Every year a new book comes along that is truly worth taking the time to read — and more than once. This year’s outstanding book is the just-published “How to Retire: 20 Lessons for A Happy, Successful and Wealthy Retirement” by Morningstar’s director of personal finance, Christine Benz.
While most of us view the words “retirement planning” as an exercise in deciding whether we have enough money to quit work, Benz has taken the concept of planning for retirement to a broader level. An expert herself, she interviewed 20 well-known (and some lesser-known but profound) experts in their fields about not only financial matters but also the psychological and practical aspects of retirement planning.
Yes, there’s good advice on investing and balancing withdrawals, as you’d expect in a retirement planning book. But this entertaining book goes far beyond hitting a “number” — a financial goal. Instead, it is a guide to planning for all aspects of a completely new stage of life.
How to even start thinking about this transition? Benz interviews Fritz Gilbert, who writes the blog Retirement Manifesto. Start thinking about it at least five years in advance. As you get closer Gilbert suggests you “start saying no to everything” to clear your calendar and your head. His advice ranges from being intentional about having friendships outside of work, so your life doesn’t stop on that last day of work, to scraping your work computer and re-subscribing to all the newsletters and personal groups that came to your work email before it disappears.
Similar advice comes from Laura Carstensen, a longevity researcher. While your lifespan is written in your genes or your “stars,” your work and your social networks play a role not only in prolonging life but enjoying it as well. “Work is good for people,” Carstensen says. “The way we work is not.” You’ll definitely want to read this short chapter twice. Is work your only identity?
David Blanchett, a top retirement researcher and financial planner, asks you to look ahead — at how your retirement spending might change. In short, what good is it to save money for a trip in 10 years when your health might change and preclude travel? Part of a retirement lifestyle is the enjoyment of it — and planning to spend your money wisely, but to indeed spend it, while you can enjoy it!
Benz gets into details of spending in her interview with financial planner Nathan Guyton, who explains how to create a spending plan. Guyton created a flexible retirement spending system called Guardrails. Recognizing that both investment returns and spending needs may be variable in any year, he helps set up a system that will create a retirement stream of income to meet your needs.
And speaking of spending, the chapter with author Ramit Sethi is titled “Give Yourself Permission to Spend on What Matters to You.” It stands the idea of a frugal retirement on its head. This is not about splurging, but about deciding on how and where you want to focus your interests and your money. Yes, it might be travel, but it might also be working with a charity. The idea is to give your life purpose — and plan for it. He points out that even on a tight budget, it’s important to prioritize where you put your money. This chapter is about the joy of retirement and your bucket list vs. penny pinching.
Famed financial planner and author Mary Beth Franklin is interviewed extensively about Social Security planning. She advocates waiting as long as possible to collect, certainly to full retirement age. But more importantly, this chapter discusses strategies for couples with uneven incomes, and the possibilities of maximizing income for a surviving spouse.
Perhaps one of the most profound and thought-provoking chapters is Benz’ interview with famed financial professor and author Wade Pfau. In this chapter, you’re guided to examine your own personality as it will impact your retirement lifestyle. Depending on your own psychological approach to money and spending, you’ll need a different planning approach. (No wonder so many couples disagree!)
Do you have a “safety-first” approach to retirement income, or can you live with the uncertainties of a “probabilities” approach? In practical terms, do you need more guaranteed income or are you willing to rely more on the upside possibilities provided by equity investments? For sure, you’ll want to go to Pfau’s website to fill out his “RISA Questionnaire” and determine how it impacts your approach to retirement.
I’ve barely scratched the surface of the wisdom and orderly thought put into this readable book. Since I wrote my own retirement book nearly 25 years ago (“The Savage Number: How Much Do You Really Need to Retire?”), the concept of retirement has taken on new meaning and new options for those planning for what should be a fulfilling stage of life.
And Christine Benz’ “How to Retire” is the most helpful guide you will find. That’s The Savage Truth.
(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)