Retirement Challenges You Must Conquer

How easy is it to relax and enjoy yourself when you’re in a state of fear and unrest about anything in your life?   

Not very easy at all!

There’s a direct link between your level of confidence on a day-to-day basis and the quality of your life.

Specific to money, which is the means with which we all support our desired lifestyle, developing and maintaining supreme financial confidence is more necessary and critical today than ever before. 

Without it, you will continue to pull your punches, and miss out on living the life you’ve earned and enjoying the experiences you deserve due to fear. 

Today’s Financial Confidence Deficit    

Have you ever stopped to think about why there is such a low level of financial confidence today?

Well, unfortunately, there’s no long history, and very few good examples of individuals who have reached and maintained total financial independence over a long life. 

You have to remember that, for anyone other than the super wealthy like the Carnegies and the Rockefellers of the world, the whole concept of retirement, or being able to financially support yourself without having to work, has been around for less than 100 years. 

Stop and think about that for a moment.  Historically speaking, that’s not a very long time. 

Retirement Didn’t Exist

Before that, “retirement” didn’t exist.  People worked until they passed away.  Or, they lived with, and were supported by, their family.

What initially changed all of that was social security and fixed monthly pensions provided by lifetime employers. 

It was a lot easier back then because you could add up the amount you’d receive each month from social security and your pension, and if it was more than you needed to live on, you could make the determination if you’d be okay or not and feel confident about it.

However, all of that has now changed.  Fixed pensions have become a thing of the past for most Americans. 

Instead, employer sponsored savings plans, such as 401(k)s and 403(b)s have taken center stage as employers have removed themselves from the financial management business.

No More Guarantees

When you transition to retirement, you’re no longer “guaranteed” a monthly pension. 

Instead, you’re presented with a lump sum of money and it’s your job to determine:

a) First, is it enough to provide the cash flow we need right now, and down the road when inflation kicks in and our lifestyle costs more?

b) Second, how do we avoid all of the potential mistakes, and take advantage of the opportunities necessary for us to earn what we need in order to make our Retirement Bucket™ of investments remain intact for as long as we do?

In a nutshell, at the stage in your life where there’s no room for big mistakes, the responsibility for your financial independence and security has been transferred from your employer to you.

100%!

Massive Responsibility

Generating consistent, inflation adjusted cash flow…navigating ever-changing tax laws…managing investments and dealing with volatile financial markets…protecting your income and assets for your family….planning your estate.

It’s now all on you.

And, on top of it all, you are pounded on a moment-by-moment basis through various media outlets tugging at your attention with conflicting and confusing information.

There’s no mystery why there is such a lack of financial confidence out there, especially when you’re looking to make your transition to your retirement years!

In essence, this is why we created The Relaxing Retirement Coaching Program™.

The Relaxing Retirement Formula

The focus of many of the individuals and couples we meet with for the first time is often in many different directions. My recommendation is always to begin with the fundamentals and have them take a giant step back and clearly identify the lifestyle they want, and then the challenges and obstacles they face in getting there.

Let me give you a very simple, but critically important, example:

Challenge #1:       “Although we haven’t decided if we want to stop working or not, we don’t want to depend on a paycheck from work anymore, so we need to generate income some other way.”

Challenge #2:       “Our lifestyle costs a lot more than our pensions and social security incomes bring in. (i.e. we need $140,000 per year to live after paying income taxes, and our pensions and social security only bring in $60,000)”

Challenge #3:       “We need to generate cash flow from our Retirement Bucket™ of investments to support our lifestyle.”

Challenge #4:       “We don’t have enough built up to let it all sit in CDs at the bank and earn only 1 to 2% interest.”

Challenge #5:      “We need to earn better investment returns to keep pace with  inflation so we don’t run out of money.

Challenge #6:      “In order to achieve the better investment returns we need, we have to position our Retirement Bucket™ of investments where it has an opportunity to earn better returns.”

Challenge #7:      “Positioning our retirement savings where it has an opportunity to earn better returns subjects us to greater amounts of investment volatility.”

Challenge #8:      “If our Retirement Bucket™ runs out too soon, we have to either make cutbacks in our lifestyle, or we have to go back to work!”

This may all seem obvious, but most couples we meet with for the first time have no idea why they’re even investing in the first place, nor why they’re allocated the way they are.

