What Can a Fishing Trip Teach You About Retirement Planning?
“Let’s head to the beach!” After several weeks going non-stop at work and with family responsibilities, I was in need of some rest. November is not an ideal time to relax on the sandy Outer Banks beaches. However, it can be the perfect time to head out on the open seas to bring home a bounty of fresh tuna or striper. My buddy JD rented a house in Hatteras and invited about a dozen guys down to spend a few days and to slay some fish! I counted down the days until I would be on the water reeling in some big fish!
But I had a problem. The last time I went deep-sea fishing, I spent most of the trip in a horizontal position. Motion sickness. Have you ever been seasick for several hours? It's not something you can just Alka-Seltzer your way through. This trip, I was determined to spend time with my guys building some good memories, not hunched over the side of the boat.
JD told me about motion sickness patches that can be prescribed by a doctor. He told me that I could simply visit my doctor, place the patch behind my ear, and all of my problems would be solved!
From my past experience, I knew I would need relief in order to enjoy this trip. But at the same time, other thoughts began to creep in...
Do I really need to get a prescription for this patch?
Does it really make sense for me to take time out of my day to go to the doctor?
Should I really have to pay a co-pay to see my doctor for a medication that (I felt) could be sold over-the-counter?
Is there a simpler, easier, less-expensive “prescription” that could solve my problem?
Naturally, I went to the place you go when you need something quick and easy: Amazon. To my delight, they sold several patches to help with motion sickness. Quickly I found a 12 pack for under 10 bucks. The reviews confirmed what I had hoped to see. FOUR STARS! Dozens of strangers can’t be wrong! Yes! Two days later the small package arrived at my front door. Let’s get to the beach!
Coincidentally, my doctor was invited on the trip as well. The night before we set out, we were standing in the kitchen and bragging about all of the fish we would catch tomorrow. I proudly pulled out my 12 pack of Amazon patches. His look turned skeptical. He snatched them out of my hands and turned to the back of the package to look at the ingredients. After about five seconds, he tossed them back on the counter and declared: “Well, this is not gonna work.”
What do you mean? Four stars on Amazon?!? I tried to mask my shock and disbelief as I read the list of ingredients. I don’t remember them all, but there are three ingredients I do remember. The first was safflower. Ok, that sounds all-natural. Good. The second was frankincense. Well, if the wise men thought it is good enough for the King of the world, then surely it is good enough for me. But then I read the last ingredient: "etc." Yes, you read that correctly. The manufacturers in China actually listed "etc." as the final ingredient.
Maybe all of those years my doc spent in medical school actually paid off. Could he be right?
And still, I was optimistic as our boat left the dock early the next day. My optimism held until we reached the open waters and the rolling waves began to raise and lower the boat. The good news is that our boat caught several tuna on that trip, and have bragging rights over the other boat. The bad news for me is that I was not able to enjoy much of the trip because my patches did not work. Maybe we caught so many fish because I “chummed” the water. As it turns out, "etc." isn't a very effective ingredient in fighting motion sickness. The quick and easy “Amazon” fix did not actually solve my problem.
So what does this have to with retirement planning?
You may be approaching retirement and want to know you are prepared. When you leave work on your last day, you should have confidence in knowing that you’ve done everything possible to live retirement on your own terms. Retiring is easy. Staying retired can be difficult for some who do not plan wisely.
You are busy and strapped for time. Do you really want to go through the pain-staking process of determining your real expenses in retirement? You think your investments have done well. Do you really need to compare them to similar investments and a benchmark?
You may also be very well educated. Perhaps you are an engineer or a physician. There are plenty of great online resources and calculators to help you plan. Do you really need to seek professional help with your retirement planning? You have heard that good advisors can actually pay for themselves with tax savings, investment fee savings, and planning strategies. Can this be true?
Here is how you should approach your retirement decision:
1. Know the numbers. Know exactly how much you are spending, and build in reserves for those expenses that only come up once a year, or even every 5 or 10 years.
Know the optimal time and way to draw your Social Security benefits. Your decision can greatly impact your retirement, or your survivor’s future, should you pass away.
Know your risk tolerance to determine how aggressive your investments should be allocated, as well as the percentage of your investment you will need to withdraw each year. Is this amount reasonable?
Don’t take shortcuts. Do the math. Know the numbers inside and out.
2. Run different scenarios to evaluate options. Would you like to retire cold turkey? Would you like to work part-time somewhere after you retire from your career job? Would you like to spend more time volunteering?
You should work through various scenarios and evaluate options so you can plan accordingly. Your retirement can be 30 years or longer, and you only want to retire one time.
3. Structure your cash flow as if you are retired far in advance of your last day at work. Few people spend less in retirement than they did when they were working. Many people actually spend more, due to increased healthcare costs and more free time for travel and family.
Once you have estimated your expenses in retirement, you can test out your numbers in advance. Simply set up automatic transfers into and out of your main checking account so the net amount left over equals your projected expenses. Remember to adjust for any deductions currently withheld from your paycheck, and also for taxes. Your last day of work will be much more enjoyable if you know that you have been comfortably living on your retirement income several months, or even years, in advance.
Your retirement should not be spent stressed out. Your retirement years should be focused on the people you love, while you are spending your days on what fulfills you. The “Amazon” fix can sound good, and perhaps it is right for you, but it can also leave you with an unsettled stomach when the volatility of the market rocks your boat.
You should have clarity and confidence in your retirement planning.
To learn about a man who lived out a “Perfect Retirement” check out a previous blog post to learn about the story of Maynard. What can Maynard teach you about retirement?