While running out of money in retirement is a big concern, a savings shortfall may not actually be the most alarming issue. While it's true that many of us aren't financially prepared for retirement, my experience has revealed that very few people have plotted a course for the kind of life they want to have once they stop working.
A few months ago, I met with a client (let's call him Bill) whom I have worked with for well over a decade. Bill's approaching age 60 and came in to review with me his progress toward meeting his financial goals. As a CEO of a medium-sized company, he's a smart man who works hard and expects a great deal out of himself. He's been a great saver and is approaching retirement with a home that's paid for and plenty of assets in his retirement accounts. I asked him when he would like to stop working, and he told me he hoped to call it quits in four years. I quickly crunched some numbers and showed Bill that, due to his many years of consistent saving, his projected income during retirement would actually be more than he was taking home now. From a financial perspective, he was certainly on track, I assured him.
Then, I asked Bill this question: "If today were your first day of retirement, what would it look like?"
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He told me he hadn't really thought about it that much, but he did have a few trips he wanted to take.
"Okay," I replied, "Say you've now been retired for two years. What does your life look like? How do you spend your days? With whom do you spend time?"
Bill looked at me for a long time and said, "I have no idea what I'm going to do."
I told Bill he really needs to start planning his retirement. Not his finances, as he was in good shape there, but planning his life in retirement.
Two weeks after that meeting, I received an email from Bill that stated, "Scott, the questions that you asked haunted me. I now realize that I have a lot of work to do between now and the date I retire."
Bill is not atypical for someone approaching retirement. He'd played by the rules and devoted much of his adult life to his career, simultaneously increasing his knowledge and expertise, and, of course, saving money. But he'd spent almost no time planning for his retirement life.
The fact is, many Americans don't do retirement well at all. The rates of divorce, alcoholism and depression are off the charts for retirees. Loneliness and lack of purpose and meaning creep in and overtake many folks during their so called "golden years." Want to know what retirement is like for millions of Americans? According to the Bureau of Labor Statistics, the average retiree spends more than 32 hours a week watching television.
From watching the hundreds of retirees with whom I've had the pleasure of working with over the years, I've found that the ones who have seemed to figure out retirement are the ones who have planned their retirement days, weeks and years around a purpose. They've identified a sense of meaning by investing in the lives of others, staying active in their communities, volunteering, working, caring for their grandkids, etc. Happy retirees tend to have fairly full calendars, and they welcome each day with a sense of anticipation and wonder. Simply, these people have goals.
If you find yourself like Bill, that is, you've done a good job of saving and investing, yet you haven't done very much in terms of planning your future life, perhaps this can be the year when you make this a priority. Start by researching what makes retirement meaningful. There have been a number of studies published by both academia and commercial enterprises, and with the world's library at our fingertips thanks to the Internet, you can start your research and discovery right now.
By investing some time planning, you may well find that your retirement years are the most fulfilling and satisfying years of your life.
Scott Hanson, CFP, answers your questions on a variety of topics and also co-hosts a weekly call-in radio program. Visit MoneyMatters.com to ask a question or to hear his show. Follow him on Twitter at @scotthansoncfp.
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