7 Habits of Happy Retirees

Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance

1. Put Health & Wellness First

Good health sets the stage for the very best retirement experience. Your health is the primary determinant of your ability to enjoy your new retirement lifestyle. You’ll need both energy and physical fitness to spend time with others, to pursue new activities and to travel. Devote a portion of your time to developing healthy routines for exercise and a well-rounded diet. These practices set the stage for both physical and mental well-being. Remember, money can’t always buy health. And more importantly, wealth is not an equal substitute for wellness.

2. Build a Strong Foundation at Home

Retirement isn’t a path that you travel alone; it’s one that you share with a spouse, family or other loved ones. If you weren’t able to invest enough time in those relationships throughout your working career, recommit to doing so now. Spouses in particular face the biggest adjustment once both are fully-retired. Replace your sense of frustration with curiosity and a desire to learn something new about your loved one. Explore new activities together and rekindle the connection that shaped your relationship years ago.

3. Keep Your Financial House in Order

You are the architect of your retirement savings plan, and your work continues even after you cross the retirement threshold. Every building design requires maintenance and upkeep. Your retirement plan is no different. Review your income and expenses regularly, and note any variances outside of your spending limits. Resist the urge to indulge in extensive travel during your first year of retirement; that’s when you’re the most likely to overspend. When you exercise discipline, you gain the power to eliminate financial stress and uncertainty.

4. Invest in Others

You’ll never know what the market will return…but an investment in others will always yield positive dividends. Take time to mentor young professionals, or even the company leaders who stepped up to fill your shoes. You offer a wealth of wisdom and perspective from your working experience. Share your best practices and the lessons you learned, even the tough ones. When you’re confident enough to share some of your mistakes too, your mentees benefit from your honesty and candor.

5. Explore New Interests

There’s probably a time in your life when you sat on the bench on a sports team, or were passed over for the lead role in the school play. If you felt like your skills weren’t ‘good enough’ back then…there is nothing holding you back now. There is no one to impress and no one to let down with your performance. It’s not about being in the spotlight; it’s about finding joy in the act of simply trying.

6. Expand Your Social Universe

Expanding your horizons with new hobbies and activities lends you the opportunity to expand your circle of friends as well. Staying engaged in the local community and building new relationships adds personal fulfillment to your time in retirement. If you don’t have companionship at home, building new relationships with those around you is even more important.

7. Respect the Law of Retirement Inertia

Scientifically speaking, an object in motion stays in motion, and an object at rest, stays at rest. The same applies to retirement. Exercise your ability to discover new activities and to master new skills. It will keep you physically active and mentally sharp. Flexing intellectual muscle extends the years of your life and the enjoyment you find in them too.

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This material is intended to potentially assist you in planning for your future. Guardian and its affiliates, subsidiaries, employees, agents, and outside contractors, including but not limited to Dr. Daniel Crosby, are not authorized to provide legal, tax, or investment advice in the materials of this website including but not limited to any blogs. The information provided does not constitute a solicitation of an offer to buy or an offer to sell financial or insurance products. Please note that individual situations can vary, and you should consult your tax, investment or legal advisor for guidance and information specific to your situation. Guardian is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this material. To learn more about Guardian, visit GuardianLife.com.

What is Retirement? 5 Common Misconceptions

Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance

If you ask adults aged 40, 50 or 60 about their outlook for retirement, you’ll receive widely different answers. As we age, expectations for our own retirement take shape and soon become an immediate reality. Our career paths and savings history are suddenly prominent plot lines in our life story, and they become the foundation for the next chapter in life. No matter your age, it’s critical to examine your expectations for retirement and how closely they match your personal, financial and professional reality.

Retirement Misconception 1: Choosing when to retire is easy.

Today, the choice to retire is less influenced by age than it is by financial considerations, health conditions or family responsibilities. For example, women in particular are more likely than men to plan for retirement to coincide with a partner’s retirement plans. The voluntary or involuntary choice to retire affects satisfaction with the retirement experience. Studies by Ohio State University revealed that forced retirement (due to poor health, company lay-offs or another reason) resulted in greater difficulties in transitioning away from work. In contrast, adults who made a voluntary choice regarding the timing of their retirement were more likely to adjust successfully.