In most cases, the reason they’re allocated the way they are is because Fund X seemed like a good fund, or recently performed well!

This is extremely dangerous in its simplicity!

If you don’t begin by first identifying all the potential obstacles in your way to enjoying a Relaxing Retirement, you will join the overwhelming majority of Americans who tend to wander and focus on things that are potentially important, but completely out of context and inappropriate for their unique situation and circumstances.

Begin with the fundamentals of The Relaxing Retirement Formula™.

How to Develop the Confidence to Retire

One of the biggest emotional, social and financial challenges you’ll ever face is the transition from working, receiving a paycheck, and saving money your whole life…to no longer receiving that paycheck from the work you do.

And, to make matters even more challenging, you then have to begin spending The Retirement Bucket™ of investments you’ve taken your entire life to build in order to support your lifestyle!

If you are like our Relaxing Retirement members who developed the disciplined habit of aggressively saving money during your working years, flipping the switch and now spending what you’ve saved doesn’t feel normal.  It just feels strange!

With guaranteed pensions now a thing of the past, even dedicated savers who have done a great job building up a sizable Retirement Bucket™ of investments are not 100% convinced they have enough.

So, they end up working longer than they need to because they think they have to.

Or, worse, they stop working and retire, but because of their fear of making a costly mistake and running out of money, they “pull their punches” and restrict their spending, and end up having to live like the masses who have to say: I can’t afford that.  I’m on a fixed income now.”

Like most dedicated savers faced with the prospect of freeing themselves from their dependence on their paycheck and relying on their Retirement Bucket™ of investments to support them, you may lack the financial confidence to flip the switch from saving what you’ve earned to spending what you’ve saved.

Unfortunately, all those years of discipline and saving, of building up money and investing it, are of no value to you now if you don’t have the financial confidence to spend it.

If this resonates with you in any way, then the best news I have for you, after running a retirement coaching program to help dedicated savers navigate this transition for over 30 years, is that none of them were born with the necessary financial confidence.

They developed it. 

And, so can you!

Retirement Confidence Has to Be Developed

As your Retirement Coach, if you’ll allow me to be that in this series, I want to help you transition to the life you deserve free of dependence on a paycheck.

And, like any great sports coach, we’re going to help you install your Retirement Game Plan, yoursystem,” by revealing and helping you implement the retirement coaching strategies, tools, checklists, and mindsets we’ve developed over the last 30+ years so you can start living the life you’ve earned 100% on your terms.

I look forward to visiting with you in the next edition.

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How to Evaluate Social Security Benefits for Your Spouse Before You Retire

In the last edition of RETIREMENT GAME PLAN, we took a long look at the math behind claiming your social security benefits by walking through a case study of a 62-year-old couple, Bill and Madeline.  

In this edition, let’s dig deeper into the rules surrounding spousal benefits.

To begin with, Madeline worked over her lifetime so she’s qualified to receive social security benefits on her own.  However, when her children were younger, she stopped working for periods of time, so her benefits are significantly lower than Bill’s.

How to Evaluate Spousal Social Security Benefits

There are two ways of calculating Madeline’s benefits. 

Even if she never worked over the course of her lifetime, Madeline is still entitled to one-half of Bill’s benefit at the very least (depending on when she decides to begin collecting as we’ll discuss shortly).

Since she’s also eligible for benefits due to her own employment history, Madeline has a decision to make as to which set of benefits to collect.

For example, let’s assume for a moment that Bill waits to collect his full social security benefits (FRA) of $3,000 per month at his age 66.4.

Given this, Madeline’s spousal benefit is $1,500 per month at age 66.4 as Bill’s wife.

If Madeline’s social security benefits from her employment are greater than $1,500 per month, she would begin benefits under her own employment records.  However, if they’re less than $1,500 per month, she will collect spousal benefits.

Other Issues and Strategies to Think Through Before You Choose

  1. Let’s assume that Bill continues to work until his Full Retirement Age (FRA – age 66.4), but Madeline chooses not to.  Bill would then wait until at least age 66.4 to begin collecting his social security benefits, thus Madeline could not begin collecting “spousal” benefits. 

