Welcome to another episode of Modern Financial Wellness, where we dive into the psychology of money to help you feel better about your finances. I'm your host, Jim Grace, CFP®, guiding you through today's discussion on understanding the emotional aspects of financial decisions, especially during retirement.

I am thrilled to have Dan Haylett join us today. Dan is a multifaceted financial planner and the head of growth at TFP Financial Planning in the UK. He's also the mastermind behind "Humans versus Retirement," a podcast and content hub for anyone looking to live a retirement filled with purpose and experience true wealth.

In today's episode, Dan and I explore the crucial transition into retirement and the psychological shift required to go from accumulating wealth to spending it. We dive into Dan's latest white paper, "The Skill of Spending Money in Retirement," and discuss how retirees can overcome the ingrained habit of saving to truly enjoy their retirement.

We highlight how important it is to start planning for the second half of life and how retirees can embrace the opportunities and address the emotional barriers they face. Our conversation also underscores the importance of not just preparing financially for retirement but also considering the mental and emotional preparations needed to spend and enjoy your hard-earned money.

5 Key Takeaways:

1. The Fragile Decade: Dan emphasizes the importance of the five years leading up to and following retirement, referred to as the fragile decade. This period is critical for transitioning mindset and planning how to spend retirement savings effectively.
2. Identity Shift: Retirement marks a significant shift in identity. Recognizing and preparing for this change is essential, as it involves moving from a mindset of saving and accumulating to one of spending and enjoying.
3. The Human Element and Spending Habits: Our conversation highlights the fear many retirees have of running out of money, leading them to underspend. Dan argues for the importance of transitioning from a saving habit to a spending mindset, backed by evidence showing many retirees die with more money than they started with.
4. Retirement Phases: We discuss the phases of retirement—exploring, nesting, and reflecting—that reflect changes in health, time, and financial needs. Understanding these phases helps retirees spend their money when it can provide the most benefit and joy.
5. Creating Memories: Dan talks about "memory dividends," which are the lasting emotional returns of spending money on experiences that create memories with loved ones. This concept encourages retirees to use their financial resources to build experiences that enrich their lives.

Thank you for joining us in this episode of Modern Financial Wellness. I hope today's conversation provides you with valuable insights into making the most of your retirement. Please remember to subscribe, rate, and review the podcast. Until next time, take care.

Welcome to Modern Financial Wellness, the podcast dedicated to helping you feel better about your finances. I'm your host, Jim Grace, and I'll be your guide as we discuss the psychology of money and explore the emotional aspects that shape our financial decisions and how we feel about them. Alright, everybody. Welcome back to Modern Financial Wellness. I am joined today by my friend Dan Haylett. Dan is a financial planner. He's the head of growth at TFP Financial Planning in The UK. He's also the creator of Humans versus Retirement, which is more than just a podcast.

He obviously has a podcast, a blog, a newsletter, a YouTube channel, author of a new white paper, the skill of spending money in retirement. He's wearing many hats. We're grateful to have him here. Dan, welcome to the show. Thanks for taking the time.

Jim, my pleasure. It's, absolutely wonderful to be this side of the mic. I don't do this that often, and I love it.

Glad to twist your arm and put you on the other side, up against the firing squad here today. Yeah. This is cool. I mean, we we met in a behavioral finance, behavioral advising certificate course, which was many years ago now, which is crazy to think about. So it's always fun to connect with you and kinda get your perspective on the industry and how you're helping clients and some of the work that you're putting out there. So, again, I appreciate the time. As we kick off, I was curious if you could describe for people the work that you do. And, obviously, as a financial planner, there's kind of the basic blocking and tackling and the technical aspects of helping people understand retirement, but there's a whole host of other things that that clients struggle with.

So I'm curious your thoughts on on maybe more so that side of of your work.

There's two elements really. I I would say there is, but there's, I suppose, three. Right? You've got what everyone would expect a financial planner to do with kind of numbers and planning and, investing and all of that stuff crunchy crunching the numbers. And then kind of added on added on top of that, you've definitely got the human element as we're gonna touch into a lot more. So how human beings react to numbers, how they act around numbers, how they, take on board, advice and guidance on what they do and why they don't do stuff and and all of the psychology behind behind that, is definitely another layer. And then kind of moving through through that, I would say that it's more about education. So there's definitely kind of for me, I'm a, you know, I'm a I'm a financial adviser and financial planner that really loves to understand the human mind and what, you know, us as human beings and how we react around money, particularly in the retirement space, which we get into. But then also understanding that there is, I think, a complete lack of education out there around, around this stuff.

And that's where kind of humans versus retirement was born to go, like, should I do this work on a day to day basis with clients at TFP? So work one on one with clients. I'm doing a lot of the number stuff. I'm increasingly doing more and more of the behavioral and what I would say kind of retirement coaching, money coaching stuff with people. Mhmm. But I still think there is a gap, and that's why I wanted to kinda get a bit more of an education platform out there for, as many people as I possibly could get it out to to listen, to read, to watch, some of this stuff. Because I think there's a huge lack of, education in general around money, but education in in, in specifically around retirement.

Yeah. Yeah. It's great. And you're putting out a lot of great work. I mentioned the white paper that just came out, the skill of spending money in retirement was a a new, piece of work that you released not too long ago. And I think it does a great job highlighting a lot of what you just described, right, which is this idea that there's a lot of numbers and number crunching that goes into something like planning for retirement and preparing. But there's a whole host of other human behavior psychology that goes into really living the life that you want when you decide to stop working. So tell us about the white paper.

