Designing an Ideal Retirement Part 1 (Ep2)
This blog accompanies Episode 2 of The Retirement Oasis Podcast. To listen to the podcast, you can visit your favorite podcast platform (Apple, Stitcher, Podbean, etc.) or go here:
We will initially take a look at how retirement today compares to retirement of many years ago with the overarching theme that retirement today can be an amazing period in one’s life. From there, we will discuss what makes for good – or even ideal -- retirement for each of us, looking at it from a well-being framework. Retirement is more than about being financially secure, it should ideally be about living a fulfilled life. Finally, we make further observations about how we should approach determining the ideal retirement and consider certain obstacles that may get in our way. We won’t go deep in any one area as we will delve much deeper in these areas in later episodes, but we wanted to lay the foundation for beginning to think about living a fulfilled life in retirement.
Let’s start by looking at the facts. Well, actually just three facts – the three facts about planning for retirement today.
Three Facts About Planning for the Retirement of Today
Fact #1: A Vastly Different Retirement. Your retirement will be vastly different than what perhaps your grandparents and maybe your parents experienced, and it can be marvelous.
Increased retirement years. Our health, longevity and financial situation may allow all of us to have a much longer and active period of retirement. The duration of retirement has indeed dramatically increased over the last century. Today’s Boomers may have 30 years in retirement – significantly longer than their equivalents at the beginning of the 20th Century (where retirement was almost nil). Part of the increased years in retirement is because we are retiring earlier. In 1950, about half of the male population worked after age 65. Today, that number is around 20%. The average age at retirement was age 70 at 1950 and today it is around age 64. In addition to an earlier retirement, the average life expectancy for those at age 65 has increased from about 12 years in 1950 to 18 today. The fact that we are retiring earlier and living longer has led to more years in retirement…perhaps as much as an average of 12 years or longer.
Shift in focus from financial to non-financial issues. Even though there was a shorter retirement in prior years, the primary focus was ensuring whether or not there was enough money saved. . (this sentence seems redundant). Now, although ensuring you have saved enough is still a critical component of retirement planning, the primary question for today’s retiree is “Will I have enough to do?”.
Increased responsibility to plan for our retirement. Another difference between our grandparents’ retirement and ours is that the responsibility on our part is much greater. Not only do we have many more lifestyle choices that will last a longer duration than our grandparents, but finances are more complex and we are more responsible for our finances.
Pensions are rarer, and we are thus more reliant on savings, investments, and tax strategies than our grandparents ever were. So, with the increased complexity and responsibility we have with our finances combined with the increased longevity, we need to take more accountability than ever before when we plan for retirement.
Fact #2: Preparing for retirement is critical. And, that brings us to the second point about retirement today. Preparing for retirement and visioning what it will look like is critical for a healthy and successful retirement.
It is said that the average American spends more time planning a two-week vacation than planning a 25-year retirement. Without proper planning and getting the right mindset, we will not experience our ideal retirement. The analogy is that the best place to start to put together a puzzle is not with the first piece or the last piece or even with the corner pieces, but rather with the picture on the box. That’s your vision, and that’s what you can plan to achieve.
It may sound daunting, but there is more at stake in planning for our retirement than what our grandparents faced in light of what we previously discussed. As gerontologist, pastor, and retirement counselor Dr. Richard Johnson wrote, “you are the writer, director, and actor or actress of this great production.” (Johnson, 1999, p. vii). That’s a lot of responsibility, but it is ours for the taking.
In fact, without proper planning for retirement – both from a financial and non-financial perspective -- negative consequences can occur. Depression, alcoholism, divorce all are said to increase in retirement. Indeed, the suicide rate is higher for older men (say 72+) than any other demographic.
We have found that visioning and planning for retirement can not only help you develop what a fulfilling retirement looks for you, but that advanced preparation can also help you spot and overcome certain obstacles. Proper preparation for retirement can help you develop a purpose in retirement and help you go into retirement with a positive mindset. This, in turn, can help the retiree minimize the risk of some of those harmful health effects like depression. And, planning can help reduce the anxiety that many people face as they approach retirement.
It’s important to understand that this is probably the first time we have had freedom with our time. When we were children, our parents often dictated our schedule. When we were in school, much of our time was scheduled by the school from a daily and calendar basis. Of course, during our working years, our jobs and bosses often set much of our calendars. In retirement, the freedom is ours. It can be daunting, but it can be exhilarating if you plan for it.
