Tuesday, March 07, 2006

June 05. 2005

Retirement in the 21st Century is't like it use to be.

There are several stages in retirement.

  1. The early stage (the go-go years).
  2. A stage where people can no longer do all the tasks of daily living (the slow go years).
  3. Finally the nursing home stage (the no-go years).

During the early retirement, individuals have the most flexibility and can enjoy life the most: they can continue to work full time or part time, they do some things themselves rather than hire someone More importantly, during this time the amount of assets at that time has the biggest effect on sustainable withdrawal and life expectancy is the most difficult to determine. You should tend to be conservative in withdrawal rates during that period. During early retirement the client can enjoy his spending the most, but the trick is to not have the spending be too high or there won't be enough left for the no-go years.

With depression era people, the problem usually is not spending enough of their money. Many planners seem to have the issue of urging these clients to spend more, because depression era people believe they will never have enough. The baby boomer generation is another story. They have not ever had to go without or wonder where their next dollar would come from. They all spend too much, to early in retirement and on many things they really do not need.

I want my clients to understand the trade-off.

No comments: