Life After Full-time Work Blog

This is how I made the case for retirement education, at a recent conference

 

The excellent folks at Pensions & Investments hold many conferences, two of which, in the States, are focused on defined contribution pension plans.  DC East is typically held in March; this year DC West was held in San Diego, CA, on October 21-23.

I was scheduled to have the wind-up keynote slot.  But a family emergency meant that the speaker for the conference’s lead-off spot was unable to be present, and I was happy to fill in. Chris Battaglia, Nikki Pirrello, Tammy Scholtes and the P&I team thought I was doing them a favor.  In truth it was the other way around, because it meant I was able to relax and thoroughly enjoy the rest of the conference.

I’m a nervous speaker, so I’m tense until my thing is over.  And I’ve experienced drying up and wandering off topic sufficiently often in my career that I now prepare my remarks in advance. I may not need to refer to my notes constantly, but their presence gives me confidence.  And this time they enable me to tell you what (I hope) I said.

One invariably starts one’s talk with heartfelt thanks for the invitation to be there.

After that … well, here’s what I said.  Forgive the occasional italics.  That’s just a way to remind myself that ideas are more clearly expressed when some words are stressed.  And, as regards specific references, remember that I was addressing an American audience, most of whom thought of investment jargon as everyday speech.

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I’m going to give you some thoughts and ideas about getting ready for retirement, after full-time work is over.  When I’m done, I’d love your thoughts – your reactions, your comments, your questions.

I’m going to start off at a tangent.  I promise you, it’ll connect pretty quickly.

I look at you and see … an educated group.  What a trivial observation!  Of course we’re educated.  To different extents, in different directions, but that’s not my point.  We all have at least a basic education.  In modern society, it’s impossible not to get a basic education.

What does education do for us?  Two kinds of things. 

First, and very directly, it helps us understand things around us – people, the way the world works, a framework for thinking about things.  That’s a wonderful preparation for life. 

Second, and indirectly, 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.

Can you imagine life without education?  You’d have to go back centuries.  I did a bit of research.  The first school in the States was started in 1635, in Boston – the Boston Latin School, still around today.  But for centuries, education was a privilege reserved for the rich.  Even in 1900, only 34 of the then 45 states had compulsory schooling laws.

I came across a quote from John Adams, President #2: “Education makes a greater difference between man and man, than nature has made between man and brute.” It’s a big deal, even though we take it for granted.

We accept 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.

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Why do I bring this up?  It’s that “man and brute” thing that triggered a parallel thought.

Look around us.  No other species on earth, other than human beings, has been able to arrange for itself the luxury of living happily while not working to scratch out day-to-day survival until death occurs.  Of course, a life of luxury has always been there for the few rich ones.  But it’s only our own last three or four generations that have been able to think of stopping full-time work and living happily thereafter … as something for all of us, something we should expect, and plan for.

Today, our expected period of future life after retirement is not that far short of our working lifetime.  I wrote down the words “life after full-time work” – and the acronym LAFTWO presented itself.  And that sounds like Life Two.  Life One, our grown-up working life, is what our original education prepared us for. My point, in all of this, is that we need an education for Life Two.

One day it’ll be unthinkable not to have it.  Today I want to confirm how necessary it is, and then give you some ideas about what it might contain.

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It really is necessary.

We hear, over and over again, that people don’t start thinking about retirement until they’re at least 50.  Then the regret starts.  “Oh gosh, I wish I’d done something about this earlier, when there was still lots of time.” That’s regret. 

Anxiety starts a few years later.  It becomes a huge concern for older employees, to the extent of having negative effects on their workplace productivity and on their health.  Google it. Studies, journal articles.  The States, Canada, the UK, Australia.  The evidence is all around.  And it’s not just: “I don’t think I have a lot.  Will I outlive my assets?”  That’s the financial angle.  There are psychological issues too.  “Will I lose my identity?  How will I spend my time?”

Now superimpose the benefits from education for Life Two.

For individuals, instead of a feeling of dread, they’ll have confidence. Not “Everything’s going to be fine,” because frankly that’s just not credible.  But we can get rid of their irrational fears.  And for the rational fears, we can show them: “Here’s what’s involved.  Here’s a framework.  You’ll still have decisions to make, you’ll have actions to take, but here’s what’s involved in setting up your own plans for the future. And once you get that far, the fear of the unknown will vanish, because you’ll know what your situation is, what your options are, and that will at least put you in the driver’s seat.”

For the employer, when you have these Life-Two-educated employees: improved productivity, greater ease of getting people to accept retirement (so, workforce planning), higher social reputation.  When you compare a primitive society with no education for Life One against a society with education, it’s worthwhile for society to pay for education for Life One.  It’s the same for education for Life Two.  I think you’ll find it’s worth paying for it. 

