01 Sep FINANCE
Redefining Wealth: An Unexpected Lesson in Retirement Planning
Every so often, a client says something that completely knocks the wind out of me. Just when you think you have heard it all as an investment advisor, this one stopped me dead in my tracks. It made me think differently, which cultivated a different way of being. Perhaps it will do the same for you.
“Brandon, throughout all the decades I spent working, I kept asking myself ‘What do I have to do to make sure I never run out of money?’ Now, I find myself asking, ‘How quickly do I have to die before I run out of money?’ I’ve got that number down to 9.5 years. So, I guess a lot can happen between now and then.”
Up until this point, this client and I had meticulously planned her retirement. We had considered every financial strategy: extensive tax planning, savings in Roths, IRAs, and 401ks, annual Roth conversions, and even a Net Unrealized Appreciation (NUA) strategy–so deep in the weeds of retirement planning that most clients haven’t ever heard of an NUA.
And by all accounts, my client was more than ready for retirement. She and her husband had enough to not only retire comfortably but enjoy life to the fullest. They went on 90-day cruises and fishing trips to Maine. They recently bought a new Tesla and were still able to live well within their means. When my client finally retired, she was in the top ten percentile of retirees.
But then, life threw her a curveball: her husband was diagnosed with an illness that required–and still requires–in-home care. The couple’s retirement plan needed redirecting as the medical bills started to stack up.
The point of this story isn’t to frighten you–even if my client and her husband were able to plan for these bills, it wouldn’t have made much of a difference. Long-term care, even if purchased twenty years ago, would not have meaningfully helped their situation today. Sure, it would have helped a bit, but I’m talking about BIG medical bills.
Listening to my client, a part of me got angry: screw it! Go into retirement unprepared, with no money, but have a life full of amazing experiences. But she was also giving me hope. You see, she is a philosopher, a long-term thinker, and the most optimistic 80-something-year-old I know. She recognizes that the world has been through tough times, but believes wholeheartedly in the resilience of the human spirit.
In real-time, my client was teaching me a lesson on how to redefine wealth. She is finding wealth not in her bank account but in her husband’s health–the fact that he is still alive today, his mental acuity that holds such fond memories of their travels together, and their two sons. She sees the estimated 9.5 years of financial assets she has on hand as the cherry on top.
Oftentimes, when planning for retirement, we divide financial resources into three buckets: a bucket for spending now, a bucket for tomorrow, and a bucket for long-term growth. As I learned of my client’s situation, we started rebalancing her buckets–with a greater emphasis on the first two. Sure, the change in strategy decreases her bucket for growth, but this decision was prudent. We both knew it was the right thing to do.
So what do we do with this story about someone who was totally prepared for retirement, only to find out that she may not be as prepared as she once imagined?
The story of Job keeps coming back to me–perhaps the oldest book in the Bible, which contemplates why bad things happen to good people. In this story, Job is asking his friends and God why a good man such as himself lost everything–his sheep, his servants, his children, and eventually his health. In response, God pretty much says “None of your beeswax. I have a plan. You stick to your faith, humility, and integrity.”
When I asked my client what she was going to do next, she said she was going to live for the next 9.5 years–the amount of time we estimate she can continue to pay the medical bills. In her words, “A lot can happen in that time.” Spoken like a true Job.
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