Can you set the stage for maybe the problem that some retirees face when they're when they're nearing retirement?

Yeah. Absolutely. I I mean, I'll, I'll I'll absolutely go into the white paper. I think it's worth kind of, stepping back a tiny bit there. And for me, just going well, actually, like, all of the work that I've done over the last seven, eight years focusing on this retirement space. So what I've heard described quite beautifully is, like, the fragile decade, like, the five years before retirement and the five years after. I think that's, you know, a hugely fragile time for people, and understanding what those main challenges are. And I've come up with what I think are the retirement big five, and that is in a specific order.

I think it's identity, purpose, relationships, time, and money security. Mhmm. So and those are the five things that I think, people need to really work on. So it got me thinking about there's and there's there's there's something that connects all of these, I I I think. And it got me thinking around what does it mean for someone retiring? What what is one of their main challenges when it comes to actually taking advantage of their time and their money and their relationships, thinking about who they wanna be and what they wanna do? And I think one of the biggest blockers of everything overarching that is the fact that people are scared to spend their money. And this kind of really the concept come from, me saying, how do we get people to shift from a savings habit? So a habit that's been ingrained in people for twenty, thirty, forty years. Mhmm. It was ingrained in people as a child.

You know, our our parents and grandparents save for the future, save for the future, put money away. Mhmm. It's ingrained in us through, maybe as we save in in in our early years of working. In The UK, they've got this thing called auto enrollment, which means that you, you know, you automatically put money into a pension before you say you know? So this thing is ingrained in us. We're ingrained to save. That means that all of our human behaviors take over, and we associate saving and money with security. Mhmm. So having a pot of money provides us with security and peace of mind.

It doesn't actually give us any any joy when we hit retirement if we can't actually spend this thing because it's so ingrained in our mindset, in our habits, and our behaviors. Mhmm. So this was about shifting, getting people to shift from a savings habit to a spending mindset in order so in order for them to take full advantage of, their second half of life, their their their retirement.

The the big five that you mentioned, you start out with identity. And it's a huge identity shift, obviously, when somebody goes from their working years into retirement. But a part of their identity as a saver could be something like, you know, I'm saving and putting away to plan for my retirement to to create that sense of security. Mhmm. So now you're you're you're in almost trying to intentionally change that person's identity, right, when they they enter retirement, which is a really big challenging deal for a lot

of people. Without putting too, kind of feeling like I'm not catastrophizing this. But I do I do think we're at the start of a bit of an identity crisis for people kind of in their forties and fifties. Right? People Yeah. You know, the the our identity has been wrapped up in so much of what we do and the behaviors around that. Like you said, it's you know, we, you know, we go to work. We save for a particular date milestone time. Mhmm.

And, unfortunately, all of those behaviors that have that we've exhibited and we've learned throughout that period is the opposite of what we need to take advantage of everything that we've worked for. It's like and it it just it's counterintuitive for us to flick a switch and spend our money and see that money go down. And that's why so many people struggle with spending their money. And I just think if you struggle with spending if you're not free and you're not in a this doesn't mean frivolous. Right? This doesn't mean blow it all away. Mhmm. But if you're not free to feel like you can spend your money, I think you'd struggle with identity purpose, relationships, and time. Because, you know, you you've got a wholesale shift, that you're gonna need to take.

And if you haven't, put some work in about understanding, the skills required to spend money and some of the realities around spending money are really you know, people aren't gonna take advantage of those twenty, thirty, forty years of hard work that they've put in to get to a point where they feel like they have enough, and they can step back and be free to enjoy their life. And it's just a massive letdown thereafter.

Yeah. One of the terms that I've heard that I like a lot referring to retirement, and I wish I could attribute it to the person that I I got this from, but I've heard it related to identity foreclosure. Right? So you're foreclosing on this person that I was before moving away from a career that gave me purpose Yep. And meaning a reason to get up, in the morning, so to speak, and we're moving into this new phase of life. Can we talk about some of these fears of spending? Because I I like what you've touched on on on this idea that we're kind of on the cusp of an identity crisis, and a lot of that feels like it's driven from from fear. But the fear of, you know, say, for example, running out of money in retirement, numbers wouldn't really bear out that that's a realistic fear. And you touch on this, I think, a little bit in the white paper with some of the statistics that that you put out in terms of, you know, clients not spending money in retirement, but also, ending up with more money than they started with. Right? So we have this almost it seems like if I read this correctly, it's almost like an irrational fear of running out of money in retirement where they end up with more when they pass away.

So what's what's kinda driving this fear? What's what's at the heart of that?

Yeah. Look. I I think, our our great friend Brian Portnoy, who, done the who who kinda headed up the course that we met on, said said something, and I attribute this to him in this quote in the white paper. I think we need to start from a point of you used the word irrational. I think we need to start from a point of, like, nothing is irrational if we understand where people have come from. I think from an outsider looking in and actually us as individuals, we might feel like we're being irrational, but actually nothing is irrational. It's not irrational for for people that have saved more than enough to not spend their money Mhmm. If you understand exactly where they've come from and why they're not spending it.

