5 key retirement factors your financial plan may not address

If you love cat pictures, today is your lucky day. Because I'm back!

As longtime readers will recall, I contributed to Get Rich Slowly from 2009 to 2013. I often wrote about more “technical” (i.e., boring) topics, such as taxes and IRAs. In order to provide a reprieve from the technical-ness, J.D. occasionally sprinkled in cat pictures. I tried not to take it personally.

Photo: ZUMA Press
Photo: ZUMA Press

But for the record, I think other creatures would have been more appropriate. Such as the blob fish.

For those who remember me, it's great to see you again. For those who don't, here's my Cliff's Notes tale of priesthood, eating pre-chewed food, reproduction, and why I know a thing or few about money.

I hung up my GRS writing boots last year because I had overloaded my life with new ventures, which included more actual financial planning for folks. But things have settled down, which allows me once again to be a part of this self- and other-bettering community. But here's the thing about financial plans: They're really financial projections, using just your current numbers — the size of your IRAs and 401(k)s, how much you add to those accounts, your current Social Security benefit estimate, and so on. A financial adviser — or you, using a retirement calculator — inputs a bunch of figures and out comes the verdict: You're guilty of not saving enough, or you're innocent of all financial wrongdoing.

I wholeheartedly believe that everyone should do just such an analysis annually to estimate whether they have a reasonable shot at retirement, or other financial goal, and to determine what they can do if things aren't looking so hot. However, these analyses also have their limitations because they only care about what can be quantified.

So more and more over the years, I've found myself using financial-judging software as the basis for starting a discussion, and then wading into more fluid factors that are also crucial indicators of future financial freedom. Here are five of those factors, oh-so-briefly explained. I could devote an entire article to each. (Yay, more cats! Or blob fish! Or a sitcom about them getting married but their parents not understanding!) But what follows will give you an idea.

Your non-portfolio assets. We all have a lot of stuff. In fact, that's why we have a house, according to the late, great comedian George Carlin, who said, “Your house is nothing more than a place to keep your stuff while you go out and get more stuff.” For some, a house is not enough. According to the Self Storage Association, 9 percent of American households were renting a unit as of 2012. Chances are, you have stuff you either don't need or that could be replaced with a less-expensive option. It starts with your stuff-container (your house) but can involve a wide and diverse range of property: other real estate, collectibles, electronics, appliances, household items, vehicles (including bikes and boats), and the many gifts of Christmases past. You can fall back on hawking these wares in a pinch, but it is even better to turn depreciating dust-collectors into growing assets now by selling them and investing the proceeds. An investment in the Vanguard 500 index fund would have grown to almost 19 times its value over the past three decades. And unless you're a 95-year-old javelin catcher who smokes, you should think of your investment time horizon in terms of decades.

Your human capital. Regardless of what advertisers or Wall Street might say, your biggest asset isn't what you buy or own. Your biggest asset is you — what you can do, what you know, what you've accomplished, and who you know. In financial terms, this can be considered your human capital — your ability to earn an income (including the variety of ways, the amount you would earn, and how easy it is to move in and out of the workforce), the things you can do that you would otherwise have to pay someone else to do, and your social and professional network. A sub-category is your financial literacy, i.e., how smart you are with your money.

Your health. A recent study from gerontologist Ken Dychtwald and Merrill Lynch found that good health is the No. 1 ingredient of a happy retirement. It is hard to enjoy your golden years if your creaky bones have you in tears. But there is also a financial component: Healthier people spend less money on health care. They keep the money that would otherwise go to hospitals, pharmacies, and the medical equipment industrial complex. Of course we are all very fortunate and grateful such things exist, but they don't come cheap. Plus, healthier folks feel better, can do more, and can work later in life if they want to — as opposed to the approximately 25 percent of retirees who left the workforce at least partially for health reasons.

Your habits. Financial success is determined largely by financial behavior. As “The Millionaire Next Door” — the study of real-life wealth by Thomas Stanley and William Danko — and Stanley's follow-up “Stop Acting Rich” taught us, monetary security doesn't just happen. The majority of Americans who earned their millionaire-hood did so by having a plan for where their money would go, maintaining a system for making sure they are on track, living on 80 percent or less of their income, and not buying homes in high-priced neighborhoods. Only 30 percent of the variability of wealth among households is explained by income, so the truly well-off are doing something right besides bringing home a bunch of bacon.

