In my book, "You Can Retire Sooner Than You Think," I explore the financial and emotional findings from over a year of research and thousands of surveys from retirees about what made them happy (or unhappy). These results were fascinating, and the data led me to write a step-by-step roadmap for folks who want real happiness during retirement.
To help you work toward your long-term vision of a bright future, let these five practical, accessible “secrets” be your guide.
Money Secret #1: Determine What You Want and Need Your Retirement Money For
What’s a stockpile of money worth if you have no idea how to spend it? The concept here is to figure out what you want and how your money will fuel the life you want to live.
I have two words to sum up this secret: core pursuits. These are your “super” hobbies — the activities you regularly do that bring real satisfaction, fulfillment and joy to your life. Based upon my research, core pursuits are critical to a happy retirement. In fact, the happiest retirees have at least 3.6 core pursuits (on average), while unhappy retirees have just 1.9.
It's essential to figure out what these passions are for you. That way, once retirement rolls around, you'll know how you want to spend your time — and money. The sky's the limit. It doesn't matter what your core pursuits are so much as that you have them.
Money Secret #2: Figure Out How Much You Need to Save Before You Retire
You want to think of your investments as a resource to provide you with an income stream during retirement. There are several strategies in my book that outline how best to make your money work for you. The bottom line is learning to supplement your retirement with your retirement savings.
The key to establishing how much you need to save before retirement is to account for all of your set retirement income (such as Social Security and pension benefits), plus the lifestyle you identified from Secret #1. Then, you can work backward to establish your retirement savings. (For context, the happiest retirees from my research have at least $500,000 in their nest eggs.)
Remember, your retirement savings will fuel the life you want to live. So, make sure you’re saving enough this year — and every year — to make that dream come true.
Money Secret #3: Pay Off Your Mortgage in as Little as Five Years
True story: A client of mine paid off his mortgage the day before he retired. I say kudos! My advice will always be that if you’re anywhere near retirement and can afford to pay off your mortgage, do it.
Note the operative word “afford.” If paying off your mortgage means tapping your retirement savings (IRA, 401(k), etc.), then you can’t afford it. But if you can do it with one-third or less of your non-retirement assets, I say write that check today.
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The happiest retirees are those who retire without a mortgage, or within five years of having it paid off. What you're doing is crossing out item No. 1 on your monthly budget, while also relieving the psychological burden that comes along with it. And boy, does it feel good!
Money Secret #4: Develop an Income Stream from Three or Four Sources, Not Just One
I want you to think about an analogy for your retirement income: The more rivers of money, the greater the reservoir. My research showed that the happiest retirees have three income streams — not just one or two, as the majority of unhappy retirees reported.
How many will you have? Well, it’s up to you. There are the set benefits of Social Security and pensions. Then there are the variable ones. Do you have a rental property? That counts. How about a part-time job? Why not get the best of both worlds and find a gig that’s also a core pursuit? As the saying goes, if you love what you do, you’ll never work a day in your life. Lastly is the income from your investments. See what I mean? There are plenty of “rivers” out there to fill your retirement “reservoir.”
Money Secret #5: Become an Income Investor
Investing is full of unknowns. And there are so many strategies out there, who knows where to start? I do. And it’s called income investing.
Income investing focuses on generating cash flow from your liquid investments. Investment income commonly comes from three places: dividends from stocks, interest from various types of bonds, and distributions that come from a variety of investments that do not fall exactly into the stock or bond category. The income these investments spin off is then reinvested to quicken the growth of your portfolio until you retire. Then, it gets redirected to provide a “paycheck” to help you meet your retirement spending needs.
To help folks become income investors, we at Capital Investment Advisors use a "bucket system." This system isn't the only way, but it's a great way to start. You can learn more about it in my book, or you can come in and talk to us. We're happy to help.
While most folks like to set their New Year’s resolutions around things like health and career, I invite you to add post-career planning into the mix. Why not make 2020 the year you start the push toward setting yourself up for a happy retirement, whether you happen to be decades or mere months away from your post-career life, or even if you’ve already called it a career?
You can begin this new chapter by doing things that span from finessing your financial retirement plan to picking up a new core pursuit. Remember that these individual pieces all come together to create the whole picture of this wonderful phase of life.
Want to know if you're on the right track? You can take the "Happy Retiree Quiz" at WesMoss.com to find out! It may guide some of the decisions you make this year, and in the years that follow.
Wes Moss has been the host of “Money Matters” on News 95.5 and AM 750 WSB in Atlanta for more than seven years now, and he does a live show from 9-11 a.m. Sundays. He is the chief investment strategist for Atlanta-based Capital Investment Advisors. For more information, go to wesmoss.com.
This information is provided to you as a resource for informational purposes only and should not be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment adviser before making any investment/tax/estate/financial planning considerations or decisions.