Because we have been conditioned, as as as I said, to to kind of not in to to not spend effectively. We're not we're taught to save. We're not taught to spend. So I think when it comes to thinking about these numbers, people are fearful about running out of money, yet not fearful about leaving loads unspent and a load of regret and missed opportunities. That's kind of the irrational swing, but, actually, they're fearful of both. The trouble is the fear of running out of money dominates. So but the the that is the dominate the the dominating fear because in our brains, when I've spoke to people about this, we there's binary outcomes. Right? This is kind of like I've either got money or I'm on the streets in a cardboard box.

Right? That and and that's where the brain goes with this. It goes to a point where and, actually, for for people that have had a reasonably successful career, a good bank balance and stuff has been a sign of success for them. And they might have a social network of people that they do really like, but if they feel anxious about their money or their their money's halved or whatever that looks like, that's a sign that they haven't done well, and they might be failing at this retirement thing. Mhmm. So they protect against that. We will protect against the the fear of running out of money because the the the less worse outcome is dying with too much. I would flip that and say that's a much worse outcome. So when I look at the the statistics, when I put this white paper together, I come across some studies, and there was a big study in The States done that said sixty one percent of people are more afraid of running out of money than in retirement than actually dying.

Like, when you say that out loud, I'm like, that that that's ridiculous.

Right.

So six out of ten people would rather die than run out of money.

Mhmm.

Or are more fearful of like, you you know, I mean so the trouble with that attitude is that shows you how emotionally draining, how emotionally connected money is to us as human beings, in this world.

Right. And they're so fearful of it. The other statistic that I I think I I have right is about thirty to forty percent of of people will actually die with more money than they started at the beginning of their retirement, or their net worth will be higher when they pass away than it was when they started retirement. So they're so fearful of running out of money that they're actually gonna grow their net worth. Right? And I think you're making the point that there's so much opportunity for living in those years that they're not taking full advantage of that.

Is that right? Absolutely. They I said the you've you've got it hit the nail on there. The flip side is, and and I suppose that's the point, Jim. Right? It's not just it's not just, I don't know whether you can have small or big fears. It's not a small fear. They're so fearful. Mhmm. You know, these 61% of people are so fearful of running out of money that the other stat on the flip side is eighty four percent of retirees are likely to die with more money than they started with.

80. So I said 30 to 40. I misquoted it.

It's it's

It was eight. Vast majority. Yeah.

Yeah. So and and so the stat that you're referring to, again so let let's repeat that. People are so fearful of running out of money that eighty four percent of retirees are likely to die with more than they started with. And over a thirty year time period, there was some really amazing research done over here in The UK. Over a thirty year period, retirees on average are only spending around 30 to 40% of their starting net wealth excluding property. They're leaving between 6070% of their starting net wealth on the table by the time they've kind of gone through a thirty year time period. So not only is this a fear, it's actually a fear that's that's causing huge amounts of problems for people. Because, again, if we look at some other stats that are out there, only 14% of people are actually drawing down capital from their savings.

The other, 86% of people are drawing on the returns or less. You know? And you you you walk life with clients. So how many times do clients come to you and people come to me and go, I've got this amount of money. Can I leave that? I want the pot remaining stable, and I'm gonna live off the the returns or the dibs, the dividends or the interest. That is not the reason why they saved that money. The reason why they save that money is to spend it and enjoy it, but only 14% of people feel free enough to actually draw this thing down over a period of time to go and live. Yeah. So it's startling statistics.

But I always wanna try and you know, when I start working with people and communicating this stuff, I wanna give them stats. This is real life evidence

Mhmm.

That fortunately enough now, we've got at our fingertips. We've we've now got evidence from the first generation of retirees over the last twenty, thirty years. Because I say, like, my parents and my grandparents retired in something that is alien to to us. Right? They retired in a very different way. So we've now got twenty, thirty years of data about how these people are acting and behaving. And by the way, it's not great.

Right. And that's that's actually a really good point. I think the whole paradigm of retirement has shifted quite a bit in the last however many years, but it it certainly seems like that paradigm shift is continuing to to evolve. And I think, to me, it's kinda connected to that identity crisis that you mentioned before. Yep. Where all of a sudden, people have plenty of money and lots of time, and they don't know what to do with it. Right? And they've been ingrained with these behaviors and these beliefs about money for so long that they just get stuck and end up dying with too much money and not living the life that they want. So when I guess this brings up a question.

When should people start thinking about this and the retirement and designing the life that they wanna live and being able to feel comfortable spending the money. When should people start thinking about what this looks like?

Yeah. So it's a really good question, actually. I think the standard answer that most people would give would be as soon as possible.

Right.

I don't necessarily, believe in that because I I actually think this work needs to be pretty intense, pretty concentrated, and, really focused. And if you say to people, I'll work on this over the next ten years, you you know anything. If you've got a ten year plan, you kinda do bits and bobs. You don't pay enough attention to it. And with most things, you know, like like, for instance, in our business, we have, like, quarterly rocks, they call them. Right? So, you know, a real big thing that we wanna do every quarter, quite a lot of quarters. I'll leave it to the last four weeks to get the thing done. It's like Yeah.

Yeah. But if I've got a time frame, I'll kind of potter around a little bit and then really focus on it at the end. So I think what I would suggest to people I've I mentioned that fragile decade, which I think is really important. I think if you're serious about wanting to think about your second half of life, let's ban the word with time. I'm gonna say it, but let's try and ban it a little bit. Mhmm. If you're 50 and you're thinking about your second half of life and you're thinking about how can I become more free, get a bit more time, align what I do with a bit more purpose, do more of what I wanna do with you know? So, you know, retirement in disguise, then I think you wanna give yourself two to three years of of kind of running and leading period to this. Mhmm.

