FOR MOST OF MY LIFE, I didn’t plan to retire. Probably reflecting the influence of religion, I’ve long thought we were put here to spend our time working in the productive service of others. This was reinforced by my experience as a manager early in my career. I often had to oversee folks in their 50s and 60s who were no longer engaged in their career and yearned to retire. I never wanted to become like them. Staying productive and continuing to work seemed like the wise move. But my views on retirement began to change as I read about how baby boomers and the FIRE—financial independence-retire early—movement were changing the definition of retirement: It was no longer seen solely as the pursuit of leisure. I liked the redefinition, which included remaining fully engaged in life, including doing work that you love. My resistance to retirement was slowly softening. Then it was accelerated by a really bad day. It was a frigid Montana morning. My car said it was five below zero. I left early to drive more than three hours to one of the remote bank branches I oversaw as the bank’s CEO. I was going around 75 mph when I rounded a curve and hit some black ice. My Suburban, almost in slow motion, began to drift until I found myself going backward in the wrong lane. It was the first time I ever thought, “So, this is how it’s going to end.” I was lucky. The car drifted into a ditch and crashed into the side of a mountain. The impact blew out all the passenger side windows and burst two tires. But I wasn’t hurt. My first thought was a prayer of thanks that I had more life to live. After the battered Suburban was loaded onto a wrecker truck and we were on the road, the driver asked me what I did. As soon as I said I was the CEO of a bank, he exploded, “You SOB, why did you take my home from me without working with me?” For the second time that day, it dawned on me this was the day I might die. Fortunately, I was able to talk him off the ledge, and he realized that he was confusing my bank with the credit union that had repossessed his house. After two brushes with death within two hours, I decided it was time to explore this new world of retirement. After another year of work, I took early retirement at age 62. Six years later, what have I learned on my new journey? Here are five lessons. First, my wife and I wanted to experience what it was like to live in a retirement community. We rented a place for six months in a Sun City development in Tucson. The benefits were real: more than 100 clubs to join, new friendships came easily, and the restaurants, fitness and other facilities offered were great. Still, the almost college-like atmosphere couldn’t compete with our overwhelming longing to be a part of our grandchildren’s lives. We decided it was a great experiment, but we’ll do our future snow-birding on the East Coast, where the weather isn’t quite as nice as Arizona, but the family ties are strong. Second, much of the literature on retirement is about staying curious and learning new skills. It sounds good in theory. I’d always loved music, but never played. My neighbor in Sun City told me about the ukulele club. Seemed like a great idea, but my ukulele now sits in my office accumulating dust. Perhaps someday I’ll pick it up again. Still, I’ve found it difficult to get excited about a new hobby unless I already had some history with it. Pickleball, on the other hand, is a different story. Having played lots of tennis and ping pong during my life, it was a natural extension of my past into the present. I’m pretty good at it, and the sport offers a great opportunity to meet others and make new friends. Third, I’ve never been a big fan of the worship of youth that’s so common in American culture. Indeed, throughout history, many cultures have revered not youth, but rather the elders in their community. I think about this in terms of today’s work world. The stress of managing people and budgets is better suited for younger professionals. But there’s a role for those of us with decades of experience. I sit on the board of a couple of banks, as well as some nonprofits. A seasoned board can offer an organization wisdom and good governance—including the hard-earned lessons of our own mistakes. Fourth, many of us prepared well financially for our retirement years. One joy I’ve learned over the past six years: the happiness to be had from giving generously with the retirement income we don’t need. A few years ago, when I was elected to a bank’s board of directors, I called the outgoing director I was replacing. He gave me some good advice: “I don't need the board fees, so I give all the money to the local food bank.” Finally, I was a hypocrite for much of my life. I served as a church elder for many years, encouraging church members to slow down, and set a regular time each day for prayer and meditation. But I didn’t follow my own advice. I was too busy raising five kids, managing banks and working in nonprofits to have much time for quiet reflection. Today, I’m happy to say that I’ve finally learned to slow down. I’ll enjoy a cup of coffee, while practicing the spiritual disciplines that I’ve long encouraged others to pursue. I know it’s just a matter of time before I enter retirement’s slow-go and no-go years. When pickleball is no longer an option, I’m hoping I can fall back on the spiritual muscles I’m now developing, and they’ll help me to find meaning and contentment as I age. Joe Kesler is the author of Smart Money with Purpose and the founder of a website with the same name, which is where a version of this article first appeared. He spent 40 years in community banking, assisting small businesses and consumers. Joe served as chief executive of banks in Illinois and Montana. He currently lives with his wife in Missoula, Montana, spending his time writing on personal finance, serving on two bank boards and hiking in the Rocky Mountains. Check out Joe's previous articles. [xyz-ihs snippet="Donate"]

