Article provided by Brent Soloway, August 1, 2016
Having worked with closely held business owners for over 25 years, I have had many discussions concerning life after business. Most of these people have owned and run their businesses for many decades. My experience has revealed that when retiring, I believe they need to consider three key issues; time, money and purpose.
These three issues are important to anyone contemplating retirement. We all look forward to the day when we can lounge on the beach and watch the water lap up on the sand. The palm trees within arm’s reach remind us that life is good. And it is!!
Retirement can provide the best years of your life. However, there is a bit of a wrinkle that your father and mother probably didn’t face. Time!! Not only do you have a lot more of it on a daily basis (so did mom and dad), but now longevity has dramatically increased. According to the Social Security Administrations Period Life Table, the 50th percentile for survival (or what we commonly call “life expectancy”), is approximately age 89 for the starting age 65 year old couple. In the good old days, you could live it up and party hard. You probably weren’t going to be around very long after retirement. Now, that has all changed.
Let’s now reflect on the “money” piece. The old tried and true strategy of taking 4% a year from your investable assets, may not be valid anymore. Depending on your actual longevity, the rate of inflation, and your investment strategy, the distribution “safety net” (how much you can take out of your “nest egg” and not run out of money) may have changed. It is critically important to review your expenses, your current state of health, and potential health care costs before establishing a plan for how much you can comfortably withdraw from your investments every month.
The last issue may be the most important. Purpose!! Most business owners I have worked with over the years have had no problems with money. They have made a lot of it, invested it wisely, and have spent it prudently. In spite of this, they have lost one of the most valuable psychological assets they have, the identity and self-esteem that comes from being a successful business owner. It is no different for any retiree. You may be anxious to exit the day-to-day grind of your work, relieve yourself of the daily stress and just enjoy life. But so much of your identity has probably been tied to your work. How do you replace that sense of purpose and still feel useful?
According to a study published in 2014 in Psychological Science, having a sense of purpose could add years to your life. In a study by psychologist Patrick Hill of Carleton University, in which his test case involved 6,163 people ages 20-75, the results indicated that of the 569 people who died (during this fourteen year study), as a group, they had noticeably less direction in their lives than those who survived.
So, what can you do? It may be important to maintain social and family relationships. You can eat healthy, exercise, maintain sound finances, and seek out intellectual stimulation. Join a gym, pursue a lifelong passion, start a small business, engage in hobbies, go back to school, join a club or organization, do community work, become politically active (run for president, you may win), or do consulting for businesses in which you have expertise. There is a litany of activities you can explore, to gain self-satisfaction. In your post-work life, you can open new chapters of your life, maintain a purpose, and continue to feel the part of a productive and useful human being.
This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Opinions expressed are those of the author and may not necessarily be those of Raymond James. Prior to making an investment or withdrawal decision, please consult with your financial advisor about your individual situation.