Updated: Dec 15, 2021
An empowered retirement plan takes more than a retirement calculator
I did not invent the term “relaunch” as a metaphor for embarking on the next phase of life following a productive career, but the terminology is a good fit for The Rockettman blog. That next phase can mean a lot of different things for different people, but for me it meant an opportunity to reset and rejuvenate my life.
There was nothing wrong with my career and my productivity; it is only that I was facing a flat learning curve and way too much travel (up to 150,000 miles of flying per year). Ultimately, I knew that I had to prepare a realistic exit strategy that leveraged my skills and reignited my passion. So, I gave myself five-years to implement what seemed like a logical next step of earning the MBA I had always wanted on my resume and following that, take on a few teaching opportunities.
A good retirement plan evolves over time
But the lead up to that plan required appropriate preparation as one just doesn’t dial down without understanding the financial ramifications and changes in lifestyle that accompany the shift. In essence, I had begun preparing the foundation for the “relaunch” decades before by developing a sense of what level of savings I would need to reach and cultivating many interests and hobbies outside of work that would keep my life fresh. It also helped that I had a very rewarding career and was satisfied with what I had accomplished, thereby mitigating any sense of “woulda, coulda, shoulda” in the next phase.
The retirement calculator
It is very hard to know what you will need to provide a realistic level of financial independence. But it is possible to develop a reasonable sense of this over time by projecting savings off earnings and how those will grow over time. I did not begin saving in earnest until ten years into my career, but once I did it was with great discipline. I also sought the help of financial advisors – as it turned out quite a few, because I made some bad choices of advisor early on. I suggest you consider having a financial advisor and not hesitate to find another if the current advisor is not a good fit. I went through four in close to 20 years until I landed on my current advisor.
So while I did not know what the end goal would be as I began saving, the support I was getting suggested earmarking 15 – 20% of my annual gross income as savings (sometimes more), and I did not deviate from that over 25 years. The financial advisor comes in handy by helping you project how the returns on those savings will build the foundation for your retirement, then map out the progress over time so that you know how much you may expect to have at a point in time and how long that will last. This disciplined approach allowed me to consider myself financially independent in my mid-fifties and facilitated this “relaunch”.
As you approach the “relaunch” stage, it is important to consolidate the retirement principal into a readily convertible (or liquid) asset – best not to tie up your wealth into assets that are complicated to transact quickly in the event of need. We had a number of real estate investments that we sold before the “relaunch” event and moved it into much more liquid assets in the bond and equity markets. We also took out the mortgage on the home we were living in to simplify the overhead we would manage.
An appropriate budget in retirement
It is also important to have a realistic view of what your expenditures will be in the next phase. I monitored our spending for the three years before the “relaunch” to understand where our money was going and rebuilt the budget several times. You are not necessarily going to spend less if you no longer work or work less. More free time means more time for travel and entertainment, so don’t expect your spending to dramatically decrease, which is another good reason for simplifying the overheads.
But the financial foundation is only one aspect of executing on the soft landing. Upcoming is my thoughts on how to emotionally and mentally prepare, as well as build a new life around you outside of the work you have been doing for decades.