Hixon Zuercher June 2015 Monthly Market Update

Are You Mentally Prepared for Retirement? How to thrive before and after the transition

GetImageThis week, my family and I had the opportunity to celebrate the life of a truly great person, my mom.  On March 22, 2011, after a short battle with depression, she chose to end her life at a very young age of 61.  While thoughts and feelings continue to swarm in my mind, I’m truly convinced that one of the main reasons for this tragedy was her lack of preparedness for retirement.  She had been a nurse her entire career, and as such she was truly depended upon and needed in many people’s lives.  Upon retirement, the feeling of being needed diminished, and her mind spiralled downward from there.

Retirement is about much more than money.  It’s also about finding a new path in life and a new identity as a retiree.

For most investors, retirement is their primary financial goal. As financial professionals, we help our clients chart a course to get them to retirement. We work together with our clients to answer financial questions like: When can I afford to retire? How much money will I need to live comfortably? Surveys show that many Americans are woefully unprepared for retirement and financial worries can make the retirement transition stressful.1 Fortunately, working with a professional can help ensure that you enter retirement with confidence in your financial future.

But having the means to retire after a lifetime of hard work and smart financial decisions is not all it takes to enjoy the next phase of your life. Many people overlook the fact that retirement is a major life transition that can come with significant mental and emotional ramifications. In this post, I discuss some of the critical non-financial issues that retirees must confront, and present some solutions suggested by psychologists who have studied the experiences of retirees.

Retirement can leave you feeling lost

There’s more to retirement than financial and logistical concerns. Many new retirees are unprepared for the psychological aspects of the transition. “People go into retirement essentially flying blind,” says Dr. Robert P. Delamontagne, author of The Retiring Mind® book series. In his research, Delamontagne found that people often aren’t mentally prepared for the retirement transition and don’t fully grasp what retirement will mean for their identity and place in the world.

Studies show that retirement can improve psychological wellbeing by removing the strain of a demanding career.2 However, the corresponding loss of work relationships, career identity, and daily purpose can cause retirees to feel adrift. Dr. Nancy K. Schlossberg, a former professor of counseling at the University of Maryland and author of Revitalizing Retirement: Reshaping Your Identity, Relationships, and Purpose, points out that a career “is such a part of your identity that people can feel very much at sea when they retire.”

This loss of a career-oriented identity is key, Schlossberg explains; “when you make a major change, your identity – who you are – is at stake.” Until retirees find a new identity in retirement and develop a new sense of purpose, they may struggle with feelings of loss and depression. Research supports this view; a meta-analysis of multiple studies found that retirees who closely identify with their role at work or had high-stress jobs are likely to find the transition to retirement hard.3

Delamontagne found that your personality type can have a lot to do with how difficult the transition will be. Those with relaxed dispositions can more easily roll with the punches and adapt to the changes retirement brings. On the other hand, energetic hard-chargers and people who have invested themselves in their careers often face more trouble making the transition into retirement. Reflecting on your own temperament and personality can give you insight on how to better manage your transition into retirement.

 

Who will you be in retirement?

Through interviews with over 100 retirees, Schlossberg identified six different paths that retirees often take to create their retirement lifestyle. For example, continuers usually adapt their existing skills and interests to retirement, often volunteering or working part-time in the same or a similar career field. Research suggests that many retirees aren’t ready to hang up their spurs altogether and instead choose to embark on encore careers. A 2013 CareerBuilder survey found that 52 percent of workers 60 and over planned to work part-time once they retired.4

Adventurers take retirement by the horns by learning new skills and working on their bucket list. They are the retirees who become dedicated RVers or devote themselves to new passions. Many retirees start out as searchers who are looking for their new path. If you find yourself here, you may benefit from career counseling and support to find a new direction. Others become retreaters who withdraw from active life; while some retreaters just need a temporary timeout to figure out their next steps, others can become depressed and confused.

Schlossberg found that retirees “don’t stay on the same pathway forever” and instead shift from one path to another as their needs and interests change.

Don’t be in too much of a rush to find the perfect retirement; what engages you at one point may no longer be practical five or ten years down the line. Delamontagne recommends gradually easing into your new retirement lifestyle before making any drastic changes. If you find yourself itching to move or buy a vacation house, try it out temporarily before committing yourself, and your finances, to a serious life change.

