by Richard Rosso, MS, CFP, CIMA
“I want everything you have. Every last drop.”
In the AMC’s hit series, “The Walking Dead,” the wolves represented a roving band of ruthless survivors. Unlike menacing characters of the past, the wolves were the most dangerous and cold-blooded yet.
Marked by the letter “W” on their foreheads, the wolves stalk and prey on human victims. They hunt silently through the woods and appear out of nowhere to confiscate possessions no matter how meager. They kill to bolster a living dead army and use rigged truck trailers full of zombies to trap unsuspecting trespassers.
Wolves (the four-legged kind) can shadow a food source for a week before attacking. Up to 100 miles a day. They’re known to bring down prey up to 10 times larger than themselves. A pack can “intimidate” larger animals. Wear them down by denying them access to food, water and shelter. They’ll nip at a victim’s flank throughout a hunt. Eventually a large beast gives up due to blood loss and exhaustion.
The wolves are beyond the line of sight yet always watching. They appear out of nowhere. They can take the shape of things you’ve grown comfortable with.
Retirees must stay vigilant against predators that wish to impair them mentally, physically and financially. After all, when no longer earning an income from employment and depending on a pool of invested assets for survival, one can’t afford to be vulnerable for long.
Recognize, Avoid & Beat The Wolves In Retirement
I notice that the most successful retirees have a rekindled appetite for life. After several decades at a job, those who hunt for new skills and experiences stay mentally and physically ahead of the wolves.
Dr. George Valiant psychology professor at Harvard Medical School and his colleagues have spent over four decades corresponding with hundreds of individuals from the Study of Adult Development.
Participants shared four key elements to a healthy, enjoyable and rewarding retirement:
Indoor, outdoor activities and travel. Anything goes. The healthiest retirees stick to a varied play regimen. They treat recreational endeavors seriously. Most of the retirees I counsel keep a calendar going out 3-6 months filled with a wide variety of activities from fly fishing in Colorado to Bingo at local venues.
Real wolves can play for several hours at a time. Physical activity makes them sharper for the hunt. Two-legged wolves in a sci-fi drama define play in ways I wouldn’t recommend for retirees (or anyone for that matter.)
For the first several years, many retirees are reluctant to fully embrace recreation. They feel the need to ease into it. Interestingly, new retirees share how they feel ashamed to play. They believe it’s unproductive. That’s why I help retirees alter their perceptions. We outline and discuss activities which improve other areas of their lives. Every element of play is defined by its ability to enhance mental or physical health. For example, a trip to Colorado may improve Type 2 Diabetes because time will be spent undertaking healthy activities like hiking and exploring fresh or organic food restaurants.
Retirees with an appetite to stay young pursue engagements that consistently stimulate their brains and emotions. Writing, painting, photography and gardening are popular with retirees I counsel. Learning to cross boundaries builds an awareness and appreciation of living.
I request pre-retirees document the creative boundaries they wish to cross during the first three years of retirement then hold them accountable through something I call “lifestyle reporting.”
The exercise is crucial to their ongoing financial planning process. Self-discovery begins with three paragraphs motivated by three questions:
- How will you nourish your soul during retirement?
- What actions do you believe will take you to another level physically and mentally?
- Describe your first creative step. How will you take it?
Along with crunching numbers and stress-testing portfolio withdrawal rates, it’s important for me to challenge people to think outside the employment box they’ve lived in for so long. Mentally strong individuals give themselves permission to stretch their imaginations and try things that help them feel a sense of accomplishment throughout retirement.
Don’t drop out.
A long-term focus on the pack or who you spend time with during play will make a difference to quality of life. Retirees who make the effort forge new friendships and strengthen existing relationships are on a path of enrichment.
Retirees are embracing social media to stay in touch. I’m witnessing usage lead to frequent communication with grandchildren, former high-school classmates and long-lost friends. Retirees are not on social media to isolate from the outside world. Facebook is used to set up face-to-face meetups. I observe Retirees are sharing (pinning) photos of hobbies, crafts and other projects with others on Pinterest and discovering new projects to undertake. As one retiree said “Pinterest reminds me of a living community bulletin board. The images and ideas shared are stimulating.”
Never stop learning.
The hunger for knowledge grows for young-at-heart retirees. There’s a renewed energy to take on education defined by the desires set aside to raise a family, build a career.
Ongoing learning grows in importance. Retirees are taking on new languages, participating in cooking classes, studying literature, embracing new physical exercise adventures like hiking, skiing and honing skills like writing to keep their minds active.
Retirees are embracing virtual reality to engage their minds. A site www.learningadvisor.com is an educational hub perfect for retirees and popular with several clients. Through their “open learning” initiative, there is access to over 1,300 web pages of free and accessible education from universities around the world. Most topics from art to finance are represented from accredited and respected universities like M.I.T.
