Intriguing subject matter relating to retirement was the topic of several sessions at the AICPA Advanced Personal Financial Planning Conference held January 19-21, 2015.  This week we share some of the conference’s golden nuggets.

What makes for a Satisfying Retirement?  Although money matters, planning for a lifestyle can be equally important in order to get the most out of retirement. According to Texas Tech’s Michael Finke, Ph.D., professor in Personal Financial Planning, it is not the amount of money spent that makes for more happiness, but rather, how money is used.  Money is like a ticket that buys access to physically active and social pursuits—these are the “goods” that make for a more satisfying retirement. A satisfying retirement plan involves thinking about when you retire, what you do in retirement, where you live, how often you interact with others, and how a couple negotiates the best retirement strategy. Wealthier retirees tend to be more satisfied; however, there’s a fine line.  Having too much money can reduce happiness.  To learn more, including what level of increasing wealth retirees report lower satisfaction levels, read more.

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Estimating the true cost of retirement.  Retirement is the most expensive “purchase” faced by most individuals.  David Blanchett of Morningstar explores a framework to better understand how much retirement actually costs.  The good news is that retirement may not cost as much as you think.  Rather than retirees spending a fixed percentage of pre-retirement income (i.e., 80%) in actual retirement, they actually spend less than that.  Spending decreases more than expected in the first phase of retirement, still more in retirement’s middle phase, and less slowly in the final stage (due to increasing healthcare costs in the final stage).  This slow and steady decline in spending reflects a reality that—absent healthcare costs—retirees have fewer wants and needs than during working years. To dig deeper, and to review a graph of the “retirement smile”, read more.

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The surprising “return” from delaying social security benefits explained. Delaying social security results in a payment stream far higher than from comparable commercial annuities. Many retirees are well-advised to consider the delay. Panelist Michael Kitces, in one session, explained the “higher return” from delay appears to be primarily due to the assumptions embedded in Social security formulas and benefits—developed at a time when longevity was shorter and interest rates were higher.  Thus, if a retiree has any plans to turn assets into a guaranteed stream of income (an annuity), the “best” annuity to be had is actually to delay Social Security Benefits. An article follows that is the basis for the panelist’s explanation.

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We hope you enjoy reading these articles along with us and that you find them informative.  Please forward this to your friends and family.

J. Mark Nickell & Co.

Disclosure – The articles mentioned in This Week with J. Mark Nickell & Co. are for information and educational purposes only. They represent a sample of the numerous articles that the firm reads each week to stay current on financial and economic topics. The articles are linked to websites separate from the J. Mark Nickell & Co. website. The opinions expressed in these articles are the opinions of the author and not J. Mark Nickell & Co. This is not an offer to buy or sell any security.  J. Mark Nickell & Co. is under no obligation to update any of the information in these articles. We cannot attest to the accuracy of the data in the articles.