This book outlines how many Baby Boomers, often shackled by the fearful teachings of their depression era parents, are not spending enough of their savings early in retirement, and Sarasota author and founder of Kennon Financial, David Kennon is on a mission to stop retirees from sabotaging their own retired years.
“For 20 years, I’ve sat down with thousands of retiring baby boomers to help them determine optimal timing for their Social Security benefits. From nearly all of them I hear the same refrain, ‘I’m worried I’m going to outlive my money.’ It doesn’t seem to matter whether they have $200,000 in the bank or $2 million, the dread is the same,” Kennon says.
I’ve also sat down with many people in their 80’s or 90’s to whom I always ask the same question, ‘what advice do you have for us that are just starting our retirement journey?’ And the answer is almost always the same. ‘Spend more money earlier in your retirement. By the time we realized that we wouldn’t outlive our money, we were too old to enjoy it!’
As outlined in Kennon’s new book, You Never See a Trailer Hitched to a Hearse, Kennon’s formula for a better life follows three steps. The first is to invest retirement savings in a diversified portfolio of stocks and bonds with at least half of the money in stocks. Second, take out 5% per year from those savings starting with the very first year of retirement. Last, spend the money. “When clients tell me they don’t really need the money, I still insist they begin withdrawals. I refuse to let them die with all of this money”, he says. “You deserve to enjoy the fruits of your labor. Spend the money.”
Kennon uses historical data to back up his recommendation. “One reference I use is a 30-year study by the Federal Reserve that tracked retiree spending and found, incredibly, that people, on average, were dying with about 60% more money than the day they retired. This is the biggest injustice facing the baby boomer population today,” Kennon says. “It’s painful to see the regret in the faces of people nearing the end of their life when they realize they missed their only chance to enjoy the money they worked so hard to save.”
Kennon notes that 87 years of economic history points to the same fact. Assuming the money is invested and working as outlined in his first step, people who withdrew 5% from their savings each year would have ended up dying with more money than they started with 100% of the time.
“It doesn’t matter if you retired in 1940 or 1960 or 1997. If you took 5% per year, 20 years later you would have ended up with more than you started with,” he says. “This isn’t my opinion, it’s purely historical data. The simplest way to understand it is this. If a diversified portfolio of stocks and bonds does not return an average of 5% between now and the end of your life, it is the first time in modern history that is hasn’t”.
Kennon says he spent three years developing his book, which he believes could radically alter the way Baby Boomers view their savings and spending for the rest of their lives. He also gets his message out by hosting a website, StopLivingScared.com, and his radio program, Dave Kennon’s Retirement Revolution.
“My overwhelming conclusion is that the transition from working and saving to retiring and spending is a stressful experience due to the intense fear of running out of money,” he says. “It doesn’t help when Baby Boomers watch the daily stock market coverage on television. The continuous fear-based rhetoric seen on the financial news adds to the depression era mentality from their parents. The profoundly affects their mental state, which in turn affects their decision about whether they can afford a new kitchen, take that vacation, spoil their grandkids, or support a cause they believe in.”
Could Kennon’s message spread throughout the country? That’s his plan. “The country needs to start a national conversation about this terrible injustice,” he says. “It is causing so much needless worry, pain and regret.”
Check out David Kennon’s First Book, The Retirement Revolution.