Tuesday, November 27, 2007

Retirement Planning and Divorce

“After a divorce”, writes E. Mavis Hetherington, author of “For Better or Worse: Divorce Reconsidered” at the beginning of chapter two, “people often imagine that if only they could go back and make a tiny adjustment here of there in the past – not answering a particular phone call, say, or displaying an ounce more resolve in a weak moment – life would have turned out differently for them.”

The reason Ms. Hetherington gets a mention in the book is because of the way she categorizes people into six groups.

The enhancers are who we would all like to be: upbeat, learning from each mistake and turning it to our benefit. In a divorce this would be someone who feels release without regret. In retirement planning, this is someone who understands that things may not be exactly how they envision it but they are nonetheless excited about the prospects of entering a new and mysterious time. This person or couple would gladly downsize and do so without so much as a re-consideration. Free from the confines of work, this person(s) will explore art and gardening with a new or renewed passion. They will volunteer and become vibrant and active members of their community.

And yes, they will have managed this because they saved as much as possible, stuck to a plan and practiced retirement often while they were working. They did not live large even when they had the cash to do so. They did not take unnecessary financial or health risks and pretty much had that single goal in mind for quite a long time.

An enhancer could also be a competent loner. This person was never meant to be confined by marriage and probably will not allow retirement to hold them as well. They forge on without the help or encouragement of others. As the name implies, they do this with some skill.

The good enoughs are like most of us. We take a beating and step right back in, often making the same mistakes as we did previously. In a retirement plan, you will be the one who will be haunted by the missed or mishandled opportunities that may have come your way.

Regret is a mighty potent weight especially as you approach retirement age. Yet, while there is time, and it could take as little as ten years, any retirement plan can be turned around. To become an enhancer, you will need to embrace a sort of lifestyle change.

How little can you live on and not be completely miserable? Not an easy question to ask but look around the dinner table one night and picture yourself asking those kids of yours for a small loan to get by. You may love them but can you rely on them to do well enough to fund their own lives while helping you out as well?

The other direction for the good enoughs is less appealing. Perhaps you would become a seeker. This person stumbles along for most of their working lives and finds that when they no longer want to work, they can not stop. They may have gathered a small pension or tapped their Social Security benefit, but they are finding that life after work may be too expensive. These unprepared souls quickly become depressed.

The libertines actually make a brief appearance in the book as the couple that sold everything for the RV life only to be waylaid by a medical condition that forced them to return to their hometown. Without house and lacking the right kind of coverage (insurance) for the wife’s problem, they were forced to live a wholly different existence than they did when they were working.

In fact, looking back, the libertine might even find work a more desirable place to be. In Ms. Hetherington’s book – and I failed to give credit to her co-author John Kelly and do so here – the libertine rejoices at the idea of finally being free of the confines of a marriage only to find that the experience is fleeting.

And finally, the defeated. These are the hapless workers who labored at the bottom of the wrung and can expect a life of hardship for the foreseeable future. These are not just the hardscrabble people you might expect who end up among the ranks, but those who have had a simple turn of luck, a misfortune, and an I-didn’t-see-that-coming moment.

Can we learn something from divorce? Absolutely. It, all by its lonesome can derail a perfectly good retirement plan. For the woman, statistics prove that you will take the longest time to financially recover. For the man, the cost of recovering can be just as difficult on your health as your wallet. Avoiding a divorce would be the best method of retirement survival.

But the separation events described above apply nicely to the state of retirement. Will you blossom or wither? Will you become regretful or will your ability to survive be enhanced by your newfound lifestyle? You are making the choice right now.