Post Updated on August 19, 2024 by Taylor.
The concept of retirement has changed dramatically over the years. For a very long time, the role of retirement was, essentially, a short-lived experience. If you look at the actuarial tables for Social Security, many people were not expected to live that long. Today, we think of retirement planning in terms of a twenty–even thirty–year period that can be extremely fulfilling and very fun for a lot of folks.
At Four Points Wealth, we work with a lot of clients who are particularly active and adventurous. Perhaps it comes with the territory in Colorado, but I love that I get to work with this kind of clientele. Planning for a specifically adventurous retirement, however, shifts the lens of retirement planning in important ways. Adventure-seekers have specific goals and needs that differ from the traditional experience.
If you’re an outdoor enthusiast or active adventurer and are hoping that your retirement lifestyle reflects that, I want you to think about your retirement in three core phases:
The Go-Go Years: First 7-10 Years
The light just turned green on your retirement life and you’re ready to rock. You’ve been waiting for this and you’re already breaking out the bucket-list. This is the exciting part! You want to take advantage of it all.
Because of this zeal for adventure, whether it’s centered on travel or hobbies or both, there are some retirement planning considerations you’ll want to take advantage of before retiring.
This phase of retirement—particularly for enthusiasts—tends to be more expensive than life before retirement. You finally have time to engage in more of the activities that you love. And those activities cost money. You could be spending more time on a golf course, or investing in new mountain biking gear, or spending more on air travel and excursions.Your cash flow is going to feel radically different than it did pre-retirement, so you’ll want to make sure you’re prepared for the specific retirement lifestyle you’re dreaming about.
The Slow-Go Years: 10-15 Years Into Retirement
As hard as it is to imagine, our bodies naturally start to slow down at some point. And you’re likely to experience some kind of slow down in your mid-to-late 70s.
This is a phase when potential surgeries or injuries from years of activity could get in the way. On top of that, some of your gusto for travel might taper off. You’ve accomplished a lot in your go-go years and your desire for more might wane slightly.
In fact, just recently I was speaking with a client who was turning 75. He is extremely active, skiing 86 days during the 23/34 ski season and logging hundreds of miles on his mountain bike this summer. He had long complained of knee pain and now he was taking the step to take care of the pain. This requires him to undergo a knee replacement surgery. This surgery will take him out of his active lifestyle for about 4-6 months. While he’s nervous about the recovery time, he also understands that he’s slowing down a little.
It’s important at this stage in life to consider health expenses and other lifestyle changes. Financially, you should factor in less travel expenses and more medical expenses.
The No-Go Years: Approaching Your 90s
In your mid to late 80s, it’s likely that the idea of jumping on a 14-hour flight to see the world won’t seem as thrilling as it once did. During this phase, you’re probably going to spend more time at home.
Healthcare will be a major priority in this phase, as well, so you’ll want to prepare for that..
How to prepare for all three phases
Broadly speaking, if you’re considering an active retirement, there are a number of ways to set yourself up for success. The following are a few tips I offer my clients at Four Points Wealth.
Plan for an Adventurous Cash Flow
So many of our clients at Four Points Wealth were the weekend warriors. They put in their hard-earned time—and now that they’ve retired, they get to do all the fun things they sacrificed for. Mountain biking, hiking, traveling. These hobbies require additional capital.
As you map out your dream retirement life, consider how much money you’ll need to keep your hobbies front-and-center on a monthly basis. Understanding the cash flow for your favorite activities is important. It’s likely going to be over and above the traditional budget you’re used to having. That said, the bulk of it may only last for about fifteen years.
When you build your interests into your retirement plan, you don’t have to worry about overextending yourself or sacrificing what you love.
Consider Renting the Dream Before You Buy It
Big dreams are important. Making sure you’ll actually enjoy them is equally so. I’ve seen a number of situations where my clients’ vision didn’t meet their expectations, so they altered course. One piece of advice I give to all retirees is to, “try a dream on for size before going all-in.”
One couple I worked with took this advice to heart. They had a dream of buying a boat and sailing around the world. Before investing in that kind of purchase, they decided to spend 10 days island-hopping in the British Virgin Islands on a rental boat. They quickly realized they preferred a more terrestrial lifestyle. They didn’t love the ocean as much as they’d anticipated. So instead of spending money on a boat they’d eventually regret buying, they opted for a “land-boat” and bought a Sprinter-van. They still got the adventurous retirement lifestyle they wanted, just in a slightly different way.
Rent the dream before buying the dream. You could save thousands in the process.
Expect Healthcare to be a Major Expense in all Three Phases of Retirement
Plan to spend more on healthcare expenses than ever before during your golden years. About 50% of annual medical expenses are incurred by people over 55 years of age.
It’s something like 75% of your healthcare expenses are likely to be spent after the age of 65. In fact, a recent Fidelity report found that the average retiree spends about $315,000 in healthcare expenses after the age of 65. That’s an enormous amount of money. You need to be able to consider this when retirement planning.
