I was interviewed at the annual Academic Forum of the (US) Defined Contribution Institutional Investment Association
There’s an organization in the US that’s called DCIIA. That’s short for Defined Contribution Institutional Investment Association. It came together in 2010, just as I was transitioning to my own Life Two. It’s dedicated to enhancing the retirement security of America’s workers – particularly relevant in a time when defined benefits (where a benefit formula is defined and underwritten by plan sponsors like employers and unions and associations) have given way to defined contribution plans, where a worker’s account accumulates and is available for drawing down in retirement, but with no guarantees.
Among its events is an annual Academic Forum. This year I was invited to be a panelist on the subject “Transitioning to retirement: beyond the financials.” My co-panelist would be Prof. Laura Carstensen, Founding Director of the Stanford Center on Longevity. Laura is a hero to me. I’ve quoted her in my writing and my talks many, many times. Our moderator would be Kevin Knowles, Senior Director, Defined Contribution at Russell Investments, my old alma mater. Of course the whole thing would work virtually, as things do these days.
The conversation that Kevin moderated was filmed about a week before the actual live showing on November 17. He got us going so well that we over-ran our time, and on November 17 there was only time for a couple of questions during the live Q&A. But Kirsten Peterson, who oversaw our session, very kindly agreed to my request to try to recover all the questions and comments that viewers submitted online, and succeeded and sent them to me – a sort of virtual focus group reaction to our session.
I’ll concentrate on those questions and comments in the next blog post. For this one I’ll mention some of the topics I remember – largely because I prepared notes in response to questions that Kevin and his organizing partner Christopher Ceder, VP at Goldman Sachs, assembled in advance.
Incidentally, how nice that an investment association saw fit to have a session on non-financial aspects of retirement. Some of this will cover territory some of you have encountered with me before, in which case think of it as a review. But it was all clearly new stuff to the audience.
Since many in the audience knew me or knew of me, and of course they hadn’t retired yet, my personal retirement experience was of great interest to them. Yes, I’m the old guy, to them – almost certainly one of the very few guys they know who has actually retired and thought about these things. So Kevin asked me to describe my own transition into retirement.
I told them I could describe it exactly, because I found the notes I made when I spoke to Russell’s clients a year after retiring…
My point [I said] is that theory and practice are different. And you can theorize and anticipate as much as you want, but it’s not the same as the actual experience. It’s like having your first child. You’ve seen others go through this, but the moment you see your own first child for the first time, it creates a whole new dimension in your mind. Why do I emphasize this? Because, in my turn, I have now touched retirement. And the experience is different from just thinking about it. And there are things I now understand much better.
Here’s the first thing. I feel I’m a tree that has been uprooted. For over 40 years I planted my roots deep, very deep, into soil that nurtured growth. I loved the experience of life and work. It had a pattern, a rhythm, an enjoyment, that I grew deeply attached to – even if I periodically complained about it, and dreamed of the day I could become self-indulgent. Harry Levinson, a Harvard professor, implicitly predicted how I’d feel; he said, in his 1976 book Psychological Man: “All change is loss, and all loss must be mourned.”
Anyway, my flourishing 40-year-old tree has been uprooted. I need to plant a new tree. I’m not entirely sure I know the kind of tree I want it to be, nor where exactly I want to plant it, nor if I’ll change my mind. I simply can’t be sure, because experiencing this … freedom to choose, freedom that I’ve dreamed about, freedom that was the first word in our family Christmas letter last year … it’s still new and I’m not used to it, and even though some roots are growing in new soil, they’re new roots and not yet deep. And only time will give them traction.
So I’m in psychological transition. Because it’s so powerful, it’s really a whole stage between accumulation and decumulation, and we should give transition its due and call it a potentially long, intermediate stage. And that’s where I am, right now.
That’s what I told them.
Fortunately, since then (and that was more than 10 years ago), I slowly defined the tree I want to be, I planted it, and it’s flourishing.
I wish there was a tape of the whole session, because Laura is a psychologist who has so many helpful things to say about retirement. I learn from her every time we meet. But during the session I couldn’t make notes about the things she said. Too bad.
