The assumptions we have of retirement have changed dramatically from when it was first introduced.
Determining how much you need - your "number" - is mechanical. That piece of financial planning is a commodity that all financial advisors can provide, including robo-advisors or online software programs.
True retirement planning integrates health, wealth, work, and leisure. Money is still a critical piece (and always will be), but you and your financial advisor can't complete the retirement puzzle without the other pieces.
Instead of starting with how much money you need, ask yourself how much life you have--and want to have--going forward.
Research and statistics have shown that there are more and more of us living to the age of 100. That's huge! The 100-year life is having a massive effect on retirement planning, beginning with the impact of living in retirement for several decades, instead of several years. When the concept of retirement was first introduced, many people didn't even make it to retirement because life spans were much shorter.
In the Retirement Coaching programs I conduct with Steve Sanduski, CFP® we tell advisors to ask questions such as, "What advice would your 100-year-old self give to you today?" It's a simple question that helps you think beyond a number, and to focus on what you want to do with your money once you have it. It also helps you determine how much you'll really need versus an arbitrary number that doesn't take into account your individual goals.
Many of you probably envision retirement as a permanent vacation. While the "honeymoon stage" of vacation certainly sounds appealing, it quickly becomes boring after as little as a few months. Decades of sleeping in, playing golf, and taking walks sounds great when you're in a grind, but become less fulfilling when that's all you have.
Here are three observations to keep in mind as you think about retirement planning:
- As mentioned above, the old retirement conversation was about funding retirement; the new conversation focuses first on what your goals are, and second, how much you need to fulfill those goals. Ask yourself if you have a job or a "calling." If you have a calling, maybe you shouldn't retire completely. However, if you have a "job," think about what your calling is, and how to achieve it.
- In the past, most people did not live long in retirement. Today, people retire and can live for decades.
- In the past, we could assume that "age was stage." When you hit 55, 60, 65, you retired--end of story. Now, there are no assumptions. The concept of retirement is personalized, but most of us are surprised when we realize we haven't given much thought to what we will actually do once we move into that stage of life. How do you plan on spending the 168 hours you have each week? Is it how you want to spend 52 weeks a year for 10, 20, 30 or more years?
More and more of us will live to see 100, and many of us are rethinking what money means. There's a reason Marie Kondo's book, The Life-Changing Magic of Tidying Up has sold more than a million copies: People understand that there is more to life than accumulating material possessions. More and more of us are interested in experiences. We need to contribute and feel involved--and that doesn't stop at 60, 70, 80, or even 90. If anything, this desire grows stronger.
The old conversation was about money; the new one is about time and money. Knowing how you're going to spend your time is as essential as the knowing how you're going to fund your retirement. As we live longer, we're going to experience more--and different--stages and major life transitions. Committing to lifelong learning is important to living and retiring successfully.
The lifeline is moving to the right. The traditional notion of working until 65 and then kicking back doesn't apply as much anymore. Many people work because they can, and because they want to. Others don't have that option--they must keep working. Whether you have a choice or not, it's important to always stay involved and engaged.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.