Life After Full-time Work Blog

And, of course, personal anecdotes that illustrate the principles

Here the conversation between Bart D (“BD”) Dalton II and me continues.

BD: I just wrote a blog. Our daughter asked my wife Michelle and me if we’re both millionaires, and we looked at each other and I said yes and Michelle said no. We both see the numbers and the assets, but we see them differently. I see the business and so, yes, definitely way past, but she doesn’t see it that way. PFR works for me.

Someone’s number could be 170 percent, and if we add in this other thing it becomes 190, but how much is enough? I think PFR really helps with that. How did you come up with the visualization that you use instead of just bar charts?

Don: Oh, all my life I had dealt with defined benefit plans and their funded ratio. So my thought experiment was just: we’re the last two survivors of a frozen DB plan. Whatever the funded ratio is for that plan, that’s our PFR. All I could do was adapt what I used throughout my career, for myself.

BD: I call this next one The Crystal Ball Conundrum. I buy more wine than I ever should have bought and I take a couple of big trips and my PFR drops from 98 to 90 percent. Should I change everything, save more? How should I use the PFR to say: it’s OK, calm down. And I’m talking about a friend, not me!

Don: Go back to my first thought. The calculation is just an approximation, an order of magnitude, because we can’t foretell the future. It’s not just personal spending that departs from the past, or from what we predict we’ll do, it’s also economic conditions. And that’s why, in light of new personal spending insights and changed economic conditions, it’s useful – not just useful, probably also reassuring – to re-calculate the personal funded ratio periodically.

How often? I don’t know. Certainly when there’s a change in your life – sorry, in your friend’s life. And if there hasn’t been a noticeable change – not just some minor deviation – doing it annually gives a sense of a sort of routine evolution, a source of comfort, because remember: a change of 10 percentage points is almost a random change, not necessarily to be taken as a reason for a big lifestyle re-evaluation. And one big party isn’t going to change your PFR 10 percent.

So if you do this annually you’ll get a sense of a path, and even 10 percentage points I think is almost a random change.

In addition to that, someone who plans well will typically have – or ought to have – a sort of liquidity reserve fund, a sort of emergency fund, a “life happens” fund, whatever you call it – to deal with unexpected year-to-year fluctuations in spending, whether they’re emergencies or just overdoing it temporarily. So, no panic.

BD: Planning gives you options, and people don’t do it enough, and then they get to retirement. Just talk about you for a second, you didn’t just stop working, you kept your brain involved. So how did you go from full-time work to still being busier than you’ve ever been and keeping your brain occupied and travelling – how did you plan that?

Don: I didn’t plan that. What I knew was that I had to keep going beyond 65 to get our funded ratio up past 100%, that was the first thing. So I did that for 3 or 4 years, then I realized that wasn’t as satisfying, I wanted more freedom, I wanted to do stuff . That’s when I stopped working – I didn’t stop thinking, just stopped working for pay.

I’m still thinking. I still write a blog post every couple of weeks on subjects like retirement and the psychology of happiness, and I wrote a book called Life Two, which I meant as life after full-time work. Now I’ve experienced analytical people, who call it Life 2.0 if they’re computer-oriented, or maybe Life 3 because 1 and 2 are adolescence and work … Whatever! I really don’t care. My point is just that it’s different from full-time work, and if we’re in reasonable health it’s typically long enough to be a lifetime in its own right. This is also the most enjoyable time of life.

I don’t like the word retirement, it sounds like the end of something. “Graduation” is the word George Russell gave me. So in your post-graduate life I think there are three big questions that come up that you need to find answers to. One is: Who am I? It’s the identity question, because most of us, if we enjoy our work, are defined by our work. The second one is activity: how do I fill my time? And since most of us have a partner, how do I stay out of my partner’s way? – because we’re not just a couple, we’re also two separate people, and we have to recognize that we’re two separate people. And the third big question is one that financial geeks like you and me think about, it’s: will I outlive my money? Those become the three big questions that now start to define the way we need to think.

BD: Financial security, purpose, health, community, and the last one is regret minimization: the five pillars of wealth happiness. OK, let’s get cheeky. You have two kids. You want to leave them some money. How do we deal with this feeling of being able to help them get their life going without jeopardizing your own PFR?