Anything outside of that, I would suggest just keep you know, live your life and don't necessarily sacrifice everything. But because, again, because I think if you sacrifice everything, you will then sacrifice stuff in retirement because you're gonna sacrifice everything to get a pot of money that, by the way, most people are not gonna spend, which seems stupid. Right? That's that's why I I just have struggled with the fire movement because they are sacrificing everything Mhmm. For this pot of money and this independence that every stat going suggests they are never gonna take full advantage of because they're human beings. So I would I would say that be prepared to put some hard work in, but two to three years out from knowing that you wanna make some real key life decisions about what you wanna do in your second half of life, and I would say second half of life is 50 plus. Yeah. Then that to me would be

the best time to really tackle it. Yeah. I love the way you put that. I I too have a kind of a love hate relationship with the fire movement. The concept of financial independence and understanding how much money you need to live the life you want, I love it. But Yeah. You know, saving 70% and eating ramen noodles and never going out to the movies or out to dinner with friends to, you know, eventually just not do anything. So on the fringes and the extremes of that movement, that's where, you know, I I have to get off the train.

I just Yeah. You know, it's all about balance. Right? And being able to, you know, live the life you want with the resources that you have. Yeah. Yeah. And I, again, I I I wanna just click in on that point about you know, obviously, you should be as early as possible and be thinking about your financial plans and and designing the life that you want. But, a ten year time horizon is really difficult for people to get their hands around. Right? So I'm hearing you say that putting in some focused work on on the second half of life, can be really important and motivating to give people a target to get something done, which is which is great.

So what does that look like? When when clients come to you and they're in that two to three year period, what are some of the things, exercises, frameworks? What do you start talking to people about thinking about the second half of life?

Yeah. So, I think it's it's really to to me, it's important to start to think about this foundationally from a life perspective. Right? So to me, this is life first, financial planning. And it's life first because that is to me, that is the that's the driver of it. Right? If if someone said to me, you know, how much money do I need? The answer is, I don't know, really, until you tell me the kind of life that you really want. And my experience has told me that and and shown me with working with clients that the life they actually want is probably a lot more simpler and costs a lot less than what they believe Mhmm. This is gonna be. So without kind of telling them that upfront, because I think that would scare the life out of them, I've got that in the back of my head.

So I I I've created a what I call a retirement planning workbook, which, enables me to to take people through exercises, around values, around kind of their life. I love the PERMA model for human flourishing, you know, this positive psychology. So I I I, you know, do some exercises around that.

Can you explain that? Because I I Yeah. I like that as well. Can you tell us a little bit more about that? I think that'd be useful for people.

Yeah. So so the PERMA model, was developed by psychologist, Martin Seligman, who who basically was the key driver in positive psychology. Right? Psychology beforehand was about fixing broken people. You had to break, and then be fixed by a psychologist. And and Marty Seligman kinda come around. Well, actually, no. That's rubbish. We can actually be positive.

So instead of waiting for people to break, let's give them tools and ways to understand how to be happy. Right? How to how to, you know, not not be sad. So his PERMA model, framework so you've got the p is for positive emotion, the e is for engagement, the r is for relationships, the m is for meaning, and the a is for accomplishment. That's a framework for what he says is understanding and cultivating well-being.

Mhmm.

So it breaks human flourishing down into those five components. And, ultimately, it gives people a sense of their happiness and fulfillment. So there's some questions that I ask based on those, that that those kind of five areas. For instance, positive emotion. I ask people to rate themselves on a scale of one to 10. How frequently do you experience positive emotions like joy, contentment, and optimism in your life? Consider how often you feel good or enjoy pleasurable moments. Like on a one to 10. Mhmm.

And then there are, you know, questions around engagement and relationships and meaning and accomplishment. And I think that gives me a really good foundation to go, well, if someone's a two or a three or a four or a five, my question back was, well, how do you know, what does that mean, and how can we change that? If there are a seven, an eight, or a nine, I'll kinda say to them, that's wonderful. Tell me what that means. How do we keep it there? If they're at kind of eight, nine, and 10, it's like, well, what might what might cause that to fall? So it gives us a real good understanding across a real positive way of looking at well-being, and and kind of life satisfaction and happiness, around a really well researched model and scale.

Yeah. Yeah. It sounds a lot like a coaching framework that you've kind of embedded into your financial planning process to get at some of these core concepts that you highlighted before. Right? So we're here we are talking about people that their identity is going to dramatically change when they retire. A lot of people derive a lot of purpose and meaning from their kids who get up, older and and move away or their career, which they're gonna walk away from in retirement. And then we're telling them, you know, you gotta find purpose and meaning. It's like, well, how do you do that? Right? Which is why I appreciate you kinda clicking in on that that example That there are things out there that somebody like you can guide a client through to help them start to put some some, you know, frameworks around these things, some ideas down on paper to move them through it and get them closer to, to understanding it. And and,

you know, you you know it. You you we've we've talked about the same things. Right? Human beings quite like boxes and frameworks. We we quite like having a, you know, having a a a model or a framework to think about. It helps us, compend mark what can I say? It helps us to put stuff into, compartments. Can't say that. Right. And and I would encourage every if everyone is if your listeners, people listening to this are thinking about, you know, one of the one of the big five, the purpose thing and identity and what that looks like.