Kevin’s second question to me was about what preparation I did for retirement. And I had a simple, honest answer, that no longer came as a surprise to the audience. I didn’t prepare for it. I enjoyed work too much, until internal conditions changed a lot, and I thought I’d get more enjoyment if I left and became free to spend my time as I wanted, rather than doing what I was obliged to do. Money was not a big issue. So that was it.
I added: Since then, actually, I’ve given a lot of thought to the subject, over the years. And in fact I’ve written a book about it, and I continue to research it and write and speak about it. Like now.
I called the period “life after work,” because I hate the word “retirement.” It’s a word that should be retired. It has connotations of finality, of the end, of decrepitude – whereas really it ought to be the start of a new adventure.
Then a very precise friend told me: “You don’t mean life after work. You really mean life after full-time work.” “OK,” I said, “that’s accurate, because even working part-time gives you the freedom I’m talking about.” But you just try saying “life after full-time work” quickly, three times in succession. It’s a tongue-twister!
So I did what any of us would do. I created an acronym. “Life after full-time work.” That’s L-A-F-T-W. Well, let’s use WO for work. That’s L-A-F-T-W-O. Laf Two. And suddenly in my mind I could hear a Texan friend saying Life Two!
And suddenly, years of stray ideas fell into place, and found a structure. Life Two is long enough to be a life in its own right. Neuroscience tells us that it’s typically happier than Life One, our working life. Wow, it was like having random jigsaw puzzle pieces, and suddenly I was given the picture on the box, showing how the pieces fit together.
But in fact we tend to fear the prospect of retirement, while we’re working. Why? Because we’ve never experienced it. It’s a fear of the unknown. Why? Because, while it’s unthinkable not to have an education that prepares us for Life One, we’ve never thought of the concept of an education to prepare us for Life Two.
Today you can’t imagine life without education for Life One. It helps us understand things around us – people, the way the world works. And it teaches us to think. We get learning techniques. So when we encounter new situations and new problems, we’re not totally lost. That framework helps us cope. It’s a wonderful preparation for life.
We know for a fact that education is a direct cause of improved health, improved productivity, higher income, greater self-confidence, etc etc etc. Education used to be a blessing. Now it’s a necessity.
I’m telling you today that, in time, education for Life Two will be as necessary and as much of a blessing.
One of the things Laura spoke about was that, among the things that makes retirement a different experience from person to person, one is the resources available to you, and one of those depends on family arrangements. For example, people who are happily married enjoy retirement a great deal. That led to Kevin reminding me that I often talked at Russell about family, and asking how my family fitted into my retirement.
I said that, quite unexpectedly, one aspect of family life had a huge influence. Russell’s career path for me had my wife Susan and me moving thousands of miles, not once but twice (Toronto to Tacoma and then to London), and then for a while I was moved to New York temporarily while Susan was still in London, and then my temporary New York stint started to stretch into years. And Susan, a balletomane, discovered the London ballet scene, got involved, and became the Chair of The London Ballet Circle, a charity that provides bursaries for ballet students. All her life she had been my wife and the mother of our children, the rock on which our family was founded, and now she found her own identity and passionate cause. Nothing in my life was as important to me as this was to her, and so my most fulfilling role in my Life Two was to be her emotional support now, as she had been mine throughout our married life and my career.
I’m doing my own thing as well, of course, but backing Susan is the most fulfilling thing I do. And we have joint happiness, 48 years after we got married.
To which Laura commented that she had had the pleasure of meeting Susan, and we were an example of what she had said. Coming from Laura, that made my day!
Continuing on the subject of education for Life Two, I identified three subjects. I said …
I think individuals have three kinds of retirement fears: psychological, practical and financial. These are the subjects for further education. Not language, math, history, geography, as we learn for Life One, but how to cope with those three fears.
The psychological fear is: “Who am I? Will I lose my identity?” You know, many of us are so used to our work, that that’s how we define ourselves, particularly if we’re successful and enjoy our work – and so, when it stops, for some of us the identity question arises. We probably spend more time awake at work than we do at home. (Well, we used to until covid, anyway!) It’s understandable if the workplace identifies us. And so, learning how to re-define ourselves is fundamental. Oh, and by the way, we’ve done that many times in our lives: going to school, to university, every time we move or change jobs, and so on. Every one is an opportunity for re-definition.