    However, Madeline could begin receiving benefits under her own account due to her earnings history.  Assuming for a moment that those benefits are lower than her spousal benefits as Bill’s wife, Madeline’s benefits would then bump up to the higher spousal benefit amount once Bill begins collecting his benefits. 
  2. If Madeline has reached her full retirement age (FRA), she may begin collecting spousal social security benefits even if she continues to work past her FRA and accrue benefits under her own account.  When she later stops working, if her benefits are greater, she may then choose to switch her social security benefits from “spousal” to benefits from her own employment account.  This scenario assumes that Bill already began collecting social security benefits because spousal benefitsmay only begin when the second spouse has initiated benefits.  
  3. If Bill began receiving his benefits at age 62, his actual benefit would have been $2,200 per month (75% of his full retirement age benefit at age 66.4).  Even though Bill began receiving his benefits at age 62, Madeline may decide to wait to begin receiving her spousal benefits at her age 66.4. 

    *** If she chooses to do so, she doesn’t receive 50% of Bill’s reduced benefit of $2,200 per month (for beginning his benefits at age 62). Madeline would receive 50% of Bill’s full retirement benefit ($3,000) as if he began receiving benefits at age 66.4, or $1,500 per month.
  4. If Madeline decided to begin receiving her reduced spousal benefit of $1,050 per month at age 62 (35% of $3,000 per month instead of 50%), she may not later draw an increased spousal benefit amount at age 66.4.
  5. Assuming for a moment that Madeline was younger than Bill, she may not begin collecting any social security benefits before she reaches age 62.  (The exception is if Bill passes away.  In that case, assuming she has no dependent children, Madeline could begin collecting at age 60.)

As you can see, there is a lot of room for confusion and these decisions are not as clear-cut as you may like them to be.

The key is knowing the rules and fully weighing all options before you begin collecting your benefits so that you can receive the largest amount you are entitled to receive.

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The Math Behind When to Start Collecting Social Security Benefits

As I shared in the last edition of RETIREMENT GAME PLAN, a new Relaxing Retirement member had a host of questions surrounding social security this past month so I thought it would be a good idea to share my thoughts with you as these are questions I receive all the time.  (To protect their privacy, I’ll refer to them as Bill and Madeline)

Since they were both age 62, one of their first questions was, “should we start collecting social security now, or wait until Full Retirement Age, i.e. age 67?”

As I explained to Bill and Madeline, there are 2 major factors to consider before collecting social security benefits before your “full retirement age.”  In the last edition, we began with “the penalty” if you begin too early.  Today, let’s explore the second major factor: The Math.

#2: The “Math” Behind the Decision

The second factor to consider is the math.  Since Bill is the one considering working part-time after he retires from his full-time work, he’s the one we are going to focus on today.  Madeline’s decision is actually different and we’re going to expand on her options in a little while. 

Bill’s social security benefits statement shows that his monthly benefit at age 67 will be $3,000 per month.  And, if he begins collecting at age 62, his benefit will be $2,100 per month.

If Bill starts collecting now, he’s going to take a 30% pay cut!  That doesn’t sound too great, does it?

However, he really needs to take a look at the math for a moment:

  • Monthly Benefit at age 67 (if he waits)         $3,000
  • Monthly Benefit at age 62 (today)               $2,100

If he takes his benefit today, Bill is going to receive $900 less per month.

What This Math Really Means for You

As I pointed out to Bill and Madeline, if they decide to wait until Bill reaches age 67, what they’re really saying is that it’s worth it to wait 5 years (or 60 months) to get the extra $900 in the 61st month and beyond.

However, another intelligent question to ask is “what are they giving up by waiting”? 

What they’re giving up is 60 months (5 years from age 62 to age 67) of social security benefits.  That’s $126,000!

Not an insignificant number.

The “Break Even” Age

In order to recoup that $126,000 that they would give up by waiting until age 67, Bill would have to live another 140 months after age 67, or 11.67 years, at which time he’d be 78.67 or 79 years old.  ($126,000 divided by the incremental increase of $900 at age 67 = 140 months)

So, in order to break even, Bill and Madeline would have to live another 16+ years (4 years from age 62 to 67 + 12 years = Age 79).

And this doesn’t take into consideration 3 other factors:

  1. Bill and Madeline are eligible to receive a cost of living increase each year on their social security benefits, so their benefits will begin increasing after their first year of collecting. 
  2. If Bill and Madeline begin collecting at age 62, they could invest their monthly check and potentially earn even more.
  3. Finally, and this is the most important factor in maintaining their lifestyle sustaining income over the rest of their lives, if they don’t draw from social security right now, they must draw income from some other source, i.e. their Retirement Bucket™ of investments. 

