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Transcript

Maria Bruno: Hi. I’m Maria Bruno, head of U.S. Wealth Planning Research here at Vanguard.

Joel Dickson: And I’m Joel Dickson, global head of Advice Methodology at Vanguard. Welcome to our podcast series, The Planner and the Geek, in which we will discuss topics that are important to individual investors.

Maria Bruno:  And we’ll have some fun along the way.

Joel Dickson: Hey, Maria, let’s talk birthdays.

Maria Bruno: Okay, let’s.

Joel Dickson: When’s yours?

Maria Bruno: Coming up.

Joel Dickson: Coming up? One’s always coming up, right, I mean. You’re like me, you have one every year.

Maria Bruno: I do have one every year but let’s talk about the one you just had not that long ago.

Joel Dickson: Ah, yes, I did have one. It was a big one.

Maria Bruno: Was it your annual 39th birthday?

Joel Dickson: Yes for the 12th consecutive year. I’m just putting that number on my cake now of candles, so it was 12 candles this year. No, so I turned 50.

Maria Bruno: Well happy belated birthday.

Joel Dickson: Well, thank you, but hey, they are benefits to it. I mean, not a lot of physical benefits. I’m thinking financial benefits to it.

Maria Bruno: Did you get your AARP card?

Joel Dickson: Actually, I didn’t.

Maria Bruno: Oh, that’s one you need to do.

Joel Dickson: Yes. Well.

Maria Bruno: Being as frugal as you are on certain things, I’m surprised you didn’t get that discount card.

Joel Dickson: I didn’t get it in the mail. I, actually, or, I don’t know. These days I tend to not even check my mailbox regularly, so.

Maria Bruno: Well, put that on your financial to-do list.

Joel Dickson: To get my AARP card? Did you make your IRA contribution yet? We talked about that in the last episode. Have you still not made it?

Maria Bruno: All right, we need to move on from my IRA contribution. So I think today what we want to talk about is this notion of retirement readiness. Not that I’m implying that you’re headed there any time soon, or willing you to get there.

Joel Dickson: You just want me to be headed there

Maria Bruno: So what happened? You turned 50, you had a big birthday.

Joel Dickson: I did, and I actually was able to, although now the retirement concepts are becoming a little more real; I do have to admit that. But there are some benefits, financial benefits. I was able to contribute more to my retirement plan here at Vanguard, and to my IRA contributions.

Maria Bruno: So you took advantage of the catch-up provisions.

Joel Dickson: Yes, catch up where I can do an extra amount, $6,000, up to $6,000 in my 401(k) plan and an extra $1,000 for my IRA contributions.

Maria Bruno: All right, good.

Joel Dickson: By the way, you know how catch-up contributions started, right, Maria?

Maria Bruno: No.

Joel Dickson: Actually, it was the brainchild of some people at the Heinz corporation. They were like, ”Hey, we need to make ketchup contributions,” so it just kind of stuck and now it’s been throughout the—ba dum bum.

Maria Bruno: What changes to your financial planning, if any, did you make? So catch-up contributions is the big one, and that’s an important one because, actually, some of the research that we’ve seen here at Vanguard is that we find that some IRA investors actually don’t take advantage of that when we look at trends in terms of how investors are making their contribution choices. We see a little dip at age 50, and then it goes back up. So that leads us to think that—

Joel Dickson: I’m sorry, a little dip in?

Maria Bruno: In the level of contributions, meaning they’re not contributing the max. So those investors that are contributing the maximum amount that they can in the year they turn 50. What we’re seeing is that they’re contributing $5,500; they’re not contributing the max. And then the following year they go back and do the max limit amounts.

Joel Dickson: I actually wonder if that has to do with a little bit of confusion on the rule because it’s not that you can’t contribute until you’re 50. It’s that you can start that extra catch-up contribution in the year that you turn 50. So my birthday’s in July and I actually started making those contributions, the additional catch-up contributions, starting in January of last year.

