Friends, I’m here to tell you, 65 is the new 45. Rounding the corner to the typical retirement age of 65 doesn’t mean that you’ll be spending your days in a rocking chair with a glass of sweet tea. People are staying as vibrant deep into their 60s as they were when lordy, lordy they turned 40.
This idea that 65 is “old age” needs rejuvenation — it’s just not reality. I believe the notion comes mainly from the Social Security Administration and what is considered “normal retirement age.” It’s been that way for decades. But the times, they are a-changin’.
At 65, you’re either retired or nearing retirement. The kids are out of the house, disposable income has returned, and you are approaching the day you can host a mortgage burning party. (Heck, you may have already had one.) The world is yours for the taking. You’re hitting your stride; you have the energy to go after your post-work dreams, no matter what they may be.
Is that how old age looks? Not in my book.
Still, some things do change as you near retirement age (even if your golf game is as good as it’s ever been). It pays to ask yourself if you’re ramping up to be a happy retiree.
The answer to this question is twofold: There’s the money piece and the lifestyle piece. First, take a look at your retirement portfolio allocations, as a prudent mix is generally much different than when you were in your 40s. Next, you want to ask yourself if you’re nurturing your core pursuits — the hobbies you’re most passionate about. (Golf, anyone?)
Let’s walk through two main components of retirement planning to give you an idea of where you are.
Do You Have Your Right Retirement Mix?
Our attitudes toward saving for retirement change throughout our lives. When we’re younger, our decisions are often motivated by a higher risk for a higher reward mentality. At this point, we may be 100% invested in stocks. And why not? There’s time to recover if the market takes a significant tumble. At this stage of the game, too, many people automate and allocate their contributions, then forget about them or take just a cursory glance at their monthly statements.
However, as you begin to close in on retirement, it’s harder to recover from a financial hit if you’re all-in on stocks. And you absolutely shouldn’t be playing the ostrich game with your portfolio.
This is a time to reevaluate your risk tolerance and consider reducing the stock holdings in your portfolio. Your stock allocation can be reduced over time to make this transition more of a glide path than an abrupt leap.
Your right retirement mix will depend on your risk tolerance, retirement income streams (such as Social Security and pension benefits, home equity, annuity income, rental income, etc.), and your estimated withdrawal schedule. I’ve seen couples go down to anywhere between an 80% allocation to a 40% allocation in stocks. It depends on what’s right for your retirement.
Once you’re ready to stop working, how often and how much should you withdraw from your accounts? I’m a huge believer in the 4+% Rule, a guideline developed by MIT’s William Bengen. His research on retirement investments revealed that a retiree could take 4% or, as we more recently learned, 4.5% of their initial retirement assets and increase that amount every year to account for inflation, assuming a 50% to 75% portfolio allocation to stocks. Following this approach, he determined most retirees’ savings would last for at least 30 years. My team has re-created this study using some slightly different parameters than Bengen, and I would recommend you conduct your own research around this particular rule of thumb using parameters that best suit your financial outlook.
Do You Have Enough Core Pursuits?
Don’t wait another day to explore what I call your core pursuits. These are your passion pieces — hobbies, interests and activities that keep you actively engaged during retirement. Ideally, you should develop your core pursuits at least 10 years from your retirement date. Though truly, it’s never too late to start or learn something new. The key is to be curious and ambitious in retirement when it comes to your core pursuits. Focus on constantly getting better and more involved with these hobbies that you love regardless of where you start.
Here’s another tip — just like you diversify your portfolio, it’s also important to have varied core pursuits. And the more social interaction you have, the better. Consider taking a new interest to the next level by joining a club or getting your friends and family involved. Are you a quilting queen bee? Join a sewing circle or a group that makes blankets for a charitable cause. (This one also taps into the No. 1 core pursuit of retirees: volunteering.) As for me, I love music, and I can’t wait to sing all my favorite songs with thousands of my fellow fans at a raucous concert in the near future.
Take your core pursuits a step further and pick at least one that’s physically active. Whether it’s pounding the pavement around your neighborhood a few times a week, hitting the gym regularly or picking up badminton, regular physical activity will keep you young at heart and keep your heart young. Exercise is the fountain of youth in retirement.
I’m hopeful we’ll get back to all of the activities we enjoy very soon. For those of you who took time last year to dive deeper into your core pursuits (and even try out new ones), you’ve got a big head start toward a happy retirement.
The research I conducted with thousands of retirees shows the happiest of the bunch have an average of 3.6 core pursuits. They also provided a wealth of ideas. From bonsai tree care to pickleball to movie making to camper road trips, the sky is the limit.
Today’s 65 can be more exciting and satisfying than ever before. Retirement is a sweet spot of life. Just remember to keep tabs on your stock allocations and make adjustments as you slide into your post-work life. And along the road, find those core pursuits that will give purpose to the money you’re socking away. These two big little things will make for more secure and more fulfilling retirement years. As you already know, age ain’t nothing but a number.
Wes Moss has been the host of “Money Matters” on News 95.5 and AM 750 WSB in Atlanta for more than 10 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.
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