This is the 8th instalment of our retirement series. In my previous writings, I shared how I used our proprietary tool “RetireWell” to give our client David (aged 59), a reliable income stream throughout his retiring years.
But retirement planning is beyond just planning the wealth aspect. In holistic retirement planning, it is also about taking care of the retiree’s health to enjoy his retirement and plan for his estate upon his unfortunate demise (See diagram 1). There is also a need to consider the “in-betweens” – Insurance, when retirees are not healthy and need money for medical expenses. Mental incapacity, when they are between living and dying and need someone to take care of their daily affairs. And legacy planning, when you are finally called home. But how does one make these delicate decisions? I strongly believe that retirees should make them based on their life’s purpose.
Diagram 1: Holistic Retirement Planning
It was Victor Frankl, a holocaust survivor who once said that “ever more people have the means to live, but no meaning to live for”. And if I may borrow his phrase, that in retirement, without a life’s purpose, you might have the means to retire but no meaning in retirement.
So, what is a life’s purpose? It is the reason why you exist on this earth or if it is easier to help you understand, it is what you want to exist for, going forward in your life. Putting in another way, it is what you want others to say about you when you die. It is the legacy (and I don’t mean financial legacy) you want to leave behind. It is more than just goals. It is your life’s calling. But how can a retiree know or discover his or her life’s purpose? Personally, it took me about 3 months of intense reflection to discover my own purpose in life. And I have taken clients away for a 4-day retreat to help them discover their purpose. And yet, we were just scratching the surface! So, due to space constraints, I will simply say that you can discover your purpose through walking down memory lane, remembering significant life events to distill your values and beliefs, combining them with your passions and motivations in life as well as your strengths, to help you derive your life’s calling.
But how do you let purpose drive your financial planning in retirement?
Some years ago, I developed a model to help individuals live a purpose-centered life (see Diagram 2).
Diagram 2: The Finishing Well Model
According to the model, broadly speaking, we live our lives in 5 arenas:
- Professional (work)
- Spiritual (faith)
- Social (friendships)
Within each arena of our lives, we have different roles and responsibilities during different seasons of our lives. For example, when we are younger, we may have more roles and responsibilities in say, the family, professional arenas and therefore has lesser time for the rest. But for retirees, in this season of their lives when their children have all grown up, they are needed lesser at home and thus may find that they have more time to live out their roles (that comes with responsibilities) in the spiritual, social and community arenas. To live a purposeful life in retirement, the retiree should see how he can align his roles along with the responsibilities, with his purpose.
As an example, Henry’s (a retiree) life purpose statement is: “No one should be poor forever. I live to care for and serve the poor by providing them with education and employment so as to break their poverty cycle.” As such, in his social arena, he can decide that in his role as a buddy to Peter, James and John, his responsibilities to them is to lead them to have a meaningful retirement by caring and helping the poor together. In this way, Henry’s role and responsibilities in his social arena will be aligned to his purpose. While doing his “friendship thing”, he is also living his calling.
Henry then ensures that he fulfills his role and responsibilities by setting goals and activities to reach those goals. For example, he sets a goal that states: “Peter, James and John to enjoy a meaningful retirement in 2017, evidenced by them being actively involved with the poor on a monthly basis.” To support those goals, Henry planned several activities with his friends in 2017 such as:
- Develop a financial education programme to teach the poor
- Organize 4 trips to visit the poor in the hill regions in Cambodia
- Raise funds for the poor in Cambodia
To better achieve these goals, he will need what I termed “enablers”. According to the model, they are:
- Personal development
Enablers are not goal. But when you have them, they enable you to better do your activities. In Henry’s case, he planned 3 exercise days (health enabler) to build his core muscles and stamina, in order to be able to cope with the harsh environment in the hill regions in Cambodia. He also planned to sign up for a series of 6 financial education courses, as well as a facilitation course (personal development enabler), to equip himself to develop the financial education programme to teach the poor. And in order to be able to do the above, he needs to budget to ensure that his funds are allocated into the above programmes, as well as a gym membership and paying for a trainer. He also set aside funds to give to the poor on a long-term basis as well as all his expenses traveling to Cambodia. This is the wealth enabler.
For retirees, they are in the last phase of his or her life. Time is short and by being clear with his life’s purpose, retirees are able focus their time on activities that matter the most to him. What this also means is that retirees can best plan how much financial resources they need and how best to allocate them. How they live their retirement life and spend their money will be purpose driven. With such great intentionality, this could be the best time of their life.
When I did this for myself years ago, I had a paradigm shift. Firstly, I can live my purpose by doing the small things in my life on a daily basis. In addition, money no longer becomes a goal. It is an enabler. If we chase money as a goal, it is like leaning the ladder on the wrong wall. When you climbed up, you will be disappointed. When you see money as an enabler, you will use money and love people and not love money and use people. You will not buy things that you don’t need, with the money that you don’t have to impress people that you don’t even know. When you do purpose-driven financial planning, you no longer crave or desire anything you don’t already have. You will begin to live a life of contentment. And contentment is not a passive acceptance of your situation. Rather, it is a conscious choice to enjoy, appreciate and accept what you have, while giving up the cravings of the things you do not have. Because you know and accept that you can’t have everything and you don’t need to have everything.
Many people make financial decisions and let their life follow the financial decisions they make. Life may be disastrous if you do that. Let me encourage all of us to first make a life decision, and let your financial decisions follow it. When you do so, your life, whether in retirement or not, will finish well.
The writer, Christopher Tan, is Chief Executive Officer of Providend, a Fee-only Retirement Financial Adviser. Besides being financially trained, he is also an Associate Certified Coach with the International Coach Federation. The edited version has been published in The Business Times on 29 July 2017.
Here are the links to the other 10 parts of the RetireWell® Series:
- Part 1: Drawing Down Retirement Money
- Part 2: Offering Retirees Security and Peace of Mind
- Part 3: Low Cost, Consistent Results
- Part 4: Counting on low-cost Index Funds
- Part 5: Investment Philosophy for a Retiree Client
- Part 6: Ensuring a ‘Safe Retirement Income Floor’
- Part 7: Remain Invested Over the Long Haul
- Part 8: Purpose-Driven Retirement Planning
- Part 9: A Tale of Two Retirees And Their Fortunes
- Part 10: Stock Markets Always Rise Over The Long Term
- Part 11: Retirement – It’s About The Kind Of Life You Want To Lead
We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current investment portfolio, financial and/or retirement plan, make an appointment with us today.