    Delaying social security reduces their inflation fighting investments more rapidly because they have to make up for the income social security would have provided, thus reducing the amount their heirs will receive at their death because social security benefits end at your death.

    And if the majority of their investments are in IRAs or other retirement plans, it may potentially reduce them even faster because they have to pay income taxes on 100% of what they withdraw vs. a maximum of 85% of their social security income.

Other Factors for Bill and Madeline to Consider

While Bill and Madeline’s example should give you a good guideline to use, here are some other factors which may affect your own unique situation:

  1. Life Expectancy:  Bill and Madeline are both in good health and have no overriding problems.

    The reason why this is a factor in their decision is that if they have health issues that are predicted to shorten their life expectancy, clearly this should lead them to collect benefits as early as they can get them. 

    As it was in Bill and Madeline’s case, however, if everyone in your family has lived well into their 90s, this may pull you in the opposite direction.
  2. Severance: If you’re collecting severance pay from the employer you’re retiring from, this may alter your desire to begin collecting right now because of the taxes you’ll pay on your social security benefits while you’re also receiving large severance pay.
  3. Deferred Compensation: This same principle applies to deferred compensation.  Let’s say that for the 5 years prior to your retirement transition, you’ve contributed to an executive deferred compensation plan.  If the plan calls for you to receive a payout immediately upon retiring, as many of our members do, this may have adverse tax consequences on your social security benefits.
  4. “Other” Income: If you have other “locked in place” income, you have to weigh the after-tax benefits of collecting social security benefits early. 

    This dovetails into a major principle that I recommend, and that is to never make any decisions concerning benefits or investments without also simultaneously considering the tax consequences. 

    This is a monumental mistake that I see in way too many situations. 

As you can see, there are several factors that went into Bill and Madeline’s decision.  Hopefully, their example provided a good line of questions for you to answer in your own unique set of circumstances.

In the next edition, I’m going to delve into the questions Madeline had about collecting her social security benefits.

Surprising to many, benefits collected by working and non-working spouses vary greatly if you don’t know the rules.

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When Will You Start Collecting Social Security Benefits: The Penalty?

A new Relaxing Retirement member had a host of questions surrounding social security this past month so I thought it would be a good idea to share my thoughts with you as these are questions I receive all the time.  (To protect their privacy, I’ll refer to them as Bill and Madeline)

Since they were both age 62, one of their first questions was, “should we start collecting social security now, or wait until age 67 (social security’s definition of Full Retirement Age?)”

As I explained to Bill and Madeline, there are 2 major factors to consider before collecting social security benefits before your “full retirement age.”  Today, let’s begin with “the penalty” if you begin too early:

#1: The “Penalty”

To begin with, the reason why Bill and Madeline have a decision to make is because they’re both 62 years old, and Bill still wants to work a little when he retires from his full-time job this month.  (A very common phenomenon we see)

He was told that there is a penalty for taking his social security benefits if he still earns income from work.

He’s partially right.  There’s a lot of confusion about what those penalties are, so let’s quickly outline the limits.

First, when you reach the FRA “full retirement age”, you can earn as much as you want from work (earned income) and still receive your full social security benefits without any reduction in benefits. 

How Social Security Defines “Income” When Calculating Your Pre-FRA Benefits?

Only income you receive from work, whether that income is reported on a W-2 or 1099, is counted for social security income calculation purposes.

Income you receive from pensions, rental property, dividends and interest, and capital gains do not factor into the equation. 

Between Age 62 and Full Retirement Age (FRA)

As Bill is facing right now, the dilemma comes when you want to begin collecting benefits before your FRA “full retirement age”. 

Currently, from age 62 until the year you reach FRA (likely 67 for you), you lose $1 of social security benefits for every $2 of “earned” income over $19,560 (in 2022).  That’s $1,630 per month.

So, for example, in Bill’s case, since he’s 62, if he continues to work part-time, and he earns $19,560 from his new part-time work, he can still collect his social security benefit without any reduction in benefits penalty. 

