In chapter 8 of Retirement Remix, author Chip Munn explores living arrangements (location, location, location) and retirement strategies.
You may have a clear idea about exactly what you want to do with the rest of your life. It may involve some version of continuing to do what you’re doing now. We can call this the Stephen King model. He loves to write and has indicated that’s exactly what he intends to keep doing until, as he says, God tells him to do otherwise.
If this is the case, then the task before you is to arrange your life and your finances so that you can keep doing what you want, whatever that may be.
Your vision of the future may be something very different from what you’re doing now. We can call this the Jack Ma model. You want to exit your current career (though, like Jack Ma, perhaps maintain a residual interest) and start something new. You want to teach, or launch a new company, or buy a sailboat and cruise the Caribbean.
If this is the case, as in the previous example, the task before you is to arrange your life and your finances to make the transition possible.
Your vision of the future may be hazy. You haven’t decided what you want to do. You know that you want a change, you’re just not sure what direction you want to go in.
This could be okay if you were twenty-five years old and backpacking around Europe. It could also be okay if you had so much money that it didn’t matter what you did because you couldn’t spend your dough fast enough to deplete it.
We should all have such a problem!
The vast majority of people in late adulthood are neither backpacking around Europe nor living like King Midas. They have some wealth but not enough to squander frivolously. Their resources need to be carefully managed. They have skills and experience, and want to keep using them, and even develop new talents.
Perhaps most importantly, they know that to take an Old School Retirement—quit working—and then go home and sit in front of the television set all day is a recipe for early death. Statistics prove it. If retirement from work means retirement from life, then they will get their wish: They will be retired from life much earlier than they want.
If this sounds like you, never fear. The fact that you’re reading this book means you want a change, but you’re not quite sure to what. You want to stay active and involved, but you’re not quite sure how.
The retirement remix approach will help you find your way.
The Importance of Financial Planning
The one thing you need to understand is that while you may be uncertain about what you want to do with the next thirty years of your life, you will certainly face three realities:
1. Your earned income is likely to drop and may end altogether. This depends on your industry, your job, and to what extent you want to, or are able to, keep working.
2. For your income, you will increasingly be dependent upon your savings, investments, retirement funds, and other non-renewable sources. While you might see an increase in value from a rising stock market, you might just as well see a decline. As of this writing, we’ve experienced the longest bull market in history, and retirement funds are healthy. But remember, in 2008 retirement dreams quickly became nightmares. Stocks plunged, Lehman Brothers went bankrupt, and the government took over Fannie Mae and Freddie Mac. The Reserve Primary Fund suffered losses, destroying investor confidence in supposedly rock-solid money-market funds.
The Great Recession ultimately wiped out $3.4 trillion in retirement savings. It also brought stagnating wages, plummeting home values, a loss of job security, and the beginning of a decade of minuscule interest rates that made saving unprofitable.
When planning your financial future, this is why it’s not a good idea to depend upon a best-case scenario. It’s better to assume less than ideal conditions.
3. Your medical expenses will rise. As our bodies get older, they break down more often, and it costs money to fix them. That’s just the way it is.
Given these three realities, while your personal plans may be fuzzy, your financial plans need to be clear.
If you plan on continuing to work, then your financial future will be more flexible. But that’s no reason not to make a plan.
You can begin by building a worst-case scenario.
Add up your income from your various sources and include some earned income. Do not be optimistic! Don’t assume a rising stock market or that you’ll be able to keep earning at the same level you are now.
Then look at your expenses, especially your medical and housing costs.
Now take a big deep breath and ask yourself, “Do we need to downsize? Can we afford to live the way we’re accustomed to, or do we have to cut?”
Downsizing might actually be fun! Plenty of retirees have sold their big houses, bought an RV or a sailboat, and embarked on a new, nomadic life. Earlier in the book I told you about Gary and Julie Pierce, and how they sold their house and bought a sailboat, and then spent eight years cruising the Caribbean before buying an RV, which is what they live in now. Thousands of other people have done the same thing: They’ve sold their house and used the proceeds to fund an inexpensive nomadic lifestyle, or even, like the protagonist in the following story, to move to a cheaper part of the world.
Think Outside the Box—Or the USA
Some retirees look at their lives and say, “What would happen if I started from scratch? If I had no preconceptions about what my life will become? How would I choose to live? Where would I live?”
How about moving to Panama?
Yes, Panama. With lush mountains, beautiful beaches, rich biodiversity, and a capital city that rivals many US and European cities in terms of culture, atmosphere, and conveniences, Panama has become one of the world’s top retirement havens. On its 2019 annual list, International Living ranked Panama as the world’s best retirement haven. The benefits of retiring in Panama include the low cost of living, perks for retirees such as discounts on flights, restaurants, entertainment, public transportation, and utilities; and affordable healthcare. The currency is the US dollar, and while Spanish is the language, while you’re learning it you’ll find plenty of people who speak English.