Indeed, many authors and observers have noted that the key difference between a successful and unsuccessful retirement is preparation and the preparation should obviously take place while you are still working. (Gilbert, 2020, p. 66; Zelinski, 2015, p. 4).[1]
Fact #3: Retirement can be an amazing Third Act.[2] It is up to you on how you define it, and you shouldn’t be merely focused on the money. In this new retirement era, I’ll quote Mitch Anthony: “your life is not about making money. Your money is about making a life.”
We generally go through three phases in our lives: 1) First Act – Education, 2) Second Act – Work, and 3) Third Act – whatever you make it. This Third Act is often called retirement. The word “retire” comes from the same root word as “to withdraw”. Done right, retirement is not about withdrawing. It should be quite the opposite. Various authors and others have used different descriptions of retirement, including the Third Act or your Encore performance.
I have heard someone describe it in terms of the word re-tire. Instead of the traditional synonym of withdraw, let’s use a slightly different version of the word retire. Think about it in the context of an automobile that needs new tires for a great trip. We can say that they “re-tire”. We need new tread for the retirement journey that is ahead of us. Retirement is indeed not an ending point of the journey like the traditional view holds, but retirement is rather the beginning point of a marvelous journey.[3]
Not growing old. Retirement today is not about being a spectator and growing old, but rather about being active and growing whole.[4]
I have heard some other interesting names for this period we have traditionally called retirement, including the following: the Bonus Years, the Third Chapter, Re-wirement (Sedlar & Miners, 1993), Re-firement (Nelson, et al., 2010), Second Half of Life, (Nelson, et al., 2010), Re-engagement (Nelson, et al., 2010), The Great Experiment (Nelson, et al., 2010), The Fourth Movement[5] (Nelson, et al., 2010), Dr. Carl Jung’s “afternoon of life”. (Oehser, 2018 p. 1).
The Components of Overall Well Being in Retirement
Now that we have established some of the fundamentals of what retirement is today, including the fact that it can be quite a long period that provides an amazing opportunity for us to shape it how we want to, let’s talk about what a good retirement could look like. When we talk about what a “good” retirement is, it can mean different things to different people. There are a host of studies, books, and opinions on what a good retirement consists of, but I like the model put forth by retirement expert and speaker John Nelson in his book, What Color is Your Parachute? For Retirement. At its core, a good retirement means three areas of our life are addressed and are in good shape: the Prosperity or Financial realm, Health, and Psychological or Inner Well-Being. While the Financial and Health realm are necessary components to lead to peak Inner Well-Being, the ultimate component of a good retirement is this third domain.
The third domain has more of a psychological component – it is that of Inner-Well Being. While Nelson refers to this as happiness, I prefer the word joy as joy, to me, is more an ongoing feeling regardless of the circumstances at that particular time. I like how the website diffen.com defines joy. They said joy is “derived from soul satisfying, emotional well-being.” Or, “happiness brings pleasure but joy brings true contentment to one’s heart.” It really doesn’t matter what word one uses, but the idea is that living a fulfilled life involves long-term contentment from your inner well-being. So, we will often use the terms or phrases of joy, happiness, and living a fulfilled life interchangeably throughout these articles and episodes.
Financial and Health are the foundation for fulfillment. It is hard to have fulfillment without a base level of security with your finances and without a base level of feeling healthy. This does not mean that you need to have $2,000,000 to be secure or that you have to be in as good of shape as Gary Player in your 80s. As we will discuss later, however, you do need to have met a certain threshold to lead to a fulfilling retirement, and that threshold varies by individuals.
Well-Being Component #1: Financial or Prosperity
Let’s take a look at the financial aspect a bit closer. This can include having a certain portfolio size and having the proper physical environment that you want such as your home. On the economic front, we have seen that most people need to feel safe and secure with their financial situation before they can open up their minds to live a fulfilled life. It’s hard to even begin to think about the possibilities if you don’t know what is possible from a financial perspective or if you cannot begin to imagine whether more than merely survival is possible.
In other words, if one does not have peace about their financial situation, then it is often difficult to think about living a life merely beyond just being comfortable. In future blogs and podcast episodes and certainly when we work with clients on their retirement planning, we cover the security aspect by looking at cash flow and retirement projections.
I like how financial author, coach, and retirement guru Mitch Anthony, in his excellent book “The New Retirementality” incorporated Maslow’s hierarchy of needs into retirement planning. (Anthony, 2014, Chapter 14). He said that once someone has the resources or income for survival and safety, they can then, and only then, begin to think beyond that. Anthony goes on to explain that there are three different levels of spending, including freedom, gifting, and dreaming. While I have trouble differentiating those additional levels in the income hierarchy, I can appreciate the basic concept – only once safety and comfort is secured can one begin to think beyond those levels and begin thinking about fulfillment.
