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Chapter 5. Financial Security

“A big part of financial freedom is having your heart and mind free from worry about the ‘what-ifs’ of life.”

—Suze Orman

Financial advisors and financial planners are my partners in helping people plan for a sensible and satisfying life after retirement. I recommend you seek out one of these professionals to help you analyze your current financial position. They will use sophisticated software tools to help you determine where you stand today and what you must do to have a secure financial future. Online calculators are also available for those who want to attempt the analysis on their own, but for most people, working with a professional yields much more reliable results.

Whether you work with a professional or do it yourself, sound planning requires answers to the following questions:

 What is your net worth?

 What is your current rate of consumption? (What are you currently spending?)

 How much have you saved and what is the rate of return on those investments?

 What are your current sources of income?

 What income streams, including Social Security, will be available to you in retirement?

 If you are still working, how much longer do you plan to do so?

 If you haven’t started Social Security, when should you start taking benefits?

 Based on your health and family history, what is your life expectancy?

The answers to these questions are rarely straightforward. Reliable data about when you can safely quit working and rely on your savings and Social Security to fund your lifestyle requires a complicated formula and a bit of educated guesswork. Many variables must be factored in to determine the point at which your nest egg will be sufficient to provide what you need for the rest of your life. Even though you may plan to work into your sixties, seventies, or even eighties, things can happen. Life can change in a moment, and you want to be as prepared as possible. Because sorting out these twists and turns is challenging, I favor working with a financial advisor or other financial professional.

“Cessation of work is not accompanied by cessation of expenses.”

—Cato

There are hundreds of financial advisors and certified financial planners in almost every community in the United States today. Some are private, some are affiliated with banks, and others are with brokerage houses. One way to locate a private financial advisor practicing near you is to go to the Financial Planning Association (FPA) website (fpanet.org). Half of the FPA’s website is devoted to consumers. You will find a pull-down menu with guidelines for finding a planner near you, choosing a planner, and understanding the various ways planners charge for their services. You can also use the FPA site to better understand financial planning and how to prepare for a financial planning meeting.

Your local bank may also have a financial planning office. Many of the large nationwide banks have financial services available these days, some with whole offices devoted to retirement planning.

A referral from a friend, relative, or colleague is another excellent way to locate a financial planner. Ask around and get a few names. I encourage you to talk to several financial advisors and decide with whom you feel most comfortable. Finding a financial advisor is much like choosing a physician, a dentist, or a hairdresser. Once you have found some candidates, you may also want to cross-reference your list with your local Better Business Bureau as well as online reviews.

Make sure the person you select has relevant experience. Someone who works with clients whose net worth is over five million dollars will not be a good fit for a person who has saved $150,000. A financial advisor with a solid base of clients who are similar in profile to you is a good indicator of relevant experience. Ask how much money is under their management and ask for some examples of clients they are working with (clients can be described without giving away their identity).

Finally, assess the level of comfort and trust you feel in your gut when you are with them. Do they listen to your concerns? Do they disclose their own values and strategy around investing? What experts do they rely on? These are the important criteria for a long-term relationship, or even a few meetings.

If you need to seek low-cost or free advice, most regional FPA chapters perform sporadic pro bono work in partnership with a community service agency or college in their area. You can inquire about those services and special events through the local FPA organization or find a workshop led by a financial advisor through your local community college or adult school.

When you speak with a financial advisor, be sure to mention you don’t have children or nearby family. These professionals are seeing more and more people who do not have local support, and they are becoming more adept at recommending good options and safety nets.

A key decision you will have to make, if you haven’t already, is when to start collecting Social Security benefits. From the time of its inception until recently, conventional wisdom dictated you should “start taking benefits as early as possible (age sixty-two).” Why? In past years, with a life expectancy of around sixty-eight, the actuaries calculated that the average person would ultimately collect more total dollars by taking benefits early than if they waited until full retirement age or later, even though the monthly payout would have been much larger had they waited.

