The Living Lists

Satish Joshi

I know the exact Aha moment when I figured it was time to retire from my job. While there have been many Aha moments, this one in particular was super important and special. This was when on two consecutive occasions on my then frequent trips to Tokyo, a member of the cabin crew on the All Nippon Airways flight said “Welcome Mr. Joshi, good to see you AGAIN”! I knew then that something was not right about the kind of life I was living, if the cabin crew on the flight had started recognizing me.

Of course, some of the planning for retirement had been done a decade or two earlier but that was only in anticipation of an event that I knew was inevitable but just didn’t know when.

Retiring is like dying – we all know it must happen someday, but we can’t know exactly when. However, the one glaring difference between the two is – we CAN acquire the freedom to choose the moment when we retire. However, that freedom is ours only if we plan for it in advance.

That planning is not easy because retirement is perhaps the second most important decision you will make in your life (second only to the decision about whether to get married and to whom!). And that planning is in fact NOT for the actual event of retirement – that is the easiest of the factors to deal with (that is the moment I described above which I experienced on the ANA flight to Tokyo)

That planning is for a period of your life –

(a) Which can be as long as your entire professional career (Just as a data point: My father’s retired life was several years more than his working life!)

(b) During which your sources of income will dwindle

(c) BUT during which your lifestyle will change completely and as a result, you might not be spending money on most of things which you did earlier but might need to spend substantial sums of money for reasons you did not need to worry about earlier (As a data point: After retiring I have not spent much on clothes in nearly 8 years, but I am spending money on keeping my weakening knees healthy!)

(d) And during which you will not know how to kill time!! (A footnote: Filling idle time is not FREE, it takes money to just fill your day after retiring, whatever you may choose – virtues or vices – to fill that idle time)

The most important thing therefore is to start making two lists –

(a) What will you want to do to fill the void when your professional activities cease claiming your time, over a period which could be as long as your professional career? In short, how will you invest/spend your time?

(b) What will you want to and need to spend your money on, over a period which could be as long as your professional career?

You cannot make these lists in one sitting – nobody has that kind of foresight. You cannot complete making them over any fixed period of time. These have to be “living” lists to which you keep adding and subtracting as you get more and more clarity on what you want to put in them.

BUT you have to make a comprehensive enough first approximation on both counts to be able to provide adequately for the cash flow gap that will develop post retirement because your income will dwindle but your expenses will not – if anything they will rise.

The earlier you start on this plan, the more time you have to

(a) to make corrections to both lists as circumstances change and

(b) accumulate enough to bridge the cash flow gap!

From time to time, you see advertisements in papers, on social media, in professional publications devoted to the financial services domain etc. which offer retirement solutions. They ALL follow a common template regardless of the origin of the advert. – whether it’s an insurer, a mutual fund, a financial advisor or increasingly these days a fancy mobile App -usually claiming to be “AI driven”.

The template is “Put down this much money now and/or this much per month for these many years and then for your post-retirement life you are assured this much amount per month”.

In itself, it is not a bad template – this is exactly what every retiree hopes for – An assured income for the entire post-retirement life. I am not getting into the mechanics of how most of these solutions in fact are suboptimal even in purely financial terms – that is a separate topic and I have already published a rather damning analysis of one such “solution”.

BUT even if the financial analysis showed the solution is not a bad way to invest your money, what it does not address is – Will it in fact fill the gap in your cash flow (which you cannot estimate unless you make the two lists as I described above)?

And if the solution does not provide an answer to this question, you really have no solution to address your retirement!

Long back in the past, before I learned better, I too was swayed by the promise of one such “solution” – the most seductive word of that promise was “assured” – and subscribed to it. BUT “Assured” does not mean “Adequate or Appropriate”!  Fortunately, there was an alternate plan in motion and what the “solution” delivers now has become a windfall to pay for my indulgences (travel and books) and NOT a means of my living!

What about you? Do you have these 2 Lists?

If not, it’s time to make one.