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How might you go about having a happy, successful, and wealthy retirement?
In her new book, “How to Retire,” Christine Benz, the director of personal finance and retirement at Morningstar, interviewed many of the nation’s top retirement experts and distilled their discussions into 20 lessons for doing just that.
In a recent Decoding Retirement podcast, Benz shared some of the top takeaways from those conversations. Lesson one, she said, is to visualize your retirement lifestyle and put habits in place to make it happen.
“The point is that we’re all wired a little bit differently in terms of what we want from our retirement cash flows,” Benz said. “A broader message of this book is there’s more than one way to do this. … You should give a little thought to what you specifically are looking for.”
In one interview, Fritz Gilbert, the author of “The Keys to a Successful Retirement” and the Retirement Manifesto blog, emphasized the importance of taking thoughtful steps before retiring.
For her part, Benz said phasing into retirement, starting around age 50, is a best practice. And you don’t have to take concrete steps; you can just start thinking about which parts of your work you like and dislike.
“Starting early, I think, is such a valuable piece of advice from Fritz,” Benz said.
Consider making decisions about your work life in the years leading up to retirement, either in “stealth mode” or through candid discussions with your employer. Then, take additional steps, such as saving contact information and personal files from your work computer.
You might also consider “dabbling” in retirement activities before fully retiring, Benz said, as this can help ensure you’re “in the driver’s seat” as you move into the next phase of retirement.
Michael Finke, a professor at the American College of Financial Services, pointed out in his interview with Benz that retirement is not all about relaxation, leisure activities, and free time. After all, you need something to relax from.
“The best relaxation comes after you’ve actually accomplished something,” Benz said. “You need to figure out a way to have a sense that you are accomplishing something.”
His actionable advice: Find an “animating force” that provides a sense of purpose in retirement, such as volunteering, continued work in some capacity, or reengaging with family.
“The main point is that even when you step away from work, you need to look at where you will go for some of the balance and structure and purpose and identity that your work provided you with,” Benz said.
Read more: Retirement planning: A step-by-step guide
In her interview with Laura Carstensen, the director of the Stanford Center on Longevity, Benz learned that work is good for us in that it helps us maintain social connections.
“Social connections mean a lot to our life satisfaction,” said Benz.
Given that, you should preemptively think about where you will find day-to-day interactions after leaving work. “Make sure that you are replacing work friendships with friendships outside of work because those work friendships may not stand the test of time,” Benz said.
Two elderly men playing a board game in Aveiro, Portugal. (Nano Calvo/VWPics/Universal Images Group via Getty Images) ·VW Pics via Getty Images
Understand that social networks may shrink with age, partly due to loss and partly due to self-selection toward a closer “inner circle.”
“As we age, we tend to want to spend more time with the inner circle, that very tight network of people who totally get us where, when we walk away from being with them, we’re like walking on air because we feel so completely understood,” Benz said.
Benz also noted that men, in particular, should be proactive in maintaining and building social circles outside of work.
Carstensen’s point, Benz said, is that “it’s OK to have your network shrink a little bit as you age,” but “you don’t want that social network to get too small. You don’t want to be down to just, say, two or three people.”
In another interview, David Blanchett, the head of retirement research at PGIM DC Solutions, noted that retiree spending — even among high-income households — tends to trend down over time but then often flares up later due to uninsured long-term care costs.
This is often referred to as “the spending smile,” Benz said.
Given that dynamic, Blanchett “has always been a believer in people giving themselves a little bit of permission to spend more earlier on,” Benz added. But giving yourself permission to spend isn’t always easy.
“The problem is a real one,” Benz said, and it’s rarely addressed, since many retirees haven’t saved enough for retirement.
Read more: Here’s what to do with your retirement savings in a market sell-off
Benz noted that she often meets people who bring up this issue. They’ve seen themselves as savers throughout their working lives, and that identity has become second nature. Now, however, with their portfolios at high levels, the idea of drawing down those savings feels uncomfortable.
And many genuinely struggle with spending — often for good reason. Part of the challenge, Benz speculated, lies in the word “spending” itself, which many associate with excess.
“There is this association of spending with profligacy,” Benz said, when that’s often not the case at all. For instance, some retirees provide meaningful support to adult children or other loved ones, particularly while they’re still young and may need it most.
How one should allocate assets when entering retirement?
William Bernstein, co-founder of Efficient Frontier Advisors and author of “The Four Pillars of Investing,” endorsed a “safety-first” strategy in his interview with Benz. That approach focuses on securing reliable, inflation-protected cash flow to cover essential expenses.
The ideal way to achieve this is by building a laddered portfolio of Treasury Inflation-Protected Securities (TIPS), a structure that helps retirees manage inflation risk while ensuring their basic income needs are met.
For Bernstein, addressing portfolio cash flows and securing inflation protection are “jobs one and two” in a sound retirement plan.
J.L. Collins, the author of “The Simple Path to Wealth,” offered another approach. Benz described his advice about keeping retirement portfolios as simple as possible, especially considering the potential cognitive decline in older age.
Collins recommended using a simple index fund-based portfolio with a bit of cash, focusing on core stock and bond market indexes, rather than overly complicated investments.
“[Collins] is very much on the side of trying to be as minimalist as you possibly can be when thinking about your retirement portfolio,” Benz said, “and there’s a lot to like about that idea.”
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