Maria Bruno: I think it is. I think it’s an awareness. And it’s an extra $1,000 dollars in the IRA, more in the 401(k). So, from a savings standpoint, it’s a good move. So what else, anything else did you do? Did you think about your asset allocation for instance?

Joel Dickson: I thought about it. But, ultimately, did anything change from the time that I was 49 and 364 days, and I turned 50.  “Well, my time horizon of my investments hasn’t really changed much.  There wasn’t a life change that created a different risk profile for me. So, from that standpoint, I didn’t really think that much of an asset allocation change was needed in terms of thinking about what I might do. I would say though, as I’m thinking about different aspects of getting ready for retirement down the road, yes, I would say there’s some clarity that’s coming. I’m starting to get a better sense of what type of spending might continue, or what kind of income I might need with a little bit more certainty.

Well, it becomes a little more real when you actually start thinking about, “Now, how much do I spend, how do I spend it, what will I spend on in retirement versus what I won’t?”

Maria Bruno: Well it’s interesting that you went right there because when I think about it, and when I think about turning 50ish, with the emphasis on the ish.

Joel Dickson: Ish. Often times that ish tends to be when you’re above the target, like my weight is always a lower number with ish.

Maria Bruno: Oh, not in this case.

Joel Dickson: Okay, so we’re talking about ish as being lower than.

Maria Bruno: Yes. Thanks for clarifying that. I’ve actually started thinking more around what do I want my retirement to look like.

Joel Dickson: Okay. I’d love some ideas here.

Maria Bruno: So, you know, as you start thinking through that your perspective changes a little bit as the milestone nears, and you start thinking about, ”Well, what do I want to do, and when, and what would I need to accomplish that?” So you seemed to go right into the number crunching in terms of understanding.

Joel Dickson: I’m the Geek, right?

Maria Bruno: Yes. But, you know, it’s not uncommon, and I field a lot of questions from individuals who are facing retirement. And often they ask, “Well how do I know when I have enough? What’s my number?” Or individuals go right into this number crunching without even fully thinking through, “Well, why do I want retirement to be? What does this look like?” And then go through and say, “Okay, well, do I have enough to sustain that goal?”

Joel Dickson: Well that’s the thing that often we’re bombarded with is, how much do you need to retire? It’s this number game. And, actually, it’s funny because, I actually don’t think about it that way. I think about how much income can I sustain from all various sources because there are lots of different sources. It’s not just an investment portfolio. It’s how much Social Security or other forms of income that might be there. How much am I going to work versus not.

Maria Bruno: Right, because the definition of retirement is different. So you might stop your full-time job, for instance, but you may not start claiming Social Security until age 70, for instance. So retirement is a broad term. How you spend your time throughout that period is one thing but, then, also what your income flows and outflows are is another thing. So it’s not once and done or nothing just magical happens once you retire. It’s actually more of a journey throughout a time period.

Joel Dickson: Completely agree. Yes, it is. You’re right from the standpoint of “What do I want my retirement to look like?” and then back into well, what does that mean to have a sustainable lifestyle or whatever in that scenario.

Maria Bruno: Yes, and the other thing, too, is for individuals that are married or with partners, you need to really have that conversation together. I have a situation of a family friend where he took an early retirement. He wants his wife to retire. She has no plans to retire. And they’re having some decision making around that in terms of how he spends his time. And she has no intention to retire in the next couple of years, so it’s an interesting dialogue.

Joel Dickson: That’s actually a key difference between sort of the planning aspect of it and kind of the number crunching aspect, as you said. I mean, a lot of times financial planning isn’t necessarily just the financial plan itself, it’s the counseling and awareness and goals discovery and communication piece of it, right?