I'm a massive fan of a number of Japanese concepts. And one of the things I take take people through is the the Japanese concept of ikigai Yeah. Which is you can Google it. There are downloadable worksheets. But I think it's and I've done a huge amount of kind of digging around the best ways to try and ask people, or get out of people what their purpose might be and what how they'll get them start thinking. And this is by far the best way to to do it. And and the great thing about Ikigai, is that it allows you to take money out of the equation. So it will get you to look at what do you what you what do you love doing? What are you good at? What problems do people have that you can help solve, which I think is a wonderful question.

Right? If you're thinking about purpose, what problems do people have that you think you can solve? And particularly at this stage of life, Jim. Right? You know, I've said to people before, if you're in retirement, your second half of life, you're at a point where you've accumulated so much knowledge and wisdom

Mhmm.

That you can help people solve a lot of problems if you just think about what you really love to do and what skills you've got. And then what kind of work could you do that's either paid or volunteering? And if you are if you kind of ask yourself those four questions and jot some thoughts down, it's a really good starting point to to uncovering, some some of your purpose and what you wanna do in this part of life.

Yeah. Yeah. That's great. So we're you're sitting down with clients. You're taking them through things like a PERMA model, you're talking about Ikigai. This is all part of your retirement, workbook and and kinda laying the groundwork. And where do you go from there once you start to get an idea of where where this individual is headed?

We we then try and what I'll try and do is keep presenting. So if we it kind of maybe, shoot back to the the the white paper a bit a little bit. What what I will try and do is understand some of these life elements, understand the opportunities, understand the challenges, understand some of the fears, some of the anxieties, etcetera, that that are out there, and bring in some of the research and evidence and planning models that I know work, but do it in a way that I can then, like, make it unique to them. So Uh-huh. The message is different for everybody dependent on how they how we go through those those kind of coaching questions. And so that's then about trying to connect their financial situation with their current reality and their future wishes. Mhmm. And we use you know, there's planning software to be able to kinda bring this to to to life in terms of cash flow and all of that stuff.

Yeah. But I wanna make sure that we use the evidence to structure this. So so for instance, in the white paper, I talk about how retirees do actually spend their money. So when I do the planning work and if I understand that they've got this fear of running out of money, I wanna make sure I overemphasize the fact that I know spending falls in real time in retirement. I wanna make sure that, in the planning work that I do with them, I color code certain times in their life, like the go go years or the go slow years and the no go years. Or I've kind of readjusted the wording. I quite like exploring, nesting, and reflecting now. Yeah.

Can you can

we click in here? Because I thought that was really, really good to kind of frame the phases of retirement or the stages of retirement. How do you how do you think about that?

Yeah. And, and, again, I think the the this is understanding that our, desire, physically and mentally drops throughout throughout our years. And this is kinda going well, actually, there is a time in our lives when health is on our side. So so the big three kind of its heart is health, money, and time. I think the first ten to fifteen years of retirement is when health, money, and time is probably as perfectly aligned as it's ever gonna be. Now if we think about our early years, we've got no money, probably quite a bit of time, enough health.

If

we think about our working life, we've got no time, probably a bit more money, and a bit more health. If you then skip this bit I talked about and go to our later life, we've probably got a load of money, not a lot of time, and our health is a bit rubbish. So if you think about these this kind of exploring phase of retirement, the first ten or fifteen years, the big three of health, money, and time is probably as perfectly aligned and balanced as it's ever gonna be. Mhmm. So this is about saying, well, these are your go go years. This is your exploring time. You can have higher spending on travel and hobbies and discretionary activities. You've got this newfound freedom that you can take advantage of.

Your energy levels are high, so you're gonna you know, you wanna do stuff at that point. That's the bit that people miss.

Mhmm.

That's the bit. It because when we get into the the nesting or the go slow years, there's just this natural decline in discretionary spending. Lifestyle adjustments, reduced physical capacity, We end up nesting down a little bit. We've more we want a much more comfortable standard living. We don't wanna be on a plane for twenty four hours. We don't necessarily wanna be on the cruises. And the trouble is if you don't take advantage of those first first ten years, it's pretty much guaranteed you're gonna never run out of money and end up with more money than you need

because your spending declines so dramatically. This is a personal example. I was talking to my father who's going to be 78 this October, and we, got into the lottery and got tickets to the Ryder Cup, which is coming up this fall in Long Island. And I'd say. Yeah. So tickets were super expensive. So after I I talked, you know, him into, you know, just biting the bullet, let's get the tickets to the Ryder Cup, then he started talking about his knees and the crowds. And, you know, this is a guy who loves golf.

And to go to a a major golf event like that would be normally a big deal, but I gotta talk him into it a little bit because he's getting up there in years, and his health isn't and his mobility isn't what it what it used to be. So it's not just the money. He's just naturally less inclined to jump at an opportunity like that because he's getting older. Right? So it's not our spending doesn't continue linearly throughout retirement. We're gonna change as as people, and our spending is gonna reflect that as as we get older. And what I'll

say is it's actually sometimes it's not actually the desire. Like, people wanna do it. They just won't be able to do it as well as they could have done five, ten years ago. So Right. Your father will absolutely probably go to the Ryder Cup. But if he'd have gone ten years ago, he would have got around more, walked around more, seen more shots, had more probably joy. It's not that he's not gonna enjoy himself. It's just he could have enjoyed himself better ten years ago.