It’s not so far away—every day there are dozens of quick, direct flights going to and from the United States. In terms of distance, if you live in New York, a move to Panama is no further than a move to California. And the advent of the internet has made it easy to relocate to nearly any foreign destination while keeping your stateside financial accounts because most responsibilities, like paying bills, can be managed easily online.
Recently MarketWatch.com profiled Mary Taft, a former Springfield, Massachusetts teacher and school administrator, who lives with her two daughters, seven cats, and two dogs in a mansion in Boquete, Panama. She moved there at age sixty-two. She loves it and has no plans to return to the United States. “Unless somebody dies,” she told reporter Catey Hill, “I don’t envision going back there. I have only been back once. I had to go to Miami to do some personal banking, I did the banking, and I got back on the plane.” In Boquete, you can live on about $2,000 a month. Taft noted that the lush, mild-weather town in the Panamanian highlands is “a place of indescribable beauty, and the culture is complex and vibrant. It’s not a sleepy town in the mountains; there’s arts and culture, birding, sailing, hiking, restaurants with chefs from around the world—it’s a foodie paradise. There’s so much going on here.”
She doesn’t just spend her time rocking on the veranda; she stays busy by serving on the board of directors at an animal-rescue nonprofit, Salvadores de Animales.
Of course, there are some drawbacks. You’ll need vaccinations against various tropical diseases, the process of establishing residency takes time, the pace of life is slower (things always get done “mañana”), and the habits of local drivers can be mystifying, but for Mary the benefits outweigh these drawbacks.
Panama not to your liking?
Every January, International Living publishes its list of the top retirement destinations in the form of its Annual Global Retirement Index. In 2019, the top nation was Panama. Number two was Costa Rica, with its tropical climate, natural beauty, low cost of living, high quality medical care, and affordable real estate. Number three was Mexico, particularly the Lake Chapala area and San Miguel de Allende, as well as most coastal retreats. Four was Ecuador, followed by Malaysia, Colombia, Portugal, Peru, Thailand, and Spain.
An interesting aspect to Mary Taft’s story is that she told International Living her cost of living, when everything was added together, was the same as what she had been spending in Springfield. She didn’t move to Panama to save money; she moved there to get more for her money. She has a much bigger house and, in her opinion, a much better quality of life than what she had been getting at home. So, when you look at your financial plan, you might say to yourself, “Okay, we have a budget of X dollars per month. Where should we spend it? What’s really important to us? If we could live anywhere, where would that be?”
On the other hand, many people have deep ties to the place where they grew up, long-term friendships, and strong feelings of belonging. They would never willingly leave their community. Apparently, Mary Taft and her two daughters had no problem moving to a foreign country, but not everyone feels that way. Many people entering their seventies or eighties would prefer to sell the big family house and downsize to an apartment in the same community, so they could maintain their existing social and work-related relationships.
As you make your financial plan, it all comes down to what you value. What do you want to keep? What would you be willing to give up?
Make a list. Write down your plan. Identify the top three things that you feel you must have in your future life. For example, your list could be:
- Productive and enjoyable work that generates some income. I want to work in ____[fill in name] ___ industry.
- I want to maintain the close friendships I’ve had for the past fifty years. This means staying in the community where I live now.
- I want to learn one or more foreign languages so that I can travel more comfortably and immerse myself in the local culture.
Now list the three things that you could give up:
- I don’t need the big house. I can live in an apartment.
- I don’t need the vacation cottage. I’d rather travel.
- I don’t need the boat.
You might not have to give up anything, but you may want to give up things that require time and maintenance.
According to your hypothetical plan, you definitely value your ties to your community. You want to keep working. You do not want to pull up roots and move to Panama, or anywhere else. But you want to spend more time traveling, and you’re looking at your residence more as a “home base” rather than the center of your life. Many people derive great pleasure from the home they inhabit, while other people take a more utilitarian view and just want a nice place to sleep at night while they spend their days busy outside the home.
For many people approaching retirement who want to make a change in their lives, one of the most significant concerns can be their children (and possibly grandchildren), and how these younger folks will fit into their plans.
To go back to “the old days” as a baseline, and even today in most non-industrial cultures, an older parent’s relationship to his or her children was never an issue. Two or three generations lived under the same roof or in the same family compound, and when parents got old they just kept living with the kids and grandkids until they died. The vast majority of people died at home, and often in the same room in which they had been born.
The advent of retirement in the post-World War Two era changed that. For the first time, retirees could expect to live well beyond their term of employment, and they had the financial resources to maintain their own residence—which could even be a new home in a location in a nice, warm climate.