Maria Bruno: Right, it’s the discussion piece, defining what the goal is first and foremost, and then determining, do you have the financial plan to support that. And, actually, I mean, would you agree, I think the definition of retirement is changing. Whereas in the past, individuals might retire and not “work” any more. I think what we’re seeing is individuals who may be leaving the workforce and their career, but may be transitioning into a consulting job or a part-time position, whether they have opted to do that, or maybe they’re even forced to do that, but it may be changing.

Joel Dickson: Yes, I’ve seen some recent academic research about flexibility in retirement and what that might look like. And, actually, that even more people would work in retirement if there was more flexibility. I think it’s a really interesting thing, too, because as longevity has increased, and some would say it is likely to continue to increase. I mean, some of the folks that like to make projections would say, ”Hey, what if the average life expectancy is 100 years, 120 years, you know, something like that?”

Maria Bruno: Oh, absolutely. And then the resources to sustain that longer life expectancy are quite different as well, too, and there’s implications there.

So can we talk a little bit more around asset allocation because this is a question that we get time and time again. And it ties into a lot, as it does with investing broadly. But as you think about nearing retirement and then in retirement, the question of well, how should I be allocated? What role do equities play? They still play a role. When you think about rules of thumb around withdrawal rates, right, how much can I withdraw from my portfolio, even the research that we do here at Vanguard, it’s all predicated upon a balanced portfolio, anywhere between 40%–60% in a globally diversified equity portfolio. So equities play a role, particularly as life expectancy increases. But with that comes that comfort with being able to withstand some market volatility along the way.

Joel Dickson: Yes, there’s so much that goes into it. I mean too often we hear comments that, “Well, I’m going to retire at age 65,” and people then start talking about their portfolio, as if 65 is the day they die, and it’s not. Retire at age 65, you may be living another 20, 30, 40 years. Actually, the median life expectancy at age 65 of a male in the U.S. is about 18 years. So if you’re 65, it’s somewhere around your mid-80s today.

Maria Bruno: Yes, and I think for married couples, for 65 year olds today, isn’t there a 1 in 50 chance that at least one of the couple will live to age 90?

Joel Dickson: Yes, just about that. You’ve got just sort of the income and you might think about this in different ways, too, right? There’s how much do I need to sort of, not be a burden. Sort of the day-to-day living expenses. And then, how much do I want to have fun with? How much do I need to think about extraordinary expenses like maybe we do need a new roof, or we have a healthcare expense that was unexpected? How much for long-term care if that’s an issue? So there are any number of components that come into play in the planning process there.

Maria Bruno: Yes, it is. And, like you said, it doesn’t necessarily have to change at age 50; it doesn’t necessarily have to change at age 55 or 60. I think we, as investors, need to think about what our goals are and what our resources are to meet those goals and how we’re allocated.

You know, I have to be honest, we‘ve been in a very strong bull market since 2009. We’ve had some market volatility this year that we’ve seen that may make some investors uncomfortable, but the reality of it is, the conversations we were having up to this point is, make sure you rebalance your portfolio to make sure that you’re not taking on too much equity risk, and that your asset allocation is aligned to meet your goals.

So for those investors, perhaps who haven’t been diligent about rebalancing, then, yes, they may be overexposed and be a little bit too much stock-heavy, and that’s where some of the discomfort may come. But for those investors who are properly allocated, they shouldn’t necessarily have to do anything if they’re invested in a diversified portfolio with long-term goals. There was an investment professional years ago that used to say that the mind isn’t the most important organ for investing, it’s actually the stomach. And can you handle the volatility ups and downs? And that, I think, is the good sign, which is that if market volatility is causing you to rethink your asset allocation, maybe it’s the case you didn’t have the right asset allocation in the first place.

Joel Dickson: We find that a lot of engagements with financial advisors, and getting back to this sort of coaching or piece around consulting with the client about goals, discovery and so forth.

Maria Bruno: You were going to say marriage counselor weren’t you?

Joel Dickson: I was going to say counseling. Yes, I was. I stopped myself.

