312: Innovating Your Retirement: How to Stay Engaged in Your Second Half of Life with Chris Farrell

Casey Weade: Chris, welcome to the podcast.

Chris Farrell: Well, thank you for having me. And Rich Eisenberg is a wonderful, wonderful person.

Casey Weade: Well, I really enjoyed our conversation with Richard. And he talked so highly of you that I am really excited to continue to have great conversations here in the podcasts with guests just like Richard. So, Richard, if you're listening, thank you for the introduction here to Chris. And, Chris, I want to kick this off with kind of a little bit about your history, and that is you have an unusual start into the world of economics. You are something that you had a job that I'm pretty unfamiliar with. It's relatively new to me. You are a merchant seaman back in the day. A merchant seaman back in the day. And then you moved from merchant seaman to getting your graduate degree in economics at the London School of Economics. How do you make that transition from merchant seaman to economist?

Chris Farrell: Okay. So, yeah, like many people, the career path was securities, right? There's no, you know, we probably all know somebody who one or two years at year one, they knew they wanted to be a lawyer when they grew up or they knew they wanted to be a doctor when they grew up. But most of us, we're trying to figure this career thing out. We know what a job is, but what's a career? Graduated from college, didn't know what I wanted to do. And so, I became a merchant seaman for four years. And I worked, at that time, my first voyage was seven months, and that was a Europe Middle East run. So, we go to Rotterdam, Bremerhaven, Genoa, Piraeus in Greece, down to Dubai, Dammam, Saudi Arabia, turned around, go back the other way, and just go back and forth. And typically, you would work for six months and once was on a container ship and all the other ships were oil tankers and got through the Suez Canal, the Panama Canal. And you work seven days a week and you get a lot of overtime. So, the weekends are overtime and there's nothing else to do on a ship but work. And so, I just saved my money and then when I would go ashore, I would get a job and I would spend everything that I made from that job. So, one time I was bartending or helping out a professor or whatever it is that I was doing, that money was spent. But what I earned at sea, I kept in my savings account. And then after four years, decided, and two friends were going to London. One was going to work at a hospital. One was going to the London School of Economics so I decided to join. Now, they even make the route slightly less, you know, more jagged. I didn't get my degree in economics. I got my degree in sociology.

So, I have a master's in sociology. But while I was in the London School of Economics, I really became interested in economics. It's the economic environment. You're at the Commonwealth. All these nations were represented there, decided I want to become a journalist, moved to New York, and it took me a year of pounding the pavement to break into it because I had no experience. I had no background. But I did finally break into journalism, and I ended up at Businessweek magazine. And then I worked for Businessweek in New York, and I had this public radio show on the weekends called Sound Money. It was a personal finance show, nationally syndicated, and then I decided to move to the Twin Cities, do more public radio, do more public television. And I continued to write for Businessweek until I think it was 2017. But being a merchant seaman prepares you for a lot. And I love my career in journalism. It's been an exciting career for me.

Casey Weade: Yeah. And I would think that those travels, you know, being a merchant seaman, doing that and traveling all over the world for four years, even going to school in London, then coming back to the U.S., that global experience must provide you a different perspective on the global economy.

Chris Farrell: Well, I absolutely did. And it helped me as my career evolved, as I became an economics journalist and studying economics and if you think about the major themes of the past 30, 40 years is globalization. I mean, globalization is one of the big ones. Aging the population is another theme. Saving for retirement has been another theme. So, I think you're right. I mean, and I grew up in a - I never able to answer the question, "Where did I grow up?" because my dad was in the Navy and then shipping. So, we moved every two or three years and we lived in Guam, we lived in Germany, we lived in California, mostly the New York Washington corridor, up and down the New York Washington corridor, but lived in Ohio. So, we were always moving.

Casey Weade: Well, and as time went on, you had a strong interest in economics and most of your coverage was around that area. And then you kind of make this transition. You've written a couple of different books around retirement, happiness, meaning, purpose. Why this interest in those topics?

Chris Farrell: So, in journalism, there are two powerful themes. You think on the economic side, the demographics of an aging population has been a major theme in economics. And it's basically been, "This is terrible." We're just going to have too many old people supported by too many young people. And then on the personal finance side, as you well know, it's all been about saving for retirement and how so many people haven't saved enough for their retirement and their standard of living is going to fall and they're really going to have a hard time. And at some point, I just had a fundamental rebellion to this, and I started doing a lot of research, and it turned out that there was a lot of economic research scattered, much of it out of Europe. This had a much more positive view about an aging population, taking into account that we're healthier, we're better educated, doing work is easier. You know, it's one thing to be working later in life if it's a coal mine but it's another thing if you're working in a medical diagnostics office or if you're working in the back office of a mutual fund company. And then on the personal finance side, there was a growing recognition about the economic impact on household budgets of just working one year longer, two years longer, and not just the effect of the income coming in, but what that might mean for Social Security and how important Social Security is to people's living standards.

So, I got really intrigued by this, started to call around people, and decided I think this is a story to put out there. And that's been a theme of mine now for, you know, Unretirement was published in 2014. So, it's really been a theme of mine since about 2010, 2012. And then I get to meet people like Rich Eisenberg and Kerry Hannon, and there's this essentially this ecosystem of scholars, think tank people, journalists who are deeply involved in this rethinking, reimagining aging, and the portfolio of activities in a shift from retirement being full-time leisure, full stop, that's it, you're out of the workforce to more of a portfolio of activities and thinking more about your next chapter, your next stage, as opposed to driving off into the sunset.

