Purpose, People, and Core Pursuits: Key Ingredients to a Happy Retirement

0:01The importance of income investing, swan money, and friendship in retirement. Today on the Saturday Personal Finance Edition of the Motley Fool Hidden Gems Investing Podcast.

0:16I'm Robert Brokamp and today is part two of my conversation with Wes Moss. Wes is a certified financial planner, the chief investment strategist at Capital Investment Advisors in Atlanta, the host of the Retire Sooner podcast and the author of five books, including his latest, The Retire Sooner Method, The Five Secrets Behind America's Happiest and Unhappiest Retirees. We may return to the financial part as well, but I do want to get into the non-financial part. And the phrase always is, you don't want to retire from something, you want to retire to something. And what I think is great about your research and your book is that you really boil it down to specific things to be thinking about, starting first with core pursuits.

0:56Tell us how you define core pursuits and what's the difference in terms of the happiest retirees on the block versus the unhappiest retirees. Another revelation to me here is the thought that we will find our purpose, which makes sense, or it'll show up at our door and knock, you know, like you get an Amazon package. You get some toothpaste and your next life purpose. Prime delivery tomorrow. It's going to show up. It's never going to show. It's never going to show up. It'll never be found and it's never going to drop into our laps. It has to be created. The way we create it is intentionally being creative around what are the things that are going to bring me daily purpose and a schedule.

1:45And the two pieces of this equation, again, very new in this book relative to what I wrote about before. It's a lot of core pursuits, which are hobbies on steroids. They are super activities. And if you do them once or twice a year, it doesn't count. That's not a core pursuit. It's not a love. You're not anticipating it. But if you're doing something regularly every week, a couple of times a week, or maybe once a month or a couple of times a year, and you're anticipating it, those are powerful motivators to keep us engaged and create daily purpose that ultimately rolls up into our annual or life purpose that we've created.

2:22It is an activity that we don't just like, we love it, and we do it regularly, and we anticipate doing it more often and getting better at it, et cetera. And that falls into the camp of a core pursuit. The other thing that was interesting that we found is that the average happy retiree spends more time doing these core pursuits each week relative to the unhappy group in a very significant way. So it's not just the number, which should be five or more. It is the amount of time spent doing those core pursuits that is so important. You point out a few other aspects that seem to contribute to something being a core pursuit as opposed to just a pastime.

3:05I'll just reference once again the studies that show that the number one activity of retirees is watching television on average four to six hours a day, which is not part of being a happy retiree. One thing you point out is that the corporate suits are adventure related because they sort of keep you growing, keep you exploring. And you hit it on it a little bit, too, in terms of something called anticipatory happiness, which sort of adds a little extra layer to making these adventure related things like travel, going to an RV, going hiking, makes them a little bit more like a corporate suit. there's something about adventure.

3:42And I was able to look at in the research, all these different core pursuit related categories. And it was interesting. The one that stood out that had the biggest difference, I've always said, it doesn't matter. At least in my mind, the kind of core pursuit you have doesn't matter. And I'd said that for a lot of years. And that may be slightly wrong. Many of the different categories that we parsed out and compared, there was not a significant difference between a happy versus unhappy retiree that both do the core pursuit. There wasn't a material difference in happiness for almost anything we looked at.

4:18So I still maintain that more and different, unique core pursuits, that still matters the most. But in the adventure section, it did have a very significant difference. If we plotted the unhappy retiree group averaged only about one adventure-related core pursuit total. Meanwhile, the happiest retirees on the block, the HROP camp, they averaged almost two. It's a big difference, and it was very statistically significant. And it made me think about, well, why is an adventure core pursuit? Which again, to your point, that's travel, RV, it is hunting, it is fishing, it is, You could probably put hill skiing.

5:00That sounds adventurous to me. Mountain climbing. There's something about an adventure-related core pursuit, seeing the world in a slightly new way, that does give us this wonderful anticipatory happiness. And we enjoy that, in my opinion, as much as the trip itself. Research says that we enjoy the anticipation almost as much as the trip itself. I actually enjoy the anticipation even more. By the time I'm on my fifth day, of an adventure, I'm pretty ready to come home. But I was never ready not to go for the three or four months leading up. And that's a wonderful thing for us to be able to fold into our post-work lives.

