My older son is a junior at Suncoast Community High School in Rivera Beach, Florida.
His high school is rated as one of the top Public High Schools for Math Science and Engineering in the United States. He wants to study architecture in college and become an architect.
The number one question everyone asks him is ‘what type of architecture’ would you like to practice? In reality, he does not yet know which field of architecture he wants to study and later practice. However, he is constantly asked that question.
In watching one of these interactions it reminded me how some of my retiring clients do not know what to do in retirement. I am not talking about the ‘how do I live or how do I afford the things I want’ questions, I am talking about the ‘what makes me want to get up and think positively about my future’ questions.
We all have goals while we are working. For example, some people have the goal of contributing 10% of their gross earnings to their retirement plan. They have learned about compounding and they understand that money doubles ever 10 years if they are making 7.2%. This is also known as the rule of 72.
As an aside, the rule of 72 is a simplified way to determine how long an investment will take to double. This rule assumes a fixed annual rate of interest. By dividing 72 by the annual rate of return, you can get an estimate on how long in years it will take for an initial investment to duplicate itself.
For example a 5% return would take 14.4 years to illustrate $10,000 growing at 5% each year would take 14.4 years to double to $20,000.
The rule of 72 is an estimate calculation and is not 100% accurate, but as a quick calculation, it comes really close to the answer.
They understand that any company match in their 401k, 403(b) or TSP is effectively free money. They have also learned that if they place money into one of these retirement plans, the money is pre-tax (not subject to income tax until it is taken out of the plan as a distribution) and any earning in the plan is also tax deferred until taken out as a distribution.
They are earning money on the government’s money. They also learned about dollar cost averaging to maximize their investments. They have also learned about proper asset allocation and achieving the best return for the most risk they can tolerate.
So, when you retire, you had hopefully met your financial goals. Most of us will never feel wealthy enough to retire. That is because while we are working, we have the saving/investing mindset.
Once you stop contributing to your retirement you have a void. You only knew the accumulation side of investing. It takes strong amount of courage to not feel lost if you stop doing something you have been doing for 20 to 30 years.
That is why you need to find something to replace the feeling that you have as you accumulated wealth. This is where you should develop a bucket list of goals that you want to achieve in retirement.
A bucket list is just that, a list of items you want to achieve or do over the rest of your life. Now it probably should be more than just, fun things that require no work or real planning. For example, go sit on a beach and do nothing for a week is a vacation, but probably not a meaningful bucket list item.
If you really are trying to fill the void of the 20 to 30 odd years of your working life, it should be more meaningful. So the first rule of bucket list planning is don’t confuse a vacation with a bucket list item.
Now, I have seen people travel to Italy and live there for a month, as a bucket list item for several clients. Is this just a distraction or can this help find meaning in retirement?
I would argue. It comes down to what motivates and what do you learn from planning, and achieving the experience.
If it is just another month off in a new location, sounds like fun, but probably not going to be truly meaningful. If it takes a year or several years to save enough to go and you put in work planning the trip, then maybe it is more meaningful.
However, imagine if while you were in Italy you discovered that you always wanted to study the history of engineering of 11th century Florence. You begin extensive research and contribute to your current knowledge of engineering and it becomes your new passion, mission (more than just a hobby) in retirement.
So, the second rule of bucket list planning is that the bucket list item should have a long term, life changing component. Another way of understanding this rule of bucket list planning is that short term pleasure items should not outweigh long term fulfillment.
When friend ask my older son which type of architecture he wants to study or what type of architect he wants to become, he can tell them he does not have enough information.
He is very busy working hard at High School and other activities. He will know when he reaches that decision point. So what are you going to do in retirement and what is on your bucket list?
Bucket list rules:
- Not just a vacation
- Long term fulfillment rather than short term pleasure
- Something new and/ or deeper dive into something
- Allow to connect to someone you care about (e.g. ballroom dancing to learn how to connect with spouse)
- Not an ego item but something that can help you improve or change
Plan Today. Protect Tomorrow.
Until Next Time,