However, what made sense in 1980 doesn’t make as much sense today. Life expectancy has risen sharply and many people can expect to live well into their eighties and beyond, which makes the larger monthly payout a carrot worth the wait. I encourage healthy people to wait as long as possible, continuing to earn an income as long as they can, need to, or want to. For every year beyond full retirement age (sixty-six or sixty-seven for baby boomers) your benefits will grow by approximately 8 percent per year until you turn seventy. For many people, the monthly payout at age seventy is almost double what they would have gotten at age sixty-two.

If you are married or divorced, when you are of full retirement age, you may be able to draw a spousal benefit from your current or previous spouse’s Social Security account. Depending on your income history, those spousal benefits might exceed the money you would collect from your own account, even at age seventy. If so, there is no need to wait beyond full retirement age, because spousal benefits do not grow over time. Even if your former spouse has remarried or passed away, if the two of you were married for ten years or more, you are entitled to spousal benefits. Spousal benefits are half of what the spouse collects (or would collect) at full retirement age, regardless of when they filed for their own benefits.

Social Security is complicated and changes have been made to the system in recent years. There are many ways of drawing the benefits to which you are entitled, and I encourage you to talk to a specialist in this area so you can file in the most advantageous way possible. You can do this by making an appointment with a representative in the Social Security office near you or with a financial advisor who has Social Security expertise. For a look at your account, go to the Social Security Administration (SSA) website (ssa.gov). You will discover the amount of money you can expect each month, depending on when you file and start collecting. The SSA website also has a record of every penny you have made, starting with your first paper route or summer internship.

Another element of this equation is how much income you need at this point in your life. Choosing the best time to retire from your midlife profession is not always easy. Many employers will allow you to work part-time, which can be a great first step toward leaving for good. You may also discover you can live on less income than you could as a younger person. Maybe you’ve paid off your mortgage or maybe you have grown tired of some of the expensive hobbies and “toys” (e.g., motorcycles, ski boats, etc.) you acquired during your younger days. You may also be expecting an inheritance at some point in the next few years. Financial advisors have formulas and calculators to help factor in all of this, and more, to provide you with a solid understanding of your personal financial condition.

You may find you are looking forward to leaving your job of thirty years, but you still need an income. Do you have a hobby you can turn into a business? What might you teach at a trade school or junior college? What side interests might have prepared you for a different kind of job? These pursuits rarely pay what you were making in midlife, but what they pay may be enough to bridge the gap between Social Security and the money you need to maintain your standard of living.

As someone who is child-free, no matter your need for income at this point in your life, the social and community aspects of working may be even more important than the money. Chandra’s story illustrates why people often choose to continue working, even when they don’t need the income.

When Chandra turned sixty-two, her financial advisor told her she could retire from her job in marketing. Thanks to some solid early investments and a small inheritance from her parents, Chandra could live comfortably on the money in her retirement accounts for the rest of her life. However, as a single, healthy child-free woman, Chandra was aware that occasional lunches with friends and a yearly international vacation were not enough to keep her brain stimulated and provide regular contact with a wide variety of interesting people.

Chandra’s employer did not have a part-time position available for her, but they did offer to bring her in on a contract basis. So, Chandra quit her job and returned to the same company on a project-by-project basis at a lower rate of pay than she had been making. Some weeks she went into the office four days, some weeks only one or two.

Initially Chandra rejected the prospect of making an hourly rate that was less than she had been earning on salary. The offer felt like a demotion and a dismissal of her value to the company. Ultimately, though, she realized the new arrangement opened the door for her to have a much more interesting and varied life. When she worked, her time was less regimented. In addition, she often found opportunities to help younger employees or those newer to the job, which was gratifying to her.

Our needs in a job change as we get older. By being willing to let go of her previous ideas about titles and her value to the company, Chandra constructed a very satisfying life for herself in her seventh decade.

Sometimes the pursuit of adventure and a life with maximum satisfaction can end up at odds with the quest for financial security. Janet’s story illustrates a life filled with travel and variety, one that might not carry enough certainty for most people, but it offers a glimpse into the choices that must be made at the juncture of life satisfaction and financial security.

