The 3 Keys to Surviving Major Life Transitions

Originally in ForbesYou might think that the most important work a financial advisor can do is related to allocating a client’s investment portfolio, or perhaps helping secure a timely insurance policy or drafting the optimal estate plan. In fact, their most important work is done when clients are in the midst of navigating life’s major transitions.

I have very recently undergone two of these major life events — a job change and a move — in the span of five months. Crazy, right? Who would willingly subject themself to two of life’s most stressful changes within such a small window of time? Fortunately, I had at my disposal three keys to surviving major life transitions, and I’d like to share them with you:

Key #1: Flexibility

“Blessed are the hearts that can bend; they shall never be broken.” — Albert Camus 

In February, I left the company I loved after seven years of life-changing work to lock arms with a national alliance of financial advisory pioneers dedicated to the practice of “building relationships by doing the right thing.” But in order to build a new and rewarding relationship with them, I had no choice but to sever some relationships with others. 

Retirement Planning Silver Bullets, Part I (of 2)

Moving truck A Wall Street Journal article by Karen Damato entitled, “Retiring in 10 years? Uh-Oh,” addressed a justified fear striking the hearts of millions of prospective retirees: that they won’t be able to afford to retire.  The article is well founded and focuses largely on the investment aspects of retirement planning—the schizophrenic battle in retirement nest eggs to seek growth to make up for past losses while attempting to adequately ensure capital preservation.  The focus of this first of two posts is to provide you with one of the most powerful things you can do, OUTSIDE of your investment portfolio, to improve your retirement plan: MOVE.

If you are already retired or planning to be so within the next 10 years, as the WSJ article clearly articulates, you cannot solely rely on compounded portfolio growth to save you.  Additionally, you may find yourself on the wrong end of the real estate bubble with substantially diminished equity in your home and more debt than can be floated without a salary (and a dwindling desire to perpetuate that salary).  What’s left? MOVE, to a lower cost of living area.

This maneuver is especially compelling when contrasting the highest cost of living areas with the lowest.  According to www.bestplaces.net, an online resource estimating the cost of living in areas across the country, the median home price in Chevy Chase Village, a DC suburb in Maryland, is $2,120,100 (in 2023) and the cost of living is 165% higher than the U.S. average!  Whereas, the median home price in the Great Recession bludgeoned, Detroit, is $71,600, with a cost of living 11% lower than the U.S. average.

But if that comparison appears all too convenient and unrealistic, consider this contrast: Baltimore suburb, Ellicott City, MD, boasts a median home price of $617,500 and a cost of living 37% higher than the U.S. average.  Meanwhile, Knoxville, TN, the engaging home of the University of Tennessee, has a median home price of $314,700 and a cost of living 10% lower than the national average… and it doesn’t snow as much.

Let’s picture a prospective couple in Ellicott City trying to figure out their plan for retirement:

In Ellicott City:

  • Home now worth $650,000
  • $200,000 — mortgage
  • Need $100,000 of income to cover annual expenses
    • Mortgage principal and interest payment ($200k loan @ 5% for 15years) = $19k per year
    • Income need less mortgage = $81,000
  • Took pension lump-sum offer, invested in 401(k), total retirement assets of $800,000
  • Social Security plus 4% withdrawal from retirement accounts = $50,000 (50% of estimated need)

In Knoxville:

  • Comparable home purchased for $350,000—mortgage-free
  • $100,000 additional net proceeds from home sale added to retirement nest egg, now $900,000
  • According to cost-of-living ratio, $45,927 income in Knoxville would feel like $81,000 in Ellicott City
  • Social Security plus 4% withdrawal from retirement accounts = $54,000 (117% of estimated need)

If you find yourself in a retirement planning pickle, I’m not suggesting you read this and put a for sale sign in your yard.  COST of living should not be confused with QUALITY of living, and if your geography and proximity to friends and family is where you derive the most joy, it’s not my suggestion that you have a financial duty to uproot.  But, if you’ve reached a retirement plan dead-end and find yourself without options and a yearning for a refreshing change of pace, there is no question that transplanting your financial life to a lower cost of living area can transform a bleak retirement plan into one that is quite comfortable.

Read Part Deux (of Deux) of Retirement Planning Silver Bullets by clicking HERE.