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Saturday Bike Rides with Bob: "The Age" of Financial Wellbeing

Posted by Joe Antle on May 23, 2021 11:10 AM EDT
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On our most recent bike ride, Bob and I "angled" into a discussion of best practices for financial wellbeing as people age, by first discussing some aspects of physical wellbeing that are impacted.....

....by the aging process.  Quite by accident, we went from a wide-ranging discussion of health conditions we have experienced over the course of our lives into the impact of healthcare costs and other costs to avoid health conditions (like purchasing health insurance, buying bikes, and eating healthier "organic foods" and vegetables.  This was clearly the makings of a rich discussion about what it takes to be healthy and have a full and active life throughout the aging process....the aging process has been a construct of our previous discussions on our collective wisdom and personal lessons learned from our experience.

Bob made some of his usual good observations around recent health-related issues that were not severely debilitating but were uncomfortable and inconvenient.  He asked me about a few of mine and I had explained that by somewhat serendipitous means I had discovered a low-cost procedure to determine one's risk of heart attacks and that the cost was very low due in part to some changes in the nature of my personal health insurance policies.  This all led naturally to a move from the discussion of the physical aspects of wellbeing to one of financial wellbeing.  Our discussions can sometimes be fluid in that sort of way.

So, after our bike ride came to its conclusion, it was clear that there was more insight and "lessons of experience" that Bob had to share about financial wellbeing, and that I was interested in learning from his experiences in that regard.  After all, he has said that this period of his life is becoming one of the most enjoyable and meaningful times he has had and that retirement for him seems to be a time of even greater activity and focused priorities.

So, over a couple of bottles of purified water (our beverage of choice after brisk bike rides and robust discussions), we continued to discuss how financial wellbeing priorities, tactics, and actions have changed for both of us over the various phases of our lives.  While I still work and do so with some energy and passion, I wanted to learn from Bob's recent and current actions regarding financial wellbeing shortly in advance of retirement on into retirement.

Needless to say, Bob took center stage at this moment and on this topic.

Interestingly, while Bob and I have taken different approaches to find a clear plan leading up to and into retirement, our conclusions were very similar.  And as Bob often does, his key points of advice or "learning inflections" came as a group of three best practices, as he calls them.  And as he always does, he began his remarks with the disclaimer that had two parts to it.  Part one, the advice and perspective he brings is uniquely his own and it is not one that might fit for other people and he is not a licensed or certified financial planning expert.  And the second part was that his thoughts were influenced wholly by his current phase of life and financial well-being tactic which is mostly centered on wealth preservation and prudent spending-after all part of his enjoyment of his retirement is due to having the financial, physical, and time resources to do a lot of activities, travel and engage in community and social functions.  (And not all of those are FREE).

I reminded Bob that I too am a novice and thus we share the same set of disclaimers...

Bob prefaced his three key best practices with another context-based comment.  The recent run-up in the stock market has influenced financial actions for many people, not just those with assets but for new investors who want to get in on the seemingly endless growth in the S&P 500 and the Dow Jones Industrial Index. 

That said, Bob and I found we had both arrived at a similar philosophy from different points of origin.  In my case, I had "invested" a significant portion of best earning years accumulating assets through stock ownership and had benefited from some excellent formal advice from professionals.  So, while I often didn't follow the advice to the letter of the law, it had led me to a place of carefully understanding that things can change dramatically and it's important to have the flexibility to make changes, both from a growth perspective as well as defensive hedges.

Bob's suggestions came in rapid succession.  In his usual set of threes, he suggested the following:

1. Always understand your tolerance for risk and be aware of the long-term trends in any asset class and when things get dramatically out of the logical projection path then have the courage to make adjustments.  This means that if the S&P 500 and Dow are at dramatically higher trajectories, then be willing to adjust to a potential shortfall through reallocation.  It also means that if riskier assets are in steep decline, take a clear view of the causes and don't be unwilling to use it as a time of accumulation, assuming one has the cash flow to do that or can adjust asset allocations to do so.

2.  Consider what are the best ways to make adjustments so that you don't get locked into a short-term response with a long-term investment change where the transaction costs of making another adjustment sooner than later are significant.  For many people during their retirement and pre-retirement periods of financial wellbeing, this may mean that while real estate may seem like a very attractive short term response to having both asset growth and diversification from other traditional asset classes such as stocks and bonds it is also one that is primarily structured for long-term investing and one where the transaction costs can be quite high.

3. While it is important to stay abreast of current financial market trends and to keep an eye on one's investments and their trajectory, it is also important to understand one's longer-term intent for assets.  So, this may mean that it is wise to hold cash, for emergency needs as well as for active living and enjoyment "in the present". In other words, if one's priorities are to continue to live a fully active life and that may have certain costs associated with it, or conversely, to save for an inheritance or large gift to one's charity of choice, church or offspring, then having enough to spend without having to tap into longer-term investments to cover near term expenses is wise.

Bob and I concluded that neither of us is wealthy by the measures that many people consider wealthy people to adhere to, so we both must continue to pay attention to the importance of financial wellbeing.  And in coming to that conclusion, we realized that most people are in the same place we are.

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