Retirement Misconception 2: Retirement is the end of my career.

Retirement isn’t a finish line; nor is it a finite point in your career. In fact, about twice as many Americans aged 65+ continue working today compared to twenty-five years ago. While many of these adults continue to work to supplement retirement savings, others work for pleasure in part-time roles, advisory roles or as mentors to younger professionals. Retirement doesn’t mean ‘not working.’ Rather, it is an opportunity to pursue projects more closely related to your passions or to take on projects that didn’t fit in your busy professional schedule.

Retirement Misconception 3: The transition to retirement is easy.

Simply put, retirement isn’t easy. In fact, retirement is a major lifestyle change that affects physical, mental and emotional health. Consider that work typically occupies at least 8 to 12 hours, if not more, of your day. When faced with an expansive quantity of time, many retirees find that their chores, hobbies and daily plans aren’t as fulfilling as expected. The struggle to fill the professional void with additional activities is often accompanied by emotional challenges. Those who held high-stature career roles tend to struggle the most in defining their personal identity in retirement. If you’re nearing retirement, begin thinking about how you’ll spend your days.

Retirement Misconception 4: I’ll take better care of myself in retirement.

Retirement is one of the most important times to improve personal care. When faced with extra time, retirees usually have the best-laid plans for new exercise routines and healthier dietary choices. In reality, if an exercise routine and healthy diet were not a part of your life prior to retirement, you are not likely to make drastic health and lifestyle improvements now. However, physical activity and personal interactions are important components of a healthy retirement. Savvy retirees combine activities such as hobbies, part-time jobs or volunteer roles that require moderate daily activity.

Retirement Misconception 5: The money I’ve saved will last long enough.

As retirees transition from amassing wealth to spending it, sound financial management is of the utmost importance. First-year retirees are the most likely to overspend as they plan vacations and adventures. In reality, retirees must understand the delicate balance between time and money throughout retirement. Income often becomes smaller and more fixed as the amount of time to spend it drastically increases. As you structure your retirement spending plans, it’s critical to evaluate your monthly living expenses and to develop a plan for end-of-life care. Meetings with your financial advisor should continue regularly throughout retirement in order to ensure you remain on target financially.

Sources:

Harold Meyerson, H. (2013, March 06). Steering America toward a more secure retirement.  The Washington Post .

Ohio State University Extension Senior Series; Facts About Retirement; Price, Christine A. Ph.D.

“Honey, I’m Home!” – For Good: The Transition to Retirement” HYG-5159-96 Kirk Bloir 

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This material is intended to potentially assist you in planning for your future. Guardian and its affiliates, subsidiaries, employees, agents, and outside contractors, including but not limited to Dr. Daniel Crosby, are not authorized to provide legal, tax, or investment advice in the materials of this website including but not limited to any blogs. The information provided does not constitute a solicitation of an offer to buy or an offer to sell financial or insurance products. Please note that individual situations can vary, and you should consult your tax, investment or legal advisor for guidance and information specific to your situation. Guardian is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this material. To learn more about Guardian, visit GuardianLife.com.

What is a Realistic Retirement Budget? #retirement #budget #financialplanning #thinkahead #money #starttoday

Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance

It’s important to live by a household budget during your working years, but it’s even more important as you begin retirement.  As you prepare to live on a fixed income, planning is key.  According to a recent Survey of Consumer Finances, the median American married couple earns approximately $60,000 per year near retirement and has approximately $100,000 in non-housing wealth.  However, your income and assets at the end of your career are just one component of your retirement budget.

Measuring the adequacy of a retirement plan depends on the retiree and his or her goals for retirement.  While there is no ‘one-size-fits-all’ retirement budget, there is a realistic approach to shaping your plan. Certified Financial Planner Board of Standards, Inc. guidelines recommend a detailed personal cash flow forecast. But, even the best-laid plans change. Your budget starts with an estimate of your income replacement ratio.

Most experts estimate that you’ll need 70% of your pre-retirement income to maintain the same standard of living in retirement as you enjoyed throughout your working years. A bulletin released by the Social Security Administration detailed the difficulty of constructing this figure. It is generally calculated using household income, shared income, non-housing financial assets and potential income from financial assets. It sounds complicated, but it doesn’t have to be. At its most simple level, think of your replacement ratio as the sum of your retirement income sources.