However, if he earned $43,560 from his part-time work, that’s $24,000 over the limit, so social security would withhold $12,000 (or $1,000 per month) from his social security benefits (i.e. $1 withheld for every $2 you earn over the limit).

During the calendar year in which Bill reaches is Full Retirement Age (67), he would lose $1 in benefits for every $3 he earns in excess of $4,330 per month/$51,960 per year.

So, if you’re like Bill and you are planning on still working after you “retire” from your full-time position, you’ll want to consider these limits. 

Bill’s Earnings Limit When He Starts to Collect Social Security

An important distinction to note, however, is that you can earn as much as you want during the year you’re going to start collecting.  These limits only apply on a monthly basis once you start collecting social security benefits.

If Bill retired at the end of September this year, and he has already earned $190,000 this year through September, the “earnings” litmus test does not apply to the $190,000 he’s already earned this year. 

It only applies during the first month he begins collecting benefits.  So, from October through December, he can earn an additional $4,890 ($1,630 x 3 months) and still collect his social security benefits without a reduction in benefits “penalty.”        

Stay tuned for the next edition where we explore the second major factor you must consider before collecting your social security benefits: The Math!

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Implement a Portfolio Life Mindset for Your Retirement

One of the biggest roadblocks I’ve witnessed with members over the last 33 years in my role as The Retirement Coach is not financial. 

There are three questions everyone has on their minds when we meet for the first time:

  1. Do we have enough built up? (i.e. to stop working if we choose to)
  2. How much can we afford to spend (and/or help our kids and grandkids) without the threat of running out of money?
  3. How can we make our Retirement Bucket™ of Investments last?

Once we remove the financial hurdle and custom design a Retirement Blueprint™ to answer those three big questions, there is a strange reality that kicks in for those who have done a great job saving money: after 30 or 40 years of working and saving, they no long “need” to do it anymore.

Note the key word in quotation marks, i.e. “need.”  Released from the burden of the need to work anymore to support themself financially, many active and successful folks struggle with what to do with the rest of their lives. 

And, with life expectancy growing and growing, that’s likely to be another 20 to 30 years!

The solution to this issue is never just one thing!  It’s many things which is why I have always loved David Corbett’s book Portfolio Life: The New Path to Work, Purpose, and Passion After 50

Corbett describes a “life portfolio”- a balanced mix of work, learning, leisure, family time, and donating time that individuals tailor to their personality and goals. 

He elaborates a disciplined, step-by-step process for creating this portfolio life with long and short-term planning. 

If you have ever struggled with the thought of “what’s next,”, I strongly recommend picking up a copy of Portfolio Life and reading it. 

I look forward to hearing your feedback. 

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Know Your Numbers to Confidently Transition to Retirement

If you want to free yourself, once and for all, from your dependence on your paycheck, there are four numbers you must know.

After you’ve discovered the first number we discussed in the last episode, i.e. how dependent you are on your Retirement Bucket™ of Investments each year, you have three more to go, so let’s tackle them today!

#2: How Long Does Your Retirement Bucket Have to Last?

The second number you must know is how long your Retirement Bucket™ needs to last.

That may sound like a very morbid question, but there’s a very big difference if you’re asking your Retirement Bucket to last 15 years vs. 30 years, so you must know your number to arrive at an accurate answer to your biggest question, i.e. do we have enough built up to stop working if we choose to?

Most people grossly underestimate how long they’re going to live, so let’s take a look at the IRS Joint Life Expectancy Table which provides the average age at which the surviving spouse in a couple passes away:

  • 60-Year Old Couple: 30.9 years (to age 90.9)
  • 70-Year Old Couple: 21.8 years (to age 91.8)
  • 80-Year Old Couple: 13.8 years (to age 93.8)

If you are a 60-year old couple, on average, one of you will live to age 91 so that is how long you must plan for. No small task!

#3: What Rate of Inflation Will You Assume?

The third number you must be 100% clear on is the rate of inflation you will assume because of the enormous influence it has over your purchasing power. 

Life is expensive and it keeps getting more expensive! 

Even if we only use the average historical rate of inflation of 3% per year, if your ideal lifestyle costs $10,000 per month right now, here’s how much you will need in the future to support the same lifestyle:

  • 10 Years: $13,000 per month
  • 20 years: $17,500 per month
  • 30 years: $23,500 per month

$23,500 per month during the final year of your joint life expectancy! The key distinction is that this is not to support a better lifestyle. This is to support your exact same lifestyle you enjoy today.

