What’s Your Retirement Personality? And How Does It Affect Your Future?

Retirement planning isn’t just about money. Sure, your finances play a big part in how you’ll survive when you’re no longer working, but the foundation of retirement planning is envisioning what it looks like for you. What do you plan to do in retirement? How do you plan to spend your time? What will give you purpose, bring you joy, and become a priority for you?

The Linscomb & Williams team of financial advisors helps clients not just plan for retirement, but plan for the retirement they desire. After all, if you are going to spend your working life preparing for retirement, it should be the retirement you deserve. Retirement planning in Atlanta may look different than retirement planning in Houston. Retirement planning for a couple with no kids will look different than for a large family with many grandchildren.

Savings and income are extremely important during retirement, of course, but who you are as a person is the primary driver of your life, before dollars and cents come into play. Your personality influences your values and priorities, and directly affects how you spend your time and money in retirement.

In our 50 years of working with families, we've come to identify 6 common retirement personalities. While, like your fingerprint, your personality is completely unique, take a look at the following “types” of retirees to understand just how your lifestyle and values affect your life in the future, because this will mean different things for your money. If you have goals that aren’t addressed here, contact us! Schedule a no-obligation conversation with our experienced team of professionals, and get the conversation started.

 

Linscomb & Williams has been helping families plan for retirement for 50 years. Learn how we can help you too.

 

The Traveler

For many retirees, the Golden Years is the best time to travel to new places and explore the world. Whether it’s a domestic road trip, RV lifestyle, or jet-setting thousands of miles away, some people prefer to devote the bulk of their time, energy, and finances to checking items off their travel bucket list.

Keys to Retirement Success for Travelers

As you may have guessed, airfare, lodging and the other costs associated with travel can prove to be among the biggest expenses in retirement. Make sure that your monthly budget properly accounts for your travel needs and can sustain your wanderlust in the long-term.

Here are a few other factors that can affect your plans, which you may not have thought about:

1. Don’t Let Poor Health Derail Your Travel.

Your health is another extremely important factor to consider. If you neglect to maintain a healthy lifestyle, your travel plans may be disrupted. To this end, be sure to consistently include the cost of healthcare and fitness into your budget. Retirees pay $122,000 in medical costs, on average, between age 70 and the end of life – mostly out-of-pocket.

2. Less is More.

Another great way to make your life as a traveler easier is to keep things simple. Simplify your schedule and budget, and compartmentalize all aspects of your life for easy management. It can make planning your adventures much easier in more ways than one.

The Philanthropist

Everyone wants the world to be a better place, but the philanthropists put this goal at the forefront of their lives, and desire to make an impact or leave a legacy. Philanthropic endeavors can take the obvious form of charitable donations, but devoting time and energy is also a major factor when giving back. Volunteering, working for a school or local non-profit, and becoming a point of contact for church ministries are all in the wheelhouse of the philanthropist, offering new implications for retirement.

Keys to Retirement Success for Philanthropists

As you devote yourself to caring for others and serving a good cause, be sure to devote similar care and time to your retirement finances. For philanthropists, budgeting time and money properly will be important.

Volunteers can make a huge difference in the world, but they are unpaid. If you spend most of your time volunteering, take time to account for your daily meals, travel, and living costs. As you are likely relying on different financial assets for cashflow, like Social Security, a pension and your retirement portfolios, double-check to confirm that your financial plan can bear the load of unpaid work.

We have a long-tenured client who desired to retire early to spend his time in prison ministries. However, his desire to retire early led him to make some unwise and risky investments to increase income. When those investments did not work out, his ability to quit working altogether and spend time as he had envisioned was compromised. Don't let the charitable "tail" wag the financial planning "dog." Charity always begins at home.

If you plan to give money, make sure to use tax-advantaged ways to donate. And don't forget that your out-of-pocket expenses while volunteering, even mileage, may qualify for tax deductions on your return.

Right off the bat, donations to a qualified 501(c)(3) are tax-deductible, lowering your taxable income for the particular tax year. There are also ways to efficiently donate securities you own in addition to cash donations.

For example, a Donor Advised Fund (DAF) is a registered 501(c)(3) organization that can be funded with cash, securities or other assets. In these unique accounts, all of the contributions are held in a sub-account in your name (the donor), and are held by a DAF sponsor until eventually donated to a charity of your choosing.

As the donor, you obtain a tax deduction for contributions made to the fund, even if the money goes to the chosen charity years in the future. And these accounts can be funded with assets that otherwise would trigger capital gains taxes, if sold.

If, like many retirees, you have tax-deferred savings pools (IRAs, 401(k)s, etc.), you may be able to direct distributions that are required under RMD calculations straight to the coffers of charities of your choosing. This can benefit you even if you do not typically itemize deductions on your tax return. 

Wise, prudent charitable giving can supplement your tax benefits and preserve your retirement savings. Be sure to confirm that your favorite charities are qualified 501(c)(3)s, and speak to your financial advisor about ways to maximize your giving and tax benefits.

If you fall into the Philanthropist retirement personality, read our recent blog post: Giving to Charity in Retirement? Here’s a Tip.

The Workhorse

Individuals who fall under the workhorse category don’t follow the traditional retirement model. Where retirement is looked to be a time period with very little work, the workhorse goes the opposite direction. If an individual with this retirement personality type decides to retire at all, you’ll probably find them starting a new business or side-hustle, seeking a new mission to which they can dedicate themselves. Prolonged leisure is, at best, an afterthought.

