This is the third blog in series of posts on the subject of non-financial retirement planning. Written by Renee Bellefeuille, CSA®, AFC®, CPRC®, Private Wealth Manager, Cardinal Point Wealth Management and Cardinal Point Capital Management
In 2021, the average life expectancy for those born in developed countries was 76 years for males and 82 years for females. Personally, I find these numbers a bit low, and this makes sense since according to an online life-expectancy calculator, my life expectancy is age 93. Retirement for me will not be a short period of time—it could be one third of my life! Longevity is an aspect of retirement planning that cannot be ignored.
Summary and Takeaways
Effective, proactive retirement planning is about much more than just finances. That’s especially true since people are living longer and enjoying much more active retirements than in past generations.
To help plan accordingly, this blog takes a unique and fun approach by asking a trio of deceptively simple questions. But the answers are exceedingly profound and meaningful.
- Not outliving your wealth is often cited as the greatest challenge retirees face. But experts actually believe that you are at greater risk of failing health, lack of access, and a declining social life.
- Those aspects of financial planning are illuminated by projecting forward while asking 1) “Who will change my light bulbs” 2) “How will I get an ice cream cone?” and 3) “Who will I have lunch with?”
- Home maintenance – such as changing light bulbs in the ceiling – may necessitate outside help, which depends on what kind of community you live in during retirement.
- Buying ice cream likely requires transportation and access to quality-of-life amenities like shopping.
- Lunch dates depend on an active social network of like-minded friends.
- Planning that provides answers to these questions helps ensure a more enjoyable retirement.
As I am quickly approaching this time of my life, I have started working harder at getting my financial house in order. I regularly update my net worth statement and cash flow statement which my husband and I review monthly. However, I have come to realize that effective retirement planning must be about more than financial security. It must include planning and preparation to live longer but also to live well.
A few years ago, I attended a Financial Planning Symposium. While there were many interesting presentations, there was one that really stuck with me over the years and reminds me to continue to plan for the next thirty years. The presentation referenced an article written by Joseph F. Coughlin, PhD, who is the director of the MIT AgeLab. Created in 1999, MIT AgeLab is a multidisciplinary research program that works with business, government, and nongovernment organizations to improve the quality of life of older people and those who care for them. The MIT AgeLab article identified three simple questions you should ask yourself to assess how prepared you are to live well in retirement.
The three questions were:
- who will change my light bulbs?
- how will I get an ice cream cone?
- who will I have lunch with?
You may ask what do these questions have to do with retirement planning? They actually uncover important factors that can determine your future quality of life and can serve as a starting point for planning a satisfying retirement.
In retirement planning, we tend to focus on accumulating assets and making sure we spend our money wisely. We fear outliving our wealth. However there is a greater risk of:
- losing our independence due to ailing health
- being unable to access the big and small things in life that make us happy
- facing a decline in the number of friends in our social network
Let’s look at how each one of the three simple questions relate to these risks.
- Who will change my light bulbs? When younger, most of us take for granted our ability to do house cleaning, maintenance, and basic repairs. Changing light bulbs is more than an issue of long-term home maintenance. It asks the question: do I have a plan to maintain my home? If I can’t do the work myself, what will it cost me to hire trusted service providers? Is staying in my home right for me? Should I downsize? Should I move to a retirement community?
- How will I get an ice cream cone? Imagine it is a hot summer night, and you decide to hop in the car to pick up ice cream. While getting ice cream is not a financial strain, the ability to go out and get it whenever you want raises a few more questions. Do I have adequate transportation to get where I want, when I want? Will I age in a community where there are activities to keep me engaged, active, and having fun?
- Who will I have lunch with? Who you have lunch with may be a good indicator of your social network. These are not the friends you have online but those friends that you see on a regular basis. People who you can count on if needed. Planning where to retire may be as important as how much it will cost. A home in the mountains or in a small town may be appealing, but it may lead to an inadequate network of friends and social engagement.
So, whether you are approaching retirement or already retired, take some time to think about these three simple questions. Your answers will lead to additional questions and retirement research which should guide you to living a satisfying retirement.