Over a 15-year period at the end of the 20th Century, I enjoyed moderating my organization’s pre-retirement planning seminars. We targeted workers age 50+. My predecessor had organized the seminar into a balanced array of topics over two days, focused almost as much on social adjustments in retirement as on optimizing the value of our corporate employee benefits. While executives were welcome, the session was mostly aimed at helping individual contributors with their pre-retirement and “as you leave” decision making.
The first day was mostly, but not entirely focused on accruing benefits, identifying payout alternatives, Social Security commencement, and coverage options, as well as securing needed “paycheck” and health coverage prior to and after retirement.
Of course, when we got to the 401(k) plan, the most frequent gripe was “why didn’t you tell us this 15 years ago?” And, of course, we had told them—they may have been preoccupied with life.
A few years later the menu expanded to include optimizing tax-favored funding for post-employment medical and Long Term Care (LTC) premiums, plus funding for out-of-pocket medical and LTC expenses.[i]
The first day started with the obligatory ice breaker of introductions followed by an exercise designed to discern each worker’s retirement priorities (and those of a spouse/significant other when present)—each individual would rank priorities, then the couple would collaborate, and finally we would combine scores from the entire group.
The top three rankings never changed and might still be top priorities in 2023—adequate income, good health, adequate medical insurance.[ii]
Retirement Prep Heresy? Maximize Outcomes, Not Income
That long-ago pre-retirement planning seminar came to mind as I read “Die with Zero,” a text on optimizing life, including the retirement years, by Bill Perkins.[iii]
In our post-SECURE[iv] environment, most every reader of 401(k) Specialist has frequently encountered the retirement preparation mantra: “Income is the Outcome”.[v] It isn’t how much you accumulate in savings, but the income it will provide.
In some ways, Mr. Perkins’ writing about work/life and save/spend balance flips the planning challenge to “Maximize Outcomes, Not Income.”
The author challenges the reader: “What is the best way to spend your life energy before you die?” His recommendations are very 21st Century. He recommends maximizing fulfillment, investing in experiences over accumulating stuff (see the sidebar below for some highlights).
The author further asserts that the value of experiences compounds over time and throughout retirement as “memory dividends.”
Takeaways from My Seminars
When asked to come up with a consensus #1 priority in retirement, regardless of age, gender, marital status, etc., it was almost always the same: “Without good health, nothing else much matters.”
When I asked seminar attendees about their retirement planning, many acknowledged that they once had a goal of a double-nickel retirement (age 55), but now know they won’t be financially prepared. I hoped that they were following Mr. Perkins’ guidance.
Yet, “acquiring memories” may not be right for everyone. If the author reviewed my life and finances, he’d surely confirm I’ve failed, over and over. I certainly flunked his form of life optimization—as my employment has now continued into my 70s. He’d confirm that I have “squandered a considerable portion of my life energy,” that I won’t be able to “spend my accumulated savings before I die,” and that I have worked too long, saved too much, and missed too many opportunities for grand life experiences.
Yet, my regrets are few.[vi]
Some of Mr. Perkins guidance echoes our seminar send: “Life is Not a Dress Rehearsal for Retirement—Start Doing Some of Those Things You Are Dreaming About, Today!”[vii]
- In the end, the business of life is the acquisition of memories—what are you waiting for?
- When asked, “Do you have fears of running out of money?” Perkins responded, “I hope I run out of money!”
- (Make) the most of your adventure before it ends; maximize fulfillment across your life span.
- Balance living in the present with planning for the future.
- Timing matters:
- Identify the “peak utility of money”—when spending brings optimal usefulness or enjoyment.
- “Early” = now; identify experiences that are appropriate for today, now, when healthy and vibrant, ones that you might not be able to have later… what will become inappropriate if experienced too late, or missed once you become sick and immobile; overcome resistance by identifying the loss from missing out.[viii]
- Give money to children or to charity when it will have the greatest impact.
- The utility or usefulness of money declines with age.
- Life is the sum of all experiences—take lots of photos—once you are too old to acquire significant new experiences, enjoy reminiscing by “retiring on your memories.”
- People who save too much until too late in their lives deprive themselves today for a future self that may not live long/well enough to enjoy that money.
- “Peak wealth” is a date, not an amount, when further additions of money come at a cost of something at least as valuable—free time and good health.
- Whenever you shift and spend money, you are also shifting when and how much you save.