5:41You provide a suggestion for helping people identify their core pursuits in the book, and you had people start with their values. And then underneath each values, you sort of brainstorm specific things that you can do that are commitments to that value. And then you break it down to daily and yearly things that you can do to plan out your retirement so that you make sure that those are incorporated in your life. So I call these happy retiring life maps. And there's a Harvard study that showed how powerful these can be. And there's something about the act of drawing something out, writing out your core values, then subcategories of the things that fit that.

6:25And then I like to draw, literally draw icons for the activity that I am likely going to pursue, or maybe I'm already doing it. I want to do even more of it. So for hiking, I draw like a little hiking boot icon. And for gardening, I draw a water sprinkler can. This is the drawing I did, which is really just a recreation of an actual listener of ours that sent her happy retiree life map. And because it was in color pencil, I couldn't actually, I got permission to use it, but I couldn't put it in the book just because there were some areas that didn't quite show up. So I just had to redraw it. I tried to stay true to this listener's drawing.

7:07I didn't embellish it. And I just put down exactly the core pursuit that she had. And there were 20 of them. and there was travel section and there was a volunteer section and there was a friends section and there was a destination part that she drew a little beach in a house that's in the mountains. And it just, that to me was an inspirational drawing and it's a wonderful exercise for all of us to do. We don't have to throw it on the fridge, even though some people do. And I think that's a cool thing to do, but the act of drawing it embeds it in our conscious and it makes it more likely that we're going to do it, even if we don't necessarily revisit it.

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9:37All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. This is a paid advertisement. One thing you touch on in the book is core pursuits that get you out of the house, but also with other people, which leads to another key characteristic of happy retirees, and that is building a community. And I'll just pull one stat from your book. In the survey, you asked people if they agree with this statement, I have enough friends. 81 % of the happy retirees said yes, but only 38 % of the unhappy retirees agreed with that statement. That's a whopper statistic.

10:13Enough is a number. Enough is an actual, maybe you could call it a moniker for a number in a lot of these different categories. Because we can always have more. We can always have more friends or we can get more sleep or have more money. you can always say, well, sure, that's a good idea. Can I retire on 2 million? Sure. Can I retire on 20? Sure. Could you retire on 200? Yeah. But where is it enough? And this applies here to the friendship piece of the equation. Community is the word for this that I feel so strongly about. And very few people are going to disagree with this. At the same time, we need to really be intentional about cultivating our community.

10:55And we are in a friendship recession in America, big time. It's one of the things I wish I had written more about, the actual phrase, I believe we're in a friendship recession. Americans that have zero friends has gone up 400 % since 1990. And two friends or fewer has gone up almost 100 % since 1990. I mean, the statistics, they scream at you. They're yelling that we're in a friendship recession. Part of it, though, is probably just demographics. We know that it's harder as we age to make new friends. That's part of my research. I did it per decade, 20s, 30s, 40s, 50s. Super easier, 20s, 30s, to make lots of close new friends.

11:37It's really hard in your 60s and 70s, et cetera. Well, guess what? We're in peak 65 in America. Last year, I think it was 4.18 million people turned 65. This year, 4.1 million people, 11 ,000 people a day, are turning 65. We as a country demographically are older. And no wonder we're in a friendship recession because the biggest chunk of the population is getting into those harder and harder decades. So we've got to know that. We have to be able to intentionally build our communities and replenish. I got a funny email from a longtime family I've worked with. He's a funny guy, early 80s. and he made a joke about his friends.

12:21He's like, you know, it's tough when you're 80. It's like, I'd love to say I have all five friends, but, you know, half of them died and two of them can't play golf anymore. And like, that's the reality of the world. And there is this sense. And I think about when people argue to take social security late. Yeah, I get it. How do you maximize social security? Well, you wait till you're 70. You get the highest payment. Don't start at 62. You're crazy because you could live to your 100. My Aunt Betty, second removed. She was 101. Everybody has one of those stories. And guess what that says to us?