Casey Weade: And a lot of your work, which I find fascinating circles around demographics, however, and this isn't something that we see in the media on a regular basis. What we see when we turn on TV is this is what's happening with unemployment, inflation, interest rates, earnings. And yet, are you saying that demographics are the biggest driver or demographics, the biggest driver of the economy, and we kind of let these other things get in the way of a better view of the economy?

Chris Farrell: Well, I think demographics is one of the major forces that is shaping our economy both and particularly when you think about the longer-term because the population is aging. I mean, there's one demographic number that I think everybody should know, which is that in 2034, the Census Bureau predicts that there'll be more people 65 years and older than 18 and under for the first time in U.S. history. And that is not a momentary shift. That is a fundamental shift in our economy and the workforce is aging. The average age of the workforce is going up and the birth rate is very low. So, this is a real shift in our economy. And the reason why I think it's so fundamental to the sort of long-term economic health is that this is going to affect housing, transportation, our health care system, the way we work, the way that employers think about their workforce. And one image that I always like to hold and I think it's happening right now and it's going to happen more and more that when senior management is walking by, a worker with white hair like I have, instead of thinking, "I wonder when that person's going to retire," they're going to be thinking, "How can I keep that person's skill, knowledge, experience on my payroll? What do I have to do to keep this person?"

Now, that's a fundamental shift in our economy. It's a fundamental shift in the way that we think about getting older, the way that we think about experience. And that's why I think it is one of the major drivers. It's like globalization, climate change, the demographics of an aging population. These are like the three fundamental forces that are affecting our economy.

Casey Weade: And there are two different sides to this argument. Obviously, you're on the positive side of the argument, saying that this demographic shift is going to be a positive and it's going to lead to a more stronger, more vibrant economy. Can you share with us both sides of this argument? What is the argument from the side, the naysayers going, "Hey, this is really bad and everything's going to fall apart due to this aging population," and then what's your argument?

Chris Farrell: Okay. So, the negative argument is that as you have an aging population and the term that's used actually is illustrative, it's called more, you had the dependent old population, so they were dependent and you have fewer and fewer people supporting this older population. And they're going to not only are they not contributing to the economy, they're actually absorbing more and more economic resources, Social Security, Medicare, disability, frailness. Think about our healthcare system and overwhelming our retirement system. And there's almost an attitude out there that we can't afford to grow old, that it's so expensive. And it's an economy where getting older is it's like everybody is on a walker or everybody is in a wheelchair and they're frail, they're physically impaired, they're mentally impaired. And there are so many of them that it's just going to drag down our economy and that younger people are going to be working hard to try and support this infrastructure that's been built up to try and provide a decent standard of living for people in their elder years. And it's just not going to - the numbers don't work. The math doesn't work. So, that's the negative view that's out there and it's probably most associated with the late Pete Peterson who former Secretary of Treasury, Wall Street investment banker. You know, and he wrote a whole bunch of books arguing that we really needed to reduce Social Security, we needed to reduce Medicare, that these things were just too expensive.

So, what's the alternative point of view? And of course, as in everything, it's not a world of on the one hand, on the other hand, there's a lot of gray in between. But what the other point of view says is, look, we're living longer and we're healthier on average. We are definitely better educated on average, and there are fundamental changes in the economy. Essentially, you can use the jargon term. It's an economy that's dominated by information technology, the office work. It's less an economy of people using their muscles and more an economy of people using their brains, and also an environment where they're more protected from storms and the winds, you know, if you think about having to be doing all your work outside. So, it's a less physically demanding economy. And that people are living longer, which a way is to think about, now it's actually really an opportunity to have another stage, another career, and someone graduating from college. So, we're having this conversation in early June. So, people who have just graduated from college in late May, early June, they can reasonably think about having a career of 50 to 60 years. Now, if you're going to have a career of 50 or 60 years, you can go, "Oh, dear," or you can say, "You know what that means? It means I can have multiple careers. It means I can have multiple opportunities. It means that I may do this for ten years and then I may try something else for another ten years, and then I may decide to be self-employed, maybe go to work for the government, maybe I go work in the private sector," and it opens up a lot of opportunities.

And all of a sudden this deadweight burden of an aging population, it shifts your perspective to an aging population, becomes one of your most underappreciated assets, and that they will continue to work, continue to pay taxes, continue to innovate, continue to be creative. If you're creative in your 20s, you're going to be creative in your 60s. So, how do organizations tap into that creativity of your 60s instead of assuming that you peaked, you're done at 50, and it's a decline after that? Instead, looking at it as what are the possibilities, what are the opportunities that organizations can take advantage of with these experienced workers in all their knowledge and all their creativity for another couple of years?

Casey Weade: It seems like your argument centers around an unconventional retirement becoming the norm or already being the norm, these retirees that retire from their main course of work, stepping into a second act and an entrepreneurial spirit, maybe doing part-time work or a whole new career. However, isn't that still the minority of that population, that 65 plus stepping into retirement?

