Conversations heard by a proverbial fly on the wall:
‘Are you sure we can afford to retire? We could live another 20 to 30 years. I’m wondering if we need more retirement savings.’
‘The recent terrible wildfires really spooked me. Many of the people who perished in those fires were older retirees who couldn’t evacuate in time. The same thing happened with Hurricane Katrina.’
‘I’m very concerned that the lives of our grandchildren will be much harder than ours, due to the potential for extreme weather events. What will we say when our grandchildren realize this, and they ask what we are doing to help them?’
We need to plan ahead
Action is the antidote to despair — Joan Baez
There’s a lot that preretirees and retirees can worry about today. Modest retirement savings. Lack of pensions. Threats to Social Security. Concerns about investment volatility and inflation. High bills for medical expenses. Increased lifespans—which should be a good thing. Extreme weather events. Concern about the world that our kids and grandkids will inherit.
It’s only natural that these worries might seem overwhelming, and that you don’t know where to start. And you might be wondering if there’s a connection between your money and climate change—it turns out there is a vital connection.
You’ll feel better if you plan ahead to mitigate the potential damage to your money, your life, and the world we leave when we’re gone. Unfortunately, there’s not one silver bullet that will magically take care of all your concerns. Most likely, you’ll need to take many creative steps to create more “green” that you can spend and to grow more “green” in your life.
The challenges we face will require planning ahead for the remaining 10, 20, or 30 years that we have ahead. And that will take commitment, hard work, and soul-searching about what’s really important to us.
We’re up to the task. Elders have traditionally played the role of stewards, converting their knowledge and experience into actions and words of wisdom. Elder stewards provide leadership to their communities by setting a good example for daily living. In this vein, elder stewards have been teachers, mentors, and guardians throughout the centuries.
Fortunately, as elder stewards, there’s a lot we can do to plan ahead.
Reflecting on what’s really important to us
Since many of us may need to make some hard decisions about our lives in retirement, let’s do a little soul-searching to reflect on what really matters.
One way is to ask insightful questions, a method used by the Greek philosopher Socrates. Here are a few questions to consider asking yourself and those who you care about:
· How would you define a successful retirement?
· What kind of peak experiences (bucket list stuff) would you like in retirement?
· What would a good “average day” in retirement look like for you? (Not doing your bucket list stuff.).
· What events could prevent you from experiencing your bucket list and your good “average days” in retirement? What steps can you take to make your life better?
· Imagine your home, community and surroundings in 10 to 20 years if current trends in the world continue. Would your life be the same, better, or worse?
· What will life be like for your kids and grandkids?
· What kind of ancestor do you want to be?
While you can always reflect on these questions by yourself, it might be more insightful to explore these questions with relatives and friends who mean a lot to you.
Next, let’s dig deeper into some of the challenges that we face.
Face the retiree’s dilemma
If you’re like most preretirees and retirees, you’ll be spending less money in retirement compared to when you were working, since you’ll have less regular income. Much less, for some people.
This means you’ll need to make every dollar count in retirement. To feel more confident about your money, you’ll need to balance the “magic formula” for financial security in retirement for the rest of your life:
I > E, or Income greater than expenses
Actually, this formula isn’t really magic, it’s just common sense. Balancing this formula will reduce your stress about money in retirement.
If your income drops significantly when you retire, then sooner or later you’ll need to reduce your spending on living expenses. A common problem is that many new retirees continue their current spending habits, delaying their day of reckoning. For most people, the sooner they face the reality of their financial situation, the better their long-term financial security will be.
You’ll want to understand the amount of regular retirement income you can expect from all sources, which gives you a target for limiting your spending on living expenses. If you need to reduce your spending, then thinking about the questions posed previously will help you focus on what you really need and what matters to you the most.
Most of us will have more time and less money in retirement compared to our working years. We can use our asset of time to our advantage, along with the knowledge that many small, positive steps can accumulate into significant improvements over time, just as compound interest increases our savings accounts.
What’s the next step?
Accept the reality of climate change
While there can be many opinions about the cause of extreme weather events, it’s becoming obvious from the recent news that these events could become the new normal for the rest of our lives.
For example, a recent report from the United Nations warns that we’re running out of time to avoid catastrophic world-wide disruptions from climate change. Yet, surveys show that younger people are more concerned about these events than seniors. Given the challenges we’re facing regarding climate change, that should be a call to elder stewards for “All hands on deck.”
The climate crisis has developed over many decades due to the cumulative impact of actions that millions of people around the world have taken, just by going about their daily lives. To mitigate the most severe consequences of climate change, it’s going to take millions of people making smart changes to their daily routines to “green” their lives. These steps will deliver a positive cumulative impact not only to the environment, but to your bank account as well.
Now that we’re motivated to take action, and we have some understanding of our challenges, let’s turn to practical strategies to make a difference in our lives and the lives of others.
Follow your money
Instead of viewing our financial realities as an impoverished situation, we have win-win opportunities for enriching our retirement years while helping to improve our communities and future generations as well. If we carefully follow the money of our spending, we can still have a good life by bolstering our finances, reducing our stress about money, improving our health, and leaving a better world for our grandchildren.
With this spirit in mind, you’ll want to closely look at where you choose to live, since your quality of life in retirement significantly depends on your community and specific home. For most retirees, housing costs are the largest part of their regular budget, so they represent a potential target if you need to reduce your spending. In the process, you can also reduce your carbon footprint.
Many retirees succumb to inertia and stay in their current home as they transition into retirement. Your current home might have been a good place to live during your working years, but it may no longer meet your needs or budget in retirement. A better approach is to investigate the home and community that can best meet your needs during your retirement years, while you still have the energy and ability to make a move.
You’ll also want to follow your daily spending on transportation, food, and other stuff that provide opportunities for win-win savings.
It may take a lot of work to adopt the green retirement, but it’s well worth the effort, considering what’s at stake. Stay tuned for Part Two of this series, where we’ll look at a dozen practical strategies and tips for saving money during our retirement years while helping leave a better planet for our grandchildren.
Conversations heard by that fly on the wall in 10 years:
‘I’m proud of how we balanced our spending and income several years ago. I haven’t been very stressed about money, and that feels really good to me.‘
‘We sure made the right decision to move a few years ago. It was a lot of work, but it was worth the effort. Did you read what happened in our old hometown?’
‘I want to share exciting news. My granddaughter will be studying environmental science in college. She was inspired by her grandma to do something to make the world better.’
Steve Vernon, FSA, is an actuary who conducts independent research on the most challenging retirement decisions. He’s the author of six books on retirement planning and he has conducted hundreds of retirement planning workshops. He recently completed nine years consulting on retirement strategies for the Stanford Center on Longevity.
Harry R. Moody, Ph.D., is retired vice president for Academic Affairs for AARP. He is visiting faculty in the Creative Longevity and Wisdom Program of Fielding Graduate University.