Celebrate Retirement Planning Week: Create a “freedom fund”
Have you noticed that every day or week is dedicated to something? It was Siblings Day last weekend. There's National Doughnut Day (a fundraiser for the Salvation Army), National Hot Sauce Day (January 22), and yesterday was Scrabble Day. Among all the frivolity, there are some worthwhile campaigns, including National Retirement Planning Week, which began this past Monday.
The attention on retirement planning begs this question: Does retirement planning need an "awareness week"? Absolutely! While no one needs to be made more aware of doughnuts, anything that gets people to pay attention to something that will help them live a better life is worthwhile. As a survivor myself, I hope Breast Cancer Awareness Month pushes women to get that mammogram they’ve been putting off. As a financial advisor, I hope Retirement Planning Week pushes you to take a serious look at where you are today—and where you need to be when it comes to funding your future income. At the same time, I’d like to make a unique push for redefining retirement planning as most people think of it today.
When I first met Katherine ten years ago, she was enjoying a fantastic career at a large, global company. She was traveling the world, entertaining, and a living a high-end, high-cost lifestyle that included a sizable mortgage. She came to me to start planning for retirement. The challenge: she was already in her mid-50s. And while she was earning a bundle, she had almost nothing stashed away to support her once those big paychecks stopped coming in. The first time we met, I suggested we rethink her approach; rather than “saving for retirement”, I recommended she start building a “freedom fund” for the future. Katherine loved the idea. She looked at it like a credit card payment that had to be paid in full each month, and she was religious about her contributions.
Five years later, calamity struck. The company she’d been with for the bulk of her career went bankrupt and laid off 80% of its employees, including Katherine. At the same time, she was hit with a frivolous lawsuit and had to spend thousands of dollars to defend herself in court. Luckily, her freedom fund was at the ready. She was able to pay herself each month while she figured out her next career move, and she paid her legal fees without having to take on any debt. Within 12 months, she had reestablished her career—this time as an independent consultant—and was once again growing her freedom fund. She’s not looking to retire any time soon, but she’s paying off that debt to herself now so she can focus on enjoying life when the time comes.
At 65, Katherine is redefining “retirement.” Like many her age, she’s continuing to earn, but she stopped looking for a “job” the day she walked out the door of her last one. Katherine is part of the growing gig economy. While much of the coverage about this new way of working focuses on millennials, many pre- and post-retirees have jumped on the lucrative bandwagon of taking on a portfolio of work to bolster their income, and possibly delay retirement completely. For many, the Great Recession brought an unplanned early end to their careers, and they found themselves overqualified and, frankly, over the hill when looking for a new job. Like ‘Cassie’ in the classic musical A Chorus Line, they found they couldn’t take a step back from being a star to being just another player—no matter how much they wanted to be. They took a new approach to working and turned the job economy on its head. From consulting gigs to driving for Uber to freelancing, older workers are finding new ways to make ends meet and completely rethink how they view life after 65.
When it comes to retirement planning, there are two sides of the equation: what you spend, and what you have coming in. To have resources you’ll need, start your freedom fund today. Or take a fresh look at how you’re funding the plan you already have. If continuing to work after 65 is appealing, consider joining your peers in the growing gig economy. It can be a great way to stay mentally and physically active while keeping some income rolling in the door.
However you define retirement, realize that it’s a complex balancing act—emotionally, physically, and financially—that you should start thinking about long before you receive that gold watch. To make the most of it, view your retirement income as a debt you owe yourself, and pay it in full every month. By the time you do decide to stop working once and for all, you’ll be truly debt free, and the last thing you’ll need to worry about is retirement income. How’s that for retirement planning awareness?
Need help creating your retirement “freedom fund”? Email me today to schedule a time to chat. As always, I’m here to help.