But those elements of a financial planning or a financial advisor sort of engagement, in many ways can be as valuable or more than actually building what the investment portfolio is. But it’s like, “Okay, so the market’s down 10%, but I’m still on track for my goal.” So don’t go tweaking everything just because you’ve got this nervousness about that. It’s, what’s the ultimate outcome, not what’s the ultimate dollars in the account.

Maria Bruno: Yes, that’s a good point. And I think it segues nicely into a discussion that we want to have today. We recently sat down with our friend at Morningstar, Christine Benz.

Joel Dickson: And one of your favorite people, unlike your co-host.

Maria Bruno: I do like working with Christine a lot. She is the Director of Personal Finance at Morningstar, and I’ve had the opportunity to work with her, as you have as well. And she just, really, gives really good counsel to investors, a lot of good practical tips.

So we sat down with her and we talked about this notion of turning 50 and this retirement readiness. And a lot of what it came down to was understanding what your goals are. And one of the things that she did, and she blogged about this last year, was she took a faux tirement; so at Morningstar she’ll explain.

Joel Dickson: Kind of like this is a faux podcast?

Maria Bruno: Yes, she took retirement for a test run. So I think there’s some neat perspective and we’re going to take a listen to what Christine had to say when she was in the studio with us recently. Christine, thanks for joining us here today. We’re happy to have you.

Christine Benz: Oh, Maria, I’m honored to be here with both of you.

You may not know this, but Joel had a milestone birthday. Oh?

Joel Dickson: Yes, 39, 29. Whatever 9 you want to that’s less than 40 or maybe 50 in my case.

Christine Benz: Happy birthday!

Joel Dickson: Oh, well thank you, Christine. It’s been wonderful.

Maria Bruno: So, Christine, what are your thoughts? You spend a lot of time counseling individuals throughout their investing horizon. So, I know you, like me, we take lots of questions around, you know, as you get closer to retirement, what’s the checklist? What are the things that really you need to focus on as you get closer?

Christine Benz: Yes, well, 50 to me, if we’re using that as the milestone, is kind of too early in most situations to really think about positioning a portfolio for retirement. But I think it does make sense once you sort of get within ten years of retirement to certainly think about taking down risk in the portfolio. But even at age 50, you should still be thinking about having a healthy complement of safer securities in your portfolio. You need plenty of stock exposure, for sure, but you probably want to think about backing off some of the risk in your portfolio.

Joel Dickson: Well, actually, Maria’s hoping I’m going to retire within the next three years, so it may make—

Maria Bruno: I said no such thing.

Joel Dickson: Actually, it’s funny because here at Vanguard, I’m actually now technically retirement-eligible in terms of getting full benefits because we have a kind of 50 and 15 years service type test. So, you know, I keep telling Maria, “One wrong word, and I’m out of here,” and she takes that as actually a challenge.

Maria Bruno: So, I think when we think about 50, it’s because it is a milestone of being retirement-eligible in our world.

Christine Benz: Okay.

Maria Bruno: But I think you’re right, turning 50, there’s nothing necessarily magical about it. The catch-up contributions certainly from a financial planning standpoint are one thing, another tool in your toolbox that everyone really should be taking advantage of.

Christine Benz: Absolutely. And, you know, many people, when they’ve seen their portfolios go up and up and up—thanks to gains in the stock market—there is this tendency to leave well enough alone and to not mess with things that seem to be working. And the tricky part of that strategy is that you’re eight years older than when this whole thing started, than when stocks began to recover; and that means that you probably do want to—if you haven’t done anything—take a little bit of risk off the table and potentially peel back on stocks and add to safer securities.

Joel Dickson: So, I guess I’m not following the first thing on the checklist, unless I do the to-do piece.

Maria Bruno: You’re doing the catch-up contributions.

