November 20, 2013

Retirement Advice: Don't Do These 7 Things



I know there are more than seven things to avoid as you move toward, and then through, your satisfying retirement. But, in the interest of brevity I have picked these examples of things to avoid.

Of these seven, I committed three of them early on. Even so, twelve years later things are progressing very nicely. None of those screw-ups was fatal to my journey.  OK, so what are the seven mistakes of retirement?



1) Try to copy your parent's retirement. Except in rare cases this is not going to happen. The days of solid company pensions and gold-plated health care coverage are not coming back. Responsibility for a happy retirement lifestyle is now firmly ours to determine.

Another important difference is probably your approach to your health. Never terribly active, my mom and dad stopped any type of physical activity shortly after retirement. I firmly believe that destroyed the quality of life for my mom's last few years and quickened her death (3 years next month). Dad underwent a quintuple bypass 9 years ago, brought on in part by a poor diet and a sedentary lifestyle. Today he spends virtually all his waking hours in a chair, reading and napping. That is not acceptable to me.

2) Try to copy a friend's retirement. Retirement is as unique as you are. Wanting to live like Bill or Sally or whomever is not likely to work. It is as pointless as "keeping up with the Joneses" during your working days.

The mix of financial, emotional, relational, and health status that defines you means your retirement must be built for you. If anything positive has come from the economic downturn, it is the realization that most of us can be happy and satisfied on much less than we thought possible. Your best friend spends his summers in the south of France, you in Portland. Are you happy? Then, send your friend a postcard.

3) Do whatever a web site or books tells you. I have written several thousand words on the risks involved in depending on others to design your retirement for you. It is important that you educate yourself, using all the resources you can. But, it is just as important that you adapt all those suggestions and ideas to your needs, your interest, and your comfort zone.

4) Assume things will work out. This laissez-faire approach to something as important as the next 20 or 30 years of your life is extremely risky. Maybe you have always landed on your feet: great job, lots of money, loving spouse and cute, well-behaved children, an in-law you like...Not so fast. Life has a habit of throwing you a curve ball just when you least expect it.

Things will work out, but probably not how you'd like them to. Proactivity is is a much safer course to a retirement lifestyle you want.

5) Count on financial promises and performances to remain unchanged. When I retired in June of 2001 I had a budget that had been under development for a few years. I based it on my experience and best guesses. Boy, was I wrong. Most importantly, over the next several years my investments didn't produce nearly as much as I had expected. My financial advisor made a few really bad recommendations that I accepted and lost enough money to bother me.

Next a bank that I had tens of thousands invested in went belly up. When do banks go under? Also, I failed to anticipate the massive, annual, increases in the cost of health care insurance for Betty and me. Who would have thought any industry could try to drive away its customers with 15% increases year after year? It took a fair amount of scrambling on our part to stem to bleeding and adjust to the new reality but we did.

6) Not trusting your instincts and decisions. I have become a firm believer in my innate instincts and "gut." I am continually gathering information and constantly relooking at our finances and lifestyle choices. As time went on, though, I gained more confidence in my ability to make a good decision based on what seems right to me. I have made mistakes that have cost me money and wasted time. At times I have followed a path that turned out to be unsatisfying for me or Betty. But, overall, I now will trust an instinct rather than be stuck in a no-decision mode for an extended period.

7) Panic. Oh boy, did I fall into this trap. After retiring I had major night terrors over my decision. Even though I had done a thorough job of planning, I kept feeling I had forgotten to take something really, really important into account. As point #5 above notes, I did forget or overlook some things that cost me.

But, the panic I felt was much more general: we'd run out of money at an early age and live on the streets. My parents' estate would turn out to be built on sand and we'd have to find room for them in our house. I would never find a passion and spend my last years in an easy chair, watching game shows.

Panic is part of the first phase of almost all retirements. After such a huge lifestyle change that is normal. What is self-defeating is to let panic debilitate you and cause you to make choices based on fear or anxiety.

