(Part 1 can be found here)
The question below pertains to the “Outside the Box” (OTB) – “There Is No Box” (TINB) debate within a personal construct.
Participant: What do you mean by “Forget this retirement meme we’ve been inundated with over the last few decades?”
Me: I get this a question a lot, so let me explain it this way because I believe it’s important. Not only in answering sincerely, but rather, that you really get the answer in your gut; for I believe many of you, as I once was, are struggling in many areas where this is the goal or reason for working so hard. And rather than working for your benefit it’s putting pressures that deep down are adding frustration that you may not fully comprehend. What’s worse is, quite possible, “the goal of retirement” you originally set believing it will make life easier down the road may in fact; be the worst thing not only to your life down that road. But maybe to your life currently.
I make this point because so many “motivation” guy’s push this meme hard along with Madison Ave., Wall Street, and the rest.
Being one that actually did it as opposed to those that read in someone’s book, that now wrote a book, so you can buy and read their book, about what they read. I actually reached that goal and lived it now for a decade. So I have what I believe is a little more standing or credibility on such an important subject. But of course that’s for you to decide. So let me start off by making this statement:
Not only is retirement not all that it seems. Rather: it just might be the period of time you’ll detest the most. Let me explain.
I had the good fortune to fulfill a goal I set years ago as to retire young and enjoy my “retirement” years. For those who want the exact age I was 45.
I have now been retired for a decade so I believe it’s important to share with you some of my findings. I also believe it’s just as important for you to hear it from someone who has actually achieved, as well as lived such a big milestone. For it seems the world and I’ll garner many of you here are spending an inordinate amount of day dreaming or contemplation on just how wonderful it’s going to be once you’re able to “retire.”
From personal experience I now know why it’s known within the circle of retirees as “the death sentence.” Because basically, once you do – atrophy will set in faster than they can pile the dirt on you. Regardless of your age. I could spend a week and write a book on it as we speak here but let me express just a few points I believe are important.
Those who view the current idea of “retirement” based on the amount of money you have and such are going to find yourselves well behind not only a curve, but possibly worse, running into a brick wall or dead-end; just when you thought the “yellow brick road” would lead to the land of golf and honey.
Using my earlier examples with the “there is no box” (TINB) construct. Let me apply it to retirement.
Let’s say you’re an entrepreneur and decide to sell your business, and the proceeds are in the neighborhood of $3 to $5 million. Sounds like a great number. And for this discussion it’s far from an exorbitant one. From here life should be great going forward. Or at least that’s what you’ve been told or sold by Madison Ave, Wall St., et al.
Or, let’s say you’re like many and you’re employed in a great position with a sizable 401K or pension benefit due, and you decide now is the time to retire for you now calculate, “I’m now set for life.” Well, that thinking was surely rational 10 years ago, but today? That thinking will lead you to possible ruin.
Since 2008 the idea that “a pension” or “money in the bank” and was basically safe – has been thrown out the window. And if you don’t understand that: you’ve not been paying attention.
Other changes such as you “getting paid interest” on your savings has now changed to “you paying them to hold it.” JP Morgan Chase™ as just one example has implemented a new program that deposits over I believe $350K will now be charged a premium rather than you being paid one. Let that one example sink in for a minute. Just as litle as a few years ago you tried to beat inflation pressures. Now your bank may charge you where inflation may be the lesser of two evils! Talk about “change.”
Let’s use the example I started with. Just a few years ago a conservative interest rate of 5% (I know don’t snicker) on what was once considered a safe investment (e.g., CD’s, Bonds, and such) of $3 million would throw off about $150K for living expenses. Not too shabby of a figure. However, let’s not forget this important caveat: If you were able to accumulate that amount of wealth. You’re probably accustomed, or used to a standard of living based on that type of earnings power. And some of you will inevitably be accustomed to an even higher standard.
All that said using the above example let me bring it to where we stand today. In just the last few years not only does this example not apply – it’s as if it came from the land of make-believe and fairy tales.
Today not only would you not have the above income generated from your money – it would cost you to secure it in places that have now been shown to be not only unstable but quite possibly – unsafe. And if you’re like most, as of right now, all you’ve done mentally is deduct the 5% interest that you once could earn along with the possible fee you’ll need to now pay. But that’s just the half of it. Literally!
You’re now going to have to deduct your living expenses from your original amount. So If you thought (using easy math for examples only) you had $3MM throwing off $150K for expenses: you’re now down $300K just your 1st year! (i.e., the $150 you would have earned plus the now $150 you now need to spend to live.) And every year after the same. So your $3MM basically now is only a “semi-retirement” plan because just on simple math in 10 years – you’re out of money. Now what? And what if you’re now 65 years old? 75? 85? I hope you see my point.
Now before anyone asks because this is where someone inevitably does “Is that what happened too you!?” For the record without going into personal details let me just say this: I’ve been speaking and writing about this because there was no other “motivation” person out there who not only understood the real issues coming ahead for entrepreneurs of all stripes going forward. And what I saw that was far worse – many were doling out such foolish and literal tripe I couldn’t stand it any longer. And I decided to do something about it. So much so where now my thoughts or writings on money and business are carried or referenced by some of the largest and most known media outlets around the globe. That’s an accomplishment for remember I’m not an “investment guy” nor a “Wall Streeter.”
So let’s get back to what this exercise is really about and demonstrate the underlying OTB – TINB thinking in a real-life example or form.
What would be an example of OTB thinking in this example? Well, here are a few as I see them…
- The obvious is to (as I expressed in my original thesis) make the box bigger by say doubling, tripling, or whatever your original “goal” amount was. i.e. $3MM to say $10MM and so forth.
- You can decide to move where your expenses will be less but your lifestyle might remain the same. e.g., Move from Manhattan to the Carolina’s. Or, from the U.S. to another country like Costa Rica etc. Again, and so forth.
- You can decide to “invest” your money in the markets and take “the chance” 2008 type scenarios are no longer an issue hoping “this time is different.” But again what safety have you gained or lost is the bigger question here.
The above are just a few but as you can see there’s an underlying issue that you’re going to search for possible ideas or strategies that are “outside” the proverbial box. That box being “retirement.”
However, if you think about it, and I mean really think about it. (as you should) All the above adjustments, theories, strategies, or tactics associated with dealing with the above so-called “box” does one thing that remains the same every time and that is: You must either give something up you might care for deeply. (i.e., If you love, live, and breath the Manhattan area lifestyle. The Carolina’s regardless of how wonderful are not going to cut it on a day-to-day basis.)
Or, you may be right upon your original retirement goal (e.g., you have your $3MM in hand) and now realize you need double or maybe triple to achieve what you thought just a few years ago. Does thinking “outside the box” help with any of this? Maybe OTB is exactly what now has you “boxed in.” So let’s explore my alternative…
© 2015 Mark St.Cyr