THE GREAT GATSBY, from left: Leonardo Di Caprio as Jay Gatsby, Carey Mulligan, Joel Edgerton, Tobey Maguire, 2013.
Warner Bros/courtesy Everett Collection
By Walter Updegrave
July 25, 2017

“The rich are different from you and me,” novelist F. Scott Fitzgerald once supposedly confided to Ernest Hemingway. To which Hemingway famously replied, “Yes. They’ve got more money.”

Well, a new UBS Wealth Management Americas survey of more than 2,000 wealthy investors (mostly people 50 or older with $1 million or more in investable assets) suggests the affluent may also know a thing or two about preparing for retirement.

To wit, here are three lessons culled from the survey that, wealthy or not, you can put to work to boost your own odds of achieving a more secure and fulfilling retirement.

1. Financial readiness trumps age.

Many of us believe the trigger to retiring is hitting a certain age, whether it’s 62, when we become eligible for Social Security; 65, the age for signing up for Medicare; or 66, when many Baby Boomers qualify for full Social Security benefits.

But the rich know that age isn’t what matters most. It’s whether you’re financially capable of maintaining your standard of living without those regular paychecks coming in. This is why 66% of wealthy pre-retirees said their decision to leave the workforce hinges not on how old they are, but on reaching a certain level of assets.

That hurdle will be lower for most people than for affluent retirees. For example, 86% of those polled for this survey said they’d need at least $1 million before retiring and 41% said they wouldn’t call it a career until they’d accumulated $3 million or more. Most Americans will be able to retire on considerably less than that.

Whatever size nest egg is appropriate for your situation, you want to be sure you’re on track to achieving it well in advance of retiring rather than discovering on the eve of your hoped-for retirement date that you’re coming up short.

The best way to gauge whether the projected value of your nest egg combined with Social Security will provide enough income for a secure retirement is perform regular checkups with a tool like T. Rowe Price’s Retirement Income Calculator.

Just plug in the amount you already have saved, the percentage of salary you’re contributing to retirement accounts, and the age at which you would like to retire. Then the calculator will estimate the probability that you’ll be able to retire on that schedule with enough income to support you the rest of your life.

Before you retire, you’ll also want to make sure you have a comprehensive retirement income plan that details the amount of income you’ll be relying on from such sources as Social Security, pensions, withdrawals from savings, home equity, a reverse mortgage, etc.

Nine in 10 of the UBS survey participants said they’re not only confident that they’ll have enough money saved for retirement, but that they also have a clear idea of where their income will come from once they retire. Without such clarity, you can’t really know whether you’re truly prepared to maintain your standard of living in retirement after you retire or are engaging in wishful thinking.

2. You still need to invest for growth.

It’s understandable why many retirees invest more conservatively after leaving the workforce. After all, severe stock market setbacks are more unsettling when you have less time to rebound from them.

At the same time, though, your retirement portfolio also has to generate solid gains to generate income that can last the rest of your life. Which is why after retiring you still need a healthy dose of stocks in your portfolio. If anything, this is even more true today, considering the anemic yields currently available in the investments that retirees have traditionally gravitated toward, such as bonds, CDs, and money-market funds.

Wealthy retirees clearly understand this dynamic. More than 60% of those surveyed said they disagree with the old adage that the percentage of stocks in your portfolio should equal 100 minus your age — i.e., 40% at age 60, 30% at 70, 20% at 80, etc. Instead, these retirees reported were holding upwards of 50% or more of their assets in stocks on average even into their 70s and 80s.

That’s not to say you should automatically follow their lead. After all, with a larger nest egg and more resources to fall back on, wealthier investors generally are better able to ride out severe market downturns with less concern about having to scale back their standard of living because of investment losses. You may not have that luxury. So you’ve got to come up with a stocks-bonds mix that’s right given your financial circumstances.

So how do that right balance — that is, enough stocks to get you the returns you need so your savings last a lifetime but also adequate protection against market setbacks?

One way is to go to a risk tolerance-asset allocation tool like the free version Vanguard offers online. After answering questions about your appetite for risk and when you expect to start drawing money from your portfolio, the tool will suggest a blend of stocks and bonds that’s appropriate for your situation.

By then plugging that mix into the American Institute for Economic Research’s Retirement Withdrawal Calculator — which you can find in the Retirement Income section of RealDealRetirement’s Toolbox — you can then get a sense of whether a portfolio invested in such a mix will be able to generate the income you need as long as you’ll need it.

3. A ‘successful’ retirement means more than just money.

While going into retirement with a hefty savings balance may increase your odds of having a secure and fulfilling post-career life, wealthy investors know that doesn’t guarantee that making the adjustment from the work-a-day world to retirement will automatically be seamless.

The survey found that more affluent pre-retirees were concerned about not having a regular schedule (64%) than not having a regular paycheck (36%), and more than a third said they were worried about how they’ll fill their free time and losing their sense of purpose in life.

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To address those concerns and better prepare for a successful career-to-retirement transition, it’s important in the years leading up to retirement to do a little lifestyle planning.

Among the issues you should explore: Do you have the kind of solid network of friends and family that research shows is important to staying socially engaged? Will you stay in your current home, downsize or perhaps even relocate to an area with lower living costs? Have you considered steps you can take to ensure this final phase of your life will be meaningful and fulfilling — perhaps immersing yourself in a new hobby or venture of some sort or working with a charity or for a cause that represents values you admire?

For what it’s worth, the retirees queried for this survey seem to have taken to retirement pretty well, with half saying they felt happy with their new lives right away, while another third or so saying they adjusted to retired life within a year. Just 19% said that if they had it to over again that they would have delayed retiring.

Bottom line: The rich may very well be different from the rest of us, and the fact that they have more money is a definite advantage in retirement. But if you plan diligently and take your cues from the wealthy in the areas above, you should be able to have a retirement that, even if not as financially secure as an affluent retiree’s, can be just as enjoyable and rewarding.

Walter Updegrave is the editor of RealDealRetirement.com. If you have a question that you would like Walter to answer online, send it to him at walter@realdealretirement.com. FollowWalter on Twitter at @RealDealRetire.

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