I’m addressing you today as employers.  And in giving you some ideas about what you can do for your workforce for Life Two, this is not a proposal.  I’m not looking for work.  I’ve been lucky in my life, and in my career.  This is just giving back.   What you do with these ideas is up to you.

And by the way, if any of this resonates with you as an individual, so much the better. You’ll see the benefits all the more clearly.

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I discovered this territory, the land of Life Two, myself, eight years ago, when I retired – or, as I prefer to say, when I graduated from full-time work. Because I hate the old-fashioned concept of retirement, as if it’s the end of life.  It’s only the end of Life One.  Life Two is the climax, the fulfillment, a long stage, the happiest stage. (I’ve even written a book about happiness!)

But I didn’t know that at the time.  I’ve learned a lot since then – my own experience, interviewing a lot of people, doing a colossal amount of research on the internet – all so that I could learn from the wisdom of others.

I’m putting this wisdom on a website, and eventually there’ll be a book.  Don’t worry about taking notes today.  Take whatever you want from the website.  It’s free.  There’s no payment involved.  And there’s no advertising and no sponsorship, and I don’t sell your name or aggregate data to anyone.  Oh, the website is called donezra.com – I hope you find it easy to remember.

I have no idea how you should deliver this education to your older employees, the over-50s.  Evening classes, the internet, an app like Zoom – whatever.  It’s up to you.

OK. Here’s what research tells me should be the essential content that you include – a sort of Walking Tour of the Land of Life Two, with me as your tour guide.  It’s in multiple stages, each focused on a specific issue, and most will have an exercise you have to do afterwards – because there’s no better way to fix principles in your head than to apply them to your own situation.

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You can’t solve a problem until you identify it clearly.  So allow me to define the problem.  I think individuals have three kinds of fears: psychological, practical and financial.  I’ve already identified them. 

The psychological one is: “Who am I?”  You know, many of us are so used to our work that that’s how we define ourselves, particularly if we’re successful or 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.  It’s understandable if the workplace defines us.

The practical fear is: “What will I do with my time?”  One big-name academic e-mailed me.  He said: “My mother told me, ‘Don’t retire.  The idleness is unbearable.’”

The financial fear is one that every survey highlights: “Will I outlive my money?”

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.

Let me suggest a time-line.  We should probably start the financial education about twenty years before retirement, when there’s still time to take remedial action and when we’re in our prime earning years.  Start the psychological and practical education five years before retirement. Frankly, we could leave those two until the final year, but for the employer to benefit, I’m guessing you’ll want five years of that resulting higher productivity.  You might even want to pay them for taking these classes. Just a thought! 

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OK, the psychological side, the irrational side, which to the non-geeky average worker can be more terrifying than the financial side.  Here’s what you tell them.

You tell them that transitioning to Life Two is scary.  We all think that way.  Tell them: You’re not alone.  This is normal.  Once you understand that, the fear typically goes away.  You just need to take the first step.  And that’s actually what you’re doing, by taking the Walking Tour.

When you leave full-time work behind, it’s not just scary.  It’s also an opportunity to reinvent yourself.  And you know what?  You’ve done this before.  You transitioned from home to Life One.  That too was scary, wasn’t it?  But it was also an opportunity to reinvent yourself.

Which leads to “Who am I?”  Transition to Life Two, for some, can be disorienting.  Defining yourself can be a deeply emotional experience.

I’ve discovered three approaches to do this.  This isn’t the place for detail.  It’ll go on the website.  Each approach involves answering a few questions that are simple but really make you think.  They approach life from different perspectives.  With three different approaches, chances are better that each of us can find one that appeals.  Sometimes it may even help us identify a sort of mission statement or purpose for ourselves, though that isn’t essential.  I’ve actually used two of the approaches myself.  In fact, like many of the exercises, this is one you may want to revisit periodically, either to revise your responses (life sometimes causes us to change our views, and that’s OK) or perhaps to use one of the other approaches for a different perspective.

Let me give you one of them as an example.  It comes in the form of three questions.  First question.  You have all the money you need.  How would you live your life?  Second question.  You’ve just found out you have five to ten years to live.  How will you change your life?  Third question.  You’ve just found out you have 24 hours to live.  What are your regrets?

Profound, isn’t it?  Something about your priorities should come out of that.  