The practical fear is: “How will I fill my time?” A vacation is great, a sabbatical is even better, but a forced permanent vacation? Horrible! And yet I’ve discovered many sources that help you to fill your time productively. And linked to that is another question that tends to bring a smile of recognition when I mention it: “How will I co-ordinate my time with my partner, if we’re both home all day, which we’re not used to?” That’s another very practical question!
The financial fear is one that every survey highlights: “Will I outlive my money?” I won’t expand on that – it’s like our livelihood, you know all about helping them to answer that question.
Anyway, we need to provide education for all three. We typically focus on the financial side. Anything with numbers is easier to deal with rationally than the non-quantifiable, sometimes irrational psychological and practical issues. But those are the ones that we run away from, and that’s why they’re frightening, because we’re afraid to confront them.
Finally, on the question of when this education should be provided, I suggested the following:
On the financial side, I think of three pre-retirement stages. I call them: Get Started, Get Serious, and Get Set.
Get Started is when you want to automate everything, and use default options. Doing something, getting started, is the only goal. You don’t want to have to think about any of it. There’s no education in this stage.
We should probably start the financial education about twenty years before retirement. That’s when the Get Serious stage starts, definitely once you reach age 50.
As for the psychological and practical education, start five years before retirement. That’s when you need to Get Set for retirement. Frankly, we could leave it until the final two years, but for the employer to benefit, you want five years of that resulting higher productivity.
By the way, if for example an employer were to offer that education internally at round-number ages like 50 and 60, it would make it very easy psychologically for both the employer and the employees, in the sense that there would be no stigma attached to an employee starting the education (“They must want to get rid of you, that’s why they’ve invited you to take this course!”) nor would it be seen as a threat (“I’m preparing to leave my employer, that’s why I’m trying to get ready!”).
I remember Laura mentioning that family conversations are very helpful. I agreed, and told the story that has gone down in Ezra family legend as Dad’s Decumulation Talk [for details, and much more, see https://donezra.com/24-talking-to-your-adult-children-or-other-close-family-members-about-this-phase-of-life/ ]. From there, somehow (!) Laura and I got talking about end-of-life conversations, and I said I thought that too is a good idea, and personally I’d be perfectly happy to have one of those with my family, particularly at this early stage when fortunately there’s no obvious sign that I’m going any time soon. Given that my parents and their siblings (six of them in all) all went past age 90, Susan has told me that she thinks 90 may be OK for me, but she’s not entirely sure how well she’ll be able to put up with me if I should reach 100! (And that’s despite the fact that she’s a very kind and accommodating person!)
I had hoped to be able to mention Dr Ed Jacobson’s notion of the life abundance portfolio as a practical way to set personal goals at any age, not just when you’re approaching retirement, but the opportunity didn’t arise. I thought it would be particularly appropriate for this investment audience, as it sets out seven areas of life as if they are asset classes in a portfolio. [For more on the concept, and about Ed, see https://donezra.com/113-in-praise-of-ed-jacobson/ .] I did summarize it in my first draft of a handout to be made available to the audience, but when it didn’t come up in the taping I dropped it. But perhaps it stayed in, after all, I don’t know, because one of the comments during the live session on November 17 mentioned something resembling it.
But more on those questions and comments another time.
I’m delighted that an investment-oriented association is devoting some time to thinking about non-financial aspects of retirement.
I have written about retirement planning before and some of that material also relates to topics or issues that are being discussed here. Where relevant I draw on material from three sources: The Retirement Plan Solution (co-authored with Bob Collie and Matt Smith, published by John Wiley & Sons, Inc., 2009), my foreword to Someday Rich (by Timothy Noonan and Matt Smith, also published by Wiley, 2012), and my occasional column The Art of Investment in the FT Money supplement of The Financial Times, published in the UK. I am grateful to the other authors and to The Financial Times for permission to use the material here.