Billy Joel started touring in the fall of 1971 as an opening act for The J. Geils Band and The Beach Boys. He released Piano Man in 1973. His first #1 hit came in 1980 with It’s Still Rock and Roll To Me.
This fall, a mere 46 years after his first tour, he’s still selling out huge ballparks…from Wrigley Field to Fenway Park to Madison Square Garden. In the last 12 months, he’s been the highest paid singer in the world, earning about $75 million from June 2016 to June 2017.
Reginald Kenneth Dwight has also had remarkable longevity. You might know him as Elton John. His debut album was released in 1970, and he’s had #1 hits spanning from Crocodile Rock (1973) to Candle in the Wind (1997). Because of his contract with Caesars Palace, you’ll have to go to Vegas if you want to see him live these days. Unless you want to catch him on the international tour in places like Spain and Georgia (the one on the Black Sea, not the one where the Braves and the Falcons play).
Paul McCartney is still touring and still making millions, even though he’s 75 years old and looks like an androgynous women’s basketball coach these days.
Two interesting notes on Sir Paul. First, he’s a strict vegetarian and animal rights activist, and demands the enforcement of a strict “no meat” policy while touring. At whatever venue he’s playing, employees are informed that they’re not allowed to have meat in any form backstage or anywhere around Paul. If someone brought a meal from home that includes meat, they’re expected to eat it in a private office, or in their car.
Second note: Paul still performs all of his songs in the same key that he originally wrote them in (which, for many of those songs, was in his 20s). That’s pretty rare for a musician of his age. For instance, Billy Joel has dropped most of his songs a key or two to accommodate his aging voice.
And any conversation about musician longevity would have to at least include a mention of the Rolling Stones, Bruce Springsteen, and U2.
At the other end of the spectrum, there are plenty of artists who had a huge year (or several years) but weren’t exactly cut out for a multi-decade run. Vanilla Ice, Britney Spears, Duran Duran, Tina Turner, Nirvana, and Foreigner were all huge acts at one point, but none of them stood the test of time (for various reasons) in terms of ongoing income potential.
You could probably collect a wide range of opinions as to why some artists’ careers span multiple decades and others flame out in just a few years. That’s not my area of expertise, but we see the exact same phenomenon with retirement income plans. Some are set up to last as long as they need to, while others are in danger of flaming out too early.
Let’s take a look at some of the reasons behind early flame-outs.
1) An unsustainable withdrawal percentage
Most people used to subscribe to the 4% rule as a guideline to help with knowing how much they can take out of their retirement accounts each year. This rule essentially stated that you could withdraw 4% from a classic stock-and-bond portfolio every year throughout retirement with relatively little chance of running out of money before you die.
In today’s environment, the reality is that a 4% withdrawal rate from a standard portfolio leaves you with a much higher chance of running out of money. Many experts have amended this to the 2.8% rule. On the other hand, with a portfolio that’s truly structured for income generation (instead of just the typical mix of stocks and bonds), you can usually generate more than 4% over the course of your lifetime, but it takes a much more specialized approach to construct that portfolio.
2) Bad choices on spousal benefits
Too often, we meet with people who have already started their pension and made a bad choice. When you start getting a monthly income from a pension, you usually have the option to take a certain amount (let’s just say $3,000/month) with no spousal continuation; or you could take a slightly smaller amount (let’s say $2,850/mo) but your spouse continues to receive some or all of it after you die.
Most people don’t take into account the income gap that gets created at the death of the first spouse. We’re already going to lose one Social Security benefit when the first spouse dies. If we exacerbate the problem by taking away a pension too, that could leave the remaining spouse in a position where they suddenly need to rely much more heavily on their investments—possibly to an unsustainable degree—for their income.
3) Not enough lifetime income streams
It's almost never a good idea to enter into retirement with Social Security as your only predictable lifetime income stream. In most cases, unless you live very simply, that means that the overwhelming majority of your income is being generated by a market-based portfolio. That means that if you spend through everything in the portfolio, a meager Social Security payment is all you have left.
It’s crucial to explore other options for predictable lifetime that don’t run the risk of drying up after an account balance hits zero. Pensions, annuities, rental income, and business income are all examples of predictable income streams that could suffice as a supplement to your Social Security.
So how is your income plan structured? Are you on track to have a retirement that looks like Billy Joel or Paul McCartney, with strong paychecks coming in for several decades? Or are you on the Vanilla Ice track where you’ll eventually have to start hosting a reality show on the DIY Network to make ends meet?