Also, we should not merely focus on fulfillment in retirement planning at the sacrifice of detailed retirement analysis and considering wealth enhancing techniques. These include many of the mechanics of financial planning including cash flow modeling, tax minimization, debt strategies, asset allocation planning, and risk management. These details do matter and one should not be too cavalier in planning for retirement and think that a fulfilled life just happens. The work and effort on the mechanics of retirement planning do indeed need to be put in. Analyzing and implementing certain wealth enhancing techniques will pay off and could lead to more opportunities to live a fulfilled life. But let’s assume that you or your advisors put in the effort to maximize your financial position and address other mechanics of retirement planning. Assuming you have a secure retirement – and are confident in your secure retirement because you have seen or done the analysis -- you can now open your mind to living a fulfilled life in retirement.
I love Mitch Anthony’s analogy of the lost hiker. The lost hiker, if they truly don’t know where they are, has fear and may let fear overtake them in making good decisions – or, in making any decisions at all. But, if the lost hiker had a global positioning instrument, then knowing where they are brings a certain level of comfort of knowing where they are. With that comfort, they can make rational decisions, take action, and have hope. (Anthony, 2014, pp. 149-165).
Another point that Anthony made in his book is worth echoing. He made the observation that today’s definition of comfort, if I can paraphrase him, is arguably inflated. Today’s survival is yesterday’s luxury. Or, the American standard of survival is 95% of the worlds’ definition of luxury. This is a mindset that can make a big difference in retirement planning and the sense of security one may have. In doing your retirement analysis, it is ok to think big but will “big” (however you define it) really make you more fulfilled?
In addition to pure financial security and the economics of retirement planning, other lifestyle issues around the physical environment will come into play, including the community we live in, the house we live in, the car, etc. While some of these elements are not as foundational as financial security, there are decisions we can make regarding our physical environment that are intertwined with our fulfillment.
Well-Being Component #2: Health
In addition to having a good foundation in the financial or prosperity domain, one needs to have certain level of health and vitality to live a fulfilled life. And, it goes beyond merely health and vitality and can include our flexibility, strength, and endurance. More practical decisions come into play in this domain, including the type of medicine (traditional v. alternative or a combination) we utilize, our health insurance, and the choice and location of our medical practitioners.
This is not to say that someone with a disability, however you define it, cannot have a fulfilled life. Indeed, some of the most content people in the world are disabled because they often frame their happiness and fulfillment in a different manner. They have peace beyond their physical limitations.
Nevertheless, in general, striving to improve your health as much as possible should contribute significantly to living your ideal life in retirement.
Before we move on, it is important to highlight our ability to impact our health. We all know this, and we have all heard various statistics around this; however, we feel it worthwhile to reiterate them in light of the lack of proactive steps many of us take regarding health. One stat suggests that only 30% of our health and longevity is dictated by genetics. The rest is up to our habits and environment. (Spector, et al., 2018 p. 109). Just as we are personally accountable for our finances, we should also be personally accountable for our health. We must first acknowledge the impact we can have on our own health and take assessment of where we are at. Only then will we be encouraged to take the right steps to get in better health.
Integrated Nature of Our Well-Being in Retirement
Before we look at the inner well-being or fulfillment aspect of retirement, it is important to note that these three domains are interrelated. Not only do you need a certain threshold for prosperity and health to be able to lead to a fulfilled life, these domains are inter-related. Many health decisions have a financial impact and many things you decide to purse in retirement will have both a financial impact and health impact. Indeed, many of the decisions we make in retirement overlap. They are certainly related, and this realization reinforces the truth that all three stools are vitally important and should be considered and acted upon in a proactive manner.
Well-Being Component #3: Inner Well-Being or Fulfillment
Having briefly mentioned the fundamental importance of the prosperity and health aspects of retirement, let’s focus on the inner well-being, or fulfillment, aspect of retirement.
The traditional concept of withdrawing should be thrown away. As we stated earlier, retirement is indeed not about withdrawing. So, put in that context, we know intuitively that withdrawing may not be the best approach for us in retirement. The traditional view of retirement and perhaps the view that many of us still hold onto is the idea that retirement is mostly about leisure. The thought goes that you have worked all of your life, have saved up for most of your life, and have put off some things until later -- with the goal of enjoying lots of fun and leisure in retirement.
What many retirees find out is that merely focusing on a life of luxury and leisure may not be healthy. One gerontological specialist said that “a life of ease is two steps removed from a life of disease.” Leisure, no doubt, is an important part of retirement, but its purpose is to really to serve as a diversion from our main activities. As Dr. Richard Johnson said, if leisure becomes the central life focus in retirement, then such activity becomes no longer diversionary and thus does not serve its original purpose.[6] (Johnson, 1999 p. 79).