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The perennial practical question is: What will I do with my time?  You need leisure activities as well as activities related to your mission or purpose.  And if you have a partner, there are two of you involved, not just you. I found something called the Get-a-Life Tree to be a great way of making a plan.  It’s from a book by someone I don’t know, Ernie Zelinski, called “How to retire happy, wild and free.”  Frankly, the title initially put me off, but I loved the book and found it very helpful.

By the way, if you have a partner, remember that you and your partner are not just a couple, but also two different people.  My website readers like the idea of a Venn diagram – you know, like two intersecting, partly overlapping circles – to identify activities you share and activities you want to keep separate.

I hope you’re starting to see how those run-like-hell fears can be confronted.

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OK, now let’s consider the financial side. 

And perhaps the first thing here is a reminder that life is about more than money. Family and friends, work and play, physical and mental (including spiritual) health: those are six other aspects. Think of them, with money, as seven asset classes in your life’s abundance portfolio.  Contemplating how you’d rate your satisfaction with each component, what you might do to raise your score in each – that too is a way to define your purpose.  A fourth way, if you like.

Your purpose with money is to live a happy life.  (I’m ignoring, today, aspects of bequests, though they’re important too.)

There needs to be an exercise to create a budget to define your needs, if you don’t already have one. 

I’ve developed a tool – it’s on my website already – that I call your Personal Funded Ratio.  It’s like the funded ratio for a defined benefit plan.  Is your budget supportable for the rest of your life (and your partner’s life)?  How much does it depend on each of Social Security, your home, your retirement savings, your other savings?  If you don’t have enough, how much more do you need to save, or how much more risk do you need to be rewarded, or what’s the impact of delaying retirement? (Which, by the way, always has the biggest impact.)  All there for you to find out.

Back to the budget.  Can you and your partner agree on how to divide it between essential things and nice-to-have things?

How would you react if, say, you had to cut back on 10% of your budget?  How much of your nice-to-haves would it affect?  More than 10%, obviously, but how much?  It varies from person to person.  Which activities would you cut?  How does that make you feel?  How about a 20% cut? 

As you reflect on what’s acceptable and what’s the limit of acceptance, you know what? You’re defining your risk attitude. It’s not about how you feel when investment returns turn negative.  It’s about how you react to the impact on your lifestyle.  It’s not standard deviations of investment returns that are important as risk measures.  It’s lifestyle risk that’s important – that’s what determines how much investment risk you can stand.

And in turn, thinking how many years worth of safety you need to sleep comfortably at night, you can work out how much to invest in securing that safety, and the rest can be invested to seek growth.  Because, quite honestly, even though we investment geeks complicate things enormously, fundamentally there are only two investment goals – growth and safety.  And I think it’s possible to help the average worker to decide how much of each is the most appropriate allocation for them.  I’ve tried this on people who run away from investment thinking.  “If the market falls, it won’t affect your lifestyle for five years” – you know, they get that!  The fact that it might then leave them with 70% seeking growth is not an issue – in fact, it’s a bonus.

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These ideas are not yet all on the website, but give me a chance, they will be.  I have an outline in my head.  As I mentioned, I’m thinking of it as a sort of Walking Tour of the Land of Life Two, in multiple stages.  At this point it looks like 24 walks and 18 exercises.  If you do one walk a week, along with any accompanying exercise, you’ll be amazed at how far you’ll have come in six months.

You’ll know yourself better, and what motivates you and makes you happy. You’ll have identified activities to fill your time – and how to co-ordinate them with your partner. You’ll have found out, along the way, about Social Security and taxation and healthcare and long-term care, because those are some of the exercises.  You’ll have an idea about your total Life Two income, and how much of your life’s essentials and how much of your life’s nice-to-haves it will support – and what you can do about it if your finances are still not where you’d like them to be.  So of course you’ll know how to make the most use of a financial professional, if you look for one.  And you’ll be ready to talk to the next generation about your will and whatever other arrangements you’ll have put into effect.

To the extent all of this isn’t finished, you’ll have made an explicit to-do list of the remaining items to complete.

Scary? I hope not – not any more.  I hope you’ll know where you are, and that it’ll give you a feeling of being in the driver’s seat.  You also know that no plan will ever work out.  But the work that’s gone into the plan will help you adapt, as circumstances change – that’s why we plan.  And that gives you resilience.

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What’s the takeaway from all this?

My purpose has been threefold. 

First, to tell you that education for Life Two is important … to your workforce – particularly the over-50s – and to you as their employer. 

Second, to prod you to think about how to deliver that education. 

And third, to give you some ideas that’ll get you started, and to identify my website, donezra.com, as a free resource.

I hope that appeals to you.

Reactions, comments, questions – please. 

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In my next post I’ll try to remember the conversations that followed.

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