Retirement: so much to consider
This is part 4 of the New Bermuda Retirement series.
Retirement impacts you in three major ways. You are affected, personally. Your family is affected. Your environment affects you.
You, individually are affected: you must plan to manage your finances for maximum impact over a long number of years, a task that is not so easy to do. There will be sidesteps, setbacks, career fluctuations, possibly contentious medical issues, and with the imminent advent of “real” retirement, the feelings of loss.
Your family is affected: particularly, if you are relied upon as the major bread winner. What you earn, and what you save in retirement benefits will determine how they will live in the future also. If you are single, or divorced, your financial burden may be more significant.
You may be responsible for:
• Elderly relatives.
• Educational funding more than you planned for.
• Disability support.
• Maintaining a stabile home setting.
• Contingency plans.
Your environment will affect you:
• Continued availability of jobs.
• Cost of living.
• Tax regimes.
• Relocation considerations.
• Continued community viability.
• Affordable human services, particularly assisted living care facilities.
I like to think about total life financial planning, which includes retirement, as divided into six phases, using terms from our island life.
1. Dawn of Great Expectations.
2. Into the Winds of Change.
4. Calm Waters.
5. Twilight Swimmingly Serene.
6. The Dimming of the Day.
Ordinary life could also be considered as divided into 60 years + 40 years division which is just coincidentally, the same percentage used by investment managers in asset allocation (60 per cent bonds and 40 per cent stocks) for a balanced more conservative portfolio.
The first 60 years can be further broken down to the first 20 years and the subsequent 40 years.
The Dawn of Great Expectations. Living the first 20 years. It could be said that from the very beginning of your life, you are planning for your retirement at the last phase of your life. Wide-eyed, full of wonder and hope, you came into this world living with your parents. They nurtured and raised you. During that time from infant to young adult, you depended on them, you identified with them, you may have mentally adopted their values, their habit, their lifestyles, how they handled relationships, culture, peer pressure, community reputation, morality and money. Or, in rebellion, trying to form your own identity, ideals and value system, you rejected all of their “stuff”. Still, they cared for you, then you cared for yourself, and then, in full circle, you will care for them.
Whether you rejected their life philosophy or not, nevertheless, everything that you experience, learn, feel, intuit, action, love, challenge, acquire and more prepares you to manage your life, your relationships with people, money, community, and religion.
Into the Winds of Change. The next 40 years. As you wind up your adolescent years (the first 20), you will advance head first through the winds of change to your new real world environment. You are on your own, solely responsible for your actions. Severing the proverbial umbilical cord, you develop you own identity. You move forward — into the workplace, into/out of relationships, education, experiences, acquiring expertise, reaching out for the brass ring of independent financial success. This is where you will be for the next 40 years. You want to like your life, have a role in industry, be recognised as a valuable player.
Whether you will exist, survive, or thrive is not yet determined, but we all, in some measure or another, will proceed through this very long second stage of our lives. We have so much to be, so much to experience, so much to just love about learning to live in our independent world.
Turbulence. In navigating life along those 40 years way, statistically, there will be problems, obstacles, setbacks, defeats (hopefully not disastrous), hurdles, both large and small: relationships, accumulating assets, managing risks, making investing decisions, taking on debt, possibly raising a family, focused on keeping a career from derailment. Life is unpredictable, after all. Be assured though that time is still on your side. You can start over; you can pull forward after setbacks. You are still young. Remember even at 60, you are considered the new 40!
Calm Waters. Rippling into retirement. For 60 years you have worked towards this event. You are now at the apex with a very possible 30, 35, 40 years left to experience a meaningful life. Will it be the same as your working years? Will it be spectacularly different? Will you be ready?
Retirement can be a time of great opportunity to reach great intellect, give back to society, revitalise your life satisfaction index, improve old relationships and build wonderful new ones.
Retirement can also mean loss of self, loss of identity, sheer loss of a paycheque, and for some, an emptiness that is hard to comprehend. Preparing for retirement means understanding that you may feel depressed, you may feel invisible, you may mourn your other life — now gone forever. And you certainly will miss that regular paycheque.
How you mentally** prepare for that 40 per cent of opportunity years remaining in your life is even more important than ensuring you will have relative financial security.
A true composite story from anonymous. “My dad George lived for his job. He had his circle of co-workers, and thrived in the corporate environment of the day. There was nothing else so fine. Camaraderie, beers at the pub at evening gatherings, solid in the knowledge that the company would provide a good living forever.
“Then, in a change in company ownership, George was retired. His generous severance package even provided a free company desk for a few weeks afterward to get his new life sorted out.
“The thing is, he couldn’t sort it out or face any changes in his life. So, George continued each day to his former job as if he still worked there, even trying to contribute his ideas at organisational planning meetings like he always did. This situation lasted only a few days; then, George was informed he was not an employee. Company premises were permanently closed to him.
“My dad could never talk about his feelings. From that time on, every day, he simply went to the pub by noon, returning home late in the evening. He passed less than a year later. You know there was no retirement counselling back then, but I doubt my dad would have gone anyway.”
Twilight Swimmingly Serene. Knowing that you can be financially solvent in retirement means you can experience that inner peace within yourself, your spiritual and physical being, community and family, you can truly enjoy giving yourself permission to do whatever you want, whenever you want, pushing the boundaries of self-fulfillment after a lifetime of work.
Dimming of the Day. To be discussed in future instalments.
Timeline. When to start retirement planning.
Fifteen years prior to your mandated retirement age is not too early to plan. It is said and still can be quite true that your best earnings years are after the kiddies leave home, the mortgage is paid off, and you are (singularly or both) working full-time. Say, at age 50 you have the intellect, the acumen and the time — most importantly to focus — exclusively on your careers.
Overview of the retirement steps towards good planning are many. Each will be explored in depth in future articles in the series:
1. Assess your financial strength.
2. Revisit your budget.
3. Review your current and possible future debts, ie a house purchase.
4. Start tracking your spending patterns.
5. Understand one of your biggest costs — medical care. Time to institute a healthy living plan to accompany your future retirement.
6. Calculate your personal inflation rate. Bermuda’s inflationary lifestyle does not even come close to the 2 per cent annual projection rate used by generic retirement calculators.
7. Define what you consider to be a minimally satisfactory lifestyle. If you can attain that horizon, anything saved or earned above that is star-perfect.
8. Take a serious analysis of your relationships. Are you divorcing, marrying, or responsible for eldercare, or a less than healthy child?
9. Add up what you own in asset accumulation now — only assets that have the potential to appreciate in value, eg your pension.
10. Review your legal affairs. Get them in order. Get help if you don’t know what to do.
11. Know and be prepared for contingencies, they may not happen, but doing the “what if” is vital preparation, too: redundancy, eldercare, divorce, death, disability, perpetual childcare, forced relocation, etc.
12. Preparing a legacy.
13. Other related items as we progress through the retirement series.
My opinion: there should be no mandatory retirement age. Why is it absolutely fine for world leaders, politicians, producers, investment managers, economists, and thousands of others, generally well-heeled, to work well into their eighties, yet the average employee is encouraged, and far too often pushed out at retirement age. What a waste of talent, years of experience, and intellectual capital!
Martha Harris Myron CPA CFP JSM : Masters of Law — International Tax and Financial Services. Pondstraddler Life™: financial perspectives for Bermuda islanders with multinational families and international connections on the Great Atlantic pond Contact: firstname.lastname@example.org