Retirement: A Full-Time Job

Thinking About You

I can barely tear myself away from the TV.  I’ve been glued to the storm coverage since Sunday.  It’s just unbelievable to see the magnitude of Sandy’s destruction.  It doesn’t even look real.

But I know it’s very real for so many of you.  I’m hoping that all of you in Sandy’s path, your families, your friends, and your neighbors, are ok.  I know I’ve got at least one reader in New Jersey, one in Upstate New York and Rhode Island, and another on Long Island.  Fred, Cindy, Deegee, and all you others, I'm thinking of all of you that actually live in the areas of the images I’ve been watching so intently. 

I understand almost seven million people have lost power over the last 24 hours.  Today I noticed readers coming from Virginia, where I’ve been watching several feet of snow carpet the streets, from New Jersey, where I’ve been watching several feet of water flooding the streets, and from New York City, where the lower part of Manhattan’s skyline went completely dark last night.  When I saw these places on my blog statistics, I wanted to reach through the Internet and give you all a great big hug.

For those of you that have power, I’d love it if you’d leave a comment or send an email, if you feel like sharing your experience.  Or just to say that you are ok.

For the rest of you that might be glued to the TV just like I am, here’s a link to the American Red Cross, where you can make a donation to help those that will definitely need our help over the coming months.

Related Posts

            Picturing Retirement:  Exploring the U.S.

            This is New York

            It Was a Dark and Stormy Night

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Will You Be Bored in Retirement?

Time is a lot like money, when you spend it on one thing, that’s time you can’t spend on something else.  Which is why I think some people stress out about boredom in retirement.  It’s hard for me to identify with the idea that you can be bored in retirement.  There are so many things to do.  Things that are way more fun than going to work eight hours a day.   Which is why I don’t think the problem really is boredom, I think it’s regret.  Or shall I say preemptive regret. 

The first day you wake up without a job, you are faced with an unlimited number of choices of ways to spend your time.   What's the problem with that, you ask?

At work, you have few choices.  You have stuff you have to get done, stuff your employer needs you to do.  You may get to decide the order of doing those things.  Perhaps you like to gab with your co-workers in the morning and save the hard work until after lunch.  Or maybe you like to get the tough stuff out of the way first thing in the morning so you can surf the internet a little in the afternoon.  Whatever.  You still have to get your work done, and besides balancing how long is safe to procrastinate while still managing to keep your job, you don’t have a whole lot of other choices.  Your choices in the workday are limited.

But in retirement, your choices are unlimited.  There’s not even a menu of set choices--the list is endless.  There are probably choices you aren’t even thinking of.  And when you choose to do one of them, there's something else you're not getting to do.  As one of my readers once pointed out, in retirement you get to do whatever you want, just not all at the same time.  When I first retired, I was overwhelmed by this reality, to the point that it immobilized me from making any choices at all.

That’s because it turns out we don’t like to have so many choices. 

Lots of studies show this counter-intuitive fact, the most famous of which was conducted by Sheena Iyengar, Columbia University professor and author of the book, The Art of Choosing.  She set up an experiment using jams in a gourmet grocery store.  Customers were given the opportunity to taste a sample of jams.  Some were presented with 24 choices, and some with only six.  Turns out when people only had six to choose from, they were more likely to purchase a jar.

As journalist Alina Tugend writes in her New York Times article on the subject, “Research also shows that an excess of choices often leads us to be less, not more, satisfied once we actually decide. There’s often that nagging feeling we could have done better.”  Regret.

If you are sitting around with nothing to do in retirement, I don’t think it’s because there’s nothing to do.  I think it’s because there is too much to do.  How do you choose, especially if you are worried you might regret picking this over that?

Here’s my advice:  It doesn’t matter.  Just pick one.  If, at the end of the day you are unhappy with the choice you made, guess what?  You get a whole ‘nother day tomorrow to choose something different.

Related Posts:

            Lusting for Boredom

            Easing Into Retirement

            Reflections on My First Year of Retirement (Part 3:  Boredom)

 

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Picturing Retirement: It's My Party

Photo Friday:  This time when I retired, I decided to throw my own going-away party.  Pizza, bocce, and karaoke, what better way to send myself off into re-retirement. 

(To submit your picture of retirement, email me a photo with how you would like it credited.)

Related Posts:

    Retirement Do-Over

    Happy Eating Pizza at Home

    Aging in Place and Watching Your Trees Grow

 

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Living Out Loud

Every so often I feel the need to write a blog post just to tell you that I haven’t fallen off the face of the earth.  This is one of those times.

It would seem like, with no more work obligations, I would have plenty of time to blog.  But blogging requires thinking and I haven’t even had a moment to think these last few weeks.  Which is nice really.  Thinking is overrated.