#4: How Much is Inside Your Retirement Bucket™?

The fourth number you must know to determine if you have enough built up and how much you can afford to spend without running out is how much you’ve accumulated in liquid investments, i.e. your Retirement Bucket™.    

It’s unlikely you will sell your home and/or cars to support your lifestyle, so let’s not count those right now. 

The key distinction to make is how much of your Retirement Bucket his held inside vs. outside of IRAs and 401(k)s. 

The reason why this is critically important is that funds held inside your IRA, 401(k), or 403(b) if you happen to work for a non-profit organization, are actually worth less to you when you withdraw funds to support your lifestyle because you have to pay more income taxes on everything you withdraw.

So, you must know the bottom line amount you hold in your Retirement Bucket, and the percentage of that total held inside vs. outside of IRAs and 401(k)s. 

With these numbers in hand, you are now way ahead of the curve and on the way to finding accurate answers to your three big questions:

  1. “Do we have enough built up in our Retirement Bucket of Investments to stop working if we choose to?”
  2. “How much can we afford to spend without running out?”
  3. “How do we manage our Retirement Bucket to make it last?”
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3 Answers You Must Have to Free Yourself From Dependence on Your Paycheck

Every dedicated saver we’ve worked with reached a unique inflection point in their lives which we call The Paycheck Dependency Threshold™.

After decades of working, raising a family, putting their kids through school, and saving a large percentage of their earnings, they all sort of paused, reflected, and asked themselves three very important questions:

  1. “Do we have enough built up in our Retirement Bucket of Investments to stop working if we choose to?”
  2. “How much can we afford to spend without running out?”
  3. “How do we manage our Retirement Bucket to make it last?”

If you don’t have full confidence and 100% certainty with your answers to these questions, then it’s highly likely that you will go down one of two paths:

Path One: You will continue to work longer than you need to because you think you have to when in fact you may not have to, or

Path Two: You will stop working and “retire”, but because of your fear of making a mistake and running out of money, you will have unnecessary anxiety and “pull your punches” by restricting your spending, and end up living like the masses who have to say, “I can’t afford that. I’m on a fixed income now.”

Unfortunately, there are no reliable rules of thumb, and two couples with the exact same level of savings can receive completely different answers to those three questions.

Here’s why….

No Reliable Rules of Thumb

Let’s take a look at two couples, Mike and Mary, and Ron and Rose, both age 62. To keep it simple using round numbers, assume each couple has:

  • $2,000,000 built up in their Retirement Bucket™,
  • the same social security retirement income of $3,000, and
  • the same monthly pensions of $3,000

From a quick glance, they look exactly the same and would likely receive the same answers if they called into a financial talk radio show.

That would be a terrible mistake, so let’s dig a little deeper to discover what else we know about them:

Mike and Mary have no mortgage or home equity line of credit, and they have recently completed many major upgrades to their home, i.e. a new roof, indoor and outdoor paint, a new furnace, new kitchen countertops and cabinets, and new bathrooms. They purchased new cars with cash in the last two years which they plan to drive for ten years.

Ron and Rose still have $300,000 outstanding on a second mortgage they took out to pay for their kids’ college tuitions, weddings, cars, and a condo down in Florida they bought a few years back. They both drive high end cars which they replace every three years. And, while their home is very nice, after 26 years, it is starting to look “tired” and will need significant upgrades in the next two years.

Even though both couples have the exact same level of Retirement Bucket™ of investments, and the same amount of income coming in from social security and pensions, their situations are drastically different because it will cost much more to support Ron and Rose’s desired lifestyle. 

In other words, Ron and Rose are much more dependent on their Retirement Bucket than Mike and Mary.  And, this is the first of four numbers you must know if you want to free yourself of your dependence on your paycheck, i.e. over and above income you may receive from social security, pensions, and rental property, how dependent are you each year on your Retirement Bucket™ of investments?

Before we delve into the best way to calculate your level of Retirement Bucket Dependence™, I want you to know that this is not about living on a “budget” and restricting your spending.  This is about having an accounting of what it costs you to live the way you want so you can have an accurate and reliable measuring stick to make decisions. 

There’s a big difference. 

