Around seventeen South and Midwest states will see two cicada broods this summer. One of the broods is on a 17-year cycle and the other is on a 13-year cycle. These broods come out together every 221 years.
Like many insects, cicadas go through a metamorphosis in their life cycle. Nymphs arise from eggs and spend years underground and then emerge as adults above ground for a few weeks if they are lucky.
We will undergo two significant stages in our adult lives. The accumulation phase of your retirement assets is akin to the nymph phase of the cicada. The accumulation span, however, can be much longer than the cicada nymph stage. Some people may work for several decades postponing gratification by diverting assets from their incomes to generate wealth in savings.
And while the cicada, if lucky, may survive a few weeks above ground, the distribution phase for our retirement may have to last for decades.
The cicada at a specific point in time tunnels upwards and emerges from underneath the ground—end of story. A person deciding to retire, however, has several decisions to make. We do not have the DNA of an insect’s internal clock to trigger the optimal time to initiate our distribution phase. We are free to select the timing and selection of the distribution of the various accumulated assets.
The accumulation stage is a Groundhog Day experience. During this period, individuals typically integrate diverse investment strategies, such as diversifying their portfolio, compounding returns, and reinvesting income, to maximize long-term wealth accumulation and mitigate risks.
The distribution phase though can be chaotic. Market volatility and inflation continue but no new money will come in from paychecks. Unexpected events may upend a hoped predictability.
The distribution stage will be a series of responses to decisions:
- Do you know your current expenses? Have you calculated a perfunctory retirement budget?
- What assumptions have you drafted into your retirement budget? Are you going to work in another job or pursue part-time employment? What if health issues force you to retire early?
- How long are you and your spouse prepared to plan to live? What are your health profiles? What about prolonged illnesses? What about the contingency of long-term care?
- What are your plans for continuing health care, including exploring a different type of Federal Employment Health Plan, Medicare, or Medicare Advantage Plan?
- Where are you going to reside in retirement? Do you intend to remain in your home or downsize?
- Are you aware of certain features of the Federal Employees Retirement System (FERS) about how it is designed? Do you understand the concepts of the minimum retirement age, the high 3 calculation, the pension multiplier of 1% or 1.1%, the role of sick leave, the buyback of time, and the consequences of the selection of a retirement date?
- There is a choice to make about when to start your retirement benefits from Social Security. Do you want to start as early as age 62 or delay it somewhere between that age and age 70? If you have a spouse the impact of that choice has consequences on spousal and survivor benefits.
- Have you thought of how you will take withdrawals from your Thrift Savings Plan and other savings? Do you understand the role taxes will have in the withdrawal decisions?
- What about your legacy?
Retirement has to be experienced to be understood. It is a very public point in your life and at the same time a very private time filled with details.
I think the best way to prepare for the challenges of retirement’s distribution phase is to attend a retirement seminar as soon as possible.
Some retirement seminars are designed to provide you with an end-state solution by purchasing a product like an annuity. These do not provide you with objective information but do supply the presenters with commissions.
Many workplaces sponsor information retirement seminars that do not have such conflicts of interest. Attending such a one-day or two-day information retirement seminar, however, will not provide you with any product solutions. Instead, such seminars will alert you to the new landscape that awaits you.
An informational retirement seminar’s purpose is not to confuse you. You may be overwhelmed. Bartosz Czekala, a self-proclaimed memory expert, suggests this might be a “learn like a child” moment.
I think a cicada would attend a seminar about what awaits her or him for a few weeks after years of dwelling in darkness. Maybe you should attend a retirement seminar because the most important and non-renewable resource you possess – time can be then leveraged to prepare you for the distribution phase. And it may even change how you think about your accumulation stage.
