A talk given at the Aquarium of the Pacific by Steve Vernon, written by Tyler Gilley, CFP®, AIF®.

Steve Vernon, author of Retirement Game-Changers: Strategies for a Healthy, Financially Secure, and Fulfilling Long Life, began his presentation by discussing the longevity issues our population faces. Average life expectancy has increased dramatically over time, dating back to ancient Rome. However, it has stalled out among those in the U.S. population who are below the median in terms of income and education. In addition, most workers have not saved enough money to be able to maintain their current standard of living if they retire at age 65 – regardless of these socioeconomic factors. Steve’s presentation focused on the series of decisions we face as we prepare for retirement.

Reframing life’s stages – and our planning horizon

One major theme he discussed is the need to reframe our planning horizon as it pertains to our own life and well-being. Generally, we think of three main stages in life: 1) childhood and early adulthood; 2) career and family; and 3) retirement. The introduction of increased longevity forces us to rethink this framework. We cannot simply add more years into the retirement stage without consequences. Instead, Steve proposes a new framework in which he recategorizes the career stage into two separate stages – middle age (with a focus on career and family) and second middle age (characterized by freedom and independence).

This change in the way we view the stages of life may be subtle but can have a profound impact. By lengthening the planning horizon and redefining what retirement truly is, we gain the freedom to modify our behaviors and goals to more appropriately align them with our increased life expectancy.

The majority of the conversation, Steve poses, should center around the idea that there is no “magic number” in a portfolio or bank account that guarantees enough money to support a successful and happy retirement. But there is a “magic formula” for achieving this goal:  I > E. Income must exceed expenses. After all, a relatively modest income can offer the ability to facilitate positive outcomes such as freedom and lack of stress – common goals for one’s wealth – when expenses are lower by comparison.

Canine wisdom: Your favorite dog may be modeling great life strategies

Did you know you might be able to get great finance/retirement tips from your dog!? Steve made the following observations about developing positive practices:

Tip #1: Downsize

When dogs get a smaller house, they’re still happy, and you can be too. Expenses are difficult to rein in: For the average American, approximately 75% of the budget is dedicated to housing, health/medical care, food, transportation, and entertainment. Reducing spending in areas such as housing is a powerful way to bring your income and expenses back into the correct balance.

Tip #2: Be patient

Dogs can learn to wait for their rewards. You too need to practice this kind of patience, especially when it comes to your investment portfolio. One major reason why people make emotional decisions to sell a losing investment or choose not to invest at all is fear. Market downturns can be scary. But looking back, we can see that the stock market has, on average and over the long run, gone up – achieving positive calendar year returns more often than negative ones. The key to capturing these returns is maintaining an appropriate time horizon and practicing patience.

There are also ways to build a retirement portfolio to help take unnecessary risk off the table. This is where a prudent financial advisor can add immense value to your long-term planning process. One important strategy is to create “retirement paychecks” using stable sources of income such as Social Security, pensions, annuities, and reverse mortgages to cover necessary expenses. This allows your investments to bear a higher risk, as they are not required to cover your day-to-day outflows.

Tip #3: Work while you can

Dogs do what their aging bodies allow them to do – they guard the house, act as service dogs, and play with their families. You too should continue to be active in deploying your own human capital to earn income while your body will allow it. This means you shouldn’t necessarily stop working simply because you reach a certain age or because your peers have stopped working.

Continuing to work accomplishes more than simply adding years of income: It allows you to defer Social Security so that you can collect a higher benefit when you start taking benefits. This also gives you the freedom to potentially take on more risk with your investments, because your portfolio will be tasked with producing a smaller portion of your income needs. Furthermore, studies show a causal relationship between working longer and lower death rates.

But life is about more than just managing a portfolio and making sure your expenses don’t outweigh your income. Steve discussed the process of building your “life portfolio,” which includes the areas of health, hobbies, people, and community.

Tip #4: Stay active

Some dogs like to run, swim, and play sports, while others simply enjoy going for walks. Do the things you love that are right for you. When it comes to our health, exercise has been shown to be the most important factor, and even modest exercise has tremendous benefits.

Tip #5: Eat healthy

Most dogs will eat whatever they can get and will do almost anything to get more. This is one case in which our canine friends demonstrate what NOT to do! Poor diet is the number-one cause of premature deaths and the number-one cause of disability. Establishing a more healthy, thoughtful diet can have immense health benefits and contribute to a longer life.

So, what’s the secret to achieving a healthy, financially secure, and fulfilling long life? It’s a lot of work! The best thing we can do is motivate ourselves to take steps now. Using information we have available to us, we should make the best decisions we can and then anticipate that we will need to make necessary changes along the way. Summed up in one statement: plan and be prepared to adjust your plan.