Understanding The Retirement Life Cycle with Jessica Cannella

Jessica Cannella: Today, we’re going to chat about the retirement life cycle. What is that? Well, we’ve segmented into three different parts. Your go-go years, the years you should get up and get going. Your slow-go years, when life starts to slow down a little bit, and healthcare concerns become most probable, and your no-go years and what does this retirement life cycle mean to you and to your family, and to being able to execute a fearless and fulfilling retirement.

I’m Jessica Cannella and I am the Founder of The Go Go Sisterhood and the President and Co-founder of Oak Harvest Financial Group. I’m also a financial advisor and I work with couples and individuals throughout their retirement, and in the years preparing them for retirement. I wanted to speak today to the retirement life cycle and how very different that is from when we are in what I will call our accumulation years, when we’re working. When we’re working and we’re investing our money, and it’s more important that that money is growing and that we’re contributing to our retirement plans if we’ve got them and market goes up, market goes down.
We don’t feel the impact from that. Never feels good to look at the accounts and see them down, but while we’re working, we’ve got earned income and it becomes much more comfortable to withstand those ups and downs, even the big ones. Even when we go into a recession. When 2001, 2000 happen with the dot-com burst. Followed by 2008, the great recession. As working individuals, our employers did not call us and say, “Hey market is really down. We’re going to have to go ahead and reduce your paycheck accordingly.”

No, that did not happen. You’re in the accumulation phase, you’re working. It doesn’t matter that the market went down. Your paycheck did not change as a result. I’m here to share with you that your retirement paychecks or your income distribution strategy, that’s a big sentence, should not change either as the market goes up and the market goes down. Now, we talked about the accumulation phase being when you’re working, you’re accumulating assets so that you can one day, if it’s on your heart to, pull the trigger, draw the line in the sand and retire and life becomes far more about distributing the assets that you saved, why we call it the distribution stage of life, versus accumulating those assets so that you can eventually do this.

I like to liken this too, I’m a big fan of analogy, is if you think of a hiking team hiking up Mount Everest, and they keep going up this mountain and up this mountain up this mountain, and it’s hard and it’s strenuous and they’re getting it and they make it to that summit. Now they’re popping champagne or they’re celebrating high-fiving that they made it to the top of this mountain, it’s very important that they’ve also con considered a strategy for coming back down the other side of that mountain.

That is actually where most people that hike Mount Everest find challenges and often die because they have not thought out thoroughly how to make it down the other side of that mountain. I believe that retirement is no different. It is very important to be a good steward of your money while you’re working, but you can withstand major market events as we mentioned when it comes time to distribute everything that you have saved. I want you to think of retirement as having a life cycle. Retirement, as we know it today, with people generally retiring in their maybe late 50s, but really in their 60s is pretty common these days for people to retire working longer and longer.

It’s very big with people retiring in their 60s, and 70s to think about making their money, all of that they’ve accumulated lasts as long as they do. Maybe that’s 20 years, 25 years, 30 years, 30 plus years. That’s very cumbersome to think about. That’s a long time back down that mountain to make your money work for you and last as long as you do. I like to break up that sentiment through the retirement life cycle. This may not be earth-shattering news that I’m about to share with you. I’ve heard quite a few professionals use this terminology, but I thought I’d take a moment today and walk you through exactly what is intended behind the retirement life cycle.

It’s taking that large chunk of time 20 to 40 years and breaking it down into different phases. First, we have my favorite part of the retirement life cycle, which is your go-go years. Your go-go years are the first 10, 12, 15 years postretirement where you should get up and get going, where life is meant to be lived. You just worked 40 years. You made it to the top of that mountain. It is time to celebrate life. It’s time to jet-set if that’s on your heart. Time to spend time with friends and family and entertain if that’s what you’re into. Just really enjoy, take up a new workout regimen, and travel. Just really enjoy life and spend some money the fruits of your labor that you’ve just worked 40 or 50 years for.

After the go-go years is the most feared and the most important years that we have a plan for which are slow-go years. Life starts to slow down a little bit. Again, this is relative to your health. I have clients that are in their 60s and they move like they’re in their 40s. They are quick like they’re still in their 40s. 60 is young today. I have the reverse of that. I have clients that are in their 60s and they’re moving like they’re in their 80s and they made different decisions. I get so much wisdom in these rooms with spending time with people that are far older than myself.

I feel like I’ve lived through my 50s, 60s, 70s and 80s hundreds of times through my career. With the slow-go years, you can think of that as round in your 80s there are some very vibrant 80 year olds but generally speaking, you’re not going to be jet setting. You’re not going to be doing laborious activities through volunteer work. Maybe you still do some swim classes or you do lightweights but you’re not joining CrossFit at 80 years old. Maybe I don’t know your life but generally speaking, from my experiences, life slows down in our slow-go years.