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Your turn. What mistakes have you made that you'd advise others to avoid? If you could go back in time what would you do differently? A satisfying retirement is a nonstop learning experience for us all.


25 comments:

  1. What a great list! I think the other piece of advise is don't think you have to have all of the answers right now as to how you will avoid these mistakes. As you have pointed out, retirement (life?) is a process. Personally I am focusing hard on #1 right now. I know I need to be very physically fit, have interests that get me engaged and interacting with people I enjoy, and generally fight my introverted tendencies. For our generation we need to add the computer/tablet/phone to the tv list LOL.

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    1. Thanks, Juhli. I am thinking ahead to new goals and plans for next year while I keep this list in mind. As you note, retirement is a process so all of us must be willing to reassess where we are and what we are doing. A new commitment to my physical health is shaping up as a key goal for 2014.

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  2. Bob, as usual, your posts are filled with very useful and important points for us to take into consideration during our retirement planning.. it is helpful that you share your experiences "warts and all" -- this makes me feel like it'll be ok if we make a few mistakes along the way.. I especially agree with your "go with your instinct" advice.. I have found that if we quiet the mind and tune in to our instincts, we usually do know which road to turn down.. (although that doesn't mean there won't be some bumps and potholes along the way!) -- thanks again!

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    1. I could be the poster child for early retirement mistakes. Luckily, I allowed myself the time to get a better handle on what I needed to know and what I had to do. Your comment about quieting the mind and tuning in to our instincts is excellent advice. We all have a rather deep reservoir of life experiences we can call on to help us on this journey.

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  3. I cannot give any perspective from a retiree standpoint, but I will say that your #5 causes more consternation for many (the majority?) contemplating retirement. The whipsawing of the markets over the last 15+ years is disconcerting, and the fact that government can become as overreaching as it has been lately into our financial lives gives prospective retirees cause for concern. Not an easy time, but I suppose past generations faced similar, but different, obstacles. Good list, Bob.

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    1. I am sure every generation faced challenges. My dad's financial views were formed by living through the Great Depression as a young man and going through several major recessions. My maternal grandfather and grandmother struggled through the depression while raising two children.

      Being alive means having our share of struggles and disappointments. It is what we do with those dips in the road that make all the difference.

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  4. This is a great list Bob. I've come to the conclusion that adjusting to retirement is similar to all the other major life adjustments we did over the last 60+ years. What was it like to get a new job in a different city? What was it like to get married and have babies? Big changes, lots of fear, financial issues, self-confidence issues and the rest of your list. The other conclusion I've come to since retiring just a year ago is that the adjustments will continue for the rest of my life, just like all those other years I've tried to adjust. Thanks for your blog. Keep up the good work.

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    1. You make an excellent point, Guy. The obstacles and adjustments we face during retirement are nothing new: we faced them while growing up, being an adult with adult responsibilities, being a son or daughter to our parents, and making our way in a world that can be daunting.

      If we got this far we are equipped to follow the rest of the journey.

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  5. If only it were so easy! For us, #1 is a non-issue. There's nothing there that I'd even dream of copying. My father passed away 5 days after his 62nd birthday, after being forced to retire or faced being laid off from his employer of 26 years. He never saw a cent of his pension or social security. Since they had no savings, my mother has lived at poverty level with my dad's very small pension and his social security. She's now 86, has dementia, and is living in an assisted living center. She never quite adjusted to life without my dad, and she didn't want to create a life of her own after he died.

    My husband's parents fared much better - he had a UAW pension and they both collected social security. They traveled and enjoyed things, but my MIL had nothing left at the end. I think this harkens back to your earlier blog on "should I leave an inheritance?" regarding how much we prepare for our own lives versus trying to take care of aging parents and maybe leave something for the kids. My husband and I have both worked very hard for years and we are (at least according to our financial advisor!) in excellent shape and ready for retirement when compared to many of our peers.

