The Retirement Bubble

Long-time readers of Barron’s, the “sister” weekly publication to the daily Wall Street Journal, are likely to be regular readers of one its oldest (perhaps the oldest) columnists, Alan Abelson. Abelson’s combination of savvy, wit, sarcasm and the occasional dollop of cynicism is quite unique, popular with many readers and, I presume, just as unpopular with some. His latest column, on-line today, if you have a paid subscription, can be read here, however that is not important to this post as he is dealing with topics other than mine. He was discussing the use and misuse of the term “exit strategy” in financial circles, often by people trying to figure out how to get out of the mess they had made for themselves. One two-line paragraph got my attention.

One of the things that strikes us, after observing the sorry episodes necessitating an exit strategy, is that the vast majority of them, whether in war, diplomacy, politics, romantic involvements or finance, could have been avoided by an “entry strategy.” But that requires a bit of foresight only arrived at by heavy-duty cognitive labor, which, for the most part, is conspicuously absent from all of those endeavors.

Ah, well said, Alan. Indeed, much of what concerns me with people following a traditional retirement path is that their entry strategy really boils down to nothing much more than how much money they have. As for an exit strategy, they don’t have one as they don’t anticipate ever leaving traditional retirement.

I am talking about “exit strategies” when, after partially separating from the work force, I discuss ways to and return to it full-time later, if necessary. I am also talking about an “entry strategy” when I discuss the “life sabbatical” as a transition from traditional employment to a new stage in life.

As I entered my 60’s a few years ago, when I decided not to retire, but to change careers, I was concerned that it would take me longer than I planned. There would be no income for awhile, but there would always be expenses. If it took longer than I expected to make the change, I could find myself in financial trouble.

Having spent most of my professional life working not only in the US, but in more than 40 other nations, I knew perfectly well that it was possible to live comfortably for less money somewhere other than in North America, Europe, or other high-cost regions. I also knew that it could cost just as much or more, depending on lifestyle. Some folks end up spending more in a low-cost nation because they seek a higher standard of living than in their home nation. So saving on expenses is not automatic, but it is far easier in some nations than others, if you use a little common sense.

That was one reason, among quite a few others, that I chose to make my career change following a move from the US to Panama. I chose Panama after considering a number of alternatives. Everyone has his or her own “checklist” of things they look for in a new home and I had mine. Panama fit that very nicely for me, although it might not for you. It is really not important. What is important was that I mindfully chose to move to a nation where I could live for substantially less than where I was living in the US in order to make my capital last a little longer if my career change required it.

I raise this not because I am at all interested in convincing you to move to Panama! My purpose is to suggest that one factor in an “entry strategy” to a new phase of your life is to pack up and move. You don’t have to leave your home nation. You can move anywhere, but there are two things that can really help when you are going through a significant life change.

The first is that you are open to new opportunities. Call it a “second start” or “fresh start” or whatever you like. When you leave an old life behind to begin a new life, physically moving can help give you the emotional boost to make real professional and lifestyle changes. Frankly, I find it very stimulating as well and stimulus is something a lot of retired people I speak to feel they have lost, post-retirement.

The second is that simple matter of cutting back on expenses. You can move 300 miles or less in the US and move from a high to a low-cost area, or the reverse. It is an important financial factor and it is one that you need to give consideration, but it can be just as useful to lower expenses as it is to raise income, and sometimes easier. Moving purely for that purpose is likely to be a mistake. Wherever you move, you “buy into a total package” that includes many things in the new area that are different from your old area. The cost of living is only part of that.

I live in Panama because I enjoy it for a number of reasons. Cost of living is only one of them and is not enough to justify my moving. So don’t make moving your primary consideration, but keep it in mind. You may close a few doors when you move, but you can open up many more and save a few bucks in the process. Just a thought to share on a Saturday afternoon.

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