Joel Dickson: Yes, oh, I’m definitely doing the catch-up contributions; but I still have the same asset allocation I’ve had my entire working career. Now part of that gets to what’s the goal for retirement in some respects too. I mean I don’t see myself as spending down every last dollar of assets in retirement, so there’s a significant legacy sort of component to it, whether charitable work or whether to relatives and so forth. And so that keeps me with a little bit of a higher allocation just sort of naturally to risky assets.

Christine Benz: Because you don’t think you’ll spend it all.  Yes.  So, it is individual-specific, right?

Maria Bruno: Absolutely.

Christine Benz: The reality is most people won’t be in that situation where they’ll have way more than they need. So, people who do have, do expect to spend a fair share of their portfolio, if not all, should be thinking about getting more conservative.

Maria Bruno: Christine, what are your thoughts? Joel and I talk a lot about traditional deferred contributions versus Roth contributions. So, when you think about individuals in our life stage, probably a good amount has been accumulated within traditional deferred accounts. Roths are relatively new to the landscape. But here’s a situation where you’re still working. You can be pretty thoughtful in terms of whether you direct your contributions to traditional versus Roth. What are your thoughts there really around creating that tax diversification at this point?

Christine Benz: Yes, I think it’s really valuable. In fact, Joel, I think you were the one who so many years ago put this tax diversification concept on my radar: the idea of even if you don’t know what your tax rate in retirement will be relative to what it is today—and who does really—unless retirement’s a couple years away. But even if you don’t know that, you still want to come into retirement without all of your assets that will be fully taxable upon withdrawal, which is the case with those traditional tax-deferred assets.

So, I do think that for people who have accumulated most of their retirement savings within the confines of some sort of traditional tax-deferred account, for the sake of just giving yourself a little bit of flexibility in retirement to not have to take required minimum distributions from the account, to have some withdrawals coming out tax-free, I think the Roth contributions can make sense. I know ever since Morningstar added its Roth option to the 401(k) plan, I’ve been fully funding that. And, of course, my matching contributions go into the—

Joel Dickson: Pre-tax.

Christine Benz: Pre-tax, but I’ve been grateful to see my Roth balance creeping up right alongside my traditional tax-deferred, which I had been initially funding before we got the Roth option. Another thing that I think high-income folks ought to think about—if it’s an option within their company retirement plan—are the after-tax 401(k) contributions, and not all plans have them. I don’t know, but I don’t think it’s very typical for 401(k) plans to have them. But for those that do, for people who have kind of, think that they’ve maxed out all of the available receptacles for tax-sheltered savings that might be another idea.

Maria Bruno: What are your thoughts, or what are the key things for those of us who are approaching that stage in terms of how do you know when you’re ready, and what are some of the things or some of the tools in your toolbox that you should be focusing on while you’re still working once you’ve determined what your goals are?

Christine Benz: Yes, you know, I think this issue of retirement readiness is, some people can strain it too tightly to financial matters; and really, there are so many other things that go into the idea of being retired. You know, sort of thinking about what you want your retirement to look like, what your goals are, whether you continue to work in some capacity, and that’s the reality for so many people today. It’s not like they hang it up all together. Most people do continue to work in some capacity, whether it’s paid work or whether it’s some sort of community work. It seems like most people do continue to do something that they find meaningful, above and beyond kind of the traditional leisure activities that people have long associated with retirement.

Joel Dickson: Well, and Christine, you had a little bit of a dipping of your toe into the retirement sort of goal and how you might envision it recently with a sabbatical that you took, and you wrote about it.

Christine Benz: I did.

Joel Dickson: Kind of what did you learn from that for yourself and your own thinking around retirement?