    My husband retired on January 1, 2013, so this year has been a very steep learning curve for us, despite feeling like we were well-prepared. I'm on the fence concerning my own retirement date because, even though I'd like to join him, I'm fearful that I will run out of money. I trust my financial advisors and I am very proud of what I've been able to put into my 403b and 457 (I'm in non-profit healthcare). My husband has two fixed pensions (one private and one state), so I know that we're way better off than many people. Still the doubts and worries...

    I really appreciate #6 and #7; they really ring true for me. Thank you for posting great blogs on a regular basis!

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    1. Panic and fear are probably the two most powerful forces at work against beginning a retirement, or fully enjoying retirement. They are human emotions that we cannot fully control. But, if we can accept them without falling completely under their spell, the battle is won.

      Of course, there is also the equally dangerous tendency listed as #4: assuming things will work out without any real planning or sacrifice. That blind faith is not helpful either.

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  6. Great points as usual Bob. I particularly agree with the idea of not trying to live your retirement based on someone else. We are each different with our own passions and interests. Forcing a retired life into a mold that is anything other than the one best fitted for us personally is not a good way to go. I think we can each create our own custom retirement based on how we want to live our second act. According to our rules, doing what we want - isn't that what it is really all about! Enjoy... :)

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    1. Thanks, Dave. Frankly, I don't know anyone whose retirement I'd want to copy even if that approach made sense. I don't suggest anyone copy mine either! We are ultimately on our own.

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  7. I am getting a message from many sources and embracing the concept that the planning is not a one time thing - it is a year by year process with never really "arriving"! A financial planner recently shared that planning five years out is about the maximum for major decisions. That took a heavy weight off my shoulders! Love your blog!

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    1. I make a one-year plan with some goals that extend out into the future. But, even something as straightforward as my budget gets adjusted at least twice a year. Why would I assume that more important parts of my life are locked in stone?

      Thanks for reading, Eileen.

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  8. The biggest suggestion I have is a combination of #3 & #7; don't do what a website or a book tells you & don't panic. My spin on it is to begin to save something, make that saving a priority and not just give up because you won't reach that magic "retirement" number. While I do have a pension, & it MAY stay, I'd be more comfortable today if I had more back-up investments, but I allowed myself to get sucked into the whole "if I can't do it right, there's no use to do it at all" mentality, which, looking back, is ridiculous. The don't panic part comes in because as retirees, especially if we are blessed with good health & take care of ourselves & our possessions, most of us have a lot of discretion on how we spend our income. We can hang out in the South of France, in Portland, in Phoenix, in California or in Iowa & have a marvelous retirement.

    Just as a side note: that #7 is interesting; whether it is full-blown panic, or just fear, even as a retiree, the issues I am still dealing with are directly tied in with fear or panic. Whether retired or not, panic doesn't seem to be a useful emotion for me.

    Great post!

    pam

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    1. Thanks, Pam. I appreciate your analysis of how these various points have affected you. Panic is such a powerful force and so unproductive.

      I wonder if there are ever enough backup investments! At some point we just figure we have done the best we can and live our life. You seem to be doing just fine.

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  9. Great points, Bob. ( I stumbled upon your blog a few weeks back and I'm enjoying it.) I retired January 2007 but could have stayed on the job a few more years; however I had mandatory retirement coming (federal position) and decided to go early when I could. I wish I could turn the clock back and save more. That would be my number one recommendation to anyone still working. Second, we have some substantial re-occurring medical expenses that we cannot eliminate. Like you, who would have thought 10 years ago, this was going to happen? It's not the having medical expenses, its the medical system, insurance agencies, and now the federal government meddling in health care. Not much we can do about part of that, though. Third, yes! go with your instincts and DON'T get in a hurry making decisions. After all, today is the youngest you will ever be again and you have the rest of your life ahead of you. Fourth, I have never tried to keep up with the Jones. Not now in retirement and not when I was working. It's a stupid thing to do. And finally, trying to enjoy what we have now, where we are in life, that we will never go to that exotic place or have that new toy we want, just relax and enjoy life as much as possible and be thankful for what we have. Half the world's population would willing take my place in life, I guarantee you that. Keith ( no specific profile set-up)

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    1. Great recap, Keith. Thank you for adding to our discussion. Planning for medical needs is almost impossible. I wish you luck in dealing with that part of your retirement. I am only 5 months from Medicare and I am hoping all my parts and pieces hold together until then!