Whatever path you take in your retirement, it’s critical to find a purpose and decide what role you want to take on as a retiree. Whether it’s working part-time, volunteering for a cause, or pursuing a new passion, studies show that retirees who are actively engaged in their lives report greater levels of physical and psychological wellbeing.5

 

How will your relationships change in retirement?

Many retirees find that key relationships change after retirement. Professional relationships are often the first to suffer. Though many maintain connections with their former colleagues, they will lose the everyday contact with their work friends as retirees move on to a new stage of life.

People who socialized regularly with their professional connections may find it especially difficult to lose the camaraderie of the workplace. Schlossberg recommends that retirees find alternative social outlets through church activities, community groups, and hobbies. Building a substitute community and support network can help diminish the loss of professional relationships.

Your relationship with your spouse or partner will also likely change as you both adapt to a new schedule and retirement lifestyle. Many couples don’t retire at the same time, causing the joint transition to retirement to potentially take longer. One study found that couples often experience conflict when one retires while the other remains working. Researchers pointed to expectations about the division of housework and transition-related stress as common sources of conflict.6

Delamontagne zeroes in on “marital compression” – the sudden increase in togetherness that retired couples may experience – as a key cause of discord. Most married couples are accustomed to being apart for hours every day and enforced closeness can turn minor issues and personality quirks into real problems.

Delamontagne speaks from personal experience. After retiring from a successful career as an entrepreneur and CEO, Delamontagne found that he needed to change the way he interacted with his wife. Without the daily challenge of running a business, he unconsciously became more controlling. “One day, my wife said, ‘Stop telling me what to do! I’m not one of your employees,’” Delamontagne admits; “I didn’t even know I was doing it.”

What can you do to help your relationship adapt? “Open lines of communication,” says Delamontagne, who also recommends delving into the personalities of you and your spouse to better understand your internal motivations and how you relate to each other. Couples who have very different personalities, communication styles, and needs for independence may find more potential points of conflict. In his book, Honey, I’m Home: How to Prevent or Resolve Marriage Conflicts Caused by Retirement, Delamontagne offers suggestions and a discussion guide for opening dialogue between spouses. Couples who struggle to communicate might also benefit from the mediation of a counselor or neutral third party.

What else can you do? “Get a part-time job,” suggests Schlossberg. Whether you’re consulting in your former field, pursuing a hobby, or volunteering for a local cause, independent pursuits and time out of each other’s space can give your relationship some much-needed breathing room. Building that critical support network of friends and activity partners can also help you avoid leaning too much on your spouse for your social needs.

Relationships with children and other family members may also change when you retire. Family is often a source of joy and relaxation to retirees but the expectations of your relatives can also offer unwelcome pressure. While some retirees look forward to spending more time with children and grandchildren, others are equally interested in pursuing travel or a more independent lifestyle. Schlossberg found that many retirees feel pressured by their children to make themselves more available for babysitting duty and other family obligations rather than focusing on their own interests. The burden of these expectations can create a stressful family dynamic.

Whether you’re delighted by the opportunity to take an active role in babysitting or not, The American Grandparents Association recommends setting boundaries early on.7 Think carefully about how much time you want to devote to your family and communicate your expectations in advance; otherwise, you might find your own life taking a back seat to family requests.

 

Our take on retirement

I hope that you’ve found this article interesting and that you’ve taken away some information to apply to your own life and share with those close to you. Like many important life transitions, retirement can be both exhilarating and stressful.

As financial professionals, our job is to help you prepare for retirement and to give you the financial confidence to pursue your dreams in whatever form they take. However, we also want you to see us as a resource on other aspects of retirement. Though we aren’t psychologists, we have helped many clients negotiate important life transitions and can offer support as you work to pursue your retirement dreams. I’ve identified some resources in this article that may be helpful in your journey and would be happy to direct you to other sources of help.

Whether you’re still preparing for retirement or you are already living in the next phase of life, there’s no single solution that can guarantee a happy, successful retirement. However, our experience teaches us that advanced preparations can help reduce the stress of retiring and help ensure that you’re financially, emotionally, and mentally ready to retire. Finally, we want you to remember that retirement can offer you the freedom to reinvent yourself and pursue new passions. “Retirement never ends, it’s an ever-evolving process,” says Schlossberg. Embrace it and enjoy the life you have created for yourself.