Christine Benz: You know, it was such a great experience. Morningstar offers these sabbaticals to people if you’ve been at the company for four years, you get the six-week sabbatical, and you can do anything you want with the time. And so, my husband and I went on a trip, but then I had four weeks just at home; and that was what really got me thinking about this concept of, I called it “faux-tirement,” this idea of what will retirement feel like for me? And, you know what, I had some interesting takeaways from it. One was how even though I wasn’t working or obligated to be at work in any way, I did find that my best days were days when I got something done in addition to whatever fun stuff I did on that day. So that balance, for me, I think, will have to be part of my retirement equation, whether it’s working in some capacity or doing some sort of community service work. But definitely feeling like I’m doing something that is valuable, meaningful, and also doing those things helped me enjoy my free time that much more.

Maria Bruno: And, Christine, I thought that was great. I reread your blog this morning to prepare for our discussion today, and I just thought it was great. I think you brought up a lot of good points and food for thought around this faux-tirement.

So, I had a couple questions for you. One of the things you had noted in the article was that you found your work expenses went down, but then other expenses maybe went up because I think you went to Target a little too much.

Christine Benz: I did. Well, I went out to lunch a lot too, which I really loved because, you know, there are a lot of times during a normal work week where you don’t have time for a two-hour lunch with friends.  So, it was kind of my after-lunch ritual. I would go like to Target or something like that, and, yes, so it changed.

Maria Bruno: But it makes you think in terms of what you’re spending your money on today versus what it would look like going forward when you don’t have those work-related expenses. But there’s other things that you might want to do and expenses, maybe in leisure, some other things might ratchet up a bit.

Christine Benz: That’s right. And clothing expenses are another category where I would open my closet. I’d be like, “Oh, my god.” I’d see this whole, a lot of clothes related to work, none of which I was wearing. And then all the clothes I needed—it was summer when I was on this sabbatical—so I was like working out a lot, walking a lot, in my garden a lot; and so those were always in the laundry. And I realized if I were going to keep doing this, that I would need more of that stuff and certainly less of that other wardrobe.

So clothing expenses, I seem to be more interested in spending money on the house because I was there more, I guess. So, I was noticing things like, “Oh, I want to buy a new dish drainer or some summer pillows.”

Maria Bruno: Well that was your need to go to Target.

Joel Dickson: Yes, the problem with those, I find Target, Costco, whatever it is along those lines, you go in with one thing, you come out $150 later.

Christine Benz: Or $300 later, yes.

Joel Dickson: It’s just like, “Wait, what happened here?”

Christine Benz: Yes.

Joel Dickson: That’s not what I was planning. That’s the biggest retirement risk in some ways.

Christine Benz: You need that big Marcona almond container and all the other things, yes.

Maria Bruno: So that bleeds into though your colleague, David Blanchett, has done work around the “spending smile” in retirement. So, do you want to talk a little bit about that because I think you touched upon that a bit in your faux-tirement, do you think?

Christine Benz: Yes, David’s research is really interesting; and to me it syncs up with the experience that I’ve had with older adults in my life who have gone through retirement. But David Blanchett, who is head of Retirement Research for Morningstar Investment Management, calls it the “retirement spending smile.” And so, his observation, and this is looking at real data about retirees, is that the early retiree years, so just after you retire at 65 or whenever that might be, tend to be the higher spending years in many retirees’ plans; and that is because maybe they have pent up demand to do stuff with their money—whether it’s travel or other leisure activities. Maybe they’re golfing a couple times a week. Whatever it might be, those are the high-spending years, kind of from 65 to maybe early to mid-70s. Then the spending actually declines a little bit, according to David’s data. And that too, you know, sometimes has been called the go-go, go-slow pattern. So, you think about people, and certainly this is a huge generalization, you’ve got a lot of very healthy 75-year-olds out there. But in David’s research, he shows that spending tends to dip, expenses tend to dip in kind of those middle retirement years where maybe the idea of heavy travel isn’t super appealing. Maybe somebody’s got health issues going on.

And then spending increases again later in life, often due to increases in health care-related spending or long-term care-related spending. So that’s the general pattern that he’s observed.

