It's not uncommon for pre-retirees to feel like they've come to the end of the road. Their work life is about to come to an end; they've saved whatever it is they've managed to save; their health condition implies a certain, limited spending trajectory.
The truth is… they're right about this. But it's not the whole truth. Yes, they have come to the end of the road because there is no possibility of re-writing the past. However, they are at the start of a new road, and the journey ahead likely has more flexibility than folks imagine. That is why I was impressed by financial advisor Russ Thornton's latest article on SA, "The Importance of Financial Choice in Retirement Planning," wherein he takes seemingly stark choices and breaks them down into more flexible options. Here's one example:
Instead of a single spending number, I encourage many of my clients to think in terms of 'basic lifestyle costs' and then everything else.
For example, instead of planning to spend $85,000 per year after-tax throughout your retirement years, what if we concluded that your 'basic' lifestyle costs were $55,000 per year, and the remaining $30,000 per year could be allocated to things like travel, health care, car purchase and/or maintenance, learning opportunities, etc."
That's a good idea. A couple that have not saved as much as they would have wished needn't think their budget will never allow for a big international trip. They could instead carve out a discretionary budget to be used on a staggered basis: One year for a big vacation; another year to pay for big medical expense; the next year for a new car, as Thornton suggests.
The options are really infinite. One can move to a lower-cost region, thereby increasing the budget for spending money. Or one can cultivate interests or hobbies that are affordable compared to current interests. Learning a new language or how to play the piano might cost less than golf course dues, and taking walks with one's spouse might be a cheap way to get exercise and strengthen your relationship. There's no reason to be glum, which is why the flexibility Thornton proposes is refreshing.
Indeed, retirement or not, we're always coming to a fork in the road where our future options are framed by our past behavior. The narrow window open to us is the one that suits us best. If it could be better, it would be better. And with the right attitude, there is nothing better than the life you have prepared for yourself using all the means at your disposal and within your control.
Please share your thoughts in our comments section. And here are today's advisor-related links:
- Jeff Miller's Stock Exchange crew provide guidance on buying the dips.
- VanEck CEO presents his 2017 market outlook.
- John Lohr discusses Economics 101's first principle: greed.
- For more content geared to FAs, visit the Financial Advisor Center, sponsored by Franklin LibertyShares ETFs.