A Doing Word…

Retirement in the Last Century

1920’s:

Men born at this time had a life expectancy of about 48. This is low due to the coming depression and WWII. Retirement planning isn’t much of an issue here. Work until you die. Leave the non-wage-earner with little despite the hard work, and rely on the children to help take care of them.

1940’s

My parents are in this category was born and his life expectancy was around 63. My dad got to 68. My mom is doing great and still living at a robust 82. After divorce she was a teacher in California and retired with a nice pension. That, and good real-estate investments and savings, have enabled her to live on her own and support herself. Thanks mom!!! People without pensions and saved wealth in this demographic are either broke, working late in life, or supported by their children.

1960’s

My life expectancy when born was 76, which is pretty close to where it is today after the dip of the last few years. I expect to get to at least my mom’s age. This time period used the same tactics as the 40’s but with more investment opportunities.

1980‘s

In 1978 the 401k was created and the plan for plan for retirement changed considerably. The philosophy changed to the stock market being the primary strategy. Companies were generally exonerated from responsibility. For other people with money in the market (the wealthy) this was great as money flowed into the market helping to fuel returns.

The strategy became

• Work hard until you save enough for the rest of your life
• Get a life partner that also works hard and saves
• Don’t have too many kids
• Invest in the market to grow your savings
• Retire when you have enough to last you until you die

And that remains the story people are told today

My Problems with That

I did that, but now that I reach the crux of that retirement decision, I find a lot of problems with the approach.

Problem 1: Dismal Math

The calculations to decide if you have enough money to retire are not comforting or inspiring.

“Die With Zero” Author Bill Perkins gives a simplified version: Multiply your annual expenses by how many more years you expect to live, then multiply by 0.7. Perkins calls this number a “survival threshold,” or the minimum needed to retire comfortably.

That is not helpful to me.

It’s dismal to literally have a spreadsheet that shows I can have a great life financially if I die at 72, but need to work more and be very frugal if I make it to 90

Beyond that, it’s simply mathematically inaccurate and naïve.

• It relies on continued market performance
• It relies on modest inflation in the assets you will buy
• It relies generally on the United States government to be stable and effective until I die.

I have uncertainty about all three. There is a significant chance all will be fine. I think there is also a significant chance that they will not. In short, it might be ok, it might not. I’m not satisfied with that strategy.

It also doesn’t factor in the ability to evolve and grow beyond retirement. I intend to:

• Reduce consumption and expenses
• Generate new income

Problem 2: Supporting in the Wealthy

I believe that your most important vote is how you spend your money. Buy things from good people and good companies, and support the same with your savings.

I don’t want my lifetime of savings invested in helping three constituents

• Public corporations
• The wealthy that have much more invested than I do and benefit more proportionately
• The financial industry

I don’t want to feel smart and powerful because Apple grows another trillion in market cap. I don’t want to feel dumb and scared when the market crashes. And I certainly don’t feel good being a contributor and supporter.

So I stay out, which has absolutely been a sub-optimal strategy since 2008 largely due to unprecedented financial stimulus and government/taxpayer support programs for corporations and the very wealthy.

Problem 3: Die with Zero (Leave Nothing but Memories)

There is a book called Die with Zero which outlines the strategy for ending your life with zero assets. For me this is risky (what if I live longer?), dismal, selfish, and short-sighted.

This is a great strategy for keeping the poor, poor. A lot of the rich became so because someone left them with assets to give them a running start. I would love to do better and leave not just wealth to those I care about, but also recurring income and fulfilling businesses.

Generational wealth is super cool, not just for trust funds, but to truly and meaningfully leave assets to make the world a better place, even after you die.

Changing Thinking

I’m finding a lot of people in this situation thinking the same way. Interestingly the demographics are split:

• 12-32: So many young people are questioning the whole corporate treadmill and support the rich with your investments plan. They generally call this “capitalism”. I see it more as an as-yet-unnamed system that is like socialism for the rich paid for by the rest – capitalism gone horribly wrong. On the bright side, they are probably going to live a lot longer so they also have that to deal with.
• 32-55: On the treadmill running too fast and hard to think about it.
• 52-68: Either set for life, either now or at least by retirement age, or questioning like me.
• 68+: Too late to make a change so just rolling with it as best they can.

A friend made a great analogy. Part of why world wars 1 and 2 were so brutal was that the world had all kinds of powerful new new technology for killing, but the military was still using strategies from the prior century: lots of young men with guns, digging trenches, running at the enemy, taking hills, etc.

We are in the same position now financially, facing new challenges in a very different world using tools from the prior century.

A New Way of Thinking

I’m working with people that are also questioning all this to learn and see if we can do better. Could we

• Turn assets into income streams. What do you have that others want that you could share?
• Invest in assets that you and those you care about also get to enjoy.
• Share when traveling to spend less, have a better and more unique experience, and meet great people. AirBnB, Turo, etc.
• Borrow or share instead of buying everything you need.
• Talk about it. We don’t talk much about money, difficult things, or fears.

These are the sections below.

Some Unique Aspects for Me

• It brings me joy to share and give. I love it when neighbors borrow tools or need a little help with a project. The pool is far better shared with friends then alone. Etc.
• I enjoy consuming via sharing instead of owning. I don’t mind not having exclusive ownership.
• I really love deep engagement with people.
• I am fairly extroverted. I definitely want my introvert time too, but 95% of the time having guests in our house is a plus for me.

Strategy: Turn Assets into Income Streams

What assets do you have that you could share in order to generate income, karma, or goodwill?