A very real component to that is healthcare expenses become a lot more significant from cross of living adjustments, from inflation we’re experiencing that right now. Also, it is a lot more probable that in your mid-80s, late 80s you’re going to need and be a candidate for in-home healthcare or long-term healthcare facility than it is in your 60s. Of course, life throws curve balls. It could happen but it is very important that we plan for the slow-go years.
These years are the most feared by women. I work with a lot of women. A lot of married women, single women, divorced widowed. You name it. I’ve sat with these women and it is the number one concern of women is what are they going to do when they’re in their 80s? The biggest fear amongst women today is that they would become the bag lady underneath the bridge that they’d have to depend on their kids that they spent their whole lives raising then come back and take care of them. Most people, women, and men, do not want to become a burden to their kids. It’s not what we set out to do. It’s not our intention to have them come back and take care of us. We want to remain independent.

Planning for those slow-go years is the path toward independence. What is critically sad to me is when I see somebody that’s coming to me later in their retirement late 70s, early 80s, mid 80s and their biggest fear didn’t come to fruition and the time passed anyway. The biggest fear meaning they land in long term care facility or they have to have a kid come back and take care of them.

My favorite part of our planning process is addressing those slow-go years and then reverse engineering it and saying, “Hey here are some parameters for spending in your go-go years.” What is very important in retirement is that you are creating a plan that addresses your baseline expenses. Things like utilities, gas, groceries, routine reoccurring consistent spending that you’re not escaping from. Taxes would factor into that, also any mortgage payment, auto payments things that are again routine and recurring.

What we want to do is create different streams of income that address those baseline expenses with the goal of we get your baseline expenses accounted for, you know where the money is coming and your distribution strategy, taking what you’ve save for retirement and paying yourself back. It becomes a lot less stressful what the market is doing because the market’s going to do what the market’s going to do which is it’s going to go up and it’s going to go down.

Also, you know with assurance and confidence what you can be doing in your go-go years while you feel amazing, while you’re vibrant, while you are able bodied. We’ve got a plan for those slow-go years because the reality is if you need let’s say $3500 to $5000 a month, today, that purchasing power will not be the same as if you had that $5,000 a month, 20 years from now. That is all calculated. That’s what my team does. That’s what our financial analysts look at.

We look at how to stretch your dollar, how to make sure that your $5,000 a month is going to have the same purchasing power in the future. That $5,000 today needs to be closer to $7,000, $7,500 10, 20 years from now. What is the plan for the rainy day? A lot of people talk to me about long-term care and should I buy a policy? The answer is often, no, not when you’re in your 60s.

If you had had the policy in your 40s, your 50s, that could be the best investment that you ever make if you need it in your 60s. Looking at purchasing long-term care where there’s this underwriting process that has to happen relative to your health is how you get approved for insurance, it’s often not the best place to go, where you want to have a plan for those slow-go years is in the distribution strategy, is if the market is down and it just so happens that you’re having a healthcare event, that you need to come out of pocket for, that you have a plan B to go to and get funds. That’s not taking money out of your investment account when it’s down so that you’re not actually realizing those losses.

That you have a distribution strategy that is far beyond the antiquated old adage of just withdrawal of 4%. Tell that to the folks in 2008, who retired and the market’s down 20%, 30%, sometimes 40%. Having a plan that addresses, what can I spend in my go-go years, how am I covered in my slow-go years will make the last segment of the retirement life cycle, where I feel like we’ve done our job. It’s the last five years. It’s the last five years of your natural life cycle. We call it the no-go years. What that means is that life has slowed down. My clients joke with me. I have a worst-case scenario. I have most of my women when I do the analysis, we live longer than our men living until age 95 or age 100.

They look at me and they say, “Yes, that would be worst-case scenario.” Then I remind them, “Hey, we can build a beauty budget in there if that’s a concern.” That last five years are our natural life-sets cycle. Let’s say that it’s age 100 for you. Worst case scenario or optimistically, depending on how you feel there. I will know that my team and I have done our jobs as will you. If you can look back and use this period as a period of reflection, that you can look back and say, “I lived my life and I didn’t do it in fear.”

You’re remembering memories from those go-go years that life did slow down in the slow-go, but you were gardening. You had visitors, you were still driving all of it. If in the last five years, you find yourself surrounded by family, thinking about the impact you want to leave as you go to the next life, your eternal life, we’ll feel assured that we’ve done our part.

If your advisor has not had a conversation with you about how we’re going to create a plan of attack and a plan of reassurance for the go-go years, the slow-go years to have a really rewarding last five years on this planet, I encourage that you facilitate that conversation with them. If you’re not comfortable to do so, I welcome you to give our team a call. We would love to have the conversation and give you a lot of confidence and a lot of clarity in retirement for how you can have the most fearless and fulfilling retirement through your go-go years, your slow-go years, and your no-go years.