Chris Farrell: So, it's actually depending how you look in numbers, it's a majority. A majority of people, when they say they retire, have some kind of bridge job, some kind - now, encore career, which is just for it to define that, encore careers, you've had a career and let's say you've been in the private sector and now you retire and you want another career in the nonprofit sector and you look for another full-time job and this is your encore career and may has more of a sense of giving back and purpose and meaning and all those very, very important things. I mean, there are a lot of people what you're looking for is part-time work, a portfolio of activities, some volunteer work, some work that brings in some money, spend some time with the grandchildren looking for a portfolio. But a majority of people now do have some kind of bridge to retirement. And so, this is the way things are going and this whole evolution of the digital world, the digital technology, which there's nothing good to say about the pandemic but one of the effects of the pandemic has been to accelerate this digital economy. Just think about working from home. Well, all of a sudden for the experienced worker, remote work opens up some real possibilities, the people who no longer want to commute or perhaps it's just difficult for them to commute but they still want to be working and they can work from home remotely, perhaps part-time.

So, again, there are real positive reasons why people want to continue to work but there's also a negative reason, which is that many people haven't saved that much money for their retirement. I mean, they just haven't. And it's not necessarily their fault. In fact, I don't think it is their fault. For people who have families, here's the news. Kids are expensive. They're really expensive. So, the notion that you can save 20% of your income while you're raising kids, you know, for many families, that's just impossible, right? But when the kids are gone and they're launched in their own career, they're launched on their own lives, well, all of a sudden saving 20% of your income while you're continuing to work is a very realistic possibility. And what the research shows is that working longer, it means you can delay tapping the Social Security, which is probably the biggest boost to your standard of living or supporting your standard of living. You can delay tapping into your retirement savings, and you have to live off of your retirement savings for a shorter period of time. And that's why work can really make a big difference to people while at the same time, the reason why I call my book Purpose and a Paycheck is you just don't want to do any job, you want to try and do something where you make a difference.

Casey Weade: Well, before we move on to that specifically, I want to understand the demographics a little bit better and what's actually happening. You've written and it's been said over the last 25 years, the number of businesses started by those in their 50s and 60s has nearly doubled. So, we have more 50 and 60-year-olds starting businesses than ever before. But I question if that is really a factor of a shift in the definition of retirement and what's actually happening or is it really just because there's twice as many people in that age group today?

Chris Farrell: Okay. So, some of it does reflect an increased size of the age group. But what it also reflects is it makes a lot of sense. What we've seen for the long term, over the long haul is if you take self-employment, self-employment rises with aging, which kind of makes a lot of sense. What is new is starting a business which may have some employees. And that is somewhat new and that's where you get the doubling. So, yes, some of it reflects just simply you have there just more older people out there, but not all. But much of it really does reflect that this is a new opportunity. And the reason why I think it's new as opposed to simply the size of the population getting bigger has to do with technology. You go back 20 years ago, standard advice was do not start your own business in your retirement years. What? Are you crazy? You know, you're going to tap into your 401(k). Starting a business was expensive. There's this wonderful example in, I don't know if you read Keith Richards' autobiography, Life, which is a wonderful story about entrepreneurship. And he talks about when they went in London and they cut their first song, they had half an hour because it was so expensive to get into the studio. They literally had half of the clock started and the clock ended. Didn't matter. Half an hour, that's all it was. And he says now for a couple of thousand dollars, your garage can be a much better studio than what we went to at that time. So, one of the things that's driving is your office is the home or a co-sharing workspace which are coming back now.

Technology makes it cheaper to start your business, makes it cheaper to test your business. And typically, businesses are being started by the 50 plus for $2,000 or less. And so, no, I think this is actually a fundamental shift. What it is, it's a realization that this may make the most sense for many people because one of the difficulties is ageism is real. Age discrimination is real. People find it very difficult to get through the algorithms. They can't get those interviews at the big company but you have knowledge, you have skill, you have experience. What does an entrepreneur do? An entrepreneur solves problems, and you take that problem-solving ability and you sell it to your former firm.

Casey Weade: Well, let's say that you're right and that there is a fundamental shift happening right now. We have this generation that's going to make an outsized contribution that has been greatly underestimated. Let's say that's true. And we fast forward 20 years, that generation starts passing away. Is there a reversion to the mean? Isn't there always a reversion to the mean?

Chris Farrell: No, I don't think there's a reverse. In this case, I don't think there's a reversion to the mean, and here's why. Much of what's going on right now is an experiment. And by the way, to be very clear, health matters and career matter. And there are many people for whom the traditional retirement is the best outcome. It's about choice. It's about making a choice. But if you think about when I was 50 years old and I'm now 68. So, at 50 years old, the division of retirement was still this idea that you saved as much money as you could and then you reached a certain age. Pick whatever age you want. 60, 62, 65. You retired, you stopped working. That was it. It was all about leisure. Think about all the articles in all the books that were published. It was with that model in mind. When my youngest, who's now 30, is 50 years old, he's going to have a very different model about what are the opportunities in the second half of life. It's going to be a very different picture and it's self-feeding. So, I'll make one of my forecasts. We can come back in 30 years. But I think that this is absolutely true, that in 30 years, right now, if you walk onto a college campus, it's dominated by young people.

