Picture this — it’s Friday afternoon, your work is done and you have the weekend ahead of you. But what makes this weekend different than any other weekend is that you have a two-week vacation following it. You wish your colleagues well, they express similar thoughts and you head toward freedom.
Of course, you’re excited! Travel, new experiences, time away from the mundane and time to recharge are all things to celebrate.
In the back of your mind, you know it’s temporary and you’ll be back at your desk before you know it. Maybe that’s part of the reason why the time away is special. It’s short-lived.
Now, let’s take this another step.
This vacation is different. You are giving your Friday goodbyes for the last time. When you awake on Monday, you will wake up when you want to wake up. No more alarm clocks. You’ll never head back to the office again.
For some, you’ve already experienced your last day at work. For others, it is a goal, but it’s not reality. At least not yet. We are talking about, of course, retirement.
One of our goals as your financial advisor is to help put you on a path to reaching your financial dreams. We take a holistic approach that encompasses many aspects of financial planning.
But what happens when you’ve reached those goals and you have the resources to retire comfortably? Just because you’re financially well-off doesn’t mean you are ready to embrace what can be a drastic new lifestyle.
In this month’s Market Commentary, let’s explore the non-financial aspects of your transition.
A recent story featured on CNBC.com stated, “Happiness in retirement is about more than account balances.” Sure, money is part of the equation. It reduces stress that can be brought on by inadequate finances.
But for those whose identity is wrapped up in their work, especially those who have built their company from the ground up, retirement can be an uncertain transition. Many of you delay retirement, opting to work well into your 70s or even 80s.
A 2013 British study cited in the aforementioned CNBC article showed that retirement may actually increase the risk of depression by 40%. Think about it — your routine has been interrupted, and the bonds you’ve formed with your co-workers will forever be changed.
All this can have substantial implications for your health. So, please, don’t overlook the psychological implications that may inevitably be a part of retirement.
Many of you are taking steps to ensure your financial well-being long after you retire. But as noted above, retirement is much more than just finances.
- If possible, transition into retirement. Recall the scenario above. You’ve worked a full week, it’s Friday, but you’ll never go back to work. It sounds enticing, especially if your job is just that — a job. However, a recent Transamerica study found that 61% of American workers hope to transition into retirement by shifting from full to part time. Yet, only 25% said their employers offer such options. A study last year by Merrill Lynch noted that 47% of retirees have either worked or plan to work in retirement, and 72% of pre-retirees say they want to work in retirement. Simply put, if you want to work or feel you need to supplement your retirement income, you aren’t alone. If your firm offers a flexible schedule, seriously consider it. If not, could you contract on a project-by-project basis, consult, or find part-time employment elsewhere? It will not only keep you busy, it will keep your mind sharp and supplement your retirement income.
- Talk to your spouse or partner. This is critically important. What do both of you want to get out of retirement? How can you get on the same page? How much time will you be spending together? In the past, you’ve been apart during your weekdays. But that will change. Find ways to integrate each other into your daily lives through activities you both enjoy. You may also want to spend time with your own friends and family. Consider mixing things up. Variety really can be the spice of life.
- Set new goals. You are embarking on a new venture. But unlike decades of work, your new life won’t have the structure it had before. That can be disorienting for many, creating drift and depression, and possibly magnifying health issues.
Consider coming up with an outline or schedule of activities. Having a daily or weekly plan can help prevent loneliness.
Keeping active via part-time work is one option. How about volunteering? What are your passions? Who or what cause would you like to assist? Your church or a familiar community organization can benefit from someone who has years of experience in the business world and decades of accumulated wisdom. In addition, volunteer work helps expand your social network, a network that can quickly fray when you no longer have the camaraderie your current job offers.
- “Eat well, sleep soundly and play often.” That’s the advice from veteran career coach Bill Ellermeyer. Bill says, “Happily retired people treat themselves like a good friend. They keep themselves well-fed, exercise at least three times a week, get proper rest and maintain strong social connections.” He’s right. Don’t isolate yourself. Stay active.
- Exercise. This is a subset of number four. Keeping busy enhances your mental capacity. If you can, incorporate some type of physical activity into your weekly regimen. If walking on a treadmill bores you, take short hikes or walks in the park. If it’s something you enjoy, you’re more likely to engage in that activity.
- Play with your grandchildren. If you have grandchildren, time with them is time well spent. That is something you intuitively know, but it’s also backed by research from the Institute on Aging at Boston College.
“The greater emotional support grandparents and adult grandchildren received from one another, the better their psychological health,” said Sara M. Moorman, an assistant professor at Boston College.
Finally, retirement isn’t a time to slow down. It’s a time to redirect your path and embrace new experiences. Take charge and don’t let circumstances dictate your future. It’s the key to a happy and fruitful retirement.
Switching gears: Happy birthday to the economic recovery
As June came to a close, the current economic recovery and expansion turned eight years old, the third longest since the end of WWII. That’s according to data compiled by the National Bureau of Economic Research (NBER), which marked the end of the Great Recession in June 2009.
A quick explanation — the NBER is the arbiter of recessions and expansions for the U.S. economy. It bases its calls on data that includes employment, sales, income and industrial production.
In a vacuum, eight years may not mean very much to the average person, so we offer some perspective.
Including the current economic recovery, there have been 12 such recoveries since WWII. The eight-year, or 96-month expansion, has only been exceeded by the expansion that began in 1991 and lasted 120 months, and the expansion that began in 1961, which lasted 106 months, or nearly nine years.
The shortest one managed to survive only 12 months. It began in 1980 and fell victim to then Fed Chairman Paul Volker’s decision to use monetary policy — sharply higher interest rates — to crush years of high inflation.
With the short explanation out of the way, you may be asking, “What does that mean to me and my investments?” Or, “The current recovery isn’t young anymore. Is a recession around the corner?”
Bear markets correlate closely with recessions, according to data going back to the mid-1960s. Expansions eventually come to an end — that’s a given. But they don’t die of old age. Instead, they historically come to an end due to economic excesses, i.e., the tech boom of the 1990s or the housing boom of the last decade. Or, the Federal Reserve raises interest rates too high too quickly, discouraging lending and consumer/business spending
One of the hallmarks of the current expansion has been its slow and boring pace.
For many who have seen wages stagnate or haven’t experienced the benefits from the modest-at-best expansion, there is one silver lining. The slow pace of the recovery has failed to stoke the euphoria in real economic activity that can sow the seeds of dangerous excesses.
It has also led to a super cautious Fed that has been slow to tap on the monetary brakes.
Economists have done a poor job of calling turning points in the business cycle. So, we believe you shouldn’t listen to anyone trying to predict when the next recession will set in.
What we can say is that most leading economic indicators suggest the odds of a near-term recession are low. Put another way, economic growth creates profit growth, which is a tailwind for stocks, even as rates gradually rise.
We can never discount unexpected volatility. But as you should know, the investment plan we’ve recommended for you takes unexpected turbulence into account.
Remember, timing the ups and down in stocks is rarely profitable in the long term. In reality, it only delays the day you reach your financial goals.
Table 1: Key Index Returns
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