your significant other is now the wage earner and/or you have alternate streams of income, you still must give a lot of thought to your financial picture. And, she, he, or they may want retirement now or soon, too.
2. You might actually get bored
You have to have some real plan of attack set up to occupy yourself in retirement. Know what you want to do with yourself before you retire. That’s essential. If you have no hobbies, then you probably won’t be happy sitting at home doing nothing. Doing nothing isn’t what retirement is all about. Especially early retirement!
3. Will you travel?
Some people sell their homes and downsize while others sell and invest in something like an Airstream trailer and travel around the entire country. If that’s you, keep in mind that you will need both shelter and money if you try it out. Perhaps try renting the travel home first before you spend $200,000 on one?
4. Keeping healthy and fit
Wow, here is the big one. You’re 30 and retiring and you are in great shape and fit— congratulations. Now what about at age 40, 50, 60, or older? Chances are you aren’t going to be 100% in tip top shape, so you need some kind of plan and some kind of insurance. A chunk of your money typically will get used on medical care and insurance premiums increasingly as you age. My wife and I spend about 30% of our annual expenses on healthcare related costs—and that’s multi-thousands of bucks. Bucks that some people think will go to travel, dining out, and other fancy expensive things. Not true for most and probably not you either. Be prepared before you have to be.
$1 Million at Retirement Is Nothing and You’ll Probably Need Way More (especially if you are young when you do it!)
Think about this, too. It’s 2020 and you are going to be 35 next year when you “retire”. You have a million bucks on hand. What will that money be worth in say, 10, 20, or 30 years? Probably a lot less than a million and oh my, here it is…everything will cost more than it does today! Even at 2% inflation, prices will go up 60% on average over the next 30 years. A car will cost on average over $56,000 or more in 2050.
When you live at or below your means at full retirement age in 2020 and actually care about where your money is going, you can live quite well on a million. But, when you retire at age 30, 40, or 50—that may be a quite different story. A million bucks is a wonderful milestone, but it’s never an insurance policy.
There is nothing inherently magical about the million-dollar figure, aside from all those zeros. It’s a completely arbitrary number.
Flexibility and the ability and willingness to change your lifestyle are critical elements of your retirement. If things don’t work out exactly as planned, then change. A solution sometimes just might include working. Perhaps consider a seasonal job or maybe look for ways to reduce your spending even more. Choosing a lower cost of living area is another popular idea, but that sometimes can be a difficult decision to have to make leaving friends and family behind. The point is this: There are a lot of things to think about if and when you retire that you probably never learned or considered. Your financial wellness, even when it’s all well and good right now, needs attention every single day of your life.
According to the “retirement police”, you can’t be retired if you’re making money by doing some kind of work. Doing work, after all, is what people do “for a living”, and therefore, if you do something post-retirement that generates income, then you’re not actually retired because you’re still making a living.
But, your life doesn’t simply stop once you reach retirement (in many cases, it’s quite the opposite). You don’t sit and stare out the window. In fact, the earlier that one retires, the more likely it is he or she or they will need to spend their time doing something productive to generate additional cash. Retirement may mean you are no longer beholden to a job to sustain your life, but it doesn’t mean that you’re done being productive.
Do you have financial knowledge? Are you a believer in F.I.R.E.? Are you prepared for 20, 30, or even 50 or 60 years of retirement and how will you do it?