Physical assets:

• Your home. Rent rooms on AirBnB. Share generously with friends that are visiting to increase general happiness, and also perhaps generate some favors in return. I also want to generate income when we travel from renting the portion of the home that we occupy.
• Your car, second car, ATVs, etc. When not using them rent them out on Turo or other sites. I’d also like to rent out my primary care when we’re traveling.
• Pool. Swimply will share it. It not only generates some income but it makes me happy to see it used and helps pay some of the cost.

Other assets:

• Take apart your resume and break it into skills that could be marketable on their own. How could you help people?
• Monetize your hobbies and passions. I enjoy our connected home and 80+ IoT gadgets and have learned a lot over the years the hard way. It would be really fun to share my knowledge, and possibly turn it into a part-time job. Same with cooking. If I cook I generally cook for 10-20. I’d much rather share than freeze the leftovers.
• Your network of friends and colleagues. At this stage of career we tend to know a lot of people that also have assets and skills. Connect people and create value! Lunchclub.ai is a great site for this that I use weekly.

Strategy: Invest in assets that you also get to enjoy

Investing in the stock market brings me no joy for so many reasons:

• I have no unique knowledge nor a unique strategy. I believe entirely in broad market index funds as tested well by Warren Buffet’s challenge.
• I don’t get satisfaction by helping fund public companies and keeping P/E ratios high so that those with money get more money.
• The investments don’t visibly appreciate my support.
• I can’t use my knowledge, energy, or other assets to improve my investment.

I have a rental house that I bought while my daughter was in college and now rent to a young couple and his brother. It is better for me in that:

• The college scenario was a great win-win-win.
• As a rental it brings me some happiness because I know who I am helping and appreciate hearing that it’s good for them. I like thinking of their new family in a cozy warm house.
• The renters seem to appreciate the house.
• I can use my knowledge and energy to pick a good investment area, make the right improvements, find good repair people, etc.

But I don’t get to enjoy it. Consider two options if you have $1.2M to spend and like the idea of renting to others:

• Buy three $400k homes. Rent two, live in one. Get around $4-5k in rental income.
• Buy one $1.2M home. Live in one part and rent other bedrooms, cabins, or whatever to short or long-term renters.

With the first option, the rentals have the advantages from above but on a daily basis they don’t increase my happiness, nor do I do things to increase the value to the renters.

I am drawn to the second option for many reasons:

• I can have a closer relationship with the people renting and both experience their joy and increase it.
• I can personally make their experience better by fixing up the place, providing nice shared spaces, etc.
• The shared common areas of a $1.2M home will be much nicer than that of the $400k home.
• I’m quite content with very little private space so more of the property could be income generating.

It’s challenging in other ways:

• The economics are less clear. We will be traveling and meeting people in situations like this to learn. We’ve had a bunch of really fun experiences already that I’ll write about!
• More sharing. I generally like people but I really don’t like messy kitchens or annoying people. I like my music loud sometimes. I rarely like other people’s music loud when they want it.

So we’re going to travel and learn and figure out whether this really works. We are interested in:

• Buy it. Acquire the dream of someone like-minded. Find someone that has built such a place but is now ready to move on. There are BnB’s and yoga retreats and all kinds of cool function property businesses for sale.
• Buy in. Find someone that has built something great and needs or wants co-investors or to expand on it.
• Buy the property. Find a property that is reasonably close to the dream and buy it. The people and business part we would then have to build.
• Buy the land. Take a blank slate and make it great. Tempting but so much work and energy and time.

Strategy: Borrow and Share Instead of Buying

We love using AirBnB, Turo, Lyft, and other sharing options. We get:

• Often a better price
• Often a more unique experience
• To meet people that tend to be more interesting than average. Like-minded “sharers”

As we travel we like this for our own reasons, and now we will also target experiences and people from which we can learn. People doing something similar or unique.

Strategy: Share Assets

I want many things that are, for me, better shared.

• Gardens. I love growing food and beautiful plants for so many reasons, but it’s a lot of work. And then, when the work is done, you have whatever is in season coming out your ears as you try to give it away. I would much prefer sharing a garden with a bunch of people to diversify the crops available, share the work, knowledge, and inspiration, and share the bounty.
• Pool. Our pool is fun but so much better with friends and family! We use it a lot and it still goes unused 60% of the days.
• Workshop. I have tools and love making things. Friends have tools. But if I had one here I would use it maybe one day in 10. Why not share with 10 people and pool/save resources.
• Vehicles: Cars, Trucks, ATVs, Motorcycles, E-bikes, Bikes. For all of these except maybe our primary car I would much prefer 10% ownership at 10% of the price than 100% at 100%.
• Animals. Jen and I have our two cats and we both really want some chickens and maybe significantly more animals if the property allows it. But, I do know that we don’t want to do it all ourselves and also have to pay someone to take care of them when we travel. I’d much rather have fractional ownership and share responsibility and cost than full ownership with full responsibility. We also want a continuity of loving care for our two cats when we travel rather than just a petsitter.

Strategy: Talk about it and Work Together

Things we tend not to talk about include:

• Our fears
• Our failures
• Money

I think we need to. This is too difficult to do alone, and honestly just not as fun.

I’ve started to talk to people at all stages of life about this last segment. What are their plans, or how well did their plans work? I’m taking notes and will be sharing in some form. Who knows, this might be part of my future giving back and maybe even income!?

Reach out if you’d like to join the conversation!