Protection. Right?

Then that's Right. So I think that's, you know, there there's another stat I put in there. There's a big study, excuse me, a big study done in the state, in in The UK, sorry, about about how health stops people doing stuff. Mhmm. And the the stat that stood out for me was from the age of 80 onwards, seventy five percent of people said that health stops them from doing the things that they want to do. And and my point is that everyone's obsessed by this kind of hundred year life, which don't get me started on it. We could probably spend a whole podcast on this hundred year life. Right? By the way, life lifespan's going backwards.

So if we have a look at the research on that, it's fascinating. But everyone everyone's obsessed about this hundred year life. But the problem is if you make it for a hundred years, twenty of them, you're not gonna really wanna do anything. Health span is very different to lifespan as I've said a lot before. Mhmm. So, in The UK, the average health span or as it it it's officially known in The UK as HLE, healthy life expectancy, is 62. So, our average life expectancy is, say, 80 to 80 four years. The World Health Organization has come out and said that its research suggests that on average, there's about ten, eleven years of life left after our health is gone.

So stop planning to do things when you're 80 because even if you get there, you're never gonna take advantage of the thing that's in front of you, maybe like your dad, you know, fully embracing the the Ryder Cup. Yeah.

And I don't wanna overstate it. He's gonna go. It was just, a realization. His response to the Ryder Cup Yeah. I thought was like, yeah. Let's go. Let's do it. Yeah.

Just took him a little longer to warm up because he's thinking about all these things about getting around and getting down there and and all that. So do you I I noticed in the white paper, you look at risk based spending and having some capacity to spend in some ranges. Right? So do you try to encourage based on all these these statistics and the reality of of spending in retirement in these phases, do you try to encourage clients to spend towards the top end of their capacity sooner? And are you coaching them towards that?

Yeah. Absolutely. I think, you know, for the vast majority of of clients that I work with, if we kind of plug their numbers into the software that allows us to look at success rates of plan based on either backward looking data or forward looking kind of Monte Carlo simulation stuff, The vast, vast majority of people are 90 plus. 90% plus. Right? Right. You know? So, in fact, a lot of them are 95 plus. Mhmm. And to me, a plan with a % success rate is a plan that will a % fail.

Right? So, you know, you you are a % gonna run out of money. So I try and reframe this. The way that I try and frame it is chance of underspending. That make sense? Mhmm. So you've got a a % chance of underspending, not a % success rate of a plan. You've got a 90% chance of underspending. When I start talking to them about this, they're like, oh, so I've only got a 10% chance that I'm ever gonna, like, overspend? Yeah. Yeah.

And by the way, if your line goes on one of those 10% lines, we'll just make a couple of little tweaks, and you'll be absolutely fine. So this is about future adjustments. So I think

that's a great point because when I first hear you, I think when people hear you say you have a 95% chance of success, what you're seeing is that that's a % chance of failure. You're saying that there's a % chance you're gonna leave a lot of life on the table. Yeah. A lot of opportunity to live. Yeah.

Yeah. We talk about memories and experiences. Well, I'm sure we get into this memory thing in a bit as part of the white paper, but Mhmm. That you're not ultimately, people are not leaving money on the table. They're leaving memories and experiences on the table. That is what people are leaving. They're leaving time and energy and ability to spend stuff with loved ones and on things that they wanna do. So, yeah, I absolutely encourage people.

And so, what I've really started to do a lot is in a very lovely, coachy, nice way, tell people what I'm gonna what they should spend. Right? So I I call it the 80% plan. So, really, there's there's two there's two kind of guardrails I'll look at. So we'll create a plan and and what what it comes out with. So most people are 90% plus. If they tell us what they're gonna spend versus their assets, and we put in some evidence around real time spending declines and all of that stuff, The vast majority are sitting well over 90%. I'll then create a plan that says with an 80% chance of underspending and a 20% chance of future adjustments, this is what you can spend. Mhmm.

And by the way, unless we come up to some really amazing reason why, that's how much I'm gonna deliver to you every month. Mhmm. Because I want you to go and spend it.

So you're even proactively trying to kinda force out distributions and withdrawals and saying, hey. You you know, this is the money that we can send to you. Yeah. Try to prompt them that way. Interesting.

Because if I I'll I'll make a number up, and I'll put it in, I'll put it in dollars. So if if a if a client is saying that, if someone's saying that I wanna spend, $50,000 a year, and I say, well, you can spend $80,000 a year. And I say, well, what would you do with the extra 30,000? Just now start thinking. And and then I've had it before where they go, do you know what? I've put everything into the 50. Right? I mean, that's the holidays I wanna do and the things I wanna do and all this stuff. And you go, well, what charities are close to your heart? Like, what do you because the science around giving is huge. Like, you know, we we all know that giving our time and money away whilst we've got you know, whilst we can see the impact of it is massive. A lot of them will bring forward some of the stuff they wanna do for their children.

So, you know, it's kinda like, well, you're saying I can spend another $30,000 a year. I've wanted to give, you know, $60,000 to help my, help my eldest do something. I can probably bring forward two years worth of, like, the spend and give it to them, can't I? Yeah. Absolutely. That's fine. You can do that. Uh-huh. So this is just about and it it may not be that you chuck out the income every month.