YOU NO DOUBT remember Peter Lynch, the celebrated manager of Fidelity Magellan Fund. He quit Magellan’s helm when he was just 46 years old. His comment at the time: “You remind yourself that nobody on his deathbed ever said, ‘I wish I'd spent more time at the office’.” Nothing brings more clarity to money’s limitations than consideration of our mortality. A few weeks ago, I thought about this truth as I lay awake all night, waiting to hear from my son. He and his wife had checked into a hospital to give birth to their first child. The plan was that we would receive regular text updates, regardless of the time. But the hours passed and no updates arrived. My wife and I had an ominous feeling that something was wrong. As we agonized and prayed, we struggled to contain our fears, imagining all the things that could be going wrong. Why hadn’t our son kept us updated? Were mother and baby okay? Finally, a call came at 3:30 a.m. Our fears were not unfounded. It was a traumatic birth—the baby initially had trouble breathing. But I’m happy to report that, thanks to incredibly talented medical personnel, our new grandson and daughter-in-law are doing fine. For me, the difficult birth has triggered a time of introspection. Has my life been too focused on the accumulation of things that won’t last—or have I have been building true wealth? The word “wealth” comes from an old English word. Its meaning is closely related to happiness and to the wholeness that comes from a well-balanced life. As we each examine our life, what traits should we look for if our goal is true wealth, rather than just lots of money in the bank? Here are eight things I view as valid metrics for measuring true wealth: Family and friends. According to research, a robust support network is almost always a leading indicator of happiness. That network is even more important amid today’s COVID-19 isolation. Community. The richness that comes from connecting with others through churches, civic groups and other forms of community engagement are at the core of civility. It’s what made my years as a community banker so rewarding. Education and experience. If we suddenly took all the money in the world and gave everyone an equal share, there would be inequality again by the next day—because of our differing abilities to adapt and respond to the situations we find ourselves in. That, in turn, partly reflects the wealth we’ve accumulated in the form of education and experience. Contentment. Growing up, I was surrounded by many lower middle-class families—and yet I rarely saw the envy and angst that destroy happiness. Instead, I saw that in the workplace, with its constant jousting over salaries and bonuses. Health. If we lose our health, we can’t work, play or travel as much as we might desire. To compound that aggravation, we must budget more for medical expenses. Good health is a key part of true wealth, and it’s worth investing in through a healthy diet and regular exercise. Spiritual peace. My daughter taught me a little about this when I visited her in South Africa. She was spending a gap year helping at an orphanage. Coming from an affluent American family, she assumed the people she’d be working with would be poor and unhappy. But as she explained to me, they were poor but happy. She saw the connection between their deep spiritual faith and their joy in life. A generous spirit. It’s a wonderful feeling to give generously to others. Studies show that many people derive great happiness from giving to those less fortunate. As a banker, I met many wealthy people who couldn’t enjoy this sign of true wealth—because they had for too long failed to give. Virtue. When we acquire our wealth by stepping on others or cheating, there’s ultimately a loss of joy in our riches. The Book of Proverbs says it well: “Ill-gotten treasures have no lasting value.” I looked at a lot of tax returns as a banker, trying to qualify customers for loans. When they didn’t qualify, many would admit that they didn’t report all their income and instead were often paid under the table. John Wooden, the great basketball coach for the University of California at Los Angeles, said it well: “The true test of a man’s character is what he does when no one is watching.” I’m not against success and riches. But we should all ask ourselves, “How am I using my riches to bring true wealth into my life and the lives of others?” It is, I believe, a crucial question—and it took a family crisis to jolt me into giving it the serious thought it deserves. Joe Kesler is the author of Smart Money with Purpose and the founder of a website with the same name, which is where a version of this article first appeared. He spent 40 years in community banking, assisting small businesses and consumers. Joe served as chief executive of banks in Illinois and Montana. He currently lives with his wife in Missoula, Montana, spending his time writing on personal finance, serving on two bank boards and hiking in the Rocky Mountains. Joe's previous article was Life as a Loan Shark. [xyz-ihs snippet="Donate"]