Even my super active and healthy clients have had their fair share of unforeseen medical expenses pop up in retirement. It’s not entirely shocking. All those years playing baseball, football, riding mountain bikes, even golfing, can really take a toll on the body. I have a client who was a long-distance, ultra-marathon runner most of her life. She did everything she could to keep her knees healthy, but still needed double knee replacements. In fact, many of my older clients have needed some kind of joint replacement.
All of this to say: count on medical expenses.
You’ll do yourself a huge service if you look into what kind of Medicare plan makes the most sense for your family before entering into retirement. This is a big decision for a lot of folks. Working with a Certified Financial Planner can help you weigh factors like cost, coverage, and how long it will take to enroll.
Decide on the Long-Term Care You’ll Want During Your “No-Go Years”
This one falls into the health camp, but it’s an inevitable reality that your body will eventually need extra care. It’s a medical advancement paradox: we live longer, but we’re not necessarily declining any slower. This is often referred to as ‘lifespan vs. healthspan.’ If you want to dive into this deeper, I highly recommend reading the book, Outlive: The Science and Art of Longevity by Peter Attia, MD.
Ultimately, though humans are living longer, they are more likely to require long-term care, also called custodial care, toward the end of their lives. This can be home-based or in a residential living environment. Insurance companies define a need for long-term care when a person cannot accomplish two of the six essential daily tasks of living. We’re talking about activities like using the bathroom, eating, dressing, or transitioning out of a chair.
It may not be the retirement lifestyle you’re dreaming about, but ideally you’ll have plenty of time during your “go-go years” to adventure before needing long-term care.
Regardless, you’ll need to decide whether you want to self-fund that long-term care or consider insurance.
You’ve likely witnessed the elder generation in your life as they decline. It’s not always physical. Often, it’s cognitive. If you were in that position, what would you want your care to look like?
This is a tricky one because it’s often an unknown expense. But as long as you’re having these conversations and thinking about it for yourself, you can plan around it.
Count on Some Retirement Income Caveats
Taxes are calculated differently once you enter retirement. There are additional taxes to consider, like those on Social Security. How will you manage that cash flow? Which accounts will the money come out of to ensure you’re doing it most efficiently, from a tax perspective?
Similarly, medicare surcharges can affect your retirement income. If you make too much money in retirement, you can get dinged for that in your medicare premiums.
This is another area where a Certified Financial Planner can offer a great deal of support. They’ll be able to calculate all the various outcomes to help you get a clearer picture of what your retirement income will actually look like. That way, you can plan accordingly to match the adventurous retirement lifestyle you seek.
Reconsider Your Investment Strategies
Investing during retirement can and should look different than it did during your working years. But you might not need to curb your investment strategies as rapidly as you’d expect.
Thinking in terms of ‘lifespan vs healthspan,’ you—and your partner, if you’re married—have a chance of spending twenty-five to thirty years in retirement. If you enter retirement at around age 60, your investment strategy doesn’t need to shift entirely into bonds or super-safe investments like CDs or U.S. Treasuries.
You can still have a growth component. You want to use your assets to generate even more income over time. Make a plan to shift into safer investment strategies at certain ages rather than all-at-once as you enter retirement.
Expect the Unexpected—Beyond Healthcare
Life doesn’t stop during retirement, for you or the people you care about. One thing I see with a lot of retiree clients are unexpected costs that they spend on their children or grandchildren.
It’s not uncommon for me to see retired couples bringing their kids back into their households well into their 30s. This can be based on a number of events, like divorce or job loss.
When this isn’t factored into a retirement plan, it could feel like a financial hit.
And then, of course, there are the really unfortunate events like a vehicle accident or death of a loved one. These situations are devastating on so many levels. The emotional toll is unavoidable, but the financial toll is at least something you can try to mitigate if you’re prepared with a safety net.
When I talk about expecting the unexpected, it’s not meant to ‘will them into being.’ It’s more like getting homeowner’s insurance. You hope you never have to use it, but you’ll be grateful to have it in the unlikely event you will.
You Deserve a Purposeful Life After Retirement
You’ve worked hard for your retirement. It should offer you the freedom to explore all the activities you love without limitation. If those activities tend to lean on the enthusiastic or adventurous side, retirement planning simply comes with some extra considerations.
At Four Points Wealth, located in the Denver area of Colorado, we welcome a wide range of active retirees, from outdoor enthusiasts to athletes to world travelers. We love it and share a lot of their interests.
That said, adventurous retirees are over-and-above the traditional situation. They have a few extra considerations to think about. More than the nuts-and-bolts of traditional retirement. We are always happy to explain those considerations to our clients. And we’d be more than happy to extend that service to you, if you’re also hoping to accommodate your retirement plan to meet the needs of an active lifestyle.
Four Points Wealth Management
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