It might be that they know that they've got capacity of spending. Right. Within the year, they can take another $30,000 out as a lump sum to go and

do something with. Well, I love how you've you've made that conversation focused and intentional. And without that prompt, they're not gonna take a distribution. They're not gonna consider it. They're gonna save and invest the money or keep it in there growing over time, and they're gonna be that 80% that, doesn't spend their money in retirement. Right? Yes. So putting that in front of them and helping them through that, you know, thought process can help affect some change. Right? Get them to to change the way that they're they're going about it, which is great.

Yeah. And I think what what I try and do with the guardrails is to take away some of this this fear. Because I think, you know, the the one of the biggest fears that they have for people, particularly in a modern retirement without the type of defined benefits that used to exist is that, you know, all of the all of the weight of money is sitting on their shoulders now. They've got this pot of money, and this pot of money has to last. And I've got some thoughts around guaranteed income, etcetera. But, ultimately Actually, I

had a question about that because that was an interesting point for me. And I I don't know if this is what you were referring to, but were you getting out with this guaranteed income idea? Were you looking at things like, guaranteed income streams from annuities and other financial vehicles that are out there that people could take advantage of? Yeah. Because, again, I'm I'm financial product agnostic. I think some people love them and some people hate them. I think the truth is always somewhere in in between with with anything that you look at. But from an annuity standpoint, I had never really seen the statistics about spending out of income versus spending out of savings and the psychological component to that. So that might be worth maybe digging into a little bit.

It's really interesting. Right? So if I, if I if I sit in front of a couple and I mention to them kind of in this three year window, we're planning for this work and the the the work that we're gonna do, the focus work. And by the way, one of those challenges that you're gonna face is your ability to spend money. Mhmm. You know, it's gonna be a challenge, so we're gonna work on that. A typical response from people is, oh, no. Don't worry, Dan. I've got no problem here.

I can spend money. So we'll be fine. And I'm like, no. No. No. No. You can spend income that's being replaced the next month. You've never spent capital that you're intentionally taking down.

You're intentionally depleting it.

Right.

And then I have a couple of questions around how would that feel, and you can see instantly the realization in their face. They're like, oh, yeah. No. I'm yeah. No. If I couldn't if I couldn't replace it, I'd feel I'd struggle to really spend it. I I I think that's an interesting observation, number one. But, Michael Finker and David Blanchett and Wade Pfau have done a lot of work and research around annuities and guaranteed income.

And, Michael Finker and David Blanchett produced this wonderful paper called a license to spend. And and, really, their research concluded that 60% of people are much more comfortable spending from income than from savings. And, actually, as a sample size, one that feels that sounds quite high, but I don't think it's high enough personally from the conversations I've had with with clients. And and the the basis was they said to people, if you had an additional 10,000 of income for life or a hundred and £40,000 in your retirement savings. So on current annuity rates, a hundred and $40,000 will give you $10,000 a year of income. And across all wealth levels, it's there's not much in it in terms of percentages. Around 60% of people said they'd find it easier to spend the $10,000 of income than actually take $1 out of the hundred and $40,000, lump sum that they had. And, also, what they then found is on average, people with foundational levels of guaranteed income spend about twice as much during their retirement lives than people that don't have any.

Mhmm. What an unbelievable statistic. Because what they find is that if you're pushing this income out to people, they will absolutely spend it. The fear of running out of money means they don't spend anywhere near enough. To me, all of that says that we need to kind of, in a lovely way, force income out to them because they will spend it. They will spend it on stuff. So, yeah, I I I found that that research fascinating.

Yeah. Yeah. I was glad to come across it again. You know, I've used annuities in the past. I'll probably use them in the future, but the the way that you tied that research into the problem of spending, I thought was brilliant and and really useful and, and worth considering. As I normally do, I think I got us down a tangent. We were talking about memories, and that's I wanna make sure we spend a little few minutes just talking about things like memory planning and memory dividends. What should we be shooting for here, you know, if we're spending our money? What what's, you know, what what's this all for, I guess, as we kinda wrap up?

I drew a sketch. One of my really early sketches that I drew that's in the white paper was this concept that everybody kind of focuses on this kind of how much can I withdraw each year without running out, and how can I maintain my lifestyle on a budget? And what I'm doing, I'm turning my investments into income. But I think we need to again, the skill of spending is reframing and, like, you know, challenging that language. And to me, what you want to do in the second half of your life more than ever, is turn your money into memories. Mhmm. Because, you know, this is kind of, this is kind of saying that, you know, rather than focusing on that kind of, you know, investments into income stream, turning money into memories will give us, like, an investment return, so to speak. It's like a return that's far beyond dollars or pounds and pence. That that kind of, you know, spending your money with loved ones and sharing experiences and exploring new things and indulging in passions, they will stick with you far longer with you and your family than kind of what any balance in your bank account will will kinda give you, will kinda give you.

And, you know, you talk about, we talk about retirement memory planning. On top of that, there there's this thing, called memory dividends, which I first come across in Bill Perkins' brilliant book, Die With Zero. And I know there's other people that have written about this probably before Bill, but and that is that concept that the experiences that your money will buy will pay emotional returns long after the money is spent, and you will recall these at dinners, at Christmas time, at Thanksgiving, at birthdays, at you know? And they're the cherished experiences that we will take with us. And and the conversations I've had with people around, you know, when you look at people end of life, and I had the brilliant Jordan Grummit on my podcast that that talk he was a hospice doctor and does end of done end of life planning. And he you know, you know, the thing that pea they didn't regret, you know, not saving enough. They didn't regret you know, what they regretted was not creating enough experiences. They regretted not trying stuff. It wasn't whether they failed or they succeeded.