      Overall, our medical situation is interesting to me. If you are with a group of folks our age, the first thing everyone wants to talk about are aches and pains and upcoming procedures. Sometimes I wonder if we'd all feel better if we just avoided that subject. The old cliché that says you become what you think about the most is probably quite true. Health issues are a natural part of aging, but in this country we seem somewhat obsessed by it all.

      That doesn't change the huge hurtle medical problems and costs can become, but I wonder if people in the rest of the world spend so much of their time thinking about it. As you note, a large majority of the world's population would love to change places with us. Maybe that helps put our problems in perspective.

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  10. Bob - great post and I agree with all of your points. For me, I know that for years while working, I always 'envied" people that had defined benefit pensions as I only worked with one company that offered it. Now that I'm in retirement and seeing the issues with companies dropping their pensions and the whipsaw of the market...I prefer to be driving my own bus and managing my own retirement portfolio vs. relying on some pension plan doing it for me! I too make mistakes but I do think that we need to take a deep breath, stay active in monitoring what is happening but don't get caught up in the 24x7 news coverage cycle that only seems to want to focus on whatever the crisis of the hour is (or is it now the crisis of the minute?). I think once you develop an investment plan that you feel comfortable with, trust it and revisit it in 3-6 months to see if it still "works" for you. Maintaining 'balance' in retirement is a lot more fun but also challenging! Thanks for all the great exchanges you facilitate on your blog!

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    1. I just watched a clip of the time when two newscasters on NBC got the world that JFK had died 35 minutes earlier. One of the newsmen was holding a telephone to his ear and repeating whatever he was being told.

      It occurred to me how much slower and "primitive" news dissemination was 50 years ago. Can you imagine today waiting 35 minutes !!!! for important news and not having live satellite feeds from the scene? Life wasn't that much different 50 years ago, but the focus on the problems and the latest crisis was much, much different....and that was probably a good thing.

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  11. I agree with your points. I m looking forward for nice life after retirement and your suggestions are wonderful. We should always believe in our self. I would not copy any one's retirement, I will have my own, but will try to learn from others.

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    1. Thanks, Joseph. Learning from others while clearing your own way = success.

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  12. Wonderful post. Regarding #2 (your friends' retirements), am finding it very interesting how different everyone is proceeding. We have friends living full time on a boat - sold house, cars and stuff - who write a blog. They say they are loving it - we would enjoy only about every 7th day! Others are sticking close to grandchildren, or working part-time, or being homebodies - and all appearing to enjoy their choices. I also have friends or acquaintances who are delaying retirement, I think because of a fear of what they will do all day. It sincerely helps to either have a passion or develop one.

    My husband is lucky because he's never been all about work - he's an accomplished musician who now has time to play in various groups 5-7 times a week. I'm lucky because while I don't have one single passion, I have several interests and hobbies I enjoy.

    Regarding the finance part, however, I do struggle. I have trouble loosening the purse strings - think I actually enjoy being frugal - but he doesn't! I think it's because of my personal background and maybe personality, but I am always looking at the worst possible "what if" and not wanting to dip into the funds I've saved to have a full retirement life. I really have to push myself in that arena. It helps having a budget, and currently seeing savings grow, but I continue to struggle with this, even though I'm finding out I'm a lot more up on finances, social security, health care costs etc. than most of my friends. Maybe they're the smart ones, to not be worriers!

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    1. Allowing yourself to spend some retirement money on stuff that enriches your life or is just plain fun is tough. I know because I have the same problem. With our savings and my father's eventual estate I will have no problems. But, I still find it an exciting challenge to live on less this year than last. It is kind of a game with me, and an irritant to my wife. As am realizing I have only so many years of good health and mobility ahead of me I am trying to be a little freer with our funds.

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