Your family's assets. When it comes to stuff, you may have heard that you can't take it with you (even though many people think shopping is a divine experience). You might be in line for an eventual inheritance. But for many families, the biggest “asset” is the support they give one another, such as child care, elder care, professional expertise, hard-earned wisdom, and a safety net. However, to keep wealth of all kinds in the family as seamlessly and cheaply as possible, you and your relatives should have frequent and open discussions as well as the properly executed financial documents.

More about...Retirement

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Tina in NJ
Tina in NJ
5 years ago

Welcome back, Robert. Good article. Another non-financial aspect of retirement planning is what you intend to do in retirement after working 40+ hours a week for 40 years or more. Doing nothing gets boring real quick. My DH and I have talked about it a bit and I suspect Habitat for Humanity will be in our future.

Curtis@PayOffMyRentals
5 years ago

Soooooooo nice to have you back, Robert!

Jen From Boston
Jen From Boston
5 years ago

Good article, but I do prefer cat pictures over blob fish pictures. The blob fish looks like a sad Ziggy.

Scooze
Scooze
5 years ago

I can’t read the column with that nasty blob fish staring me in the face. Ewwww.

sarah
sarah
5 years ago
Reply to  Scooze

I really thought it was some of that lab-grown chicken meat.

FindX
FindX
5 years ago

Great article! Now I want to read more about each topic… Oh and I vote for cat pictures!

The topic that resonates most with me is the human capital. I strive to keep developing my skills for flexibility. That way if I’m ever laid off I can easily jump into another career/job.

Aldo
Aldo
5 years ago

Good points. And don’t listen to the blob-fish haters. Blob fish needs some love too. Look how sad it looks. Poor blob fish only wants a hug.

DiverGC
DiverGC
5 years ago

Welcome back Robert! I’ve always liked your articles. Looking forward to having you back.

kathyglo
kathyglo
5 years ago

That blob fish is one of the ugliest things I’ve ever seen!

Tom@TheCoghlanTeam.com
5 years ago

Welcome back. One of the things I rarely see mentioned in Retirement articles such as this is the non-linear way people tend to live their lives. I’ve noticed this since several of my relatives have lived long lives. I just retired last year. I’ll use my parents as an example, both now in their mid 80’s and they have been relatively healthy for most of their lives. But they are growing more fragile with age. What I’ve noticed is that as they aged their expenditures have dropped very substantially… meaning they require less money today to live than they did… Read more »

Debi
Debi
5 years ago

I observed the same thing with my mother, who recentl passed away at 86. In her later years her investmens grew faster (the power of time) and her expenditures dropped dramatically. Would like to see a cure of real peoples’ expenditures between 62 and 85.

Kristen
Kristen
5 years ago

The lack of linearity can go in the other direction, too, however. My grandmother lived frugally, and to age 95, but the few months of her life, paying for extra home-nursing care (in addition to my parents, my sister and I taking shifts at her house) ate up all her savings. The extra nursing care was less expensive than moving her to a home, and certainly more pleasant. She was really quite healthy right up until the last few months of her life. In any case, the future is hard to predict!

Luke
Luke
5 years ago

I’m excited that Robert is back! His articles were always my favorites and I was just recently wondering where he went. Welcome back!

Emily @ Simple Cheap Mom
Emily @ Simple Cheap Mom
5 years ago

Our retirement plans aren’t very detailed right now. We’re a single income family and there is a generous defined benefit pension attached with that income, so if we do nothing but keeping within our means, we’d end up ok. But there might be a job change coming and the Mr. may not make it to his early retirement age. So, once the mortgage is paid off we’ll be refocusing on getting our end game worked out. Thanks for some more things to think about.

Debi
Debi
5 years ago

I don’t know your age but I cringe to think that any single income family would depend solely on a defined benefit program for their retirement plan. That’s like having all of your eggs in one basket while knowing that the basket could disappear without any warning. Please, please hurry and put a Plan B in place so that I can sleep at night!