Don: Let me be personal. Susan and I are lucky. Our kids have been nice to us all the way through, and have trusted us with their personal issues, and we’ve been the same right back to them. Plus they really get along and are extremely unlikely to suddenly squabble over whatever inheritance they eventually get. That may also be because, when they were in their mid to late 20s, we gave them each an amount of money, enough to help buy a starter home. This freed up the equivalent of rent or mortgage payments for them: enough, as Warren Buffet put it, that they could do anything, but not so much that they could do nothing. And that mutual trust has stayed as an underlying support for our ongoing relationship.

Now they also have our wills, so they know where we plan for our residual assets to go, and periodically – every couple of years or so – we update our list of investments and bank balances for them. I’m guessing they don’t even bother looking at them, They just put them in a safe place for the day they’ll need to do something after we’re gone.

So we’re not in the situation of people whose kids don’t know, and stay in touch only in the hopes of inheritance.

BD: If you were to go back to Don in Life 1.1, what’s a question or two that you wish you would have asked yourself or given yourself leeway to do, something that you would tell younger Don?

Don: Oh gosh, I don’t know. As you can tell I’m a very numerical man. I wish I’d thought of this concept of the PFR much earlier so I could decide earlier what I would do. As it happened I went out in business on my own and then in partnership with a few others until the age of 40, and the amount we were drawing every month was just enough to pay the mortgage, it wasn’t enough to have much of a lifestyle. So when the opportunity came to start a Canadian office for Russell that was huge.

Given how successfully it’s worked, I no longer regret the way my 30s went. But I wouldn’t have had the courage – not just courage, it took ignorance as well – to have gone out on my own for seven years until age 40, to do that, to struggle psychologically, wondering what would happen, we’d just had two kids etc: that was a very very worrying time. And so, if I’d had the PFR, I might actually have changed the way I lived.

That’s why I say I’m one of the world’s lucky people, despite seven years of living in the wilderness. I came across this colossal oasis that turned out to be not just a water-filled oasis but an ocean on which I could float happily. I’m so lucky.

BD: And you’ve made luck.

Don: Well, I’d phrase it differently. To me you get your luck and you use your luck. I didn’t make the luck that I was born in the 20^th century as opposed to the 10^th century, but I’ve used that, and so in a sense I’ve exploited my luck happily and successfully – and luckily, I’ve had so much more luck since then!

BD: That’s perfect. So your three questions (Who am I? How will I fill my time? Will I outlive my money?) sit in people’s minds that are 55, getting ready to run off into the sunset. So where can we find out more about you, Don?

Don: Well, I wrote a book about those three questions that is called Life Two, and I have a website donezra.com, and I’ve put up 250-odd blog posts, one every couple of weeks. It’s free, nobody tracks where you go on the website. It needs an index, because these are random topics, and #250 was the last index I compiled. And the subjects are divided into Personal Happiness, Investments, Longevity and Retirement Finance. I write for myself as much as for anyone else because I love learning.

BD: Just keep on learning. When you stop learning, you stop earning, that’s what I always say. It doesn’t mean earning money, you earn friends, you earn knowledge, you earn community.

Don: I think that coming across you and Michelle was one of the luckiest things in my life.

BD [to his podcast audience]: So if you enjoyed this conversation, here’s what you can do after this. You can go to wealthhappiness.life and figure out your 5-pillar score. Once you’ve figured out where you are with the 5 pillars of happiness then we’re going to go over to the PFRs and you can start to build your plan. And you don’t need me, you can just build it yourself. Stick to your plan even when crazy things happen in the world

Don, thank you so much for coming on the show today. We’ve had Life Two, PFRs, all sorts of fun, and hopefully everyone’s a little bit better. When people hit 50 I call it f- off money. It doesn’t have to be the f- word but you just say “I’m out”. So Don Ezra, thanks for coming on the Wealth Happiness Plan podcast, it was a pleasure having you.

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Takeaway

Reflections about working longer to raise our own PFR, the need for an emergency fund for fluctuating spending, answering three big questions in Life 2, about how we talked about money with our kids, wondering what changes I’d have made in my life if I knew our PFR in my 30s.

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