William Bernstein and Charlies McQuarrie posted a strange article to Advisor Perspectives saying that people do not spend less when they retire. They fixate on 30% as the spending cut that doesn't happen.
Maybe it's me but I think the focus is more about not needing to fully replace income in retirement. I don't think people talk about flipping a switch to spending 30% less. They attribute part of the myth to mortgages, FICA and kids' tuition going away. They rightly say this doesn't all happen at once when we're 64 years and 11 months.
Yes, FICA goes away as soon as earned income stops, that part is not myth. Can you square up being mortgage free before you retire? I could see where some folks would peg their retirement date to paying off the mortgage like maybe the mortgage will be paid off at 65 years and 2 months and so someone retires at 65 years an 8 months to war chest their first few months of retirement. The way the world has evolved, even if a new retiree is long past paying tuition bills, adult offspring could still be on the payroll (crude way to put it, I know).
We've talked plenty of times about taking a bottoms up approach to working through expected spending needs and then revisiting periodically. Even if you're 70, have been successfully retired for 7 or 8 years I would do this. Is there visibility for something in your spending picture to change? The context could be favorable or negative. How resilient is your plan to some sort of negative and expensive surprise?
I say it constantly here but I think the key to resiliency in retirement is having income streams beyond an investment portfolio and fallbacks and the planning for this needs to start early. I don't think I will retire from what I do but at some old age my practice will be more of a small income stream similar to how my Del Webb Foundation gig is shaping up, both of which by then would probably be smaller than the rental income from our Airbnb.
As with a lot of things in life, the more you put into it (retirement planning) the more you will get out of it.
Michael Kitces and Carl Richards looked at advisor burnout. If you're an advisor reading this and you have truly hung your own shingle that includes operating the business and doing compliance then yeah I could see burning out on that. I outsource all that thankfully but even the little bit of compliance reporting that we have to do is no fun so I get that. As far as the advisor and portfolio functions, I have nothing for any advisor who doesn't enjoy that part of it. Look at this excerpt from Matt Levine;
My theory of exchange-traded funds is that they are an easy way to package trades. Anyone — any broker or financial adviser or individual investor — can think up a trade, and there are infinite possibilities. “Buy Tesla stock” is a trade, and “borrow money to buy more Tesla stock” is a different trade, and “buy Tesla stock and also buy Ford stock” is a third trade, and “buy Tesla stock and short an equal dollar amount of Ford stock” is yet another trade, and “buy Tesla stock and also buy some Dogecoin,” and “buy Tesla stock and sell call options on Tesla,” and “buy Tesla stock and also put options on Tesla,” and “buy Tesla stock and buy puts and sell calls,” and “buy Tesla stock and buy puts and sell calls but with different strike prices,” and “buy Tesla stock on Mondays and sell it on Wednesdays,” and so on, a tedious infinite list of potential trades just involving Tesla.
That is a doozy of a paragraph but it isolates why the work is so much fun, you have the opportunity to always learn new things and not captured in that passage is the opportunity to help people, I mean really help someone figure something important out. No matter how long you work in the field, those two opportunities will always exist.
To help with burnout, or as the guys said it might just be boredom, more generally, I would say regular, vigorous exercise can help as well as some sort activity that requires completely different thought processes. For me that is volunteer firefighting but there are infinite possibilities on this front to turn off being whatever your day job profession and then turn on your volunteer role. Both exercise and volunteering offer regular rebooting which I think can help with burnout.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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