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James and Pamela’s Big Dream

Excerpt from The Smart Person’s Guide to Financial Planning & Investments: A Simple and Straightforward Approach to Understanding Your Personal Finances

By Michael J. Garry 

The situation: James and Pamela have had well-paying jobs and good savings habits for their entire careers. Their retirement plan is strong, their kids are independent, and they are debt-free. They’re approaching retirement age, but it’s hard for them to imagine what exactly retirement will look like. They both dream of traveling half—or even most—of the year after retirement, but they’re not sure if they can afford to, or how to budget so that their retirement savings will last. 

The solution: Believe it or not, the problem here isn’t money, and I’ll tell you why. 

Figuring out how much money James and Pamela have to spend on travel is actually the easy part. As a financial advisor, there are plenty of things I can do to work with them here: We’d go through their cash flow. We’d look at the asset allocations of their portfolios and whether they’re tax-deferred, tax-exempt, or taxable. We’d think about their life expectancy (never fun, but a necessary part of retirement planning). With all of that information, I can easily estimate how much money they have to spend each year on travel without curbing their current spending habits or adjusting the budget.

So—problem solved, right? Well, actually, no.

Here’s the real issue: what, exactly, does “travel half or even most of the year” mean? The math is the easy part, but James and Pamela have never really had a conversation on what their dream will look like—or even to what extent they both share it. “Travel” can mean very different things to different people, even if they’ve been married their entire adult lives! What if one spouse is imagining six months of luxury cruises in tropical destinations every year, and the other one is envisioning self-supported treks through remote mountain ranges? (Okay, that’s an extreme example, but you get my point.)

Where do James and Pamela want to go? Where will they stay? What do they want to do when they get there? If each person wants a different destination, how will they compromise? Will they travel alone or together? Stay in hostels or fancy hotels? Do they imagine bringing along family members for any of these trips—say, a big blowout vacation in Disney World with their kids and grandkids, all paid for by James and Pamela? Or perhaps treat the whole family to a week in a fancy Italian villa?

These are more than just budget questions, although of course budget is important too. I can tell James and Pamela how much money they have to spend, but I can’t tell them how to spend it. Their annual travel allowance will go much farther in some destinations than in others, and that’s certainly something they’ll also need to talk about. If they want to treat family members, that will also have to be factored into their budgeting. But before they even get to that conversation, they need to have a real conversation about what each of them is imagining retirement might look like, and where and how they want to travel. 

It’s surprisingly common for me to have married clients who have never really had those conversations with each other. Sometimes one spouse will have developed an entire plan for how to spend retirement without ever having shared it with his or her partner! I often suggest that clients give their retirement plans a dry run while they’re still working. If you envision yourself spending your retirement volunteering in an animal shelter, why not start spending time at the local shelter now? Maybe you’ll find the work incredibly rewarding—great! You know you’ve hit on something that will be good for you. Maybe you’ll learn that being around animals who are down on their luck isn’t as heartwarming as you’d hoped. Maybe you’ll find out you’re allergic to cats. Maybe you’ll decide to open a shelter of your own. You can’t know until you start, but it will help you focus your retirement plans if you have some idea of what you want before the time for retirement actually comes. If you’re interested in pursuing hobbies or volunteering, why don’t you start while you’re still working? Better to find out sooner rather than later what projects are the best fit for you.

Likewise, I’d suggest James and Pamela sit down for a few hours—or a few days—and really talk about what their dream means to each of them. If they haven’t traveled much together before, I’d certainly suggest they try a trip or two before they pin their entire retirement plan on something they’ve never experienced. Traveling with another person is a very different experience from living with them. And if James and Pamela have different ideas about where they want to travel, how, and for how long, it’s best for them to work that out ahead of time.

Click here to get your copy of Mike’s new book, The Smart Person’s Guide to Financial Planning & Investments: A Simple and Straightforward Approach to Understanding Your Personal Finances. 

Michael Garry Yardley Wealth Management

Author Michael Garry Yardley Wealth Management

Michael Garry is a CERTIFIED FINANCIAL PLANNER™ practitioner and a NAPFA-registered Financial Advisor. He is a member of the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA).

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