Debi
Debi
5 years ago

“However, to keep wealth of all kinds in the family as seamlessly and cheaply as possible, you and your relatives should have frequent and open discussions as well as the properly executed financial documents.” This is perhaps the most valuable statement in the article. My mother had a sizeable estate when she passed away recently but had a very detailed trust document so that there was no doubt as to what her intents were. Also, she made sure that we knew exactly where all her important papers were, who her investment manager was, etc. This really was a tremendous relief… Read more »

sarah
sarah
5 years ago

Great article. There’s so much more to retirement than money. I used to be a geriatric social worker and the one thing I took away from the experience was to cultivate as many healthy, supportive relationships as possible and put in the effort to maintain them. And it’s not a bad idea to develop relationships with younger people, you might just live to 90 and be the last one of your peer/sibling group left.

Steve K
Steve K
5 years ago

Excellent article, thanks. Especially liked “…unless you’re a 95-year-old javelin catcher who smokes.” The image cracks me up. The bulk of my retirement dollars come from my Army pension. There are far fewer Americans nowadays getting a definite pension, aren’t there. Government, military, maybe large companies like IBM. Am I being paranoid to wonder if one day, all the rest of “you” will take up your pitchforks and say, “If we don’t get a pension, you don’t get a pension.” My wife says “not a chance.” I say, “not at one fell stroke, but look for it to be nibbled… Read more »

Old Guy
Old Guy
5 years ago

Medical needs are the straw that will suck your financial slurpee dry. Any person who ignores their health is seriously jeopardizing their retirement. Although, on the other hand, they often have fewer years to worry about. (Call me callous, but you know it’s true. A crotchety old man like me can say it, but you young’uns are thinking it.)

HJ
HJ
5 years ago
Reply to  Old Guy

My DH and I are retired and feel as though maintaining our good health is our JOB now. We eat healthy, exercise, socialize with friends and family, travel, volunteer and take our meds as necessary. We are lucky to receive a pension and can pay our normal living expenses with it. We haven’t had to touch our investments and feel we’re some of the lucky, frugal ones.

Great article, Robert.

Jen
Jen
5 years ago

So glad you are back! Your great writing, sound advice and interesting articles are desperately needed here… I was just about to give up on this blog.

Marsha
Marsha
5 years ago

I especially liked the mention of family assets–and not just financial ones. Unless you completely separate yourself from your relatives, their financial health affects yours. Part of our retirement plan includes helping our sons get through college debt-free and getting a solid start on their careers. If they need to take lowly paid or unpaid internships to get their feet in the door we’ll help them do so. Yes, we could be putting more in our retirement accounts right now if we didn’t supply this help. But we reason that helping them become financially savvy young men increases our financial… Read more »

El Nerdo
El Nerdo
5 years ago

Yes!! Brokamp is back! And with a great article–and photo, ha ha.

Rail
Rail
5 years ago

The jist of this article is really at the bedrock of GRS. Less money going out than coming in at retirement is the name of the game. Frugality will either be our choice or it will forced upon us in its own harsh terms, and we all know that we live in vastly different times than our grandparents and parents. Company pensions have gone the way of the Dodo, and a weak dollar with the specter of hyper-inflation hitting at the time of retirement scare the hell out of a lot of us. I’m hitting 45 in a few months… Read more »

Kayla @ Femme Frugality
Kayla @ Femme Frugality
5 years ago

Although it may be more on the “boring” side, this was a very informative post. I have been using a retirement calculator every so often for the past few years (I only joined the working world recently, I’m young), but I never thought about these other things as having a factor in my outcome. Thanks for sharing!

NicoleAndmaggie
NicoleAndmaggie
5 years ago

<3

Ramblin' Ma'am
Ramblin' Ma'am
5 years ago

Welcome back, Robert!

John Anderson
John Anderson
5 years ago

Welcome back!

Marie
Marie
5 years ago

I am too horrified by that picture to read this article. I’m sure it’s a good article, though.

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