Sunday, October 11, 2009

That Awkward Age

For many folks, the phrase "life beings at 40" rings true. 40 was a good year for me. I was finally starting to make some money, I had my own business going fairly well, and it seemed that I had started to figure out how life works.

Those were good years, but they didn't last all that long.

The next stage in life is somewhat more disquieting, and myself and a number of my slightly older friends are going through it right now.

Having friends who are 10-20 years older that yourself can be instructive, as you can see what issues and crises you will face in the next phase of your life, and if you are astute, you can learn from their mistakes (See, The Three Kinds of Learning).

Forty was fun. I had money, a modicum of youth, and retirement and its issues seemed a long way off.

Fifty is less fun. Retirement is not such a far-flung thing. You are now old enough to join AARP, and within the decade, you will be able to start drawing from your 401(k) plans. Real retirement is only a few years off, it seems. For those in their 60's, it is an imminent threat.

Many folks at this age struggle to figure out what to do for their retirement. It is an odd concept to a person in their 20's. A twenty-year-old, if told he could goof-off for the rest of his life, would have no hesitation or difficulty in figuring out what to do. Having a huge party would be the first thing. Maybe hitchhiking around the world. Or just hanging out.

But the pre-retiree can find themselves locked - like deer in the headlights - in a stasis of inaction. There are so many decisions to make, and unlike the 20-something, the retiree has to worry about whether each decision is the "right" one. Living on a fixed income means that you can't afford to make too many mistakes from now on.

Should we sell the house and move South? Or stay put? Should I retire this year? Or should I work five more years and put money away? Should I take an "early out" offer? Suppose I only live another 10 years? Suppose I get sick? Or my spouse?

It is a stressful time. And I call it That Awkward Age.

I have thought long and hard about this conundrum. Our later years should be more relaxing and stress-free, not fraught with worry about bank account balances and what is the "right" decision.

I think one way to look at the problem that may be illustrative is to invert the proposition entirely. Rather than look at this situation based on your age as measured by the time elapsed from your date of birth, look at it based on your age, as measured by the time remaining between now and your death.

In other words, rather than look at yourself as a 60-year-old, think of yourself as an 18-years-left. It puts a lot of these financial decisions in sharp perspective.

Of course, you might say, "How can I really calculate my time remaining on this Earth?" And of course, the truth is, you can't, really. But insurance companies do it all the time, and you can get a pretty good idea of your time left, without too much trouble.

To begin with, you can use the average life expencency numbers for people in the US. Average life expectancy in the US is 77.7 years. If you are a man, subtract a year. If you are a woman, add one. You can go down the actuarial tables and figure out a pretty good number based on your situation, health issues, and social standing. Add a few years if you are middle class and above. Subtract if you are poor. Add a couple if you are white, subtract a couple if not (don't as me why this is, but the actuarial tables say it is so). If you are in shape and exercise, add several years. Out of shape, subtract. Have children? Add a few. No kids - subtract. Smoke cigarettes? Subtract, subtract, subtract. And then look at your family history. Did your folks live long? What about Grandparents or siblings?

If you think about all these things, chances are, you'll get a pretty good idea of how much time you have left. And bear in mind the spread is not that great. Most folks kick off in their 80's. Few make it into their 90's (and often not in great shape). The oldest person in the world is like 114. Don't think you are going to live forever.

And this is a perception that many Americans have and one that prevents them from planning for the remainder of their life (which what retirement planning is, really). My Father, in his 80's once said he'd like to buy a condo in Florida, some day. "Maybe 10 years from now" he said. "Dad," I pointed out, "by then you'd be 95 years old, and probably dead. If you want a condo, go get it now."

But my advice fell on deaf ears. He was convinced (aided by our death-denying society) that somehow he would cheat the grim reaper - that he was the next Methuselah. He started talking about getting a dog. "Dad," I pointed out, "a dog can live 10-15 years or more! Chances are, it will outlive you!"

But such advice fell on deaf ears as well. Many elderly buy pets well into their late years, and don't bother to work out in advance who will care for the pet if they die or are forced into assisted living. It is tragic and totally preventable, if they only thought of their age in terms of "time left" instead of "time lived."

This concept is also useful to you in determining how to live YOUR life, as opposed to the lifestyle that others want to thrust upon you. I have been told by more than one busybody on retirement island that "You're too young to retire!" - as if (a) it was any of their business, and (b) they could tell how much time I have left to live. (one of the nice things about living on retirement island, however, is the knowledge that you will outlive most of the folks there. I can smile at even the most annoying senior there, knowing that within a year or two, I will be attending their funeral).

The sad mistake many retirees make is assuming they will live forever. In the RV and Boating magazines there are always RV s and Boats for sale, bought by retirees and never used, with the notation "illness forces sale".

If you want an example of what I am talking about, rent the movie "About Schmidt". The movie is a bit of a litmus test, as it is a very, very dark comedy. When someone tells me that they "didn't get it" or that it was "too depressing", it gives me a pretty clear window into their lives. They don't like the movie, simply because it is too close to home - their lives mirror those of the Jack Nicholson character.

(That movie also illustrates what I am talking about in my articles The Parent Trap and The Child Trap. In the movie, Schmidt feels compelled to try to control the lives of his adult children, keeping them, in his mind, as children and not allowing them to have lives of their own. The children, in turn, struggle to live independently of their parent's lives. It really is a very instructive movie. Plus it has very subtle RV humor.)

If you look at life in terms of time left you may find that you are not a 60-year-old, but rather a sprightly 18 (years left). Ask yourself what an 18-year-old would do in your situation. The answer is: Party!

Yes, the remaining years of your life should be spent relaxing and enjoying yourself, not worrying about money or trying to run your children's or grandchildren's lives.

For me, this means:

1. Have a home that is paid for, or low enough in cost not to be a burden or worry.

2. Having sufficient money in the bank to take trips and do things and enjoy myself.

3. Simplify my life by owning less "stuff" to take care of and worry about.

So, at age 50 (since birth, perhaps 25 time remaining) my goals have changed. In the next few years, I want to pay off all my debts and have a home that is mortgage-free. I want to reduce the number of possessions I own to the minimum. One or two cars, no boats, no toys. I want to have money in the bank and no responsibilities. I want to travel and see the world.

It looks like I should be able to do all of these things, with some work and with time. As a man makes plans, however, God laughs, as the old saying goes. So I keep in mind that my best planning can be usurped at any time by the almighty. But that does not mean one should not plan at all.

One thing I had to work through to achieve this plan is pride. Foolish Pride. Pride goeth before the fall. Pride can often stand in the way of making sound financial decisions. And I've seen this happen a number of time.

And that is the subject of my next article.