Please feel free to share this information with your friends and family; everyone deserves the benefit of professional recommendations and the confidence of knowing that their future retirement has been planned for. If you would like to review your current retirement plan or need help developing one, please call our office at 419-425-2400.  Lastly, if you or someone you know struggles with depression, please seek medical help immediately.

 

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Hixon Zuercher March 2015 Monthly Video Update

How Should I Start Saving for My Kids Education

The other day, I (Tony) got an email from a long lost friend of mine that I hadn’t chatted with in years.  He knows I’m in the industry and he reached out to me with an email question that I thought our blog readers might find of interest.  Turns out, he and his wife had a daughter about a year ago and they were thinking through what type of account would be the best way for them to save for her college education.  Below is my abridged reply.

“It’s great to hear your desire of being a good steward of your family and finances.  Unfortunately, your question isn’t as easy as one might think.  We typically look at a variety of ‘first steps’ that we believe should be in place before beginning to fund a college goal.  First, do you have a Will in place?  A Will should be developed that would name an Executor of your Estate and your desired caretaker of your kids in the unfortunate event of you and your wife’s death.  It would be a travesty to allow the courts to decide who would care for your daughter.  You should have a Will fully executed before beginning to fund your college goal.  These aren’t outrageously expensive, but they aren’t cheap either.  You’ll need to seek and find a qualified attorney to draft a Will for you and your wife.

Next, you should have adequate life insurance in place.  In the unfortunate circumstance of your death, you’ll want to leave your wife and daughter adequate income to survive.  Future college costs can be worked in to the equation of adequate life insurance amount.  Further, if you and your wife should both die at the same time, your chosen care-takers of your daughter will be grateful that money is available to help raise your daughter over the long term.

Third, you should establish and fully fund an Emergency Fund.  We recommend 3-6 months of your living expenses to be set aside in this account to be used for emergencies.  While saving for your daughter’s college is a noble cause, if you lose your job or some catastrophic event causes you to have a large outlay of cash, you’ll want to make sure your family’s needs are met first for the here and now…in which an Emergency Fund could be used.  Once money is in a college savings type account, you will be unable to take the funds back out of it without penalty.

Fourth, it is to your advantage as well to ensure that you and your wife’s retirement is a primary consideration above college contributions.  The main reason is that you may put your own retirement at risk by not funding it fully, only to find out your daughter receives a hefty scholarship or perhaps doesn’t even go to college for various reasons.  I’ve dealt with too many clients who have put their own retirement in jeopardy to send their kids to college and are now living with regret and having to work for longer than they had ever anticipated.

Next, it is to your advantage to make sure you’ve dealt with any consumer debt that is outstanding.  High interest rate student loans, auto loans or credit cards will kill you financially over time.  It is recommended that you extinguish most, if not all, consumer debt (not mortgage) before considering funding a child’s college education.

Last, but not leastJ, if these other financial considerations are in order, you could consider college contributions.  We typically steer clients to CollegeAmerica which is Virginia’s 529 Plan managed by American Funds.  This Plan is only available through advisors.  American Funds has a robust line-up of target date offerings and has had stellar performance.

For those living in Ohio and not working with an advisor, consider Ohio’s 529 Plan.  www.collegeadvantage.com  Choose the Do-It Yourself Direct Plan.  You can sign up everything online and do your contributions via EFT from your bank account.  Choose an age-based option that will vary in risk as the child gets older.  The closer they get to college, the less risk the model will take.  Also, Ohio’s plan allows for a small tax credit that many find helpful in tax planning considerations.

For more information of which I pretty much agree with, visit www.daveramsey.com  He lays out many of the principles I’ve written above in book form.  Also, a lot of times there are live classes in the area in which you can attend.  You can search for those and you and your wife can learn more.”

December 2014 Monthly Video Update

September 2014 Monthly Video Update

June 2014 Monthly Video Update

March 2014 Monthly Video Update

Tony Hixon of Hixon Zuercher Capital Management leads our March 2014 video update. This month he will be talking about some of the major events that moved markets in February as well as what might affect us in the days and weeks ahead.

Don’t forget to register for our 2014 Tax Strategies Webinar, March 21 at 12pm EST.

Register here.

