My wife often asks why I waste time reading "Dear Abby." She just doesn't appreciate how much it has made me a better person over the years for having applied some of the advice to myself.

For example, a letter from a woman last week struck a chord when she said that she had tried to retire, but then found herself unhappy with nothing to do. So she went back to work at age 70 and worked for three years before quitting for health reasons. Now recovered, she's ready to go back to work again, but her husband wants her to quit for good.

Abby tells "Nose to the Grindstone" that she can "fool Mother Nature but not Father Time." She should try something less stressful and maybe part time if she needs the stimulation and the routine of a work environment.

The same week, I had a conversation with an owner of a private company in a business that involves home installations that call for their workers to climb ladders, crawl under buildings and cruise around town in a fleet of vans. The realization that their workforce reflects a rapidly increasing average age has become an issue affecting their bottom line, because this job, like it or not, is one that favors the young and energetic. One answer is to develop a compensation format that is heavily influenced by some measure of productivity, but this sidesteps what could be the real issue.


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Many people who feel a need to continue working are simply unaware that they have reached a point in which they could afford to quit. They keep on working beyond the point that they need the money. "Nose to the Grindstone" and California's Gov. Jerry Brown notwithstanding, many people at retirement age may be using the rationale of workplace camaraderie and personal fulfillment to cover what is basically a fear of the unknown. Psychologically, it's the "status quo bias" otherwise known as "being in a rut."

Clicking the switch and turning to investments and Social Security to fund a retirement income can be overwhelming for many people. The idea of buying an annuity and turning over a life's savings to an insurance company in return for a lifetime of guaranteed income requires a huge leap of faith plus an insurance company that stays in business, so that's not the answer.

A two-pronged approach to facing a productive retirement starts with painting a picture of what a stimulating retirement life will entail. Help in this effort can be found in a 15-year series of books by Ernie J. Zelinski -- the latest of which is "How to Retire Happy, Wild and Free: Retirement Wisdom You Won't Get From Your Financial Advisor." Leafing through his earlier books, I found Ernie's advice to be "right on the money," so to speak. In short, much of a productive retirement has nothing to do with money.

With respect to retirement income, the advice in my columns has focused on generating income through a combination of Social Security and income from well-chosen investment categories and cost-effective financial institutions -- Vanguard in particular as its giant co-op ownership structure trumps virtually all other vendors of financial products. A 50-50 combination of bond funds and dividend-producing stock mutual funds can be reasonably expected to provide an income of 5 percent per year. The half in stocks should continue to grow to protect the entire portfolio against inflation. As Ross Perot used to say, "It's that simple."

The trick is to understand that temporary downdrafts in capital values of either stock or bond funds don't materially affect the flow of interest and dividends. In fact, if bonds and stocks happen to drop by 20 percent in capital value during some temporary period, it's safe to say that what was a previous 5 percent steady flow of income has suddenly popped up to 6 percent of the reduced capital amount.

Add the 5 percent return on savings and retirement accounts to Social Security benefits and presto. Many people are sitting with the means to meet the needs of the eccentric personal lifestyles suggested by writers like Zelinski. At the risk of lapsing into psychobabble, I will point out that the end object of investment is serenity, and serenity can only be achieved by the avoidance of anxiety. To avoid anxiety, you have to know who you are and what you're doing. This insight comes from a book by the late George J.W. Goodman called "The Money Game" written under the pseudonym "Adam Smith." And he's right.

Managing finances in retirement is as much an exercise of deciding how your identity will be reshaped if you're no longer, say, teacher of the year or a top salesman featured in your company's ads. Getting a handle on how you see yourself in retirement -- your new identity -- is as important as rearranging your investment allocation to one of income generation rather than one of nest-egg building. Apart from reading books on retirement, look around at contemporaries to see if there are some role models that strike you as being sensible.

As for "Nose to the Grindstone," Jerry Brown and me, I suspect it will be awhile before we start taking Dear Abby's advice. I still get satisfaction from building my personal "rainy-day fund" and the governor is signing up for another four-year term. "Not that there's anything wrong with that," as the other Jerry (Seinfeld) would say.

Steve Butler can be reached at 925 956 0505, ext. 228 or sbutler@pensiondynamics.com