Questions From the Flight Deck:
• What do we do with large retro/bonus checks?
• Is a cash balance plan any good?
Meat of the Mission:
1. Never spend more than they make.
a. How?
i. Habit Patterns...
ii. What type of spending actually makes you happy?
1. Spend money on fun stuff; Leisure, fun, travel
2. Don’t spend money on stuff that does not add value – cut it out.
3. YNAB, EveryDollar or other apps.
4. https://www.iwillteachyoutoberich.com/
5. Amelie Riendle Podcast (Flight #44 and Flight #27)
2. Prepare more, plan more...
a. What do you want to do in retirement? You can only sit on the beach or play golf so much.
i. The #1 thing people do in retirement is watch television! Michael Finke
b. Know your retirement needs...it’s expensive!
i. Start a financial plan now to know your “number” for how much to save to meet your retirement financial goals. Don’t let it be a lingering question.
c. Simulate (software), practice...take some time off and live on the retirement budget.
d. Deliberation, Planning and Intention in and of themselves make people happier in retirement: (Michael Finke)
i. E.g., Those that retire in accordance with their plan vs. Forced retirement.
1. Both experience happiness, but forced retirement is a delayed happiness (3- 4 years)
ii. E.g., Those that move after retirement...not b/c they move but because they had a deliberate plan with intentionality.
1. Control vs. Out of Control???
2. Michael Finke says “Invest in Imagination”
3. Never compromise their health: exercise and eat right.
a. Exercise not only helps you feel better in retirement but also helps mental capacity and cognitive health.
i. Flight #58
ii. Exercise and the Brain: The Neuroscience of Fitness Explored.
1. “Exercise stimulates neurogenesis – the creation of new neurons – primarily in the hippocampus, influencing memory and learning while increasing key mood-regulating neurotransmitters. It also enhances brain plasticity, essential for recovery from injury and aging, and improves cognitive functions such as attention and memory.”
iii. Estimated that average couple will need $315k to cover medical expenses in retirement, excluding LTC (https://institutional.fidelity.com/app/item/RD_13569_42402/retirement-planninghealth-care-costs.html)
4. Invest more in their relationships and always work to build new connections. (Michael Finke)
a. “Dude...you’re not as good at retirement as the women are.”
b. Invest in relationships outside of work.
c. Strongest predictor of life satisfaction during retirement:
i. Relationship with your spouse – huge impact, good and bad. Highest statistical significance.
1. Marital counseling to prepare...? (Valuable investment)
ii. Friends – Second highest statistical significance.
iii. Your kids – not as significant...statistically and FB comments online.
d. Takeaway – Invest in your marriage...invest in friendships outside of work.
5. Plan, prepare for taxes...it is a large (frustrating) expense.
a. What are the financial AND emotional costs of paying too much taxes in retirement?
i. RMDs – when not needed?
ii. Legacy planning: Roth, 529, Brokerage account.
iii. Practical side: HSA, Roth, Cash, Taxable Brokerage
6. The right mindset – what is money? It does not make you happy...
a. Money is paper or numbers on a computer screen...E.g., bricks to build a house.
Pre-Retirement:
b. Don’t allow money to make you miserable...
c. Examples of how money ALONE has made people miserable
i. By chasing after it too much...like a trophy
1. Airlines are great b/c fly more = more pay. BUT...
ii. Money is a tool to reduce stress and increase your enjoyment...there are other tools!
Post-Retirement:
d. It’s okay to spend your retirement money on frivolous stuff...
i. Example, people spend from pensions but not on IRAs, 401ks. Defined Contributions versus Defined Benefit.
ii. Finke example: Mom has a pension and spends every dollar happily, but refuses/hates to draw from her IRA
e. Understand what truly DOES make you happy in retirement – you must invest in these three things:
i. Finances
ii. Health
iii. Relationships
7. Realize there are things that you cannot control – Realize that you have more control (of other areas) than you realize:
a. Example – Short term stock market gyrations versus your own personal inflation.
b. Example – Our country's debt crisis – saving more to prepare.
c. Example – Higher inflation and taxes in the future – save more to prepare.
d. If things go really badly – you'll be glad you prepared, saved, etc.
e. Example – MGP “bad timing” scenario – 2008-type retirement for airline pilots at age 60.
Summary: Three Pillars: Health, Relationships, Money. Invest and plan for each!!!
Facebook Group: Retired or Thinking Retirement – Michael Finke. “...Lurker for a couple of years...For those in retirement if they could turn back the clock five years what would they have done differently...Roth IRAs/HSAs all over the place.
8. Be an Ant during working years and be a Grasshopper in retirement (up to a point). Though Aesop’s fable is regarded as a lesson in thriftiness, “grasshoppers” are likelier to smooth their spending over their lifespans. Don’t wear thriftiness as a badge of honor- you saved to consume later- hint, it is now later!
https://www.aaii.com/journal/article/grasshoppers-and-ants-in-retirement
9. Don’t compare (especially finances) – live someone else’s values.
a. Comparison is the thief of joy!
i. From this article:
ii. “Feelings of jealousy, frustration, and hopelessness emerge if comparisons continue. If left unaddressed, chronic anxiety and depression can stem from such behavior.”
iii. Avoid comparing other peoples' "outsides" to your own "insides"
b. When, if ever, is it okay to compare yourself to someone else?
c. How to prevent comparison from limiting your success and peace of mind?
10. Even if we do not want to think about it, our mortality is real. Should we spend the money today or wait until tomorrow? How many pieces should I cut “the financial cake” into not knowing how many years we shall be here. Very few get to spend the last dollar at the last second of life. How do we create a good retirement under so much uncertainty?
a. Consider your legacy not “at the end of life” but 50 years from now. Helps to consider mortality and legacy that you want to leave financially.