Observations About Fulfillment in Retirement
Can our retirement years offer years for the peak of human achievement? As we stated earlier, for the first time in our life, we may have more discretionary time and more discretionary money in our lifetime. That can lead to some great opportunities. Indeed, a Cambridge historian studied this “new retirement” in the 1980s and made a pretty profound conclusion. He said that this new life stage – which is generally between the ages of 50 and 75 – has significantly reduced responsibilities but now has much better health and vitality than previous retirements. He felt like this new era could be the peak of human achievement. That’s a huge statement! Today, our post-age 75 or post-age 80 years may be more like what we thought of as the traditional retirement where health issues may be more at the forefront. (Nelson, et al., 2010 pp. 16-17). Of course, many over age 75 will have great health and vitality so do not obviously think of age in and of itself. Nevertheless, the reality is that many of us will have decreased health and vitality later in life.
Retirement can be our amazing encore. Rather than a period of withdrawing, retirement can be our encore. The old view of retirement is that we are “Retiring From” something. The new and proper view is that we are “Retiring To” something. I really like that word encore as a description of our retirement years instead of the traditional meaning of retirement. Rather than “withdrawing”, this stage in life can be our encore. While encore has variations in meaning, I like this definition from Merriam-Webster dictionary: “a second achievement especially that surpasses the first.” There’s so much more to this stage than leisure, although leisure can be an exciting and integral part of this encore period. So, we have just touched on and contrasted a couple aspects of retirement – that of work versus leisure. Let’s take a closer look at more parts of our lives in retirement.
There is more to retirement than rest and leisure, e.g., work. So, retirement is indeed not about withdrawing. There are so many activities other than rest and leisure that happy retirees engage in. For example, work is one such activity that one may be surprised to hear that this is often a vital component to a good retirement. Studies suggest that we undervalue the benefits we receive from work. Work can provide such meaning in our lives that if we totally stop working in some form that we can lose or even be void of meaning in retirement.
Diminishing returns on leisure. And, not only does work and other spheres of life provide meaning, there is generally a law of diminishing returns on leisure. That brings up a story that Anthony relayed about an early retiree and his golf game. Many of you have probably heard a similar story. This gentleman retired in his mid’60s and had a solid golf game. He began playing a lot of golf in retirement and spent much time at his new country club. Several months into retirement one of his buddies that was still working said “man, I bet you are living the life. Having the time to golf practically every day. That must be sweet.” He said, “no, actually, golf is starting to feel like work. I have been so focused in getting out there and golfing at a certain time on particular days during the week. With such dedication to fulfilling my golf routine, I have found that golf has become work. I use to golf as a release from work and as a way to re-energize.”
In other words, his leisure drew meaning from his work. The same can probably be said about travel, lying on the beach, or working in the garden. Most people are happiest in retirement when they find that perfect balance between vocation and vacation. (Delete this sentence here or up above – redundant)
Categories of a Fulfilling Retirement
There are different ways to categorize what we will do in retirement, but I like how Mark Friedman of encore.org categorized them and how Mitch Anthony often describes them. We will briefly describe the categories here and come back to them a bit later in a another episode. (Anthony, 2008, pp. 98-104). The categories are as follows:
- Leisure or Play. This can include travel, hobbies, and general relaxation, among other activities. Note that you may want to frontload some activities like travel because your healthspan may be quite shorter than your lifespan.
- Connecting. The time and the quality of time you spend with family, friends, and more distant relationships can have a profound impact on your health and overall fulfillment.
- Renewal. This includes physical, mental, and spiritual well-being. While we talked about health as a foundational part of well-being, it shows up here in the renewal part of living a fulfilled retirement.
- Work. This can include paid or non-paid (i.e., volunteer) work.
Other retirement authors classify it in different ways, including Nelson. He classifies the activities as leisure, self-development, and productivity.[7] These categories obviously overlap and are similar. The categorization doesn’t matter so much as the details and ensuring you plan for these aspects in a way that is authentic to you.
Components of lasting happiness. Each of these categories have certain elements of what I would call fulfillment. Nelson described positive psychology and listed three elements of happiness (or fulfillment, in my mind), and this construct was theorized by Martin Seligman, a psychologist. (Nelson, et al., 2010 pp. 189-216). The three elements of happiness are pleasure, engagement, and meaning.
- Pleasure. Pleasure refers to short-term happiness, according to Nelson. It could be that hole-in-one. Just as a life of leisure in retirement is short-sighted, pleasure in and of itself will not lead to fulfillment.