Maria Bruno: Okay, so I just have one last question on Christine’s faux-tirement—

Joel Dickson: Which, by the way, we keep talking about this faux-tirement write up or blog.

Christine Benz: I’m going to go get a trademark first.

Joel Dickson: I think you should. But this is on Morningstar’s website, right, that you wrote that blog?

Christine Benz: Yes, thank you.

Maria Bruno: So, Christine, you’re married; and your husband doesn’t work at Morningstar, does he?

Christine Benz: No, he does not.

Maria Bruno: So, you had a sabbatical, so did he do his faux-tirement yet? Did you guys marry up what your goals are, right, because this is a really real issue in that you’ve got married couples. I know when I was working with clients is, you have one client or one spouse who has a vision and the spouse, “But no, no, no, that’s not what I had intended.”

Christine Benz: Yes, you know, we’re generally on the same page in terms of lifestyle considerations. The one thing is though I think he has talked about retiring at a more or less traditional retirement age, whereas I love what I do, and I could see myself working at it in some capacity past traditional retirement age. So that’s where we maybe have a little bit of a divergence, and we’re going to have to see how that pans out, whether me being able to work syncs up with like his vision for how much we’ll travel, for example.

So that’ll be a work in progress. We still have a little ways to go before we’re there. But, definitely, I think it’s helpful to have that dialogue to make sure that spouses have at least semi-compatible visions about what their retirements will look like.

Joel Dickson: Well, Christine, thank you very much for joining us. It’s been great. We always enjoy talking with you, and you do such great work for not just the industry as a whole but for all of the clients, Vanguard clients included, through your work at Morningstar.

Christine Benz: Well thank you both. It’s been a real treat to be here, thank you.

Maria Bruno: Thanks, Christine.

Joel Dickson: So, yes, listening to Christine, I think I’m going to just put this faux-tirement thing into my vernacular going forward.

Maria Bruno: Oh, I love it. Have you thought about it? What would you do if you had six weeks off?

Joel Dickson: If I had six weeks off, that’s very different than what I would think about from a retirement standpoint. But if I had six weeks off, I would do some travel. I’d love to go hiking in New Zealand or Australia and spend sort of six weeks kind of decompressing and doing that with really no care in the world, if you will, from that standpoint.

But that’s different than having a 6-year or a 20-year or something like that retirement because I kind of see 6 weeks as vacation.

Maria Bruno: Okay, but Christine took that period of time as a test run to say, “Okay, well this is making me think, how would I spend my time?”

Joel Dickson: Yes. I think I’d prioritize. I’d love to do some things that I haven’t done yet and treat it more like a vacation standpoint. So if I were to do a faux-tirement, I mean, I would actually go back and do some more education schooling type things because there are some things I think are kind of neat and I’d like to think about building that I might be able to do. I’d learn a little bit more technology stuff to be able to build my own—I don’t know. But something along those lines is what I would do.

Maria Bruno: Yes, it’s funny, because I had thought about it as well, and I thought, “Hmm, if I had six weeks off,” my thought was, ”Oh, I’d hit the open road.” I’d go out with Guy Fieri and just hit all those Triple Ds and go out and have a food fest.

Joel Dickson: Does Guy know that?

Maria Bruno: Well, no, I thought about it but I wouldn’t do anything for his ratings, so I figured he wouldn’t take me up on that. And then I thought, “Well, no, instead of taking the car, take an RV.” And then that led me to this whole thought around RVs.

Joel Dickson: That’s a trendy thing.

Maria Bruno: It is. And Christine and I actually talked about this because I always see, and it’s usually with couples, it’s the wife that always writes in to say, “What happens when your husband wants to sell the house and go into an RV, but I want to spend time with the grandkids?” So it’s always the wife who’s kind of bringing up this husband and RV notion.

But here’s a fun fact because you know I enjoy my fun facts. What’s the average or the typical age of an RV owner?

Joel Dickson: Typical age of an RV owner. I’m going to guess 63.