BASEBALL USED TO BE a game where managers would go with their “gut.” But Brad Pitt changed everything. In the movie Moneyball, Pitt played Billy Beane, the first baseball general manager to use data analytics to great success—and suddenly it was all the rage. Today, from a typical game, seven terabytes of data are gathered, everything from the arm angle of every single pitch to the exit velocity of hit balls. Teams then interpret these numbers using sophisticated algorithms, so managers have the insights necessary to make decisions based on statistical probabilities rather than intuition. Big data analytics now drive baseball decisions on and off the field—because the process has proven to work. The traditionalist in me revolts at this dehumanization of baseball. But the investor in me sees an opportunity to learn from baseball’s experience. I see two key lessons. Lesson No. 1: Be aware of cognitive biases—especially the Dunning-Kruger effect. What’s that? People who are the most ignorant about a topic tend to be the least aware of their ignorance and, as a result, often have the highest confidence. Bad things usually happen when we suffer from overconfidence. We can see evidence of this bias in the rising number of day traders. New apps have made it easy and fun to trade stocks and options. With the market hitting all-time highs, new traders have—I suspect—been lulled into thinking investing is easy. The media feeds into this belief. We’re bombarded with headlines like “8 Stocks to Buy and 5 to Sell,” making successful investing seem as simple as reading a monthly investment magazine. I learned about investing by watching the popular PBS show Wall Street Week with Louis Rukeyser. The highlight of the show came at the end of the year, when the stock pickers would wear tuxedos and be either exalted or humiliated based on how their stock picks had performed that year. They would then confidently offer stocks for the next year, persuasively explaining why the new picks would be winners. It was great theater but misleading for a novice like me. At the time, it never occurred ro me that, in any given year, random luck was possibly the biggest factor in determining which stock pickers did best. Instead, for me, the moment of clarity came in an investment course I took during an MBA program. As I dug into the complex math of securities analysis, it dawned on me that there would always be investment analysts much smarter than me. I might get lucky now and again, but it was unlikely I would ever gain a true long-term competitive edge in investing, no matter how hard I worked. It was during that class that I found humility. I was not going to be the next Warren Buffett. Lesson No. 2 comes from poker. Good poker players develop a process that puts the probabilities in their favor. They don’t panic about short-term losses but instead stay committed to their winning strategy. In fact, poker players expect to lose often, but it doesn’t shake the confidence of the good ones. If they’ve done the math correctly, they know the odds of eventual success are in their favor. Modern baseball and poker players both recognize that patterns exist in games that they can exploit—provided they eliminate cognitive biases and stick to high probability strategies. As small investors, we may not have access to supercomputers to crunch big data, and we may not have the ability to count cards and mentally calculate the odds of success while sitting at the poker table. Still, we can garner sufficient understanding of such things to improve our chances of investment success. To that end, here are four suggestions: Recognize that our brains are wired to find order in chaos. This is normally a good thing—unless we’re investing. The markets are constantly in chaos, and yet Wall Street firms try to appeal to our innate desire for order by issuing an endless stream of seemingly logical predictions. How many of these firms predicted the events of 2020? Expect the same accuracy in 2021—and ignore these useless forecasts. Don’t base investment decisions on your gut feel for which way markets are headed. Instead, adopt practices that have worked through many different market cycles. Like a good poker player, don’t sweat the losses if you have a process in place that puts the probabilities in your favor. Focus on tax efficiency, holding down investment costs, diversifying broadly and investing in line with your risk tolerance. Make sure you can absorb short-term losses, so you can stay in the game long enough to let your investment strategy show results. If you’re funding a retirement that’s decades away, you should be able to ride out stock market declines, because you won’t spend the money involved for many years. But if you’ll need cash for a honeymoon in Europe next year, look to take much lower risk with that money by, say, buying a short-term bond fund. Last year turned out to be a good one for the stock market. If you have a plan in place that allocates 60% to stocks, you probably need to rebalance because your portfolio is over that threshold. In poker terms, it might be time to take some money off the table. Joe Kesler is the author of Smart Money with Purpose and the founder of a website with the same name, which is where a version of this article first appeared. He spent 40 years in community banking, assisting small businesses and consumers. Joe served as chief executive of banks in Illinois and Montana. He currently lives with his wife in Missoula, Montana, spending his time writing on personal finance, serving on two bank boards and hiking in the Rocky Mountains. Check out Joe's previous articles. [xyz-ihs snippet="Donate"]

