By Jeff Tedesco
As a newly certified 65 year old, I’ve been amazed by the many changes that occur as you are thinking about, started working on or planning for the transition to what some call ‘the third third.’ Before I considered it, I thought that retirement was easy—all I had to do was figure out how to stay busy, where I will travel, or getting at those to-do’s I’ve always wanted to complete.
But I’ve found that, as with all life changes (and retirement is certainly a major life transition), there are many new mental considerations to be recognized and dealt with. For me, the first concept that I noticed was the idea that now money will flow ‘out’ and not ‘in.’ It’s strange to think that for 44 years I have been focussed on earning money and bringing home an income to pay for the wonderful life we have had as a family. Now, the script is flipped. It’s all changed with my new contribution becoming a ‘negative’ or ‘a withdrawal from the nest egg.’ This, for me, was a very scary proposition and I need to shift from saving for retirement to wealth management.
In chats with friends, I came to realize there is a difference between a financial advisor and a wealth manager. I, for one, thought our financial advisor had only one mission: help us grow our savings for retirement. For many years, I only wanted to know how much we had made, over what period of time and the outlook going forward. However, in retirement I learned that when withdrawing funds for various purposes, the wealth management aspect kicks in. In retirement, you have multiple options from which to draw cash including social security, any stock and bond investments, 401Ks or other deferred savings plans you might have had. All of them have dollars just the same, but when you take money from the source and from which source, is important to manage.
There are a number of questions. For example:
- The amount you are paid monthly from social security goes up over time from the date of eligibility. Delaying taking social security can increase how much you receive. Knowing when to start withdrawing social security is very important.
- Managing your withdrawals to minimize taxes, how to liquidate assets to make tax-free donations, gifting to children and family is all a balancing act of timing, thought and its source.
It’s a different ballgame now, and I needed a professional wealth management expert to guide me down this path. My criteria for who managed our money changed from “how much will you make” to “how will you help us spend it with thought and planning.”
I’m extremely fortunate to have money saved through a variety of investment types over the years and I realize many of us may not have the luxury to pull monies from multiple sources or defer social security. But what I do know is that if you have worked for decades and begin retirement, there is a mental transition from earning to withdrawing your money. Becoming comfortable with this new reversal starts with yourself alone and recognize it as something very different from what you used to do to what you will be doing going forward. Don’t dismiss the effect this transition has on your mindset and your self image. You tie a great deal to what you earned and did for a living. But remember, this transition happens to everyone who retires and you can embrace this change. This important mindset shift is sure to put you in a better place to embrace the more exciting parts of retirement, and will open up new opportunities for you to be your best in your ‘third third.’
Jeff Tedesco has been a Ladera, California resident since 1992. He lives with his wife Marti and has raised two boys who now reside in Austin, Texas and Brooklyn, New York. Jeff spent 22 years in tech sales and then founded ReadyToPlay, a CD to digital conversion company. ReadyToPlay, after 20 years, still has customers which he does part time. For his ‘third third,’ he is founding a new company ReadyToPlayart which will begin soon, helping Burning Man artists bring their art to the rest of the world.
Throughout the “Top Priorities” section of this blog, we will provide data-backed insights for a long, active retirement.