The very first retirement community in the United States was established in Ryderwood, Washington State. Established as a Long-Bell Lumber Co. logging community in the 1920s, since the 1950s, it’s been a legal corporation and retirement community for people fifty-five and older. No children are allowed to live there. In 2009 it made the news because of a protest held by more than thirty Ryderwood residents who gathered at the Cowlitz Hall of Justice to rally for what they considered their right: to have their grandchildren live with them. As reported by TDN.com, they argued that Ryderwood’s governing body had engaged in illegal housing practices by enforcing a rule barring children from living in the retirement community.
Sally Gene DeBriae, one of five board members of the Ryderwood Improvement and Service Association (RISA), said the protesters simply didn’t want to follow the rules. The residents, she said, “Came here to get away from a loud, noisy community with a bunch of children.”
Well, at least she was honest!
The first planned retirement community was Sun City. Opened January 1, 1960, the Maricopa County, Arizona, town boasted five varieties of homes, a shopping center, a recreation center, and a golf course. It was an immediate success, drawing 100,000 people on its opening weekend. The company had planned to sell 1,700 homes in its first three years, but in the first year alone a total of 2,000 homes had been purchased.
Over the years, developer Del E. Webb expanded Sun City, and his company went on to build other retirement communities in the Sun Belt.
The concept, as the current Sun City website says, is that Sun City is a master-planned retirement community built specifically for active adults. In 1960, this was truly an original concept because up until that time, retirees were expected to “retreat from life—literally, to retire from it—so they could sit at home and rock away their golden years.”
Sun City offered the opportunity for retirees to “pull up roots, move to a vacation spot, buy a stylish new home, and surround yourself with fun and pleasure in a community of people just like you.”
At Sun City, you can play a different golf course every day of the week.
As for your kids, the Sun City rules state that at least one person per household must be age fifty-five or older, no one under the age of nineteen may live there, and there are various rules about visiting children and grandchildren. Above all, “Visiting children must not make excessive noise.”
At the time of its founding, Sun City was a revolutionary concept. It was a retirement Garden of Eden, where post-war white-collar workers could go and live the American Dream in a bubble isolated from the unpleasant Real World. It was a bold statement that said, “We suffered to get here, and now the fun begins! We fought the World War, worked in corporate America, and raised our 2.5 children. We did our time in the rat race, and this is our reward: A taste of heaven here on earth.”
Today, while Sun City and other retirement communities still thrive, the concept of retirement cocooning seems, well, a bit unimaginative and boring. Many of today’s mature adults want to get more involved with the real world and deepen their range of experiences. They like the joyous sounds of their grandchildren playing. They want to contribute to their community. They want to test themselves and see the world.
How you choose to communicate your retirement remix vision with your children is a personal matter. Every family is different, with their own expectations about sharing information. In general, you can help avoid hurt feelings, confusion, and family disagreements by having as frank of a discussion as possible about your retirement remix vision and how it will impact everyone’s expectations.
Discussing your retirement as early as possible helps family members become accustomed to a possible change.
If you become an RV or sailboat nomad and want to stay connected to your children, today’s technology allows you to have “virtual visits.” Video conferencing platforms such as Skype and FaceTime have become ubiquitous, so if you and your partner want to hike across the Himalayas, rest assured that even from base camp at Mt. Everest you can share video visits with your kids back home.
Perhaps the biggest area of contention will be the family house. Understandably, your children may have fond memories of the house where they grew up and may bristle at the idea of mom and dad selling it and moving to the Caribbean.
As you ease into the next phase of your life, when considering your family or vacation home, you have three choices:
1. Keep it and bequeath it to your children in your will. In this scenario, you’ll be choosing to live in your home until you’re physically disabled and they cart you off to an assisted living facility. This plan assumes you have enough money to pay for the house or vacation home even if you’re not using it. This plan requires well-adjusted, non-greedy children who will be capable of sorting out ownership after you die without suing each other.
2. Transfer or sell it to your children, who agree (if you want) to let you live there until you choose to leave. This avoids making the kids figure it out after you die.
3. Sell it and add the cash to your retirement remix operating funds. The children may or may not endorse this plan, but if you own the house, at the end of the day it’s your decision. And when it comes time to read your will to your grieving children, allocating cash to each is much simpler and less contentious than telling them to sell the house and divide the proceeds. There is no better way to encourage your children to sue each other than to ask them to sell the house after you die. The instructions and allocations you leave in your will must be clear and immune from argument.
Some children—particularly those who are self-supporting and own their own homes—won’t care if you sell the family house. But children who have anxiety about wealth and getting their fair share of the family assets may cause trouble. You know your children best, and you owe it to both yourself and them to be very clear about what you choose to do.
The above article originally appeared as a chapter in The Retirement Remix and is reprinted with permission from the author Chip Munn. No parts of this article may be reproduced without correct attribution to the author of this book.
You can find the full book here.