Christine Benz: 5 Things I Learned About Retirement Planning From My New Book

Key Takeaways

• One of the issues in How to Retire centers on the problem that some people have transitioning from saving savings mode to spending down their portfolios in retirement. The experts discussed how to use those preretirement years as a training ground for spending and the role of annuities.
• Several of the conversations in the book talk about the logistics of retirement spending. They cover research that looks at how people spend in retirement and how being flexible in their spending, looking at their portfolio values, and using them to determine how much they can spend can be good practice.
• We discussed all of the dimensions of long-term care and specifically talked about hybrid policies and the behavioral aspects of long-term-care planning.
• How to Retire also highlights the idea of not only phasing into retirement but also the phases of retirement once you’re in it. The experts cover how we tend to focus on where we are today, why you need to think about the future to put yourself in the driver’s seat, and why you want to think about whether the home you live in today is the right home for you throughout your retirement.
• There is also nonfinancial territory covered in How to Retire, where the experts cover the relationships in your life as you age and the importance of finding your purpose.

Susan Dziubinski: Hi, I’m Susan Dziubinski with Morningstar. In her new book, How to Retire: 20 Lessons For a Happy, Successful, and Wealthy Retirement, Morningstar’s Christine Benz interviews thought leaders about how to manage various aspects of retirement. Christine’s here with me to share some of her key aha moments from putting together the book. First of all, congratulations on the book, Christine. It’s wonderful. What a useful, useful read.

Christine Benz: I appreciate that, Susan. It was a labor of love, and I’m super happy with the way it turned out.

Why Christine Benz Spoke With Other Retirement Experts for ‘How to Retire’

Dziubinski: Let’s talk a little bit about the book before we get into some of your aha moments. Specifically about the structure, which is interesting to me is that you are a retirement expert in your own right. How did you come up with the idea and why did you want to interview other retirement experts about their specialties in the field?

Benz: The concept for the book really came from Craig Pearce at Harriman House, which is publishing the book. And the idea was to maybe leverage some of the contacts that I have had through my work on our podcast especially and the other things that I’ve been working on. And so the idea was what if we styled each chapter as kind of a lesson in how to do some aspect of your retirement? Because that’s what I’ve realized, Susan, as I’ve worked on this area, I don’t have all the answers, but I do know a lot of very well-credentialed people who are well-equipped to answer some of these questions, like how to structure your portfolio for retirement, how to make tax-planning decisions, how to decide when to claim Social Security. The idea was to reach out to those deep wells of knowledge and kind of harness what they know about these areas. So, I’m glad to hear you say that you think it’s useful. That was really the goal.

Who Can We Hear from in ‘How to Retire’?

Dziubinski: Now, drop a couple of names. Who do we hear from in this book besides you?

Benz: Bill Bernstein talks about structuring a portfolio for retirement. Carolyn Mcclanahan, who is a big deal in planning circles because she’s a medical doctor and a financial planner, talks about managing healthcare. Ramit Sethi, who is just a terrific communicator, talks about how to make sure that your spending aligns with what gives you joy. Jean Chatzky talks about what women need to do differently as we transition into retirement. Some of my favorite people in this space are represented in this book.

Transitioning From Saving to Spending in Retirement

Dziubinski: That’s great. Let’s talk about some of the interviews that you conducted and things that maybe made you look at things perhaps a little bit differently related to certain aspects of retirement. Now, one of those issues centers around the problem that some people have transitioning from that sort of saving savings mode to spending down their portfolios. What are some of the new ideas that you’ve gleaned from your interviews on that?

Benz: With this whole “permission to spend” problem, which is kind of how I shorthand it, it’s something I became aware of just in terms of interacting with older adults. I’d often speak to groups of retirees and I’d invariably have someone come up to me at the end, often someone in his or her 80s saying proudly, “I only spend 3% of whatever my portfolio is each year.” And I’d kind of think to myself, “Well, I hope that’s enough. You’re sounding like it’s enough, but you’re probably under-consuming.: And so I think it is a bit of an issue with savers, people who have built their identities as savers, transitioning into spend-down modes.

There were a couple of takeaways in this book. One came in the discussion with Jamie Hopkins, who is a retirement researcher, and he talked about how to use those preretirement years as kind of a training ground for spending. An example he gave I think was pay for a car in cash. If you are about to purchase a car, and you and I have talked about this offline, my husband and I recently bought a car, we did just that and it doesn’t feel great. You’re like, “OK, it’s coming out of the account.” But you do get a little bit more accustomed to how that feels. And so that was one idea.

Another topic that we talked about related to permission to spend is the role of annuities. And I still am intrigued by the ability for annuities because it’s kind of a one-and-done cash outlay and I think that it can help address that. You do at least have that cash flow, it reduces the number of times you need to go into your portfolio. And of course, annuities are a really broad basket. There are a lot of very crummy products in the mix, but I think that that’s another potential tool in the toolkit for people who are struggling with that permission to spend.

Retirement Spending and Retirement Income

Dziubinski: Now several of the conversations in the book talk about the logistics of retirement spending, and you and your team at Morningstar have done a good deal of work on retirement income as well. How are you now looking at this issue perhaps a little bit differently based on these conversations you had for the book?

Benz: We had a conversation, or I had a conversation with David Blanchett, who was our former colleague at Morningstar and now at PGM, but he’s done some research that looks at how people actually spend in retirement, and I think that’s a very important component of this. So one key finding is that our high spending years tend to be the early part of retirement than we spend less. Even when we have the funds, we spend less as the years go by, we choose to spend less. And so to me, that’s an important finding, especially for people with tight financial plans who want to make sure they really do enjoy those early years of retirement. David talks about the trajectory of retiree spending. So, I think that is something that has been in my mind when I think about retirement spending.