People who read these types of life optimizing books may have heard some of this before in two somewhat similar texts[ix] and, to a lesser extent, in articles on FIRE—Financial Independence Retire Early.[x]
How to maximize Outcomes without sacrificing Incomes (in retirement)? Start by ensuring participants maximize tax preferences, employer financial support, and the utility of their retirement savings by providing “liquidity without leakage along the way to and throughout retirement.” (xi)
SEE ALSO:
• SECURE 2.0: More ‘Impactful’ Stuff Plan Sponsors Don’t Need; Didn’t Ask For
[i] J. Towarnicky, Funding Retiree Medical & Long-Term Care for the Second Half of the 21st Century Solution: Make available and leverage all tax preferred savings options … then … save all you can! Society of Actuaries, Pension Section News, August 2020, Accessed 3/23/22 at: https://www.soa.org/globalassets/assets/library/newsletters/retirement-section-news/2020/august/rsn-2020-08-towarnicky.pdf
[ii] J. Towarnicky, Risky Business – Retirement Risk Taxonomy, 3/20/18, Accessed 3/23/23 at: https://www.psca.org/news/blog/risky-business-retirement-risk-taxonomy See also: J. Towarnicky, The “Other” Retirement Planning Model (First of a Series), 3/29/18, Accessed 3/23/23 at: https://www.psca.org/news/blog/other-retirement-planning-model-first-series See also: J. Towarnicky, Life is Full of Surprises, Life is Unpredictable*, 4/5/18, Accessed 3/23/23 at: https://www.psca.org/news/blog/life-full-surprises-life-unpredictable
[iii] B. Perkins, Die With Zero, Getting all you can from your money and your life, 2020, bmhbooks.com See also: N. Cavuto, B. Perkins: ‘Die with zero’ money to get ‘maximum fulfillment’ out of life, 3/20/23, Accessed 3/23/23 at: https://video.foxbusiness.com/v/6322977155112?playlist_id=937116503001#sp=show-clips
[iv] Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, Pub. L. 116–94, signed by President Trump 12/20/19 (as part of the Further Consolidated Appropriations Act, 2020)
[v] J. Towarnicky, Another Nobel Laureate in Economics Who Is Focused on 401(k) Plans, 1/29/18. Accessed 3/23/23 at: https://www.psca.org/news/blog/another-nobel-laureate-economics-who-focused-401k-plans-part-3-3 8
[vi] J. Towarnicky, I Did it My Way, 6/23/19, Accessed 3/23/23 at: https://www.psca.org/news/blog/i-did-it-my-way
[vii] J. Towarnicky, Life is Not A Dress Rehearsal For Retirement: Start doing some of those things you are dreaming about today! 9/18/18, Accessed 3/23/23 at: https://www.psca.org/news/blog/life-not-dress-rehearsal-retirement-start-doing-some-those-things-you-are-dreaming-about
[viii] H. Chapin, Cat’s in The Cradle, 1974. “My child arrived just the other day … there were planes to catch, and bills to pay … (and the final stanza) I’ve long since retired, my son’s moved away I called him up just the other day I said, I’d like to see you if you don’t mind He said, I’d love to, dad, if I can find the time You see, my new job’s a hassle, and the kids have the flu But it’s sure nice talking to you, dad It’s been sure nice talking to you.”
[ix] S. Pollan, Die Broke: A Radical Four-Part Financial Plan Paperback, 1998, Harper Business. ‘… Quit Today: mentally separate yourself from your employer and realize that you’re on your own. … do your best and focus on getting the best deal you can. Pay Cash: … you’re now in a new world … where excessive borrowing is the seed of financial ruin … pay cash whenever you can. … do not reach beyond your grasp. Don’t Retire: … Forget about retirement. … giving up this living death is actually an empowering act that opens up undreamed-of opportunities for your personal, professional and financial growth. … and, Finally, Die Broke: get the maximum use out of your assets and income … help your children when they’re young and need it most… I tell my clients that the last check they write should be to the undertaker … and that it should bounce. Ironically, by striving to die broke you guarantee you live well.’ ; See also: V. Robin, J. Dominguez, Your Money, or Your Life: 9 steps to transforming your relationship with money and achieving financial independence, 2018, Penguin Books. ‘… Did you receive fulfillment, satisfaction and value in proportion to life energy spent? Is this expenditure of life energy in alignment with my values and life purpose? …’
[x] FIRE movement, Wikipedia. The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement with the goal of gaining financial independence and retiring early. … The objective is to accumulate assets until the resulting passive income provides enough money for living expenses throughout one’s retirement years. … FIRE is viewed as a lifestyle … (a) basic template of combining a lifestyle of simple living with income from investments to achieve financial independence. Accessed 3/21/23 at: https://en.wikipedia.org/wiki/FIRE_movement
[xi] J. Towarnicky, Most Young People Should Not Save For Retirement in Their 401k, 10/4/22, Accessed 3/30/23 at: https://401kspecialistmag.com/most-young-people-should-not-save-for-retirement-in-their-401k/ See also: J. Towarnicky, Top 10 401k Plan Loan Myths, Misdirections and Misrepresentations, 2/17/21, Accessed 3/30/23 at: https://401kspecialistmag.com/top-10-401k-plan-loan-myths-misdirections-and-misrepresentations/
Jack Towarnicky provides independent benefits consulting and serves as a member of aequum, LLC and of counsel for Koehler Fitzgerald, LLC.