Through www.masterclass.com, retirees are taking instruction on acting from Dustin Hoffman and writing from best-selling author James Patterson. For an affordable $90, there is lifetime access to online classes which include video lessons and interactive learning tools.
“I like this. Just talking.”
In the opening scene of the season 5 finale of The Walking Dead, one of the Wolves comes up slowly on a traveler in the deep forest. Sits down across from him calmly and begins a conversation like a long-lost friend.
With that in mind.
Beware of wolves who minimize the long-term impact of the financial crisis.
In the face of short-term zero interest rates and below-average rates on longer-dated fixed investments like bonds and CDs, retirees are increasingly receptive to taking on more risk to principal.
Unfortunately, the wolves now gather in every investment regardless of traditional risk definitions. Think about how much risk you take to achieve 3-5% returns today compared to a decade ago. Nobody knows how and when the Fed will unwind from extreme accommodative policies. Bonds and stocks are more erratic as markets transition from Federal Reserve dependent to a focus on fundamentals again.
As stocks and bonds are both expensive based on historical measures, there is no such thing as a safe haven outside of cash. Retirees must understand that financial pundits who tell them different have become wolves.
Frankly, experts have grown nescient. Economists have written off the “great recession” and the worst post-WW2 economic recovery as “average.” They’re bending the numbers to suit their forecasts which showcases their lost touch with Main Street.
The majority have been wrong (big time) over the last 7 years. About everything. Pick a subject any subject: The direction of interest rates, GDP growth, inflation, corporate revenue growth, consumer spending.
The media talking point is how the U.S. stock market and economy can handle interest-rate hikes with minimal impact.
The commentary is pervasive.
- “Stocks rise in the face of rate hikes,”
- “The U.S. economy can handle the brunt of negative global headwinds.”
Can you hear the wolves howling through the media, trying to sooth you?
Put you off guard?
Averages and medians are great for general analysis but obfuscate the variables of each cycle.
The story is different today. GDP growth has been consistently below trend. Currently, wage growth is weak and productivity is below par, 1-in-4 Americans are on Government subsidies, and 76% of Americans live pay check-to-pay check. This is why central banks globally, are aggressively monetizing debt in order to keep growth from stalling out. In addition, we are aging as a population which doesn’t fair well for above-average economic growth.
The wolves of uncertainty are howling at the gates of your sanctuary.
In the face of “Brexit” or the UK’s break from the EU there is no historical precedent for the financial services industry to find comfort or cave to hide in. They are now exposed and you must be as diligent as ever.
Brexit itself long term is not going to break global economies. It’s what lurks underneath that concerns me.
You see, markets are beasts. They thrive on confidence, positive flow. Animal spirits, which can’t be measured by fancy mathematical equations, are what motivates the pack to strike.
Since the beginning of the year, something has been off. There’s been an invisible dark, wet blanket hanging over the world.
I coin it the ‘cycle of disgust.’
The masses have completely lost confidence in leadership. Whether it’s governments, central bankers, their bosses in fancy offices while they languish in cubicles. People are done. They are now galvanizing to fight back. The bombastic nature of the U.S. political landscape, the surprising vote in the U.K., the screaming low yields in the U.S. bond market, the signs are now clear.
Don’t ignore them.
Something is arising and it has big fangs.
Retirees can’t afford yet another significant negative financial impact. To keep the wolves at bay, regular meetings with an objective financial advisor to discuss risk management strategies are warranted right now.
At the least, portfolios should be prepared immediately for lower returns (sequence of return risk) and greater volatility going forward which means if you’re taking distributions, you and your advisor must monitor those withdrawals at least every three years to assess the repercussions of macro events.
I’m increasingly concerned about the group who retired at the beginning of the year. I’m already advising them that their distribution rates must be closely monitored, budgets tightened, especially since it appears that a cost of living adjustment for Social Security will be negligible in 2017.
To bolster cash flow, retirees should be receptive to part-time employment which combines their passions with a need for supplemental income. For example, I know a retiree who loves animals and gets paid for providing accounting services for a group of local natural pet food stores three days a week.
Single-premium immediate annuities that generate lifetime income can reduce sequence of return risk where low or negative returns are more likely to occur. The insurance of income for life will compliment a traditional portfolio and allow a retiree to manage longevity risk and help preserve retirement spending.
“I’m taking you too. And you’re not exactly going to be alive.”
Real wolves won’t warn you before they draw blood (unlike in fiction drama.)
Retirees are smart enough to master the beasts that lurk inside and outside themselves.
It’s important to remember that wolves show suddenly and are always beyond your vision.
Now’s the time to be proactive and recognize where they prey in your mind. Your heart.
And in your investment accounts.
Richard Rosso, MS, CFP, CIMA
Richard Rosso is the Head of Financial Planning for Clarity Financial. He is also a contributing editor to the “Real Investment Advice” website and published author of “Random Thoughts Of A Money Muse.” Follow Richard on Twitter.