Maria Bruno: Ah, not even close. So according to that Recreation Vehicle Industry Association, because there is one, the average age is 48-years old. Doesn’t that make you think? And I’m like, “Oh, maybe I should.”

Joel Dickson: So, in other words, somebody who’s 50ish is the person that’s buying.

Maria Bruno: Exactly.

Joel Dickson: Okay, I’ve got it.

Maria Bruno: Anyway, I just thought that was fun because the RV always tends to come up. But I thought about it differently, and I’m like, okay, if I had six weeks, yes, I’d go have some fun, I’d maybe do some travel, I’d do some organizational stuff, much like Christine did. But if you’re thinking about a trending towards retirement, it’s like, “Okay, well if I have more time, and maybe the financial means, I might do some other things in terms of maybe a little bit of a second career,” or, like you said, going back and either taking on some new skill sets or things like that. So it’s interesting.

Joel Dickson: We’ve spent a lot of time talking in this episode about kind of that retirement readiness from a 50ish perspective. But retirement readiness is, really, for anyone at any time to think about isn’t it?

Maria Bruno: Well, I mean, it can be, when you think about what you’re saving for. Most individuals, the big rock is saving for retirement. So, naturally, as you get closer to retirement, the stakes are higher, your time horizon is shorter, it becomes much more real, how you plan for that is different. When you’re younger, the message there is to save.

Joel Dickson: Yes, you may not know what it looks like 20–30 years, 40 years from now.

Maria Bruno: No. And so we talked about replacement ratios, for instance. You can’t talk about replacement ratios for somebody who may be ten plus years away from retirement because it’s not really meaningful. So, for younger investors, it could be financial independence, it could be wealth accumulation, like those types of things.

Joel Dickson: Right. And not trying to put too fine a point on it because, ultimately, things are going to change a lot, but having that base of if you save 10% or 15% or something like that off the top, at least you’re setting yourself up to be able to do it.

Maria Bruno: Oh, yes. No, I think it’s an understanding of making retirement a priority and make sure that you start a disciplined savings program earlier. So the one thing maybe we could leave our listeners with is we covered some information, but as you get closer to this decision making around when to actually retire, or taking a step back and understanding what retirement actually will look like, how can you go about doing that, right? So there’s tools, there’s calculators, there’s content on vanguard.com and other news sites or financial sites. But it may be time to actually work with an advisor or a professional, really, to once you understand that looks like, to do some number crunching because, while you’re still working, you can make some changes to help make those goals more achievable rather than after you retire, for instance.

Joel Dickson: And I would say, in a household partnership situation, I would actually suggest if one of the two are listening to this podcast, maybe sit down tonight or later, and hey, what does retirement look like if you’re getting close to that piece? And start that whole discovery process on your own because, in many ways, that’s going to determine how you think about whether there do need to be changes to the portfolio and the allocations.

Maria Bruno: Or you may be pleasantly surprised that, oh no, all that we’ve been working for our adult lives is actually achievable and we’re on the same page. And that could be a welcome surprise to some couples, so.

Joel Dickson: Exactly.

Maria Bruno: All right, well thanks, Joel, I think it’s been fun.

Joel Dickson: Why, yes, Maria, it has been fun. Just, again, want to thank our listeners, and I look forward to our listeners joining us again for the next episode of The Planner and the Geek.

Maria: We hope you enjoyed this episode of The Planner and the Geek.  Just a reminder that you can find more episodes of The Planner and the Geek on iTunes and on vanguard.com.

Joel: Or, simply subscribe to our series and you won’t miss an episode.

And please don’t forget to rate us on iTunes. Your ratings will make it easier for others to find us when they’re looking for investing podcasts. Please join us next time for another episode of The Planner and the Geek.

Notes:

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Diversification does not ensure a profit or protect against a loss.

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We recommend that you consult a tax or financial advisor about your individual situation.

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