Instead of thinking, I’ve been relishing.  First, we went up to Seattle to visit some friends.  What a fabulous town.  I’d be tempted to move there myself if I didn’t already know that we enjoyed what was the end of an unusually long stretch of sunshine for that part of the country.  I relished the sparkling blue water vistas, the fall-painted hills sprinkled with stately homes leading down to the water’s edge, and all that energy of their hip-downtown scene.  Definitely put Seattle on your list.

I relished time with family at a jazz concert, with Doug at a (winning) Giant’s game, and in my own backyard with my fun-loving neighbors over home-cooked pizza. 

And last weekend, I relished time in Yosemite with those kinds of friends that blur the lines between what is friendship and what is family.  Oh, and Yosemite, how can I have lived less than four hours away from you and never have been to visit you until now?  Put Yosemite on your list too.

Did I enjoy these events more because I’m back to full-time retirement?  I think so.  My mind was so uncluttered with thoughts of work that I kept hearing myself say, “This is so great!”  Yes, out loud.

Related Posts:

            Retirement:  Where Are Those Extra Hours?

            So What Exactly Have I Gained by Retiring?

            What’s the Difference Between Vacation and Retirement?

 

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Buy Low, Sell High

 

(Posted in Money Mondays)

This is the final part of my three-part series on how I invest my nest egg.  First I talked about decreasing your risk with diversification across asset classes.  Then I discussed matching your risk tolerance to your own allocation among asset classes.  But this is where the magic happens.

Part Three:  Periodic Rebalancing

You've probably read the stats that a surprisingly small number of trading days determine a large percentage of the stock market's gains.  From 1963 to 2004, 1% of the trading days accounted for 96% of the market's gains.  In the period from 1990 to 2005, a buy-and-hold investor would have realized average annual returns of 11.5%.  Contrast that with someone that was going in and out of the market during that 15-year stretch and managed to miss the 10 best trading days of that period.  He would have realized only an 8.1% return.  Now it's true that if he had managed instead to miss the 10 worst trading days, he would have realized a 15.3% return, but it turns out that people are notoriously bad at getting in before the gettin' is good and getting out before the market tanks.

While the market has doubled since the bleakest days of 2008, mutual fund outflows were at record highs during that same period.  Investors pulled nearly $260 billion out of U.S. equity funds since then, missing an awful lot of upside.  The percentage of households that hold stock has fallen each year since the financial crisis hit, to a new low of 46.4% in 2011.  Unfortunately, investors tend to sell as the market is tanking and buy as it is rising.  That's why over the two decades ending in 2010, investors' average annual equity returns were 3.8%, even while the S&P 500 returned an average of 9.1%. 

There's a perfectly good explanation for this:  People are human.

So what to do about this predicament?  Remove the emotion.

Once you have determined what your ideal asset allocation is, you have to do a little work to keep it there.  Let's say your risk profile provides for a 50/50 split between stocks and bonds.  Let's say it's 2009 when the stock market returned 26% and the bond market returned 11%.  At the end of 2009, your 50/50 allocation is out of whack.  At that point, you would hold 53% stocks and 47% bonds.  Rebalancing just means you sell some stock to get back down to 50% and move the difference into bonds, getting you back to your target asset allocation.  Conversely, at the end of 2008, after stocks went down 37% and bonds went up 20%, you'd have a 34/66 allocation of stocks to bonds.  In which case, you'd sell some bonds and move that money to stocks.

In both of these cases it wouldn't feel very good to do, abandoning some stocks after an upswing, or dumping money into stocks after the've just tanked.  But it would force you to buy low and sell high on that portion of your portfolio that needed rejiggering.  That's rebalancing.

Now, if you decide that the eurozone turmoil, or the Fed's quantitative easing, or potential election results mean that stocks are going to tank, and you decrease your stock allocation down to 20%, that is not rebalancing.  That's market timing.  You feel that it's a bad time to be in the market, and you are making judgment based on what you think is going to happen to that market.  That's fine, it's not for me, but it may be for you.  In any case, it's not rebalancing.

When I retired, I had 30% allocated to fixed income and 70% to stocks.  As I mentioned before, I found that allocation to be a little aggressive for my risk tolerance.  I will be shifting my allocation to a 40/60 split to more accurately reflect my risk tolerance.  As I get older I expect to shift that even more in favor of bonds.  That is not rebalancing, that is adjusting my asset allocation.

But rebalancing, that prevents me from moving with the pack.  Which is good when the pack doesn't seem to be making very good decisions.

Related Posts:

     Back to the First Day of My Retirement 

    Retiring Into a Down Market--Part III (or Armageddon)

    The Market:  This Time is Different

 

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