12:56We all say, well, I'm going to be Aunt Betty. I'm going to live to 95. But as much as we all want to be that, the reality is the majority of people start having some real issues at 75, 78, 80, 82. Yeah, there's people that are centenarians. We can go to Sardinia and find 20 % of everybody lives to 100. Not in America. That is just not the reality. All of that to say, retirement is hard because community continues to be hard to maintain. And I think retirement isn't as long as we all want it to be. And that's why I'm so adamant that we grab a couple extra years of freedom and don't hold on and keep working until we're 70 or 65 if we can do it at 64, 63 or 62.

13:48That to me is a reasoning behind teaching the world what it takes to make the correct turn so we can shave a couple of years off of our working life, financial independence as soon as we can, as reasonable, and then have the community that supports us because it's such a huge variable in our own happiness as we age. You made the point in the book that you have to be, and you mentioned this already, you have to be intentional about it. And you point out, like, for example, where you live, you're going to have better luck making friends if you are in some place where there are lots of things going on versus out maybe in the middle of nowhere.

14:25But I like how you, in the book, you compared it to basically investing, right? And you wrote that you wouldn't expect your retirement accounts to grow without regular contributions and attention. So similarly, you have to do that with your relationships as well. You have to keep making investments in these relationships, ideally before you retire, so that once you do retire, you have that community to fill the time, maybe the time you spent with colleagues, with clients. Now you don't have that, but you have spent time building up this other community that you can rely on. Our colleagues, we don't see them as much when we stop work.

14:59Our customers, our clients, our vendors. And guess what? Our kids. Our kids are busy. God willing, they live nearby. That is so important. But guess what? You have three or four kids. Good luck. You don't get to see the adult kids as much. And I had a couple of friends of mine ask me about this and we're in our, you know, let's call it most of my peer group is in their late forties, early fifties. So they're still a little soon to stop working. But the question was, and I did write about this, but it brings up a really important point of this point of no return. If you're so focused on work and building your wealth and you exclude community, which is so easy to do, particularly for entrepreneurs, and you exclude time for you and your own core pursuits, easy to do.

15:48A lot of us feel guilty on, hey, I don't do it. I really, should I spend four hours a week doing this and working out takes five hours. And if I want to go cycling, that takes another three. And golf takes like the whole day. But maybe I'll do that later. Maybe I'll do that later when I have plenty of money. The problem with later is a lot of times that point of no return makes it really hard to get the engine rabbet. It's like you can't leave a diesel engine in the garage all winter long and think it's just going to start. You've got to keep it running, at least in some capacity, so that you have momentum to build it as opposed to starting full.

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17:13Step into a local Crocs store and step into your new look. Try it, style it, make it yours. because the right pair doesn't just show up, it shows off. First day fits handled. Walk out ready for whatever's next. Visit your nearest croc store today. Let's go back to the financial side of it. And you talk in the book about how to turn your portfolio into a paycheck to the five pillars of income investing. Before we get into maybe a couple of those. When do you think people should start making that transition? I know in the book, you mentioned that you're not a huge fan of target date funds because they get conservative pretty quickly.

17:58When do you think the average person with, say, a moderate risk tolerance should start being like, okay, now's the time to begin preparing my portfolio, maybe doing some de-risking as I get closer to retirement? It's going to be a little different for everyone, depending on how worried we get. You and I talked about earlier in the conversation that running out of money fear that lingers in the back of our minds. Yesterday I did a webinar about this book and someone said, you know, when the stock market's down one or 2 % in a day, like ruins my day. This person was in their 50s. I said, how do you think that's going to be in retirement?

18:35It's going to be even worse. I check it every day and I feel pretty good when it goes up and I feel pretty awful when it doesn't. That is a perennial problem we have to manage. And that really goes back to our risk tolerance. So what is that allocation? Even if you're in your 40s and 50s, you may need to have, you may want to have a certain amount of safety assets, even though we know equities do the best, quote, over time relative to fixed income, but not in any given year, not in any given timeframe. So it really does depend on our comfort level. But you bring up the hard shift, which is the accumulation, shifting over to distribution.

