Monday, September 12, 2022

Everyone knows that you need to have your retirement accounts in order. But careers don’t just serve financial needs—they fill our lives with connection, meaning, and purpose.

Tippie professors Amy Colbert, Leonard A. Hadley Chair in Leadership, and Erik Lie, Amelia Tippie Chair in Finance, are here to help make these two halves a whole whether you're ten, five, or just one year away from retirement.

10 years out

Lie: The most important decisions should have already been made—when you started working and contributing to your retirement accounts. Now just stay calm despite any volatility in your life or the stock market.

Hot tip: If you plan to take a year off before retirement, this would be a great time to switch your regular IRA to a Roth IRA for significant tax savings because your tax bracket could be quite a bit lower that year you’re not working.

Colbert: Think about what you want the closing chapters of your career to look like and become more self-aware of what fills your bucket. What makes you thrive, and feel engaged and satisfied? Knowing this about yourself will help you plan and intentionally move toward retirement.

My research shows careers are a major source of connection, purpose, and meaning in life. Retirement is about finding new sources of fulfillment.

5 years out

Lie: My advice differs depending on your situation—whether you have set aside a lot of wealth and can withstand any sort of dip in the stock market or if you haven’t. If your situation is a bit tighter, you should really dial down your risk at this point and maybe even consider things like long-term care insurance if you do not think you could incur that cost.

FYI: As a rule of thumb, I would say don’t buy long-term care insurance—invest the money instead and you could potentially grow it to outright pay for these services.

Colbert: I'm a big fan of experimentation. For example, I never think that a student knows exactly what they want to do when they graduate, so I encourage them to do an internship and try different things. It’s similar with retirement—five years out is a good time to start experimenting. Does this non-profit organization board look interesting to you? What about this volunteer activity? Is there an opportunity to become more connected in your neighborhood? Try them out and see what resonates with you and meets your needs.

1 year out

Lie: Remember, if you retire at 65, you still have a long investment horizon. Stay the course and count on a maximum 4% annual withdrawal from your retirement accounts. And don’t forget to harvest your losses periodically. My favorite tax loophole is to see what securities in your portfolio have a net loss for the year—you can deduct up to $3,000 in losses directly from your income, which translates to roughly $1,000 in tax savings.

Fun fact: The word loophole originally referred to small slits in medieval castle walls that let archers fire arrows at attackers without being vulnerable themselves.

Colbert: This is the time to wrap up projects and hand off responsibilities. As your work duties wane, you could dial up your community involvements.

Former doctoral student Bethany Cockburn and I conducted a study that showed bridge employment, or taking a job after retirement, is a fairly common phenomenon. We found this type of employment is a way to feel connected and have a greater sense of purpose and meaning.

DYK: Some retired professionals go on to feel fulfilled working part-time at preschools or by sharing their expertise teaching at Tippie!

To keep active and engaged mentally, personal projects—like documenting your family’s genealogy, joining a book club, or restoring an old Corvette—are also great ways to focus, find purpose, and organize your time post-retirement.

Lastly, try to have a flexible mindset during this major life change. One way to encourage this is to expand your social networks, which might happen naturally if you move into a retirement community. You’ll be interacting with people you don’t usually—people who may have a very different view on life. It’s almost like going away to college again!

Go Deeper
No matter which stage of life you are in, Tippie’s Life Lessons Webinar Series will provide you insight.

This article is part of the fall 2022 issue of Tippie MagazineAlumni are invited to update their contact information with the college to be placed on the mailing list for future print editions.