Keys to Retirement Success for Workhorses

If you’re going to work in “retirement,” make sure to use your unending work ethic to your advantage.

Prolonging your work-life can supplement your retirement savings if you generate additional income. If you have the energy and interest to continue working, consider using your existing skills as a consultant or independent contractor. In these roles, you can take greater control over your schedule with the potential to maintain your pre-retirement income levels. We've even seen clients increase their income in self-employed retirement pursuits beyond what they enjoyed in their working years. 

Furthermore, a major benefit in generating income in any capacity can afford you the opportunity to postpone your need to commence Social Security, increasing your future payouts for yourself and a spouse. If you can comfortably delay Social Security payments, you can maximize how much you’ll receive each month, maxing out at 70 years old.

The Student

The student is dedicated to their own personal development. Whether it’s exploring the world to learn new things or devoting time to focus on a particular subject, the student will dedicate their free time to lifelong learning.

Keys to Retirement Success for Students

Some of the key financial questions for the student is: How will you pay for the methods you use to learn? Will it be as simple and cost-effective as buying a book and learning solo? Or, will it require enrolling in a university program or traveling to a foreign country for in-person learning in another culture? Tuition historically has increased at about twice the inflation rate each year (although recent data suggests this trend might be slowing). If you do find that enrolling at a college is your best bet, see if you can find a less costly state or community college course.

Enrolling in a class can be a great way to learn and connect with like-minded individuals. Work with your financial advisor so you can continue learning without wrecking your retirement account.

The Home-Body

Home-bodies are essentially the inverse of travelers. They prefer to use their newfound free time in retirement to simply stay at home, or in their own locale. The downshift from one’s work-life offers the full freedom to structure their home-life as they see fit, with more potential free time to spend with friends and family.

Keys to Retirement Success for Home-Bodies

Enjoying quality time at home is an excellent way to recharge your batteries after decades of the daily grind. Just the thought of abandoning a daily commute in traffic might seem like paradise. But, we have also observed that boredom can begin to surface over time.

Beware of boredom spending!

If your day-to-day activities lack variation or the right mix of routine and newness, you can quickly become bored. This can result in unnecessary spending, and the development of inadvertent habits from “idle hands.” The Internet and online shopping have made overspending available with the ease of "one click."

Staying home can be a great way to save money, but where you live greatly determines how far your money can go. (Read our recent blog post: How Long Will $1 Million Last?) Typically speaking, the biggest expenses in retirement are housing, transportation, and healthcare. If you live in Atlanta, Georgia, as opposed to Orange County, California, it can mean roughly a 59 percent savings on housing and nearly a 17 percent reduction in transportation costs.

Talk to your financial advisor about where you plan to live when work is no longer a factor.

The Grandparent

From babysitting to family trips, and the like, individuals who fit the grandparent role want an active role in the lives of their grandchildren.

Keys to Retirement Success for Grandparents

Giving a 20-dollar bill to your grandson or granddaughter may give them a temporary smile, but there are additional ways you can have a strong positive impact on their life. On average, grandparents spend about $2,500 per year on grandchildren. In the midst of giving presents and quality time, direct some of your money to a 529 plan or other education account that can grow over time. These can represent a nice legacy of your impact on their lives even after you are gone.

These accounts have their own built-in investment strategies and offer tax-free growth, if the money is used for education expenses when withdrawn.

If you want even more control over how the funds will be distributed, you can create a trust and specify rules to govern how the money should be managed in the future. These strategies can positively impact your adult children's financial lives and set your grandchildren up for financial success as well. Your financial advisor will be a very helpful resource in this instance.

Depending on your situation, you might live quite a distance from your grandchildren, or perhaps just a quick trip away. In any case, it’s important that you are aware of the financial impact of making time with your grandchildren a high priority.

If visiting your grandchildren requires scheduling a trip, how often can you visit and how much will it cost? Will your cashflow be greatly diminished? On the other hand, if you live close, is your locale a great place for retirees? Like any other part of your financial life, be sure that your financial advisor knows that seeing your grandchildren consistently is a high priority.

Not to finish with a spoiler, but we should point out one risk that we've occasionally seen play out with grandparents: The inability to say "No" to direct appeals from parents or the grandchildren themselves to provide financial support beyond what is prudent. Fortunately, we've rarely advised families that face imminent danger of exhausting their financial resources. But, in the very few cases where this has happened, it is usually related not to the client overspending for their own needs but because of being overly generous to children or grandchildren. This is a great place to use your financial advisor to be the "bad guy" and say "No" for you when prudent. 

The Bottom Line: Live Authentically and Plan Accordingly

Some people are a mix of one or more of these retirement personalities. Whatever your retirement personality is, the crux of your retirement is to make sure your financial plan complements your values.

There is no one-size-fits-all approach to your financial life, but the quality of your financial plan can make the difference between a comfortable retirement with peace of mind, or high financial anxiety during your Golden Years.

For help creating a financial plan that’s right for you, contact the Linscomb & Williams team. We’re here to help!

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Heidi Davis, CPA/PFS, CFP®

Heidi Davis, CPA/PFS, CFP®

Heidi Davis is a Managing Director and Wealth Advisor at Linscomb & Williams.

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