So, the undergraduates and then undergraduate students, okay, so they're in their mid-20s to early 30s. In 30 years, when you walk on a college campus, there is going to be an age range from 18-year-olds to 70-year-olds, and no one group is going to dominate. And they're all there to get the kind of education, the additional skills, the knowledge that they need to try their next career, to try their next opportunity to boost their career going forward. That's the kind of change. Now, if that's the institutional environment that you're in, then it is a reversion to mean. It's about a very different vision. And we've seen this happen before, before World War II. So, we're back in 1900. Let's go 1900, 1920, 1930. What was the vision of retirement? Which you pretty much work until you died. I mean, there was retirement but you didn't live very long after that. Now, you go to the post-World War II period, and you had Social Security, Medicare. Big companies offered their employees defined benefit pension plans, the traditional pension. And you had the rise of Sun City and places like Sun City down south and all of a sudden retirement as the country club life really took hold. And it still has a powerful pull on our imaginations. Even though not that many people really participate in that particular version of retirement, it's still the dominant image. So, I think that in 30 years, the image of what I'm going to do for my next 8,000 days, which is about the time frame you're working with, is going to be very different than it is for the current generation.

Casey Weade: And the majority of the families that we work with, I find they want that traditional retirement and they want to get the RV, travel the country, and maybe snowbird, spend time with the grandkids, do a little bit more traveling. And that's the majority of the families that I'd say that we meet with. And you seem to feel that they may be missing out on a huge opportunity for themselves and contributions back to the world. What would you say to those individuals that are saying, "No, I really just want the traditional retirement?"

Chris Farrell: I say fine. I mean, look, if you can afford it and that is the good life to you, do it. That is wonderful. But what many people have found is and depending on your numbers but say 40% of people who are fully retired from a full-time job, full-time career unretired within about two years, and a lot of it, part of it is money, but what the surveys show is you do exactly what you're talking about. But then there's that sort of sense of what's my purpose? Now, for some people, like that you describe, that's it. That is their purpose. This is what they want to live. This is good. This is what they worked for. Great. But for many other people, one of the difficulties with aging is being lonely. And the thing about work is that it's a community and your people care whether you show up. There's people you gossip that there's people you like, there's people you don't like. You know, it's a community. You work with diverse groups at all different kind of ages. And so, many people unretired after they had sort of fun and they travel and they do these things and then they realize, “You know, it'd be nice to be doing something where I feel like I have a schedule. I'm getting up in the morning and I'm doing something that I believe in,” and volunteer work is good. But if I show up or I don't show up, they don't really care that much. But when someone is paying you money, they actually care whether you show up.

And this is why I think it's so important to emphasize that when people do go back to work or do decide that they want to continue to work, in most cases it's not, "Hey, I need a job." It's, "Yeah, I want a job. I want to get paid. I want to have a community, but I want to be doing something that I believe in." So, it's not a judgment on the people who want the more traditional life. That's fine. That is good. But what the battle is about is opening up opportunities for people who want to continue to work. And for so long, the workplace said, "Hey, 60, you got nothing to offer to us. You're in decline. You're mentally not as competent as you used to be. You're not as creative as you used to be. Please retire." And yet they weren't ready to retire. They didn't want to retire, and they were creative. And so, this is about creating choice for people. And it's a movement, a grassroots movement to create choice.

Casey Weade: And what do you say to those individuals that are currently in a position, they're collecting a paycheck, they don't feel a sense of purpose and they want to make a transition into retirement or they sense that it's about time that they make a move or make a transition into an unretirement, but they're not really sure how to do that. What kind of process or exercises or steps could they go through prior to stepping into that next stage to make sure that they land on purpose and a paycheck?

Chris Farrell: Okay. So, a couple of things. And by the way, that's most people, right? Because, yeah, you're hard at work, you're doing your job. You got your friends, you have family, you have things that you want to be doing. So, there's a couple of things you can do. One is, you know, hopefully, plan ahead like five years before you think you might retire. But the reality is a lot of us that planning ahead is a little bit difficult. Maybe you just retire and then you're going to start the process and that's fine. But you want to do a couple of things. One, what is your most valuable asset? Your most valuable asset is not your 401(k) or 403(b). Your most valuable asset is the network of friends and colleagues and people that you have become close to over the years. We'll call it your network. A lot of people don't like that term because it has certain connotations. Let's just call it your network. So, this is your network. And the thing about your network is they know you. They know what you're able to do. And so, what your network can do is two things for you. Talk to your network and say, "You know, what do you think I'm good at?" Because one of the real exercises that you want to go through is figure out what are your skills. Not what your job title, not what did you do in the organization that you're in, but what are your skills and what are you good at doing? And what do your friends or your colleagues or your network, what do they think you're good at doing?

And then you want to spend some time doing some introspection. And a lot of us don't do a whole lot of introspection. Life is busy. But one way a technique of helping on the introspection is just do a five-minute diary a day, random thoughts about what it is you think you might want to be doing in your next stage of life. And this is 5 minutes. Nobody's ever going to read it. So, whether it's ungrammatical or it makes no sense, or just reads stupid, doesn't matter. You take 5 minutes just to write down what you think you might want to be doing. So, that's your introspection side. And then you also have to think about as part is introspection, not what we do, not only what would you say yes to, but what will you say no to. And I learned this from entrepreneurs that I've interviewed, and so many entrepreneurs have told me that one of the most important skills that they've learned is when to say no. And if you think about starting a new career or a part-time job or flexible job or whatever it is, self-employment, you're really having an entrepreneurial mindset. So, it's like not only what it is you want to do, but what it is you don't want to do. And here's the thing. And then the other thing is talk to people who are doing what you think you want to do. And you know what? People will talk to you. 96% of people will talk to you, probably will come across one person who will say, "I don't have time," because you're just doing informational interviews and you're saying, "You know, I have this image about what you're doing and I think I'd like to do that but tell me what's it like? You know, what was it really like?

