By Jamie Cornehlsen and Ted Schwartz
In a culture that widely views wealth as an end in itself, too many Americans are fixated on spending and material acquisition, even as they approach retirement.
Yet others view wealth accumulation as the key to achieving other goals, as a means to an end. After working hard with the single-minded goal of financial freedom, some independently wealthy people — some retirement age and some younger — use their wealth as a key to living according to non-materialistic values.
Except for paying off mortgages early and enjoying extensive leisure travel, some don’t live much differently from many middle-class Americans, calling to mind the modest consumption habits of independent business people described in the classic best-seller The Millionaire Next Door. As these people have few outward signs of wealth — they live in modest homes for their means and drive fairly ordinary, inexpensive cars — they could be your next-door neighbors.
Instead of focusing on spending, they’re more concerned with how they spend their time, using the freedom their wealth affords them. This could mean spending time with relatives, doing volunteer work or merely pursuing what less wealthy people take for granted as mundane tasks. We have a client who truly enjoys raking leaves on a crisp autumn day. She could easily afford to hire someone to do it, so it becomes a luxurious option for her.
Of course, many wealthy people attempt to achieve happiness through high spending, though this may leave them unfulfilled. Some might consider what they truly want to do with their freedom — what their personal priorities are. With enough reflection, they may identify values that can be drivers of behavior and bring the reward of long-term happiness.
In some ways, acquiring this self-knowledge may be easier for people of modest means than for the wealthy. The more money you have, the more freely you can spend before changing course to follow a more fulfilling post-work path. By contrast, people of more modest means must plan retirements more carefully, thus thinking harder about what they really want, and to budget accordingly during their working years.
Still, average people face major decisions, such as whether a Florida condo will really make them happy. Just because they’ll come out way ahead after selling their house to the north and buying the condo, is this really where they want to be?
Maybe, instead, they’d rather move closer to their kids’ homes and spend more time with grandchildren.
Regardless of your means, the sooner you begin to develop your retirement mentality, the better. Sure, if you start thinking about this at 45, your tentative plans will likely undergo multiple iterations. That’s only normal. The point is to have a mindset conducive to having tentative plans evolve with your outlook, interests and values. Making yourself think about this forces you to determine your values.
Figuring out what’s going to give you ultimate satisfaction isn’t easy. Just because you love to play golf or go skiing on weekends doesn’t mean you’ll find this a fulfilling activity three or four days a week. You enjoy such activities on weekends or on vacation because of the rarity, like chocolate syrup on ice cream. By itself, you might get tired of it.
So the idea, according to writer Mitch Anthony, author of The New Retirementality (Wiley), is to figure out what other things bring you pleasure and spend time on them in lieu of working. For many people, this may be more time with grown children and grandchildren. For others, it’s time spent in charitable endeavors.
Many who find true satisfaction after they stop working spend their time this way. Yet, there are more self-indulgent uses of time — writing a novel, learning to play a musical instrument, or any other creative endeavor you’ve longed for during your working years.
After many years spent seeking a return on your work investment (ROI), you stand a better chance of getting what Anthony calls ROL: return on life. The sooner you start thinking about how you’ll spend your free time after you stop working, the greater this return — your ultimate level of satisfaction — is likely to be.
Jamie Cornehlsen and Ted Schwartz are advisors with Capstone Investment Financial Group. Cornehlsen is also president of Dunn Warren Investment Advisors in Greenwood Village. A Certified Financial Planner®, Schwartz advises individuals and endowments. Contact them at [email protected] or [email protected]