Last month, the world’s coolest grandma called into my radio show. “‘Round the World Robyn,” as I’ve affectionately dubbed her, needed advice on how to pay for an epic 50th anniversary trip with her spouse and an equally awesome African safari with her kids and grandkids. Although she didn’t bite when I pitched her to bring me along, her story — and the retirement planning principles it offers — is worth unpacking.
Disclaimer: Robyn is a rare breed of retiree. She’s blessed with the trifecta of ample income, health and mobility and a fun-loving family. So while this may not be your story in its entirety, parts of it can be!
Where’s she going?
With her sweetie, ‘Round the World Robyn is eyeing a multiweek, Around the World by Private Jet expedition with National Geographic. Alongside a team of top historians, anthropologists and photographers, she’ll hop chartered flights to UNESCO World Heritage sites like Easter Island and the Great Barrier Reef. Of course, world-class accommodations and stunning views don’t come cheap: Robyn expects to shell out $200,000 for this once-in-a-lifetime expedition.
Once she returns, ‘Round the World Robyn will trade the architectural marvels of Machu Picchu and the Taj Mahal for safari Jeeps and East Africa’s legendary savannas. Our favorite grandma will cross the pond with a gaggle of kids and grandkids for a traipse through Kenya and Tanzania. Exploring the Serengeti will run her another $50,000.
How to fund it?
For virtually anyone, $250,000 puts a huge dent in retirement savings. But with some thoughtfulness, retirees like Robyn can indulge their free spirit without needless loss.
Here’s a quick look at Robyn’s financial picture:
• $500,000 in retirement and IRAs.
• $1 million in cash and cash equivalents (from savings and inheritance).
I reminded her that funding these splurges comes down to a few basic rules:
1. Stay away from retirement accounts. Balances may be attractive, but big spending from here can easily bump up the tax bracket, with withdrawals being taxed as ordinary income.
2. Look at cost basis and sell the losers. Generally, a diversified non-retirement portfolio will have a few assets that have underperformed. Sell these to limit the capital gains hit.
3. If no big underperformers, look at the "lots." Often, securities are bought in bunches. These have various cost bases depending on the underlying stock or bond performance and purchase date. Sell the worst of the lots first, e.g., the ones with the highest cost basis, to limit the tax hit.
4. Sell and retreat to safety. Legendary trips require legendary planning. So once you decide on the trip and begin preparation, sell your assets and move the money into the money market or another stable investment like short-term Treasury bonds. You'll earn a percent or two and miss any inopportune market craters during the nine- to 12-month planning period you'll need.
Even if you don't have a quarter of a million dollars to spend on travel, there's much to be learned from 'Round the World Robyn. Most important, as her retirement has progressed, her time horizon has evolved as well. Now that she knows that her own finances are set for her lifetime, she is thinking about her legacy and how her assets will impact her children and grandchildren. Simply put, she has shifted her investment time horizon from her and her husband alone, to that of the family.
Robyn has built long-term wealth, lived within her means, done elder care planning, and now is prioritizing her legacy and making memories with the people who matter most. And alongside her financial diligence, she’s made actual lifestyle choices that offer the greatest chance of happiness in retirement.
In my most recent national retirement happiness survey of nearly 2,000 retirees, I identified a few key behaviors with the greatest potential to unlock long-term happiness. And Ms. Robyn? Yep, she hits nearly all of them.
You don't just go from the couch to world travel. A regular dose of hobbies and activities has honed Robyn's adventurous spirit and kept her in tiptop shape. This makes sense, as my survey found that the happiest retirees have 3.6 core pursuits.
Epic family trips don't happen for families that don't get along. Every family has its warts, but I found that the happiest families are close; figuratively and literally. Of those that I surveyed, the retirees that lived "near or close" to at least half of their children were five times more likely to be happy than those that did not.
Think about the big anniversary trip 'Round the World Robyn is planning with her sweetie. What does my survey say about happiness levels for couples that have weathered marriage ups and downs for over 40 years? Happiness skyrockets. Couples are two times more happy than at any other point in their marriage besides their honeymoon! I call this the "We made it!" phase. Here, a deep sense of gratitude, anticipation and joy flows. Many achieve a feeling of control over their money. Not the other way around. Long-term consistency has likely created a cycle of freedom, autonomy and progressively fewer financial constraints.
‘Round the World Robyn is certainly a special case. But her story has something for each of us. Hobbies, family, budget management, romance. There’s always something you can be doing today to improve your odds of eventual retirement happiness.
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. 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.