And so, this is part of your research. And years ago, a person came up to me and said, "What did I think?" They were thinking about becoming - they wanted to own a fourplex and they wanted to become a landlord. I said, "Nothing wrong with fourplex, nothing wrong with the landlord. You have the finances to do it. But have you talked to any landlords?" "Well, no." Well, I said, "Go talk to landlords. Go to the landlord meetings. There's landlord meetings every month and they'll tell you about what's good about being a landlord. They'll tell you what's bad about being a landlord. They'll tell you about the mistakes that they made being a landlord. They'll tell you about the things that they wish they'd done. They'll talk about the things that they did that really worked out well. And that's part of your research because do you really want to be a landlord? It's not quite like you had the finances but is this what you really want to live as your life and you're just going to spend this money and become a landlord without doing your research?" And then here's the final thing. Your network, you're back to your network. The research shows that 50% of all jobs come from a referral. I don't have any research behind it but I think for experienced workers, older people, it's much higher. Your network is going to give you the opening. Hey, you should talk to so-and-so. You should talk to so-and-so. That's how you're going to that. Once you kind of have a sense of where you want to go, your network is going to help you get that job.

Casey Weade: It seems like what you're saying, a lot of folks are quitting their job because they don't like certain aspects of it. There are certain aspects that they love, they excel at, they could do for hours on end and lose track of time. And then there's other elements that they dread so much so that they step into retirement or they sell their business as an entrepreneur. And I see this a lot with entrepreneurs that they're doing everything. And if they could just eliminate the things that they don't like and just focus on those that they really love, they could continue to work into their 70s or 80s or 90s. They would never actually quit that job if they loved what they were doing every day. And one of my coaches says, "The best way to beat our competition is to outlive them." Now, a lot of that has to do with longevity and creating longevity so that we can work longer. However, it also has a lot to do with good planning around doing the things that we love to do every day. And if this generation of retirees can really isolate the things that they love about their job and recreate that now, it's not about beating their competition. Maybe it is and they're an entrepreneur but maybe it's actually more about them being able to be financially stable for the rest of their lives as well. They're going to beat the other retirees because they're not actually going to retire when they thought they'd retire.

Chris Farrell: Yeah. And let me just throw in one other thing about this. You mentioned the longevity. Longevity is a gift and you're nearing retirement and you're thinking about what do you want to do next and then maybe what you want to do next as you're describing earlier, buy the RV, and just travel around the country. Or it may be that you want to do some part-time work or go to work for a nonprofit. But one of the things is you do have knowledge, you have experience, you have skill. So, how do you take that knowledge, that experience, that skill and help the younger generation? How do you mentor younger people so that they can actually perhaps skip some of your mistakes? They'll make their own. But at the same time, maybe they can skip some of your mistakes. Maybe you can help them to advance their career faster or to figure out what actually really matters to them in life. And so, one of the things that I always feel is that in the sense of wanting to give back, which is incredibly powerful among people as you get older, is really also to have a part of your thinking around mentorship, around giving back, and not talking about giving back financially. I'm talking about giving back with your human capital to help others, to help other generations. Because you have lived a life and you have learned a lot and you do want to impart that knowledge and that skill. So, there are organizations that can help you do that. You may do it informally. I was interviewing years ago this gentleman down in South Carolina. He was an entrepreneur, very successful, and he sold his business.

If I remember right, he sold his business around age 60 and he bought this huge house on a golf course. And he was really excited. He's going to do traditional retirement and he lasted about six months and he just was bored. And it wasn't a financial issue. He had plenty of money and he could travel and do all this, but he was bored. And what he realized, what he really loved doing was building a business. And so, what he did was with his children and then with some people that he'd worked with before who he really liked and who were ambitious, he helped them start their businesses and he had an ownership stake in each of them. But it was more the let's help these people grow their own business. And that's what he got his real psychic return. And that was his retirement. And what he found is that he could still spend plenty of time playing golf. He could still spend plenty of time having a drink out on his porch looking at the golf course. It wasn't that he didn't take away but he was enjoying himself and his life so much more and he had this knowledge and skill to help other people. So, again, it's less about how you express it but more that you give back and more that you really do try and make this world a better place, however little that is. And it can express itself in all different kinds of ways, and work is only one of them. But I do think that is something to as you're thinking about, what do I want to do next, definitely put that on that list to think about.

Casey Weade: I think what you're really talking about is leaving a legacy. You know, we're talking about legacy but we're talking about a different kind of legacy. I just had this talk with our team just this week. We were talking about the impact that we make with the families we work with, and they're talking about the impact that we're making on that individual, the impact we're making on them, allowing them to live with a higher level of meaning in their life due to better-defined values and a better-defined sense of purpose for themselves, and being able to live and breathe that every day. Or some might think it's leaving a financial legacy to the next generation. And I think simply having these kinds of conversations, listening to these kinds of conversations, and doing what we're doing, the financial planning profession gets it wrong all the time, right? You know, if we're helping individuals live a bigger life, the real impact of that is going to be their kids and their grandkids seeing those parents and grandparents living a big life.

