Bill Perkins - Entrepreneur, hedge fund manager, movie producer, and author of “Die with Zero: Getting All You Can from Your Money and Your Life - penned an excellent article for CNN about retirement that gets to the heart of what life-first financial planning is all about.
His article highlights the significant error most people make when planning for retirement.
That is, they focus on the money without nearly enough thought into what they’ll be doing during retirement - what they will spend their money on.
As we plan for retirement, we often spend a disproportionate amount of time saving money, deciding where to invest those savings, and minimizing our tax burden compared to deciding on how we want to use those funds.
It’s easy to understand why we do this, considering the big unknowns the future holds - particularly when it comes to health-related issues in old age. We want to ensure we’ve got enough to cover almost any eventuality or keep our options open.
In fact, as Bill states in his article, US household’s median net worth peaks when the head of the household is between the ages of 65 and 74, many of whom won’t be able to spend all their money before they die.
But, it doesn’t need to be like this. With deliberate planning and intentional living, we can better define, co-create, and guide clients to live healthier, wealthier, and wiser lives.
Being intentional means deliberately planning your time
We spend very little time considering what we actually want to do in retirement. We’ll often have one or two activities on our wishlist - like touring the country in a campervan or doing the Great Loop - but that will only take up a small portion of your time.
We then have many more years to fill, which, if not deliberately planned for, can be wasted saving for eventualities that never occur or living a life defined by other’s or society’s expectations. And before we know it, our time has run out, and we regret how we’ve spent it.
In fact, a recent article by psychologist Michael Gervais states that time is our most valuable resource. And it is only in developing an appreciation of the value of time that we can stop the clock on regret and truly start to live a fulfilling life, rich in memorable experiences that tell the story of a life well-lived.
Because, at the end of the day, a life well lived isn’t determined by the balance in your bank account. It’s about the relationships you forge, the experiences we share, and the people we help out along the way.
In short: it’s about the memories we create.
At Lumiant, we believe a life well-designed equates to:
Let me explain.
Values help you live a life of intent
Values help us determine what is most important to us and how we want to spend our time. That’s why we see the values session as a pivotal experience within the discovery stage of the advice process. It helps clients define and articulate where they want to focus their time and what goals they want to achieve to live a life aligned with their values.
The benefit of starting with values over goals is that goals often change, while values don’t. Values are, therefore, great guardrails to use as we guide clients to live fulfilling lives. They help us to map a life lived with intent and offer a decision framework to keep us on track rather than getting sidetracked by the “frivolous, empty pursuits our culture often validates.”
If we can help clients determine what they value in life, we can help them live more intentionally. It means they can attribute their time to meaningful endeavors that will help improve their well-being and fulfillment in life.
To live your defined life you need to be in good health
For clients to live the life they’ve defined with their advisor based on their values and goals, they need to be in good health or at least have a thorough understanding of their active and go-slow years. Knowing what your health and longevity look like in retirement will help you better plan for when you should be taking that dream skiing trip versus a wine tour through Napa Valley.
This is because everyone becomes more sedentary the further they get into retirement. No matter how fit you become, family health history, lifestyle choices, and age-related physical decline will all affect how active you will be and when.
That’s why we see HALO as a critical component of financial planning. Its science-based approach to longevity planning helps clients understand their go-go and go-slow years and the different health-related levers they can pull to meet their requirements in their defined lives.
This is why we combine Values and Health. Your health will ultimately determine the type of life you can lead. If it’s deteriorating, it will have a negative impact on your values and what you will be able to achieve. If it’s improving, it will positively affect your values and the activities you can participate in.
As such, you cannot plan for someone’s best life without having an understanding of their health and longevity.
To live a life well-designed, you need to ensure you have money in the tank
OK - you’ve worked out your values and defined the life you want to live. You’ve assessed your health and taken proactive steps to shape your longevity. Now, you must determine the wealth you need to make it happen and the financial strategies you can employ to activate your finances at the right time to achieve your plan.
Defining your best life upfront with your clients means understanding the cost of achieving those goals. And, knowing what their health and physical health will look like now and in retirement means you can plan for the appropriate expenditure based on when they’ll need it. Emphasis should be placed on having more to spend in your active years while having the right cover to manage healthcare costs effectively throughout retirement.
By dividing values and health by wealth, we plan on maximizing a client’s fulfillment in life rather than maximizing the size of their nest egg. It empowers clients to make better choices around the insurance they need, the impact they want to have on their children’s lives, and mitigates the risk of regret through deliberate planning and intentional living.
If you want to learn more about our best-practice advice process and how we help clients retire on memories, you can check out the Lumiant Academy course: The Lumiant Advice Experience.