GROWING UP, I WAS heavily influenced by the ideals of the Protestant work ethic. Working hard and finding career success provided great satisfaction, so I assumed I’d handle the second half of my life in the same way as the first. This wasn’t a great plan. I was around age 50 when I came across the writings of psychiatrist Carl Jung and his discussion of the two halves of life. For me, the timing couldn’t have been better. Jung saw that, in the second half of life, it’s no longer enough to find meaning in success. He knew, as we age, we find purpose in different ways than in life’s first half. Jung summed it up poetically: “One cannot live the afternoon of life according to the program of life’s morning; for what was great in the morning will be of little importance in the evening, and what in the morning was true will at evening become a lie.” Jung opened my eyes to seeing our 50s to our 80s as a season of life when we redefine ourselves. We don’t need to hang onto our aspirations from the first half of life. What happens when we ignore this insight into aging, and try to do the same things in the second half of life that we did in the first half? I suspect this is a root cause of career burnout. Career success doesn’t motivate us in our 50s like it did in our 30s. For most of us, the second half is a time to find significance elsewhere. Using Jung’s insights into aging, here are three ideas on managing the two halves of life. 1. Seek future freedom. There’s a lot of advice given to young people to follow their heart, regardless of money. I wouldn’t argue with that if you felt called to be a missionary in a remote part of the world. Those that have that type of clarity of purpose early in life are fortunate. But many of us had no idea in our 20s what we wanted to do for the next 30 years. Does anyone imagine today’s 20-somethings have a better handle on that same question? My contention: Without a clear-cut mission in life, why not follow the money when you’re young? I think I found almost everything interesting in my 20s. I loved rock music and could have become a low-paid roadie. But I also found finance interesting in my 20s. As a banker, I could do interesting work and help people, while also making money and saving for the future. It worked well for me. The goal is to move toward financial independence in the first half of life. It’s wonderful to have resources set aside so we have the freedom to reinvent ourselves with a more mature sense of purpose. My point: Unless you have a distinct calling, why not save as much money as you can early in life by pursuing a fulfilling but decently paid career? That way, as you reach your 50s and beyond, you’ll have some capital built up to fund a new path if you find you’re no longer engaged in your career. 2. Find purpose. Even as we age and lose interest in our career, we may still lack focus about a new purpose. Fortunately, there are some exercises we can do to help us. [xyz-ihs snippet="Mobile-Subscribe"] George Kinder wrote the book The Seven Stages of Money Maturity and trains financial advisors to help clients figure out what they want to do with their life. He suggests three excellent questions to help discover what’s truly important to each of us. I find them great conversation starters for those struggling to find their life’s purpose. Here are paraphrased versions of the three questions: If you just won $10 million, how would you change your life? If you found out you have just five years to live, but you’re in good health, what would you do? If you’re told today that you have only 24 hours to live, what regrets would you have about your life? Ask a spouse or close friend to spend a little time talking through these types of questions. As you discover hidden aspirations, you might try some of them out. And if you discover these ideas are something you want to pursue, it may open the pathway to a new direction in life. 3. Give back. Consider what you can pass on to others. There’s a big need for mentors in our society. No one is better suited than those of us with some experience and wisdom to share from our life’s first half. Encore.org is an organization that has recognized that aging is an opportunity for us to redefine who we are as we age. Mentorship is one of those opportunities. Encore.org can assist by connecting those over age 50 with younger folks. Alternatively, if you’re a grandparent, uncle or aunt, you probably don’t need any help finding a mentee. Religious traditions capture this same insight. We see older men and women in the church transitioning from their first calling to teaching the community’s younger members. These opportunities continue to exist in churches, as well as in many nonprofits. For those of us still connected to our first-half profession, running development programs can be one of the most rewarding times of our career. I just got a “thank you” note from a single mom who graduated with an accounting degree because of the goals she set in a program I led. It’s one thing to succeed ourselves. But it’s hugely gratifying to play some small part in the success of others. Joe Kesler is the author of Smart Money with Purpose and the founder of a website with the same name, which is where a version of this article first appeared. He spent 40 years in community banking, assisting small businesses and consumers. Joe served as chief executive of banks in Illinois and Montana. He currently lives with his wife in Missoula, Montana, spending his time writing on personal finance, serving on two bank boards and hiking in the Rocky Mountains. Check out Joe's previous articles. [xyz-ihs snippet="Donate"]

WHEN I THINK ABOUT investment advisors selling high-fee products, it brings to mind the story of two politicians who were shouting at each other. One of them stands up and screams, “You’re lying!” The other one answers, “Yes, I am, but hear me out!” In my 40 years of investing, I’ve bought into some questionable sales pitches. You’ve heard them: “The easy money’s been made. It’s going to be a stock picker’s market going forward.” Or: “Only losers are satisfied with just earning the market averages, and we want to put you in funds that beat the averages.” Fortunately, this intellectual battle is over for those everyday investors who are paying attention and have adopted a long-term buy-and-hold philosophy. The folly of investing in the latest hot mutual fund or stock has been debunked thanks to wise sages like the late John Bogle, founder of Vanguard Group. He succinctly described his long-term investment philosophy