Chris Farrell: Yeah. I think that's right. And it's also the conversation that we're having is I'm not going to live long enough to see a lot of the changes that I'm talking about. But the younger generation will and this is why I think that the younger generation really has a big stake in things like fighting ageism, fighting age discrimination. I think one of the things that came out of the pandemic is a greater empathy, a genuine empathy between younger generations and the older generations because the younger generations really saw what social isolation and loneliness could be. And they were also dealing with their own social isolation and loneliness. They were going to college and looking for that period of time. And all of a sudden, they're having to stay in a dorm or they're having to go to their parents' basement. And so, I do think that this, the whole conversation that we're having, that it is an older generation right now is kind of experimenting and struggling and kind of trying to figure this out. But I really think it's the younger generation that has the real stake and this outcome and also has a real stake in a healthy economy and has a real stake in people working longer and continuing to contribute to this economy. And there's always this image that if people are working longer, that means that the promotion opportunities aren't there. Right? They're holding everybody back. But the reality is most people leave their current employment or they try and do something different. They're not holding back the younger generation. It's the pie is growing. The whole pie is growing. It's not a zero-sum game.

And so, this legacy, is it a really important idea? And on the family level, it's an important conversation to have. But on a societal level, I do think that this is one of the, if there's a gift of longevity, this is part of the gift, the longevity. You have time to impart, whether it's wisdom or the hard knocks or whatever you want to call it, you have that opportunity.

Casey Weade: Yeah. I think you have more action items and insights into this area of legacy because you recently wrote an article in the Star Tribune about leaving a legacy but leaving a bigger legacy, not a financial legacy. Not something around wills and trusts. In what ways can we lend to the next generation or what kind of things can we do that can enhance the non-financial aspects of that legacy?

Chris Farrell: Yes. So, a lot of this, so if you think about within the family or the extended family, part of this is whether you write it down or you do a podcast or you look in a video or you just have family gatherings and you have conversations but it's about what are my values? What values would I like to continue? What values I think are important to me and to our family that we'd like to see the younger generations participate in? And my mom passed away last year at age 94. And the stories about her growing up during the Great Depression and about the cousins and about how family life was organized and what things that they did, I mean, these are important stories that you want to continue to live. And then when you think about the broader society, one of the things that I think is nice about work, if you're an experienced worker and as you get older, is that there's lots of opportunities to mentor in the workplace. It's kind of like it's there. Now, it's becoming more and more formal and more companies are doing it as they are setting up formal programs mentoring older workers, mentoring younger workers, but also younger workers reverse mentoring, mentoring older workers, which just means you're setting up a conversation, right, to sort of like, what is it? Because we all know in any organization there's a rulebook for how things get done and then there's how things actually really get done. And that's the intangible knowledge that you want passed on.

And then in your broader society, there are organizations, Encore.org, for example, has been really making a mission to work with Big Brothers Big Sisters and other organizations that really have an intergenerational focus. That's kind of the core of what they're doing to bring the generations together so that each can learn from each other. So, there's plenty of opportunity but it's getting that mindset going. It's putting that as a priority and not putting it off. Have those conversations. And the thing that's kind of fun, I know this from my experience and I don't know with other people, when you're a teenager and your parents are telling you stories, the eye roll is a fairly typical reaction because they've had many conversations with people. But then you get in your 30s and your 40s and your 50s and you actually really want to hear these stories and you want to learn from them and you want to kind of understand what is it that why they made some of the decisions that they did for good or for bad. And so, there is this sense of I do want to learn, particularly as you get older and then you look at your kids and you want to pass on some of this. And you do realize that when they're teenagers, there's a limited amount of conversation that's going to go on there because that's just the way life is. But as they get older, having these conversations, passing on legacy, these were values of my grandfather. These were the values of my father and mother. These are the values that I'd like to pass on to you. These things really matter.

Casey Weade: Yeah. Well, and you nailed it. I just had this conversation, actually, last weekend with my dad when he was in town. You know, he wanted to pass on some of the stories. Here's something that my wife and I started doing. We started doing a podcast on our date nights. So, we're chronicling, you know, 20-minute podcasts on our life together, how we met, what we were thinking, when we did this, when we had our first kid or second kid, got married. And I think it's going to be so great for our kids to be able to go back and do what I would want to do, which was what the heck were my parents thinking when they did that? And that really felt like it messed me up. Why would they do that to me? I want to go listen to that snippet where they talk about that experience. I think that's going to be such a neat legacy for us to leave to our kids. But then to start doing these interviews with my father now, we're going to be doing these interviews where we just talk about certain aspects of his life so that kids have this audio that they can go back and listen to. And technology, as you said earlier, is just really helping to grow so many aspects of what we can leave to this next generation, whether that's work, whether that's experience, whether that's stories and memories. So, really love that concept.

Chris Farrell: And then have to put in, okay, if you're listening to this, do you have a will? Do you have a health care directive? Do you have power of attorney? Because this is an important conversation we're having. But you also do want to have those baseline documents in place so that you're not leaving your family. You know, frankly, if you pass away and you don't have those documents or you're ill and you're nearing your death and you don't have those documents, you've really created a problem for your family. They'll get through it. They'll manage it. But it's a real difficulty. And if you love them, just do those three things.