Your replacement ratio is less than your pre-retirement income because of three factors:

• Income taxes are lower after retirement, as income is generally lower and retirement income, such as Social Security, is taxed at a lower rate.
• Your retirement saving approach has shifted.
• Work-related expenses are reduced or eliminated.

The sum total of your income must be enough to cover your everyday living expenses, healthcare, unplanned expenses and end-of-life arrangements. Your replacement ratio is unique to your household; it’s driven by your individual lifestyle expectations, health and ability to save throughout your career.

Identifying Retirement Income Sources

Retirement savings and Social Security benefits form the bulk of most retirees’ income. Additional income may be available via defined benefit pensions or supplemental work throughout retirement. Each income source deserves a thoughtful review of both risk and reward.

• Retirement Savings Plans: As you near retirement age, your portfolio should shift away from risk toward a conservative blend of assets. The goal is to maintain your wealth over the course of your twenty- to thirty-year retirement. Schedule consulting sessions with your financial advisor to ensure you’re on the right path.  
• Social Security: This income typically accounts for 40% of a retiree’s replacement ratio. While you may draw benefits at any time between the ages of 62 to 70, depending upon your year of birth, you must be aged 65-67 in order to qualify for your full retirement age. Social Security withdrawals prior to full retirement age can reduce your benefits by about 30%. Choose the age at which you will begin drawing benefits carefully and monitor long-term trends affecting this program.
• Pensions and Defined Benefit Plans: Few companies today offer pensions, and even fewer offer retiree healthcare coverage. Read your plan thoroughly and identify the age at which you qualify for full benefits. Be aware that this income is dependent upon the business’ ability to thrive and thus pay out benefits over the long run.
• Work-Related Income: As a retiree, you may choose to work throughout retirement; either for the pay and health benefits or for the simple enjoyment of doing so. If you draw Social Security benefits prior to your full retirement age, the government will deduct $1 for every $2 you earn above a specified limit ($15,120 in 2013). Deductions are lessened as you near full retirement age. Calculate how these deductions will affect your income if you draw benefits early.

Identifying Retirement Expenses:

Retirement should come with some form of reward, whether it is travel or the pursuit of your passions. As you review the expenses related to everyday necessities, allocate a portion of your expenses to activities that you enjoy.

• Everyday Living: Calculate your monthly expenses for food, shelter, transportation, clothing and other necessities.
• Leisure and Travel: Many retirees overspend during their first year of retirement as they’re eager to take once-in-a-lifetime trips. Develop a strategic plan for travel and leisure activities, and you’ll be rewarded with more flexibility over the long run.
• Healthcare: Whether you’re in good health or managing a chronic illness, account for unplanned medical expenses that may occur. According to a study by the Society of Actuaries, the risk of paying for long-term care is the largest and earliest disruptor of retirement planning. Not only are these burdens hard to predict, they’re also significant in size and scope.

Completing an inventory of projected income and expenses will help you shape a realistic retirement budget. Its level of adequacy to support your everyday needs and to cover unexpected expenses depends on you. Your risk tolerance as well as your desire to leave a financial legacy shape how much ‘extra’ you’ll want in your retirement budget.

Sources:

“Income Replacement Ratios in the Health & Retirement Study.” Purcell, Patrick. Social Security Bulletin Vol. 72 No. 3, 2012.

“Measures of Retirement Benefit Adequacy: Which, Why, for Whom and How Much?”  Society of Actuaries, 2013.

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This material is intended to potentially assist you in planning for your future. Guardian and its affiliates, subsidiaries, employees, agents, and outside contractors, including but not limited to Dr. Daniel Crosby, are not authorized to provide legal, tax, or investment advice in the materials of this website including but not limited to any blogs. The information provided does not constitute a solicitation of an offer to buy or an offer to sell financial or insurance products. Please note that individual situations can vary, and you should consult your tax, investment or legal advisor for guidance and information specific to your situation. Guardian is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this material. To learn more about Guardian, visit GuardianLife.com.