using index funds: "[T]he winning strategy is to own all the nation’s publicly held businesses at very low cost. By doing so you are guaranteed to capture almost the entire return they generate in the form of dividends and earnings growth.” But there’s another ongoing battle that’s waged in the minds of long-term investors—and it’s less intellectual and more psychological. This battle involves the inner voice that starts talking to us every time there’s a stock market downturn that plays on our fears and doubts. I’ve watched investors over the years cash out of the market just as it bottoms. When stocks rebound and recoup their losses, the regret of bailing out at the bottom haunts these investors. There’s a number of reasons investors make this same mistake time after time, but I want to focus on two of the big ones: failing to accept in advance the psychological cost of being a buy-and-hold investor and failing to manage our investment time horizon. Consider an analogy from the exercise world. My first job after college was working for the Department of the Treasury as a bank examiner. I traveled around the Midwest from bank to bank and was given an expense account—and that’s where the problem started. Growing up, I can only remember going to a restaurant a few times with my parents. When I was given that expense account, I found myself in heaven every night, enjoying one buffet after another, all at government expense. Even with the metabolism of a 23-year-old, I began to pack on the pounds. [xyz-ihs snippet="Mobile-Subscribe"] Fortunately, I worked with a marathoner who ran every day after work. Because of his influence, I took up the sport and have now kept it up for more than 40 years. The benefits have been great. Immediately, I shed the unwanted pounds and learned how to manage stress better. Longer term, I think regularly running over the decades has contributed to my current ability to still run and hike in my 60s. And there are occasional moments of extreme delight, as I run while watching a beautiful sunrise or just feel one with nature as the endorphins kick in. But the costs have been real, too. Sacrificing an extra hour of sleep before work was tough. Running in the cold Montana winters can be bone chilling. On some days, I just don’t feel like it, but I know that’s the price I have to pay to achieve the health benefits I want. After 40 years, I also know it works and that the costs are worth it. This is how things work in life more generally. There’s a cost to be paid to achieve success. But for some reason, we don’t expect to pay a big psychological price to be a successful investor. My contention: Not considering the psychological cost of down markets may be the primary reason some bail out of stocks at just the wrong time. We objectively look at the evidence of how the market has performed over long periods of time, and we decide we want to invest and grow wealthy, too. We don’t, however, properly factor in the inevitable cost we’ll endure when those dramatic dips in share prices occur. When our 401(k)’s value drops sharply, the resulting fear, regret, embarrassment and self-doubt are costs that aren’t easily factored into our analytical models. In fact, until we actually experience it, it’s hard to imagine the stress of a downturn and watching our retirement nest egg shrink by 30% in just a few weeks. During these emotional times, we’re especially susceptible to the siren call of a market-timing pitch that promises all the market’s gains without the stressful losses. Problem is, those temporary losses are the price that has to be paid to enjoy the long-term success we desire. I like Warren Buffett’s advice to see a market decline as stocks going on sale. That’s a great way to look at it—unless you’re at the end of your prime earning years. If we need to cash out of stocks in a down market to pay for retirement or other expenses, his advice doesn’t help at all. Result: We need a second strategy to mitigate this risk. For those of us toward the end of our careers, I really like combining long-term buy-and-hold diversified stock-index fund investing with the low stress benefits of a bucket approach to managing our finances. In other words, to keep from panicking when the market drops, try to keep stock investments in a “bucket” that you don’t need to draw on for at least five years or, better yet, for 10 years. Meanwhile, funds you’ll need in the near future, such as buying groceries next week or replacing the car next year, should go in less volatile places, like short-term bond funds or money market accounts. Kiplinger’s magazine recently had a chart listing the probability of negative returns for the S&P 500 over various time periods since 1929. While there’s a 46% probability of loss on any given day, the loss probability drops steadily over time and is just 11% over five years and 6% over 10 years. Based on these probabilities and my bucket approach, when I lose money in the stock market, I can honestly assure my wife that it’s money we don’t need for several years and we have a high probability of gaining it back, plus some. That’s a much better conversation than explaining why we can’t take the vacation this year because I just lost our travel budget. Joe Kesler is the author of Smart Money with Purpose and the founder of a website with the same name, which is where a version of this article first appeared. He spent 40 years in community banking, assisting small businesses and consumers. Joe served as chief executive of banks in Illinois and Montana. He currently lives with his wife in Missoula, Montana, spending his time writing on personal finance, serving on two bank boards and hiking in the Rocky Mountains. Joe's previous articles were Doing Good, True Wealth and Life as a Loan Shark. [xyz-ihs snippet="Donate"]