Money, money, money – being responsible 2

Following Frank into Retirement – 3 Months to Go

A series of articles starting 5 months from retirement

By Frank

I have already mentioned my obsession with cash flow spreadsheets and my money worries.  Since I don’t want to blog it to death, I thought instead that I would share some bits of information that have eased my mind as a result of discussing our financial situation with family, friends, and our investment advisor.

 You say tomato, I say…

I quickly learned that everyone has a different opinion about what they need in retirement.  We’ve decided to keep our life simple, primarily because our lifestyle always has been simple.  We’ve never wanted to own a cottage or a winter retreat in the south, don’t take long or multiple exotic vacations, or even need two cars because of divergent interests.  We do want a comfortable, attractive house.  Some modest travel is desirable and comes with the bonus of getting to research and plan our trip beforehand. We also like to eat well (and feed people), so we’ve made sure there is plenty of room in the budget to buy those nice cheeses, lots of chocolate, wine and scotch, and all those exotic ingredients we need to create our favourite dishes.  I guess you could call us homebodies.  I’m sure our lifestyle would cause others to pale at the thought, but my point is that you have to figure out what you need to be true to yourself over the next few decades.  Buying into someone else’s dreams of retirement could cause you to either over- or underestimate the amount you need in the bank before retiring.

May you live to be 120

I expect that I will live to be somewhere between 85 and 90 years old.  Suzanne, on the other hand, is aiming to fulfill the Yiddish birthday wish of “may you live bis ein hunnert und zwanzig” (until 120).  My spreadsheet split the difference and mapped out all our financial needs until I was 100, at which time our only asset would be the house in which we now live.  When we met with our investment advisor, his canned software only calculated cash flows up to 90 years of age.  Although his model showed that we would have plenty of money left in our estate at age 90, it did not include about $100,000 that I anticipated we would need to fix up our house in 2036 or the cost of living for the next 10 years.  His answer set me back on my heels: “They don’t include capital costs past 80 or living expenses past 90 because there is no possible way for anyone to predict the future with any accuracy.”  Of course it’s important that you have funds to cover your living expenses, but will we still be physically able to live in our house?  Will we still want to live in our house?  Will the economy be up or down?  Will I eat a dodgy leftover from the fridge and shuffle off my mortal coil at age 72?  Much to my chagrin, we will just have to adapt as best as we can to whatever life throws at us.

Inheritance guilt

Besides being comfortable with our lifestyle, my only other major financial concern is not being able to leave a whack of cash to our children when we’re gone.  Our parents worked hard to provide for us, and our early retirement is partly owing to our inheritances from them.  My conscience has had a field day lecturing me about my duty to pass along to my children at least as much as our parents did to us (and of equivalent value, not inflated dollars).  Without money they will be nothing!  I was so perturbed by my guilt that I went to the root of the problem and asked my kids what they thought of our early retirement and the squandering of their inheritance.  While I did not expect them to say that we should work until we drop, I was relieved to have them honestly answer that, while getting some money later would be nice, they are not counting on it.  We should do whatever makes us happiest.  They are adults. They are getting their own lives going. We are responsible only to continue to give them the unconditional love, support and friendship as we all live our lives.

So, talk about your retirement plans with those people who are most important to you and whose opinion you value.  It will help shape your vision of retirement which in turn will make it clearer what funds you need to retire.  Since life has a way of mucking with the best laid plans, do your best, and then, in the words of Bobby McFerrin, “Don’t worry, be happy.”