Janet was twenty-one when a small US carrier that did international charter flights hired her as a flight attendant. It was her dream job, having grown up in a small, working-class town in Pennsylvania, and she was excited about the life it would offer her. Janet was outgoing, athletic, free-spirited, and wanted to see the world.

She flew for ten years, eventually becoming a senior flight attendant. But visiting the same cities over and over grew tiresome and monotonous for her. During her free time, Janet had learned to hang glide and sail. She became an excellent hang glider pilot, and for several years competed in international competitions with the US Women’s National Hang Gliding team. However, sailing was her first love, and when she quit flying she moved to Florida to pursue work as a crew member on large, privately owned sailing vessels.

Janet started her sailing career as an onboard cook, working whenever she could, for both a large charter company in the Bahamas and for private yacht owners. It was hard work, sometimes fun, other times thankless, and after two years she decided she needed to move up the sailing “food chain” and get her captain’s license. She enrolled in a two-year program and while continuing to crew, she studied celestial navigation and other nautical skills necessary to take complete command of a large vessel.

In 1989 she completed her studies and her apprenticeship and was awarded her license to captain any vessel under two tons. By then she had forged relationships with most of the sailing community in South Florida, and through this network Janet began to make an adequate living as a charter boat captain.

In 1999, Janet began to feel a little unmoored herself, having never owned a home and spending most of her time somewhere in the Caribbean or en route to the summer ports in the Northeast. She began experimenting around with cooking and eventually started a side business preparing and delivering home-cooked meals. In 2004, Janet left South Florida and headed north, this time to a rural area outside of Chattanooga, Tennessee. She chose a spot on a mountaintop near a hang glider park, and with money she had inherited when her father passed away, built a small home with a guest cottage. At age forty-nine, Janet started her food prep and delivery business as a full-time occupation in a new community. Her new lifestyle also allowed her to move her eighty-five-year-old mother into the adjacent cottage.

The business was successful within two years, and with some interest from large food retailers, Janet figured she would eventually sell the business and use the proceeds to fund her life in retirement. It didn’t happen. When the 2008 recession hit, Janet’s business was hit hard. All interest from food retailers dried up and Janet decided to call it quits.

For the next five years, Janet worked at a variety of jobs to make a living, and between her mother’s Social Security checks and Janet’s small income, they did okay. However, none of the jobs Janet held were of lasting interest to her, so she talked to a financial advisor. Together they determined that Janet would be happiest, and do the best financially, back on the water. So in 2013, at age sixty-three, Janet resumed the sailing life, again taking jobs as captain or crew for large deliveries that paid well and allowed her to visit parts of the world she hadn’t previously seen. Her mother had passed away the previous year, so Janet had nothing tying her to Chattanooga other than a house she could lock up and leave. In addition, her mother’s passing had freed up the guest cottage, and Janet decided to rent it out for additional income. That worked well for her, considering how much she traveled. She also began to rent out the guest bedroom in her home on Airbnb. That added more to her monthly income, and today Janet feels secure that she will be able to enjoy a pleasant lifestyle with several income streams as she ages. Janet never was able to save any of the money she made, but she is still quite strong and healthy at age sixty-six, and looks forward to quite a few more years of sailing.

Janet’s and Chandra’s stories are very different, but the commonality is that both of them have carved out a life for themselves that is both meaningful and interesting. Janet needs to maximize earnings as best she can at this point, while Chandra will focus on doing what interests her today, regardless of what it pays. They are doing things differently from when they were in their twenties or thirties, and even though Janet doesn’t have the financial cushion Chandra can rely on, they each have years of experience to draw upon and, as you will see in many of the following chapters, “security” and a good life is not all about money.

NOTE: I am not a financial advisor or financial planner. In this chapter I have provided ideas and opinions about how to organize and stay on top of your financial affairs. I strongly encourage you to seek out professional advice before acting on any of the ideas or suggestions mentioned in the stories or narrative in this chapter.