TROTTER: The retirement reality check

Ike Trotter

Several years back, there was a popular book entitled “What They Don’t Teach You at Harvard Business School.” Perhaps someday, another book will appear to discuss certain aspects of the retirement experience that go unrecognized, as well. That being said, here are some of the little things in that regard that can be frequently overlooked.

1 — Will you need to continue savings? More and more baby boomers are retiring with the hope that they can become centenarians. That may prove thanks to health care advances and generally healthier lifestyles. And while most of us try and put away money in some shape or form, our expanding longevity will also require a greater need to save during retirement for the (presumed) decades ahead. That means much more than budgeting; it means investing with growth and tax efficiency in mind year after year.

2 — Will your cash flow be more important than your savings? While the No. 1 retirement fear is someday running out of money, your income stream may actually prove more important than your retirement nest egg. How great then will a cash income stream be from your accumulated wealth?

There’s a longstanding belief that retirees should withdraw about 4 percent of their savings annually. This “4 percent rule” became popular back in the 1990s thanks to an influential article written by a financial advisor named Bill Bengen in the Journal of Financial Planning.

What, however, puts stress on any kind of withdrawal formula is market volatility which we’ve certainly witnessed over the last few years. Because of this, it is hard to imagine sticking to a hard-and-fast withdrawal rate in retirement. Drawing from this, your annual withdrawal percentage may, in fact, need to vary due to life and market factors that can and will occur.

3 — What will you begin doing in retirement? In the classic retirement dream, every day feels like a Saturday. Your reward for decades of work is 24/7 freedom. But could all that freedom of time leave one bored and without purpose?

According to experts, it happens and more often than you might think. Some people retire with only a vague idea of “what’s next.” After a few months or years, for example, they find themselves in the doldrums. On the other hand, concentrating towards a goal-oriented retirement can bring about true purpose to one’s life. Purpose then leads to objectives which, in turn, leads to plans that help build structure and order to one’s days and weeks. Solid steps that can help alleviate retirement listlessness.

4 — Will your spouse want to live the way that you live? Many couples retire with shared goals but may find that their ambitions and day-to-day routines differ. Over time, this dissonance can be aggravating. A meeting of the minds may help iron out potential issues that can be caused from this.

5 — When should you (and your spouse) claim Social Security benefits? “As soon as possible” may not automatically be the best answer. Taking a careful look at all options may be best. What’s important is to run the numbers. If you can wait and apply for Social Security strategically, you might realize significantly more dollars in benefits over your lifetime. Believe me, as it pertains to Social Security retirement, there are no set answers.

This Month’s Parting Shot: I consider myself to be a pretty young-at-heart type of guy. And, while I have to acknowledge the fact I’ve reach the age of 60, I feel great — pretty much the same as when I was 30. I received this week, however, a birthday letter that featured the news on the day of my birth; July 15, 1952. It served as a reminder that time is always moving on. Here are a few news items from this day 60 years ago: Harry S. Truman was President, General Motors builds the first automobile equipped with air conditioning, a gallon of gas costs $.20 cents, a new automobile goes for $1,850 and the price of a new home; $16,800. While I would like to have my numbers start back in the other direction, news like this serves as a gentle reminder that the clock is always ticking away . . .

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