The Only Thing We Have to Fear is…Fear Itself

It’s been said that a human is born with only 2 fears, the fear of falling and the fear of loud noises.  Every other fear is acquired.  Those 2 fears in babies were very present when our son was born and our oldest daughter was 5.  She wanted to hold him so bad, but she didn’t quite know all the rules yet, and as she rocked him a little to much, he freaked out as he felt like he was falling on the down-stroke of her rocking him.  She was also quick to pick up on his fear of loud noises and she’d be pleasantly talking to him and all of the sudden shout “BOO!”, followed by him practically jumping out of his skin and crying.  (Please don’t call child protective services as we quickly disciplined this out of her and it no longer happens:)

So, other fear is acquired, mainly by our brains projecting a possible outcome that may or may not happen.  As our brains mature, we humans have the ability to project future outcomes that range from legitimate, to downright silly.  Case in point, I’m deathly afraid of spiders.  Big ones, small ones, they all freak me out.  I hate them and anyone who has a pet spider needs to have special counseling.  So my brain projects that this tiny little thing can do some sort of egregious harm to me that more than likely will never happen.

So it goes in modern day markets.  Fear and greed push markets up and down and our beloved financial media will always pound the side of fear.  Striking fear in the minds of listeners drives viewership and hence, advertising dollars.  So what are the current fears that are out there; up, down, sideways…it’s all bad all the time.  Here’s a few points from Brian Wesbury of First Trust Portfolios that I attempt to summarize below:

Oil – Between September 2011 and March 2012, oil prices rose about 20%.  This generated fear that consumers will now have less to spend.  But recently, as oil prices headed down through May and June, did the fear go away?  Nope.  Media touted that falling oil is a bad sign, signaling weak global demand.  Be afraid…be very afraid.

Interest Rates – The 10 year Treasury yield has hovered around 1.5% and many now argue that the low rates signal economic problems and the US is the new Japan.  Then there are those who freak out about rising rates as they will hurt consumers, lead to less refinancing, and less business borrowing.  No matter how you look at it, its bad.

Consumer Debt – It is currently trending up.  This is bad because we Americans are on the verge of creating another panic of 2008.  But if it was trending down, we’d hear all about how Americans are tightening their pocketbooks and spending less.

Consumer Savings – It is currently trending down.  This is bad because we’re not saving enough for retirement and we’re all going to be screwed.  But if it were trending up, well that’d be bad too because it takes money out of the economy.  All bad, be afraid…do you sense a pattern here?

Foreclosures – Trending down.  This is bad because now first time home-buyers can’t find any bargains.  Unreal!  But if it was trending up we’d never hear the end of it!

All bad, all the time.  Be afraid, the sky is falling, be worried about everything.  In the meantime, since the lows of March 2009, the market is up over 115%.  Hence the reason why we are adamant about avoiding the noise, make carefully researched and educated decisions, and continue to consistently protect and increase our clients’ wealth.  But are there legitimate fears out there that need to paid attention to?  You bet.  But there are also many compelling investment opportunities that being a perpetual pessimist will blind you to.

Apple vs. Microsoft – The Tale of Two Techs

In a February 7, 2012 interview, Henry Blodget of the Business Insider was quoted as saying:

Apple’s iPhone business alone is now bigger than Microsoft.  Not Windows.  Not Office.  Microsoft.  Think about that.  The iPhone did not exist five years ago.  And now it’s bigger than a company that, 15 years ago, was dragged into court and threatened with forcible break-up because it had amassed an unassailable and unthinkably profitable monopoly…  In the December quarter, Apple’s iPhone business generated $24.4 billion of revenue.  Microsoft’s whole company, meanwhile, from Windows to Office to servers to XBox, generated $20.9 billion.

A quick look at a 5 year chart comparing the stock price of Apple (AAPL) vs. Microsoft (MSFT) reveals the tale of two techs.  One going nowhere, the other shooting to the moon.

Now, some decry the fact that AAPL share price has been taking a beating lately, but it isn’t hard to discern that overall, the company has a solid brand, solid financial position, and a bright future ahead.

FULL DISCLOSURE:  We are long AAPL at the time of this writing.

FULL PERSONAL DISCLOSURE:  I recently purchased an iPad 3rd generation and am undergoing positive life-change as a result.