The Baby Boomers have arrived at the retirement stage and like every stage of life they have gone through, it is going to be different for them. In fact, one financial institution has already given them a new name, “Generation I” with the “I” standing for “income.” As the Boomers approach retirement they are confronted by many circumstances different from their parents’ generation:
- They have spent more and saved less
- They want to retire earlier and expect to live longer
- Markets have not been kind to them in the last decade
- Interest rates are at an all time low
Perhaps Yogi Berra has some nuggets of wisdom for Generation I. He is one of the most quoted personalities of our time, so let’s see how his “Yogi-isms” apply to retirement planning.
- “It ain’t over ’till it’s over” – Longevity is becoming increasingly important as retirees try to stretch our retirement assets over two or three decades. Most people don’t have defined benefit pension plans so there is a real possibility of outliving their income. But how much time do you want to spend managing your money when you are 80 years old?
- “I usually take a two hour nap from one to four” – Having enough income to live comfortably is where most people focus their attention but preparing for a different lifestyle where every day is like a weekend presents challenges as well. How many games of golf do you really want to play in a week and what do you do in the other seven months in Saskatchewan?
- “It’s Déjà vu all over again” – Maybe not. If Boomers are looking at their parents’ retirement as a reference point they may be disappointed. Their parents retired with little or no debt, were older, less active, and accustomed to living with their means. Interest rates were much higher and annuities were a popular choice for guaranteeing lifetime income.
- “When you come to a fork in the road… Take it” – What to do? Leave your money in equities for better potential returns to fight inflation or move to fixed income assets to counter volatility and uncertainty. Should annuities be considered? What about these new Guaranteed Minimum Withdrawal Benefit plans? Saving may have been difficult but spending may be harder.
- On why New York lost the 1960 series to Pittsburgh “We made too many wrong mistakes” – If you make a mistake when you are still earning an income, you can adjust and recover. Mistakes made during retirement often have permanent consequences. Not having the right asset mix, spending too much too soon, or not factoring inflation into your plans can leave you wanting later on.
- “You can observe a lot by watching” – Look around and see how others have prepared for retirement. Did they discuss how spending 24/7 together will impact their marriage? Are they counting on their kids looking after them when they need long-term care? Do they have a retirement budget? Did they start with a retirement spending plan?
- “The future ain’t what it used to be” – For some who retired in the last two to three years, their future is not what they thought it would be. For others retiring without a retirement spending plan as a guide, their future is a moving target changing with markets, interest rates and unforeseen challenges.
- “If the world were perfect, it wouldn’t be” – You can’t plan everything but you can start with getting expert advice from someone who specializes in retirement spending. It is a different skill set than providing advice on accumulating assets because new factors like sequence of returns, survivor income and estate planning must be incorporated.
When is the right time to start your retirement spending plan? When Yogi was asked what time it was he asked “You mean now?”
He also said, “It gets late awfully early around here.”