Improving Investor Behavior: Retire to What?

If I asked you to define retirement, how would you describe it? Take some time and think about it. You’re probably envisioning white sandy beaches, trips to the golf course, and visits with family, free from the constraints of work and email. Sounds nice, right?

That’s how a lot of people see retirement. The belief is that upon reaching a certain age (usually around 65), retirement should be an expectation – a foregone conclusion. And once retired, people will get to enjoy “the good life” of unlimited freedom, time, and fun.

But when I’m asked to define retirement, I do it a little differently. I think back to 1996. I was a younger man back then, intent on starting my financial practice. A fresh perspective brought about the attitude that going forward, clients would be writing my paycheck, not the big brokerage house for which I had been working. And if my clients would be the ones paying for my services, would they demand I wear a suit every day? Probably not. So that day, I retired my two-piece suits and checkered ties. I “retired” them to the back of my closet, only to be pulled out for weddings, funerals or the company Christmas party. I retired that coat and tie look because it was no longer useful or needed. When you describe retiring something or someone that way, “retiring” does not usually feel good.

My point is this: if you are planning to retire, you should think about what to retire to, in addition to what you plan to retire on.

What would it be like if instead of a 30-year vacation, you took your skills and passion and put them to use? Odds are you’ve spent the last 35 years developing a particular profession. If it takes 10,000 hours to become an expert at something, you’re Mr. Miyagi with 75,000 hours under your belt. So what if you applied that genius to something about which you really care? What impact could you make?

Now I’m not saying you have to give up the dream of a more manageable workload, more frequent vacations, or spending overdue time with family. Take a couple of years and enjoy it. But when the doldrums of everyday life set in, think about creating again.

This will have two benefits. First, you’ll feel purpose. We believe in making work a choice, which is to say that you get to choose what you work on, with whom you work, and for how long. Work is a lot more interesting when it’s in support of causes you believe in or toward problems you find challenging.

Second, it can bolster your income later in life. Credible surveys point to a scary truth: nearly 25 percent of prospective retirees have no money saved for retirement. About a third of Americans have less than $5,000 saved. Of those with retirement savings, the average amount saved is $84,821, according to Northwestern Mutual. With longevity increasing thanks to innovations in medical care, you will likely outlive your parents. Americans don’t have enough saved to live on, especially for 30, 40, or more years. But a willingness to work (and collect an income) can dramatically impact the amount of money people need to have saved.

In this way, retirement becomes a sliding scale of sorts. On one end, you “have to work” to maintain an income on which to live. On the other end, there’s “choose to work,” in which you have the freedom to choose if you work, on what, and with whom. Your willingness to save and prepare today will ultimately decide where you fall on that scale.

I encourage anyone who is considering retirement to make a list: the left column heading would be: if you retired today, what activities would you stop doing? The right column heading: what activities would you start or continue doing if you were retired? Are there things you can stop or start today in these two columns? In thinking about these two columns, what would be the benefits from each? What would happen if you began now? What holds you back from starting today? Take these answers to your employer, your team, or your employees, and begin to make these changes.

Helping others can be profoundly rejuvenating. It can change your mindset from one of hanging that suit up in the closet because it is no longer useful, to fostering an attitude of leveraging your strengths and contributing your value. Retirement doesn’t have to be the end of something. With enough preparation, you will have the choice to define your retirement; however it may look.