I’ve been enjoying a Western Philosophy course the last couple of weeks. It started with that fascinating scene in Plato’s Allegory of the Cave. You might remember it. There are three guys tied up in a cave who can only see shadows cast on a wall in front of them. They assume the shadows are reality.
When one of them escapes and experiences the sun and reality, he comes back to the cave to tell the others. Surprisingly, they don’t believe him, and threaten to kill him if he tries to set them free.
I don’t think SMWP readers are the violent type, but I think the retirement dashboard is a good way to separate dreamy shadows of retirement preparation from reality.
I received several emails and comments last week on Part I of the retirement dashboard. I hope today’s Part II will add to the conversation. While it might be painful to escape from a shadowy dream of retirement, it’s a good idea to look at the hard realities. Here are four more metrics to consider about your retirement status.
Purpose in Retirement
Rationale: There is an old saying in management, “If you can’t measure it, you can’t manage it.” So, how do we measure “purpose” in retirement? Some research suggests those who retire to get away from something stand a good chance of being miserable. On the other hand, those who retire to find the time for some core pursuits they have a passion for will likely find joy in retirement.
In fact, those who retire with four or more core pursuits seem to be the happiest. Studying philosophy, for example, was a discipline I’ve always wanted to pursue, but never had the time. For now, it’s a core retirement pursuit of mine.
And second, those who spend a few hours each year planning their retirement purpose also have a higher probability of a meaningful retirement. Based on these insights we might evaluate our dashboard readiness like this:
Green: We have five or more core pursuits we want to spend time on in retirement and we spend at least ten hours planning our retirement every year.
Yellow: We have at least three core pursuits we want to pursue in retirement and spend at least five hours planning our retirement each year.
Red: We are counting the days down to leave our toxic job and we will figure out what to do with our time once we quit.
Actions to Improve: Spend some time reconnecting with what has interested you in your life. Many find that as they rediscover old interests, it can reignite their desire to pursue them again. Others may find a new passion in pursuing social goals through nonprofit organizations or spending more time with family members who need assistance.
Emergency Funds
Rationale: This category doesn’t mean the standard advice to have three to six months of living expenses socked away in case you lose your job. That advice is good as far as it goes. But, if retired, we should already have a steady income of social security, annuities or other sources that are not easily lost. More likely, from the baby boomers I know, are unexpected expenses caring for aging parents, needy children or unexpected health issues.
Green: We have not only our own long term care plan in place, but we’ve had the talk with our parents about their financial plan. We have funds set aside to cover the shortfall we may feel obligated to cover if they need help. Additionally, we have had the talk with our children. They know the limits of the assistance we can provide in an emergency. Finally, we have set aside funds for the large capital expenditures that will periodically arise such as replacing a car or a remodeled kitchen.
Yellow: We have our own long-term care and capital expenditure needs covered with a solid plan, but we need to address where our parents or children may require our help.
Red: We don’t have a long-term care or an emergency fund for ourselves, let alone a plan for our parents or children’s needs.
Actions to Improve: The younger we are when we apply for long-term care, the more likely we will qualify. That seems a prudent move if you don’t have enough to self-fund this risk. Also, forecasting capital expenditures over retirement years should give information for planning how to meet those needs. But the hardest action is probably the honest talk with parents and children about what they can and cannot expect us to cover for them.
Financial Planning
Rationale: In retirement we have to take responsibility for managing through potentially thirty or more years without the paycheck we got when employed. To avoid a big error that could disrupt our plans, it’s a good idea to at least annually review these elements of a financial plan: insurance, budget compared to actual cash flow, investment allocation and fees, net worth changes, tax planning, retirement plan and estate plan. These reviews can be outsourced or you can do them yourself if you have the expertise.
Green: Every year you review each of the key elements in a financial plan either yourself, if qualified, or by a professional. Changes are proactively made as a result of the reviews each year.
Yellow: Most of the key elements in a financial plan are reviewed each year.
Red: None or very few of the key elements are reviewed each year.
Actions to Improve: Find a mentor who has their finances under control to assist or compare notes with on your own financial plan.
Financial Literacy
Rationale: Everyone can learn the basics of money management. Allocating a few hours a year to educating ourselves on managing our money successfully will have a very high return on investment.
Green: Those who have read the book Smart Money with Purpose and subscribe to this blog will excel in this area.
Yellow: Those who have only read Dave Ramsey.
Red: Those who follow Suze Orman.
Actions to Improve: Sorry, even a blogger should be allowed to have a little fun once in a while. Dave and Suze have some good insights in their areas of expertise. It’s a great idea to read a book or more each year on financial matters.
It’s time to hit the send button, but like the last post, I’d love to hear your suggestions on what else should be considered to make the retirement dashboard more valuable.
Joe Kesler
OK, that last section had me literally laughing out loud! Well played, Joe!
Another book that I would recommend is Jane Bryant Quinn’s “How to Make Your Money Last: The Indispensable Retirement Guide”. And don’t wait until you’re retired to read it. What particularly impressed me was that her entire first chapter had nothing to do with finances; it was an examination of how your life will change in retirement.
Excellent thoughts, particularly under the first two sections. Retirement shouldn’t mean jettisoning the skills you acquired and honed over decades in your career; it should mean re-purposing them in some way(s).
Thanks Steve! I don’t think SMWP is a threat to the Ramsey or Orman empire so I didn’t think they’d mind if I poked a little fun.
Appreciate the book idea. She always has a lot of wisdom in her writing. Good comments from you as always.
When Plato came up with the Cave-as-alternate-reality metaphor, he put a ball in play that we’ve been tossing around ever since. His question was, “Could there be an alternate reality that is actually more real that the one we perceive now?”
St. Thomas Aquinas caught the forward pass from Plato and ran it for a touchdown. He answered Plato from a Christian perspective: “Yes, there is an alternate reality and we call it ‘The Kingdom of Heaven’. You can experience it somewhat now, through thin spots in a wall that separates them. Catholics call this Consolation or Mass and Protestants call it ‘Tender Mercies’ or ‘Gifts of the Spirit’. You can experience it fully after you leave this life.”
Plato/St. Thomas’ model got stuffed into the dumpster by the 18th century European philosophers like Hume, Kant, and Spinoza who questioned even the reality we see and touch. To them, even this world was barely real, maybe subjective. Modern-day athiests/Materialists/Evolutionists believe in only one physical reality. A second, non-material reality is scorned and ridiculed.
Then the movie “The Matrix” came out and a new generation reconsidered the idea. Not along St. Thomas’ Christian model but it got people to think multi-dimensionally. Tolkien invented Middle Earth and C.S. Lewis invented Narnia, to open new minds to old ideas:
* What you see around you is just the surface of an ocean, full of hidden mysteries and life
* You are not just an animal
* There is a reality far beyond what you see, actually more real than what you can touch
* A great war between Good and Evil is being fought. Would you like to participate?
* Your life has great meaning, given context by this hidden reality and a purpose to extend Good and prevent Evil.
* Take the red pill Morpheus offers. Undo the chains in your cave. Walk through the wardrobe. Listen to Gandalf and take the ring.
Walt,
I love your summary of the history of Western Philosophy! And putting The Matrix in this context of the flow of ideas is something I’m going to run past my kids who grew up on that movie. Thanks for giving me some things to chew on as I learn to think more about how we got to where we are today in philosophy.