To determine your level of Retirement Bucket Dependence™, you have to be very clear on your inflows and outflows.  On the inflow side, how much will you receive each month from social security, pensions, and rental property.

On the outflow side, what does your ideal lifestyle cost, including “fixed” or mandatory expenses, and “discretionary” (your choice based on your priorities).

Typical “fixed” expenses include utilities, insurances, groceries, clothing (at least most clothing falls under this category), mortgages, real estate taxes, etc.  These are expenses that must be paid, and typically they’re paid every month.

“Discretionary” spending, on the other hand, is where we’d like to spend all of our money, like meals out, vacations, presents for your grandkids, and entertaining!   However, when planning, most folks don’t account for them as much as they should. 

Remember, this is all about living exactly the way you want, so you want to be generous with your estimates.  If you guess too low, you’re only shortchanging yourself.

The difference between your inflows and your outflows during any one given year is your level of Retirement Bucket Dependence™, and this is the first of four numbers you must know if you want to free yourself of your dependence on your paycheck.

Stay tuned for number two, three, and four.

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Retirement Is Not Just About Stopping Work

Kevin and Barbara were anxious and came to us looking for answers to settle their nerves.  Their reaction when they discovered the answers to their biggest questions at this unique stage in their lives used to surprise us.  However, it has now become the norm among our members.   

Let me explain….

After putting Kevin and Barbara through our extensive program and creating their custom-designed Retirement Blueprint™ based on their priorities and resources, I had very good news for them.   

“Congratulations!” I told them. “You’re in wonderful shape. Given everything you’ve shared, you are no longer dependent on your paychecks and can stop working right now if you want to.”

Can you guess what their reaction was? Did trumpets sound and balloons fall from the ceiling? Did Kevin dance from the room and call his managing director to say he was finished?

No. What happened?

Instead, all I heard was crickets!

Stopping Work Can Be Scary

Kevin and Barbara turned to each other, confused. Now that they knew they could afford to stop working, they weren’t sure they wanted to.

Kevin derives an enormous sense of accomplishment from his work, and Barbara would miss the friends she has through hers. They wondered if perhaps they didn’t want to stop working.  They just wanted to know they could.

This is the reaction we see more and more among the dedicated savers we help. 

Kevin and Barbara weren’t interested in the conventional idea of “retirement” that has been portrayed in the media because they weren’t conventional people. For one thing, they’d done a better job than most of putting money away. For another, they’d never aspired to what most people strive to experience.

It’s About Freedom From Dependence

As your Retirement Coach, our goal is not to get you to stop working. Our goal is to get you situated so you never have to work—never have to do anything you don’t want to—ever again. In other words, our job is to help you live your best life, however you define it! 

Your ideal best life is one in which you do whatever you want, with whomever you want, where, when and however you want, free of dependence on your paycheck from work. 

Many of our Relaxing Retirement members have continued to work well past the point where they needed to because the work they are doing remains inside of their definition of their ideal best life

Drilling down to what “ideal” means to you requires that you set aside any fears and misconceptions you may have. Look at things you think are facts, and question if they’re really true. Call on your imagination to paint your perfect lifestyle. Even as an exercise, it’s a massive mindset shift to go from thinking about your responsibilities and constraints to imagining your dreams and freedoms. But that’s what your years of dedicated savings can purchase. You pre-paid then for choices now.

Define Your Ideal Lifestyle

As potentially morbid as this may be, here is how I recommend you begin.  Imagine it’s the day before your last day.  Reflect on any regrets you think you might have. In thirty years of doing this, no one has ever told me their vision of the future includes more time doing menial work.

Try to come to this exercise without preconceived notions of what you think you can do. Resist basing your expectations on what your friends are or aren’t able to afford.

Come to it with a completely different mindset. Go in thinking you can have anything you want. Later we’ll put a price tag on it and let The Relaxing Retirement Formula determine whether or not you can afford it all. Because if you could, wouldn’t you like to know?

  • What do you never want to do again?
  • What are you unwilling to miss any longer?
  • What will you regret not having done?
  • What have you wanted to do forever but didn’t think you could?

Create a picture of your ideal best life that is as detailed, as exciting and inspiring as you can.

Do this without putting any financial constraints on your imagination. Don’t worry whether or not you can afford it just yet. We’ll work on that in another edition shortly. 

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When Facing Financial Crisis Focus on Meaningful Specifics