Then Jon Guyton and I had a great conversation about his work with his clients. He’s a retirement researcher, but he’s also a financial advisor who actually works with clients. And he’s very much in favor of retirees being flexible in their spending and looking at their portfolio values and using them to determine how much they can spend and revisiting this annually he thinks is a good practice. And he made a point to me in the book that I thought was just like, “Wah,” where he talked about how this is a rare sort of confluence where what you feel like doing behaviorally aligns with what’s good for you financially. In this case, if you take less from your portfolio when it’s down, that’s what you feel like doing, probably. You probably feel a little worried, don’t want to spend. That’s good for your portfolio, and you can spend a little bit more when your portfolio is up. That’s probably OK to do from a financial standpoint as well.

How to Plan for Long-Term Care While Working

Dziubinski: Interesting. Now you’ve also sort of come upon some different conclusions when it comes to long-term care while working on the book too, right?

Benz: Absolutely. Carolyn Mcclanahan was the main contributor to that discussion. She talked about all of the dimensions of long-term care, but she talked about hybrid policies, which she said she deals with her clients, and she said that she’s become increasingly interested in them simply because it’s easier to get the client to consider them. She feels like many people should have insurance, but there’s a lot to be worried about with the peer insurance products. She finds that these hybrid products that bundle oftentimes long-term care with life insurance are a way to get the client to say, “OK, well, at least I’ll have something. If I don’t use the long-term-care benefit, then I will have life insurance for my family in the end.” I thought that was an interesting behavioral insight that Carolyn contributed.

And she also talked a little bit about actually having clients who have needed long-term care. Many of them have had the funds to either have insurance or self-fund insurance. She talked about one client in particular who had a gold-plated long-term-care insurance policy that was going to pay him a very rich benefit, but unfortunately, he lived in a rural area where to secure in-home care for him so he could stay in his home, they weren’t finding people to deliver that care. That was just a really common-sense dimension of this, that we do have a caregiver shortage, and I think especially in some of these nonurban areas, that it can be difficult to find people to deliver care. That was just good food for thought about the practical implications of needing long-term care.

Phasing Into Retirement and the Phases of Retirement

Dziubinski: Another aha moment from your book is this idea of not only phasing into retirement but also that there are sort of phases to retirement once you’re in it. Talk a little bit about that.

Benz: Right. I talked to several individuals about this idea of ideally if you can transition gradually into retirement, that’s often a really positive thing, certainly from a financial standpoint. If you can keep some sort of cash flows coming in the door, that’s a positive. If you have relationships and purpose that come from work, you can kind of keep that pipeline up later in life. Jamie Hopkins again talked about transitioning into retirement, and then the idea of retirement as a series of phases came up in several of the discussions. And I think the point is that as we are kind of thinking about our lives, we tend to focus on where we are today. It’s kind of the human condition that we don’t want to look forward, certainly into a period where maybe we’re not as healthy or where our cognitive functioning isn’t what it is today.

But Michael Finkel made the point very early on in the book that you need to think about these things because you need to get ahead of them to put yourself in the driver’s seat. His point was you don’t want your kids to have to make these decisions for you. You want to do it with a clear head. And that came up in the discussion on housing, too, where Mark Miller made the point that you would want to think about whether the home you live in today is actually the right home for you throughout your retirement, and you want to be the decision-maker. His point that really resonated with me was that it’ll never be easier to move than it is today, right? Don’t wait until you’re 82 to think about getting out of that big house where you raised your kids. Think about doing it when you’re still hale and hardy and can really participate in that process.

Nonfinancial Advice for Retirement

Dziubinski: Longtime fans of your work, Christine, might be a little surprised by how much nonfinancial territory you cover with some experts in this book. What are some of the findings here that maybe really stuck with you?

Benz: One chapter I love is with Laura Carstensen, who’s a professor at Stanford, where she talked about the role of relationships for all of us throughout our lives and how our number of relationships tends to decline a bit as we age. And some of that is for sad reasons. We might have friends who die or move away, but she said that there’s a winnowing that goes on where we shed people who maybe we’re good enough friends, but they’re not our inner circle. And she talked about how that’s just fine, that you should feel OK with that, but just make sure that you’re cultivating that close inner circle because that’s very, very important to our happiness throughout our lives. I love that chapter and all of her wisdom there.

And then Jordan Grumet shared a great discussion of his work with people on their deathbeds, which sounds like a horribly somber, depressing topic, but he made it super uplifting because he talked about the value of purpose and the importance of having purpose throughout our lives. One really comforting thing is that people, I think he calls it purpose paralysis or something, they think, “Oh, I’ve got to start a foundation or climb this mountain or do something really big.” His point is that the “small p” purposes, as he calls them, family time or playing pickleball or whatever your thing is that gives you joy or maybe a group of those things, those things are just as important. And so those little joys that we have every day, just make sure that you’re doing them throughout your life and figuring out what your “big p” purposes are in your “small p” purposes, too.

Dziubinski: Well, Christine, the book is really wonderful. Congratulations. So well-balanced, so thoughtful, and very practical. Thanks for your time today.

Benz: Thank you so much, Susan. I appreciate it.

Dziubinski: I’m Susan Dziubinski with Morningstar. Thanks for tuning in.

Watch Should You Bother Contributing to a Pretax 401(k) or IRA? for more from Christine Benz.