Getting Ready for the Next Act

Hi. Welcome to Bloom Anywhere. I'm Gwen Moran, a writer, editor, author, and problem-solver. My goal is to share information, ideas, and resources to help you overcome obstacles, reach your goals, and get more joy out of life, even when things are messy. Thanks for joining me. (If you got this from a friend, subscribe here: Bloom Anywhere.) I'd love your feedback and suggestions for future topics. Please send me an email: connect@bloomanywhere.com.

Since Halloween was just a few days ago, it’s still technically “Spooky Season.” For many, one topic can make stomachs clench and neck hair stand up straight: retirement.

To be fair, some people can’t wait for retirement. I have a friend who is giddy at the prospect. But this person is a high earner and wants to save a bit more before relying on investments for a lifetime of income. That’s probably smart, especially while the market is still in bull territory. To this friend, retirement means relief from a high-stress job and options: traveling, spending time with the kids, volunteering, or doing nothing.

Retirement: A Scary Prospect?

For others, retirement is a scary prospect—but perhaps not as bleak as many report. I was surprised that the latest Employee Benefits Research Institute survey found that seven out of 10 people surveyed believe they’ll have enough money in retirement. Of course, the folks who believe this tend to be college-educated and married, earn more than $100,000 annually, and in good health.

At the same time, the same survey revealed that 60% of all workers and 80% of retirees surveyed are worried that the government will reduce their Social Security benefits. For many, that income represents a significant portion of their income in retirement.

Many of us know that time is our friend when it comes to investing for retirement income. And, of course, the power of compounding is an important factor. A recent discussion in a retirement income group drove home how much longer it can take to accumulate that first $100,000 milestone than the subsequent ones, even if you keep your investment level the same and have the same return.

While it may take nine years to hit that first milestone, the same investment level could lead to $200K in six more years. The same investment level and the same return may help the investor reach $300K in four more years. That could be good motivation when it’s tempting to not be disciplined about saving and investing. (This is not financial advice. Always consult a reputable financial advisor before making investment decisions.)

A Spending Smile in Retirement

A friend of mine first introduced me to the term “retirement spending smile.” (Admittedly, it made me think about the creepy movie “Smile,” which seems appropriate, given this newsletter’s theme.) While many of us consider retirement income a fixed monthly amount, the real issue is how our expenses change over time.

The concept of the retirement spending smile is credited to David Blanchett in his article “Exploring the Retirement Consumption Puzzle.” Blanchett wrote that (paraphrasing) rather than remaining flat or increasing steadily with inflation, expenses often follow a U-shaped curve—higher in the early and late years, and lower in the middle. There are even popular names for the three categories:

Go-go years: This is when you’re newly retired and have time to travel, pursue hobbies, or complete long-held goals or projects. In the early years of retirement, spending typically rises as retirees travel, pursue hobbies, or tackle long-postponed home projects while your health and energy levels are still strong. You may even still be earning if you start a new business or do some part-time, freelance, or consulting work to fill your time.

Slow-go years: This is the period when health or energy begins to wane, leading to less travel and fewer purchases. Downsizing a home and making budget adjustments may also reduce expenses, leading to less financial need.

​No-go years: This is when spending on healthcare costs and long-term care expenses increase, boosting the funds needed again.

Of course, no one can predict how their future will play out. But, if your retirement years follow this common trajectory, understanding these spending patterns can help you—along with the help of your financial planner—make more accurate investment plans and withdrawal strategies.

The Identity Factor

Running out of money in retirement is a legitimate fear. But there’s another consideration, too: So many of us have no small portion of our identities rooted in our work. It’s a scary thought to have that sense of purpose end. A recent retiree who held a high-profile role in the community told me, “I was used to getting invited to everything.” Once retirement happened, the invites stopped. It’s a big adjustment.

This relates to how we can build our bounce-back-ability through life’s changes. A key part of the resilience framework I outlined in the second issue of this newsletter is to cultivate many sources from which we draw self-worth. Sure, your career is one. But so are your relationships, hobbies, volunteer activities, spiritual life, and anything else that occupies your time and mind. However, those are wells you need to dig before you’re thirsty. (With attribution to a Chinese proverb and/or author and networking master, Harvey Mackay.) More about this in a future newsletter.

How Are You Feeling About Retirement?

Are you like my friend and can’t wait to retire? Or are you worried about what the next chapter holds? I plan to do a Q&A with a retirement expert soon, so shoot me your questions and I’ll do my best to include them: connect@bloomanywhere.com.

Bloom Drops

Things I want to share with you.

Retiring: Whether retirement is in the far-off future or closer than you’d like, there are a number of good resources to help you prepare. Of course, AARP (a client of mine) has many resources. So does USA.gov. If you’re looking for a financial planner, this article from NerdWallet is a good place to start.

Banned books: Banned Books Week was October 5-11, but in support of the week, my book club chose The Bluest Eye by Toni Morrison as our current read. (Because don’t tell me what I can and cannot read.) What is your favorite banned or challenged book?