Stern Advice: Invest in yourself to retire well

Thu Jan 12, 2012 2:02pm EST
 
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By Linda Stern

WASHINGTON (Reuters) - I have a particularly resourceful friend who lives a pretty good life, despite never having quite enough money. She is hardworking and popular with her wide circle of friends, neighbors and colleagues. She networks, barters and works for what she really wants.

A former chef turned teacher, she finessed enough grant money to pay for a two-week trip to cooking school in Italy. She knows where all the good used furniture stores are, has bartered home cleaning for a two-week stay in a vacation home in Vermont, and is working on an arrangement now that will get her free housing in France for several weeks this summer. Tres bien!

I'm pretty sure my friend will do really well in retirement, though I strongly suspect she has nowhere near the $1-million plus that you would think her lifestyle would require. She has a different kind of capital: skills, smarts, and a great social network.

"Everyone is focused on the money, but when somebody retires, they usually manage," said Larry Cohen, director of Consumer Financial Decisions, a consulting group that studies consumer behavior. "If they don't have the money, they have human capital like skills and education, and social capital in terms of friends, neighbors or a church. All these things help."

Cohen predicts that "The (retirement) solutions for the future are going to involve more of these other forms of capital."

Experts are increasingly focusing on the non-financial assets that workers can bring into retirement to help them manage on fewer dollars than might be optimal.

The Retirement Income Industry Association, a group that represents a cross section of insurance, investment and research firms, has its own program for training and certifying "retirement management analysts." The training handbook used in that program includes items such as membership in religious and civic organizations, and the ability to earn money as forms of "capital" that are foundational in the new retirement world.

So what are the best non-financial forms of capital that pre-retirees can invest in now to insure a good retirement? Here are a few.   Continued...