- Engagement. Engagement comes “when your abilities are well-matched to some challenging task.” It often involves tasks that are challenging and you could get so wrapped up in the task that you might say time flies. You can be said to be in your zone or that you have flow.
- Meaning. This may be the most difficult one to reach as individuals. In today’s society, it is certainly one that seems to escape us in light of our focus of time and energy on non-meaningful activities. Retirement offers us the chance to get back to the heart of the matter. As Nelson says, living a fulfilling retirement is “living your life in alignment with your values.” This element of meaning that can lead to fulfillment is more than a mere belief – it is engaging in activities or services to that belief(s). The belief or values can range from God, your family, the environment, your political bent, and many other values.
So, as we circle back to the domains of activities, we need to keep these elements of fulfillment in mind. We will see that Play, Connecting, Renewal, and Work contain these elements. Again, we will address these areas and many issues surrounding them in future episodes.
Vitality. Another way of measuring our level of fulfillment in retirement is to consider our level of vitality. In their book Retirement Your Way, authors and career counselors Gail McDonald and Marilyn Bushey discussed vitality as a critical component of fulfillment. (McDonald, et al., 2019 p. 166). The Merriam-Webster definition of vitality is “the capacity to live and develop” or “the peculiarity distinguishing the living from the nonliving” are enlightening and powerful. The extent that we have vitality is the degree to which we are living or the degree to which we are capable of living and developing. That’s a powerful statement. McDonald describes it as “the energy and zest for life that allows us to live a life full of purpose and passion.” (McDonald, et al., 2019 p. 166).
As you think back over all this, consider how you will apply this to yourself. Defining an ideal retirement is certainly unique to each of us, but we all have a great opportunity to craft our encore period in a marvelous way. All of us have certain aspects of retirement to consider, including the well-being realms of financial, health, and inner well-being. There are certain financial and health thresholds you may need to meet before optimizing your inner well-being, but once those thresholds are met, you can turn towards many aspects of designing a fulfilling retirement. A fulfilling retirement often consists of a mix of pleasure, engagement, and meaning in four domains of retirement, including Play/Leisure, Connections, Renewal, and Work. We may have 20-30+ good years in retirement so we might as well plan for it.
In our next episode and blog on ideal retirement, we will discuss some key concepts on how we can find fulfillment in retirement.
[1] It is important to note that a mere transition itself can be difficult. There is a wealth of information on how to cope with transitions in general. See https://wmbridges.com/about/what-is-transition/ where Bridges discuss the three stages as Endings (with potentially confusion, rage, etc.), Neutral Zone (learning new ways and identities but still perhaps confused), and New Beginnings (new understanding, new attitudes, fresh identity). See also https://richardbjoelsondsw.com/articles/managing-difficult-life-transitions/, https://www.mindtools.com/pages/article/bridges-transition-model.htm,.
[2] Johnson describes it this way: “Retirement holds up a new prospect of growth for us. Retirement is a new journey, a path full of challenges, where we are called to become more interesting, more curious, more personal, more diverse, and more meaningful in all that we do.” (Johnson, 1999, p. xi).
[3] Retirement commentator Zelinski put it this way: “…retirement is the last opportunity for individuals to reinvent themselves, let go the past, and find peace and happiness within.” (Zelinski, 2015, p. 4).
[4] In fact, we should take a page out of Japan’s playbook. In Japan, rather than celebrating just youth, they celebrate one’s 60th birthday (“kanreki”) as a rebirth of a second childhood. Indeed, “a lifetime’s troubles are forgotten as the celebrated individual enters a new stage of life with all the joy and possibilities of a newborn.” Although, it appears this tradition on kanreki does not quite tie to the overall view of this article that we are to be quite active in retirement as kanreki seems to suggest part of this ceremony is that the 60-year-old male passes the mantel to his son. We are suggesting that no such mantel is passed in these early stages of retirement. http://japansocietyny.blogspot.com/2013/09/in-vestments-kanreki-rebirth-at-age-60.html
[5] I especially like the concept of The Fourth Movement. Nelson explained that with symphonies, the Fourth Movement is a blank slate and the composer can make it a triumphant victory full of joy or it can be more anti-climatic and somewhat meandering. That is a great analogy as our individualized retirement experiences can vary, and we are indeed the composer (and the conductor and musician). (Nelson, et al., 2010, p. ix).What Color is Your Parachute. Preface – get page and bio.
[6] Johnson compared making leisure our main focus to moving to a vacation spot that loses its luster once we move there.
[7] Oehser describes similar types of arenas in retirement and refers to it as the “Happiness Portfolio®” in retirement and says it should be balanced and diversified. (Oehser, 2018, p. 8).
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