Two men are sitting in a bar, and have been for a while. One of the men leans back on his bar stool to finish his beer in one gulp. He wavers for a second, and then continues backwards, falling to the floor and passes out. The second man looks at the bartender and says “I love it when a man knows he’s had enough to drink.”
In the last week, I have taken part in two different conversations concerning the question of enough. The first conversation was concerned with how much money is enough, while the second conversation was concerned with not having worked long enough.
In my first blog post, FOUNDATIONS OF RETIREMENT: THE THREE-LEGGED STOOL, I introduced the concept of enough. In that post, I talked about the three legs of a three-legged stool and how they represented the three different principles of enough. Those three principles are: Do I have enough money, have I worked enough, and do I have enough to do in retirement?
The first conversation concerned having enough.
When considering the three principles of enough, “Do I have enough money” is the most straightforward of the three. Establishing how much money is needed to retire is primarily mathematical. (Previous blogs have begun the process of establishing a retirement number, current net worth, and current annual spending, with a blog combining and coordinating this information to form a cohesive plan.)
Going through the process of finding current net worth, current annual spending, estimated retirement spending, retirement lifestyle, examination of current health status, and estimated longevity helps to define a retirement plan and focuses on what constitutes Enough in each of these areas.
These are the mechanical parts of how much money is enough. But, even after all of these numbers are derived, collated, and reviewed the numbers alone don’t provide an answer. This is because the question of how much is enough money is going to be different for every person.
One person may have $200,000 in savings and feel like that is adequate for all necessary retirement expenses. Another person may have $2 million in retirement savings and feel that a net worth of $2 million is not enough to fund the retirement lifestyle desired.
Another key issue here is longevity and health. Two people may have the same amount of retirement funds, with one being in excellent health and one being in poor health. The one in poor health will normally have more medical expenses, and potentially a shorter lifespan. The person with excellent health will conversely have lesser medical expenses and a longer anticipated lifespan.
In both of these cases, there will be both lifestyle and medical expenses incurred. For the first person, the consideration becomes greater healthcare and lesser lifestyle expenses. For the second person, the situation reverses with greater lifestyle and lesser healthcare expenses. Will either or both of these examples create unsustainable stress on a retirement portfolio? Will either or both of the people in this example be able to live a fulfilling and meaningful retirement life? How much money will be enough in each of these examples?
The answer lies in combining Net worth, annual retirement spending, retirement lifestyle, health, and longevity to create a retirement plan. If the plan is sustainable then technically the person has enough. If it is not sustainable it can be altered or modified to reach sustainability.
So why is it that some people who have reached Financial Independence continue to work and save long after they have reached the point where they could comfortably retire with Enough? (Financial Independence.)
Once the financial aspect of enough has been satisfied, then the consideration becomes mental and purpose driven. Each person must mentally convince themselves that the retirement plan they have formulated is truly sustainable, that they have Enough, that they have a mindset of gratitude, and can quit working at any future point with things to do in retirement.
It is very difficult for most people to reverse course after a lifetime of saving and accumulation. The thought of quitting work, decumulation, and spending hard-earned savings is very stressful. For many people, this is a major impediment to Retirement.
The decision retire concerns finances, but also concerns mindset and purpose. It’s not an easy decision This is why many people delay the decision to retire. Some people will delay the decision for years, creating the OMY (One more year) syndrome. Deciding if someone has Enough is not a casual or easy decision.
The second conversation concerned not having had Enough.
The second conversation I had was with a close personal friend. In addition to being a close friend, the person I consulted with is in the medical field. The problem he related was that he is not ready to retire. He stated that he likes working, feels he is still young enough to handle a full-time practice and does not have hobbies that he enjoys.
This type of situation is found often, and especially when consulting professionals. This group encompasses professionals with post-postgraduate training who own an individual business or practice. (I am most familiar with professionals, but this type of situation could be found in any business that is owned and managed by a single person or couple.) Most professionals work for numerous years building a practice and running a business. They are normally caring people, and channel their time, energy, and life forces into their chosen profession. This leaves less time for outside activities and hobbies. It is not uncommon for this group to reach the age of retirement without any consideration of discontinuing work, retirement, or retirement activities. In many cases, this is coupled with the fact that this group may have little or no financial training before entering the workforce. This becomes a double-edged sword for anyone who doesn’t want to quit working and is financially unprepared or unable to quit.
The task becomes one of applying the principles of Enough for a professional who has worked for many years but wants to continue working.
Is that a problem?
The second principle of Enough is Have I worked enough? In this particular situation the answer, as addressed by the professional, is no. He has not worked enough and wants to continue working in his chosen profession. This professional loves his profession, is still passionate about working and loves his staff and patients.
By his admission, he is also lacking in the third principle of Enough, “Will I have enough to do in retirement.” Many professionals reach retirement age with the realization that a career spent in their chosen profession has left little time for outside interests, passions, and hobbies.
For this group, fear of retirement and lack of purpose after leaving work become problematic. Professionals often work long after they are financially able to retire because they fear retirement and have no plan formulated for retirement activities. (They don’t have Enough to do in retirement.)
My answer to this professional was to follow his passion and honor his decision to continue working as long as he is comfortably able and willing to work. He still enjoys what he’s doing, and is struggling to find a purpose for post-retirement life. A second suggestion encouraged him to start exploring new hobbies, purposes, and possible activities before he retires instead of retiring into an uncertain future. He could also reduce the number of hours worked, which will allow the exploration of potential hobbies and the development of a purpose in retirement.
Two different sides of the principles of enough have been presented. As stated in FOUNDATIONS OF RETIREMENT: THE THREE-LEGGED STOOL, retirement would be easy if everyone retired on the same day with the same amount of money to do the same things. But life and retirement are not the same for anyone.
The realization of Enough is a personal decision that must be carefully thought out and determined by each individual.
It would be nice if there was a pre-decided path where plans are formulated and answers provided for all retirement questions. Unfortunately, the answers to retirement questions and the path to retirement will differ for everyone and these answers cannot come from anyone other than the individual approaching retirement.
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