Casey Weade: It's all about bolstering and enhancing that legacy. Now, I'd be remiss if I didn't bring up an economic outlook for you today since you have such a deep economic background. And I wanted to go back to a book you wrote. In 2004, you wrote a book called Deflation: What Happens When Prices Fall? And in that, you talk about it being part of a natural economic cycle. And many may not remember but we did experience deflation, 2007, 2008. And so, you were right on the nose. Now, if you were to write a book called Inflation, what would that highlight, and what do retirees need to keep in mind?

Chris Farrell: So, there are a couple of things. One is, and I think you probably have read a lot of articles or had people have conversations who lived through the 1970s, early 1980s, when you had this high and rising inflation. And now we're going through another bout of high and rising inflation four-decade high. And I think there's a really fundamental difference between these two periods. And the fundamental difference is back in the 70s and early 80s, many people believed we didn't know how to get inflation under control. And there was a book like by John Goldthorpe, you know, and I can't remember the title, but the theme was Inflation is the Disease of Democracy. And Arthur Burns gave a famous talk when he said he was the former Federal Reserve Board Chairman and he gave a famous talk in Switzerland where he said, "You know, we can't get inflation below 10%. You know, we just can't." Take a look now at the discussion that's happening. There's a great deal of confidence that we can bring inflation down. The real question is how bad does the economy have to get in order to accomplish that? So, it's a very different mindset. And I think the reason why it's a very different mindset are just some of the trends that we talked about earlier. But it's about technology and how technology does drive down costs. It is about globalization.

And yes, globalization is going through a rethinking with the Russian invasion of Ukraine, the isolation of Russia, the U.S. and China and that difficult relationship. But nonetheless, when you look at what are companies actually doing, they had more like a supply chain in China, and then they had their various outlets. And now what they're saying is, "No, we still have to have an exposure to China, but we also have someplace else in Asia, maybe Vietnam. We're going to have some exposure in Europe and exposure in North America," which might be the United States, might be Canada, might be Mexico, and something down in Latin America. So, there's a rethinking about globalization but globalization isn't disappearing. And then you look at the actions of central bankers. You know, the term that you probably talk to your clients about, you know, regime change, central bankers everywhere are tightening. And this is a fundamental shift in their outlook. And they're going to combat inflation. They're going to bring inflation down. And I think you can have a great deal of confidence that inflation's going to come down. The worry, which is what's rallying the markets right now, is how bad does the economy need to get? Does the Federal Reserve just looking at the U.S.? Does the Federal Reserve manage to bring down the inflation rate without tanking the economy? There's a lot of skepticism about it.

But again, you're dealing with forecasts and forecasts, there's a great deal of uncertainty. There is not certainty. So, it's a nerve-wracking time. Inflation is high. Inflation definitely hurts retirees. And I love I Bonds, which are sold by the United States Treasury, which is a great inflation-protected security that people can put some money into. Not much, but they can put up to $10,000 a year.

Casey Weade: Yeah. Well, I was going to ask you. My next question is, well, what are you doing about it? So, I guess we've got a little snippet of what you are actually going to be doing about it for yourself. You know, one of the things that I wanted to wrap up today with was something unique. We've never done this before, and I have some questions here.

Chris Farrell: Okay. I like being part of an experiment.

Casey Weade: We're going to be spontaneous. We have every week prior to bringing our guest on, we sent an email out to our Weekend Reading subscribers, those that sign up for a weekly email, four articles sent to their inbox, takeaways, etcetera. We send an email out and say, "Hey, this guest is coming on. We've got Chris coming on. What kind of questions might you have for this individual?" Sometimes we get questions that have a lot to do, say on retirement or the softer side of retirement or economics. And every once in a while, we'll get some questions that are a little bit more general in nature and maybe don't speak directly to our guest's area of expertise entirely. But I thought you know what, it might be kind of interesting to see how someone like you might answer some of these questions and how that might be a little bit different than the way I might answer one of these questions. And if you're not sure what Weekend Reading is or you want to get signed up so you have the opportunity to make questions like this, just text WR to 866-482- 9559. So, let's go to our first question. We have a question from Linda. Linda says, "It's been said you can accumulate $1,000,000 by age 65 by saving a certain amount per month at different age levels, 1 to 60 at an interest rate of 10%." So, she says, "Where can you obtain 10% or close to it?"

Chris Farrell: So, there are two answers to this. In most cases, if someone's offering you 10%, run. Don't walk. Run, because where, you know, U.S. Treasuries, so what are U.S. treasuries now? You get ten-year treasury, it's over 3%, right? So, that tells you at 10% so the higher the interest rate, U.S. Treasuries gives you a baseline so the higher the interest rate, the riskier the security. And for most people, when they're saving for their retirement, 10% is a pretty risky security. There is, however, one momentary exception, which I had mentioned I Bonds. So, I Bonds aren't quite 10% but it's 9%. And the I Bond is the savings bond sold by the U.S. Treasury. There's no commission cost to buying I Bonds. You can only buy up to 10,000 a year, but it's calendar year. And the I Bond has two components, an interest rate and then the rate of inflation measured by the Consumer Price Index. And I believe the rate was over was around 9% I think in the most recent.

Casey Weade: Yeah. A little over that.