They didn't care about the outcome. They regretted not actually trying or doing. Right. And so you rightly said, Jim, the point of your money is to what? I mean, the point of twenty, thirty years of work, for a lot of people, that work isn't necessarily filled with joy. You know, it's kind of a means to an end to get to a point where you then feel uncomfortable and fearful of spending, which means you're not gonna have the experiences or create the memories that you want, seems to me a really rubbish way to exist. And Yeah. We know that there is a much better way to do this, and it doesn't mean you need millions of dollars or pounds in the bank. It just means you need some intentionality about what what's meaningful to you, what you wanna do, what memories you wanna create, and then working with people like us to put some frameworks in place to make it happen for you.

Yeah. Yeah. It's great. It's great. We're coming up on an hour, so I wanna get you out of here. Is there anything else you wanna leave people with, thoughts, from the white paper or anything else that that we haven't covered? That fragile decade's important.

Mhmm. Don't don't worry about not starting early. Start with intention and start with seriousness. But, you know, retirement has to be really on your mind to make this impactful. And understand that spending money is a skill that you absolutely need to have to be able to take full advantage of all of the stuff you've been through to get to the point where you are. And that that work could and should form part of everybody's retirement plan because work gives us by the way, going back to those big five, work gives us purpose and identity and relationships, a concept of time and some money security. Just don't do stuff you don't wanna do and have have a bit of freedom with it. I I fine.

Just to kind of I put something out on LinkedIn the other day, and I had this this kind of head thought, and I just got on video and recorded me talking in my car. And it was about just reframing this again a little bit more. So when we were growing up, we think about three phases. Right? You think about kind of, education, work, retirement. That's kind of if that that's the old way of thinking about things. We know that model's broken. So when I think about our childhood and our education, I would say that that is a period where we have freedom but without wisdom. Right? So we have time freedom, but we don't know a lot.

It actually my 16 year old daughter seems to think she knows everything, but that's a whole story. But we don't know a lot and all that stuff. We then get into a point where I think we are constrained, but learning. Right? So our our freedom gets taken away from us a little bit, but we're learning, and we're creating skills, and we're knowledge and wisdom. My god, we get to a point where we are free with wisdom. That is the period we need to take advantage of. So we get to a point where we can go, right. Actually, I can take back my freedom.

I've accumulated a lifetime of knowledge and wisdom. I now need to take advantage of of this and do things. So a bit like the icky guy exercise, why not use that wisdom to give back? Why not use that wisdom to work on your terms? Have freedom. Do things you love doing. Don't make it about the money, and it will you know, and and and honestly, you and I have seen people do this well, and they are some of the happiest, most joyful people that I come across. And I wanna spread more of that, out into into the world.

Yeah. I love it. You're doing a lot of great work, Dan. Again, I really appreciate your time. One last quick question. We referenced a lot of research and a couple of books, that have kinda come up in our conversation. Are there any other recommendations, books people should check out, maybe podcasts, that you like that are kinda centered around retirement at all? I'm a big reader.

Mhmm. And behind me, there's a number of there's a number of books. I'm gonna turn around because I need to there's so get your pen and papers ready, everybody. This is what we need to do. I think, Happy Money, by Elizabeth Dunn is an amazing book that talks about spending money. Alright. There's a really lovely book by a lady called Patrice Jenkins. It's a it's a little book.

It's called What Will I Do All Day? Mhmm. And it is phenomenal. And so I I love that. And then Christine Benz's new book, how to retire, 20 lessons. She's interviewed 20 experts across. So I would start with, though, those three books, I think, give a real good foundation about kind of Christine's book is kind of an overview of retirement. Patrice's book is about, kind of time. What am I gonna do with my days? And then Elizabeth Dunn's book is about how you're gonna actually utilize your money, and and spend

it. Awesome. So we'll link to all that that came up in those recommendations in the show notes and on the, the website post here. And did I see is Christine gonna be on your podcast upcoming? Or do you

She's been on. She's been on

She has. Yeah.

She's been on a couple of times. So I I had her on really early on, and then, I thought I've gotta get her back and talk about her book. Cool. So, yeah, she she's she's been on. And my favorite one of my favorite chapters in her book is the end one with Jordan Grummit about purpose, and I've reached out to Jordan. He recently come on as well.

Awesome. Cool. So people who wanna check out your podcast is obviously at humansversusretirement.com.

Yeah. Humansversusretirement.com is the website, and it's available on Apple and Spotify and all the other things. And increasingly, people are watching it on YouTube, which I love. So

Yeah. That's great. Yeah. And a lot of good stuff, the blogs, the sketch, the newsletter, which I encourage people to sign up for. Daniel putting out putting out a lot of great work, and, again, appreciate your time and your expertise. It's always good to chat about these things with you. So thanks for coming on. Appreciate you having me on, Jim.

A quick note, although I do hope that you find the information on this show to be helpful, in no way are any of these discussions to be taken as specific financial advice. Please do your own research and talk to your own advisers, especially when making important financial decisions.