Success in retirement requires maintaining the standard of living you are accustomed to living as long as you are alive. Granted, that standard will change as you age, but the trick is maintaining the opportunity for making financial decisions at retirement age with the same ease as your working years.
Increasing life expectancy – until recently – has added a challenging twist. We are living longer, resulting in increasing long-term inflation risks and substantial changes in tax policy. Surprisingly to some, increased time periods of withdrawal actually reduce risk from volatility.
Two potential choices for increasing retirement success are to save and accumulate more resources or simply delay retiring. Choosing to delay the day you separate from the workforce is often deemed a failure strategy. Regardless, the longer you work, the fewer days you will be in “retirement,” whatever that word means to you. Consider that your intentional delay could actually improve your retirement psyche.
As a reminder, the last few years of retirement preparation are about growing the assets you have already accumulated rather than making current additions to your accounts. Delaying retirement allows for additional contributions but certainly offers more time for what Einstein declared the eighth wonder of the world: compounding interest.
A successful retirement resides in the ability to replace the lifestyle you enjoyed while working. Honestly, it isn’t the number of vacations, the types of cars or anything else readily measurable. Psychological success comes from maintaining life as you knew it, not dramatically altering expectations.
One of my business coaches often reminds me of the principle of addition by subtraction. Parts of a business or life in general can be improved by a mere reduction of other issues causing friction. Reducing the number of years in retirement may sound like a bad trade off or anything but additive to a happy future, but consider the strategy, especially if you don’t despise your occupation.
What if you worked two to three years longer and stopped making new contributions to your retirement accounts? What if you used those dollars to fund things you dreamed of doing but gave up on due to finances? The Corvette, the workshop, the trip to Italy, even a selfless gift to a charity or family member can suddenly come into reality. Using this strategy, we reduce – not remove – the risk of long-term inflation by shortening the technical retirement years while enjoying the fruits of our labor with decreased fear and responsibilities.
The financial means may not be an issue for you, and living this life is already an option. My experience tells me the guilt of unnecessary expenditures prevents many capable families from maximizing their retirement and pre-retirement years. This strategy of working longer functions as an acceptable trade-off to allow some splurging.
I fully respect the discipline required to save and accumulate and have devoted my life’s work to maximizing that endeavor. It is also my responsibility to help you utilize those assets in a way that provides you the retirement you have earned.
