RETIREMENT CAN BE the best time of our life—but only if we manage it right.
I recently passed a milestone: the three-year anniversary of the day I left my 40-year banking career. What have I learned over the past three years? I’ve found that a good retirement has three key elements: sound finances, wellness, and intentionality about managing time.
1. Finances. I watched some of Berkshire Hathaway’s annual meeting last month. As usual, Warren Buffett was a master teacher. He showed the top 20 companies in the world as of 1989. His point? Not one of those companies is in the top 20 today.
He also showed the top 20 companies today. It’s an impressive list. We might think of them as great companies to own for the next 30 years. But if history offers any lesson, it’s that most—and perhaps all—will lose their dominance.
That made me think about my own finances. I probably have an actuarial life expectancy of 20 years or so. My wife is a few years younger, so—to be conservative—I think we should use a 30-year investment planning time horizon. Given the demise of the 20 largest companies over the past 30 years, what’s a good plan for managing our exposure to stocks over the next 30 years?
Buffett’s example made clear the compelling logic of owning low-cost index funds that invest in all publicly traded stocks. As some giant companies fall, others will emerge. As index investors, we will profit by participating in this creative destruction. We will own the next Amazon or Apple.
Buffett has said his estate plan calls for trustees to invest 90% of his assets in a low-cost S&P 500 index fund. My portfolio has a little more diversification, including a total world stock index fund. As innovation and prosperity spread to other countries, it makes sense to me to diversify outside the U.S.
One caveat: I don’t want my day-to-day bill paying to depend on stock market performance. That would be too stressful. I like a retirement income plan that also uses Social Security, any pension income and other fixed income-like annuities to pay ongoing bills.
2. Wellness. Humans have no doubt looked for a fountain of youth ever since they discovered they were aging. But it’s reached a new frenzy with baby boomers like me. I’ve been through enough diets, supplements and exercise routines to write a book.
The pursuit of eternal youth is epitomized by the $1 million that’ll go to the winner of the Palo Alto Longevity Prize. It’s called “a science competition dedicated to ending aging.” To my knowledge, no one has collected yet.
If there’s a way to hold off the frailty that comes with aging, I’d like to participate. But—aware that frauds work most effectively with those looking for miracles—I also know that selling anti-aging wares can be a fertile field for scammers.
My advice: Treat this subject the same way you handle your finances. As an investor, I keep an eye on current events. But I seldom act on anything except advice from financial experts I trust.
Similarly, there are exciting developments in anti-aging that are worth keeping an eye on. I’m intrigued by the emerging science of senolytics that tries to remove harmful cells that afflict the elderly. It shows some promise, but it’s probably years away from being anything that you and I can benefit from.
On the other hand, there’s a lot of trusted, actionable advice we can immediately implement. A pain doctor told me his healthiest patients are hikers. I frequently go for long hikes, as well as regularly visiting the gym. Nutritionists consistently advise eating lots of natural foods for their vitamin and mineral content. That’s also good advice.
But whenever we’re tempted to buy into a new health craze or an incredible investment opportunity, it’s good to remember the story of Stephen Greenspan. He wrote a book on gullibility, including how to avoid it.
Unfortunately, shortly after the book was published in 2008, it was revealed that he was an investor in Bernie Madoff’s Ponzi scheme. If a gullibility expert can be duped, clearly the rest of us need to be on our guard.
3. Managing time. I love no longer going to the office five or six days a week. But I need something to look forward to each morning besides coffee. Among the unhappy retirees I’ve talked to, most are bored because they don’t have anything to do. That can usually be fixed.
If you’re searching for ideas for how to spend your time, think about old interests you weren’t able to pursue in the past. My quirky desire: Learn more about Western philosophy. I’m up to my neck trying to understand Thomas Aquinas’s view of natural law. I’m sure that sounds weird to most people, but that’s the point of retirement. We can pursue interests unique to who we are.
Joe Kesler is the author of Smart Money with Purpose and the founder of a website with the same name, which is where a version of this article first appeared. He spent 40 years in community banking, assisting small businesses and consumers. Joe served as chief executive of banks in Illinois and Montana. He currently lives with his wife in Missoula, Montana, spending his time writing on personal finance, serving on two bank boards and hiking in the Rocky Mountains. Check out Joe’s previous articles.