19:15And I'm a believer that if you get within five years of distribution, knowing that, hey, I'm going to probably stop working in the next couple of years, I think it's easier to think of it from a per year basis, three years worth of safety assets from a spending perspective. That could be a big chunk of your portfolio percentage-wise. It could be a smaller chunk of your portfolio percentage-wise. But to me, that gives us a psychological shift so that then the equity side of the equation and alternative income side of the equation can start to be more predictable with our income, particularly when we get within a couple of years of retirement and certainly in our non-working years.

19:54I also advocate that there are a million great ways to invest. And it's almost a limitless options of investing and styles and philosophies. The one that I have subscribed to for most of my entire career has to do with cash flow because the cash flow gets really important in retirement when you need the money. And it also naturally is a psychological elixir away from that running out. I'll just add one of the terms you use in the book for cash and some of the safer money is SWAN money, which stands for sleep well at night, which I liked. I think it came from your predecessor on your radio show, but I thought that was rather catchy.

20:37And you do talk a lot in the book about income investing, in fact, multi-asset income investing, which can come from all kinds of things, bonds, stocks, REITs, maybe even some energy investments. What do you think are the most important things that people need to know when it comes to creating this collection really of multiple income sources? I go back to the root of all investing is the equation is actually super simple, which is just G plus I equals TR. TR is what we all want, total return. G is growth, I is income. And income investing allows us to harness both of those, G and I, by spreading your investments out across multiple asset classes.

21:30MACI, by the way, is not a great acronym. It's just how I remember multi-asset class income investing. Each asset class, though, has its own way of generating cash. But it also, except for the fixed income portion, which I don't really expect any G from. That's really almost all I, just interest, just income. But each asset class has its own unique contribution of, hey, I'm going to give you this much cash or this much in payments, and then this much appreciation over time. And we're in a world where the S &P 500 is at one of its lowest yielding points in history on a percentage basis, not a whole lot of income.

22:07It makes sense for folks to think about what are some of these other components if the S &P is only paying one in dividends, I'm relying on G and it's just got to grow. There's something I think is really powerful when we get into our retirement years that we add in ingredients to that recipe that have higher yields and can find 2 % and 3 % and 4 % and 5%. The higher we go on that income ladder, the more we're relying on the I as opposed to the G. A mix of that, in my opinion, still really helps that total return question. And the more balance we have between those two as we're in retirement, I think psychologically can work really well for folks.

22:51Well, let's conclude here with touching on a topic you talked about, and that is having the written plan. You point out in the book that the happiest retirees are far more likely to have a written plan. And not just, you know, this concept in their brains, but something they've actually written out. How does someone start with that? Do they start with the money? Do they start with the core pursuits? Where do they begin? Of the five core pillars or steps of the Retire Student Method, this one's the quickest one. You could do it today. It starts out with time. and we visualize or draw out a timeline of where we are today and how many years we think we might live.

23:38But invariably, there's going to be a zone of, hey, this is in three years or seven years or 12 years from now, this is the zone I'd like to be able to be stopping work. And then very simply, what do I have today and how much am I saving? Conservative rate of return is, in my opinion, the way to do this. And then that'll give us just mathematically, but we can now get a really easy sense of what that money should be at a conservative rate of return in seven years or 12, whatever it is for you. If I could prefer anything that would be on your fridge, it would be that. My favorite refrigerator is a happy retiree life map and a retirement timeline.

24:20And that's going to wipe away a lot of anxiety about the future and And the chances of having the Aristotle brand of happiness I talk about in the book, which is what most of us want, it goes way up. And that, of course, is the sort of happiness that comes from life purpose, from community, from good friends. Fulfillment. Yes. Not the hedonic sense of happiness, which is basically... You really did read this book. Well, thank you, Wes. It's really been great having you on the show. And I did really enjoy the book. It's excellent. Thank you. Thank you for joining us. And that, my foolish friends, is the show.

24:56Thanks for spending part of your weekend with us. And thanks to Bart Shannon, the engineer for this episode. As always, people on the program may have interest in the investments they talk about. And The Motley Fool may have formal recommendations for or against sell or buy or sell investments based solely on what you hear. All portion of finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Robert Brokamp.

25:23It's a little while everybody.