Chris Farrell: So, it lasts for about six months and then it readjusts, always depending on what's happening to the Consumer Price Index. That's what's really driving that. So, what I like about the I Bond is it's an inflation hedge. It's just all an I Bond does is it says the dollar that you put into an I Bond in five years or ten years when you withdraw that money and then you pay taxes on it but it will be worth a dollar relative to inflation because all inflation says is that a dollar is going to be worth less in the future. So, that is one exception that I would put to my wariness about 10%. Be very wary about 10%.

Casey Weade: And that's not long-term, right? And I Bonds going to revert to the mean over the long term. And if we look at the long-term run of inflation, it's nowhere close to 10%. But today where can you get 10% that's safe and secure? Well, there's one option that can get you pretty darn close. The way I would often answer this is when you hear those numbers, 6% to 12% a year or 10%, 12% a year, that is the talking heads of the advisors, other brokers talking about the long-term average of the stock market. We're talking about a 100-year average of the Dow Jones Industrial Average. Over 30-year rolling periods will give us over 10%. However, if we looked at it over ten-year rolling periods, it would be closer to 6%. And they don't talk about the nonlinear nature of those returns, which is and looks a little bit more like this. It's a bit of a roller coaster that we have to ride. Can you get 10%? Sure. You're going to have to take on risk, as you just mentioned, in the majority of cases. Or for the majority of the life savings that you've been able to accumulate, there's going to have to be risk taken in order to achieve those rates of return of 10% or 12% per year. And you just have to be aware of that. And I think most end up not getting that because they're not prepared for the volatility. They're not prepared for that downside that inevitably comes.

I mean, I can show you portfolios that have averaged 20%, 25% a year for over a decade. However, what are they down this year? They might be down 30%, 35% this year, right? So, you're taking on some risk that some may not be entirely prepared for. Well, let's wrap it up with one final question for our Weekend Reading subscribers. We've got another question from Sean. Sean wants to retire before the age of 60. So, Sean wants to retire before the age of 60. He says, "I want to retire before the age of 60. Can you explain or provide some different options of how someone can bridge the gap until taking Social Security?"

Chris Farrell: So, the answer to this question has dramatically changed in recent years, and the reason is because of the Affordable Care Act. And so, you go to one of the exchanges and you look at the different options there, and you can get yourself covered until age 65 when you go on Medicare. Here's the key thing, though, or what I would add to this is you want to retire at age 60. Great. What does that mean? And run the numbers. And part of running those numbers is including the cost of your health insurance because it's absolutely critical. You have to have health insurance. You're going to have to bridge it for ten years. There's no way around it. Health insurance is expensive. It just is. But it is now available. The individual insurance market before the Affordable Care Act, it really was bad. It's much better now, but it's still expensive. So, I'd be budgeting. I'd be making sure that you investigate what are going to be your options going to one of the exchanges. The other thing you can do is depending on you may belong to a trade association or a trade group that might offer health insurance to its members, you might want to look at that kind of an option also but build your budget and build your budget around health insurance, have it in there. And then I just want to just add. Great. You're going to retire at 60. Wonderful. You're taking a break.

So, you know, live through 85, 88, so that budget that you're running, make sure it lasts enough, long enough for you or what is it that you want to do. It just really matters what's next. Retirement is just a word we use but it's your next stage of life. So, whatever it is that gives you meaning in that next stage of life, and I'm not making any judgments that whatever it is that gives you that meaning, make sure that you, if you retire, that that's what you're going for but also make sure you budget.

Casey Weade: Well, the easiest opportunity to get started are actually facilitating this in the easiest way might just be to continue to work. So, maybe we need purpose and a paycheck. We need to dig into Purpose and a Paycheck as a book and figure out, well, how could we find some part-time work so that we didn't have to use our savings to bridge that gap from 50 to 60? This is someone that wants to retire prior to 60. And for most of those individuals, and I think what is being alluded to by Sean is how do I bridge the gap from a tax perspective, right? Because most of a retiree's savings is typically saved up in tax-deferred plans, IRAs or 401(k)s. And if we take withdrawals from those prior to 59-and-a-half, we have to pay a 10% penalty tax along with paying taxes on those things. But there is some little-known rule that I see advisors miss out on quite often, which is, hey, if it's in an IRA, you might be able to do a 72T and stretch those distributions out over a longer period of time, avoid those tax penalties. If it's in a 401(k), I've seen many an advisor roll the dollars out of a 401(k) into an IRA and this is someone that wanted to retire prior to 60. And there is a rule in your 401(k) that if you retire separate from service after 55, you actually get four-and-a-half years there that you can take withdrawals from your 401(k) without a tax penalty as well.

So, there are some options there but the best thing you can do is get ahead of this and start building some tax-free or at least penalty-free dollars into side accounts prior to you getting to that stage so you have some dollars to bridge that gap. But, hey, if you're ready to maybe dive into getting some part-time work and finding that purpose and a paycheck, instead, maybe we have Chris and he swayed you here to go a different direction then we have a special offer for you today. If you would like to get a copy of Purpose and a Paycheck: Finding Meaning, Money, and Happiness in the Second Half of Life, all you have to do is text the word "book" to 866-482-9559 and we will send you the book for free. You can catch links to Chris so you can follow him and listen to him and dive into more of his readings in the show notes. Chris, thank you so much for joining us.

Chris Farrell: Thanks a lot. This has been fun.