Contemplating Retirement - Describe Your Transition

[tequila4kapp]

I saw something on TV that caught my attention. I was shaking my head, yes. It relates to how people talk about retirement. Camp 1 talks about having enough money to last. Camp 2 talks about making memories. The point being that you want to be in Camp 2 as it implies money is not a barrier nor is not working the goal but rather doing things and having fun. This implies plenty of money.

Age I don't recall being mentioned but I believe is a factor that needs to be balanced. Leave too early and with marginal savings and you might get bored. Leave to late and you may not have a body capable of fun even if you have the means.

for me the factor came down to my youngest going to college. the house is empty come september so allows my wife and i to create a new chapter

Other factors related to age are health insurance and that most people spend more in earlier years than later years. Health insurance is freaking expensive until you are Medicare eligible. Also, I learned that each spouse has to individually be age eligible.

 

[Acesteve]

great add! this is a very important consideration. If your company offers a health benefit in retirement, I've never heard that being available until age 55. Most companies unfortunatly don't have it. Made far worse if you have childern under 26 still on the plan

 

[gonyr]

great add! this is a very important consideration. If your company offers a health benefit in retirement, I've never heard that being available until age 55. Most companies unfortunatly don't have it. Made far worse if you have childern under 26 still on the plan

It's one of the main factors in picking when I decide to pull the plug. Our contract gives me 5 years of paid health insurance after retirement, and cashing in my unused sick time will pay for about 3 years more. So if I retire at 56 when I'm first eligible, it leaves a 1 year gap where I'd have to buy insurance on my own before being eligible for medicare.

 

[Scott F]

It's one of the main factors in picking when I decide to pull the plug. Our contract gives me 5 years of paid health insurance after retirement, and cashing in my unused sick time will pay for about 3 years more. So if I retire at 56 when I'm first eligible, it leaves a 1 year gap where I'd have to buy insurance on my own before being eligible for medicare.

I was lucky. I qualified for social security disability when I had to retire at age 61 so I was able to get Medicare early. My wife still needed health insurance and my pension provided money that paid for medical expenses including her health insurance. Medical insurance is a huge expense that keeps a lot of people from retiring early.

 

[Slot708]

I was lucky. I qualified for social security disability when I had to retire at age 61 so I was able to get Medicare early. My wife still needed health insurance and my pension provided money that paid for medical expenses including her health insurance. Medical insurance is a huge expense that keeps a lot of people from retiring early.

I was lucky that I worked in a field where you were fully vested after 15 years.Getting full health insurance coverage for $100 a month for the whole family is a huge win for us

 

[Matthew]

So working with a financial advisor on retirement was new to me. Thought I'd share about the experience ... maybe it helps others.

I called our bank and asked if they offered any retirement services and/or if I could talk to a financial advisor about our retirement. I was able to schedule an appointment for about a week out. 30-60 minute meeting. I provided our household essentials - ages, goal retirement age, retirement goals, sources and amounts of retirement income, etc. We identified likely bigger expenses (eg, paying for a wedding). She helped us identify / determine a budget for travel, unexpected expenses, medical, etc. This gets plugged into a program and spits out a 30 page report. The report performs something called a Monte Carlo analysis, which essentially is an assessment of your finances given different levels of economic performance, from world disaster to normal market performance to exceptional performance. You get a Probability of Success score for each of the economic performance scenarios. This was the "high level" assessment, and it was free. I suspect this is a bit of a loss leader for the banks, as they also offer a "detail" analysis (mine would have been $1500) that includes more precision in the assessment and goes into strategies for making up revenue gaps, should any exist.

HIGHLY recommend the experience for everyone, especially the free version. It really paints a picture and lets you know where you stand. What you do from there is up to you, but at least you know. And (again) it is free.

We sat down our Edward Jones guy a couple of weeks ago. Still a long way to go but we're getting there.

 

[Iceman!]

Thanks for sharing. I recently completed a similar exercise with a wealth management firm. It started with a 20-25 minute discussion about the big picture. I shared my investing experience, estimated assets/debts, and provided general retirement thoughts about lifestyle.

The firm followed up with a secure portal link to share specific details such as address for home evaluation, mortgage details, salary/paystub, 401k funds, health savings account, stocks, bonds, insurance policies, property, and any additional investments.

We then met about 2 weeks later for 90 minutes. They presented a detailed plan with specific investment recommendations. I’ve been in asset accumulation since I started working as a teenager. Flipping the mental script to cash flow wasn’t difficult but it’s critical. Tax rates are a big part of the plan too. The team did a nice job of showing how they would reduce my tax liability.

They also presented a Monte Carlo scoring of the plans. They endorse scores over 80%. We started with a baseline monthly cash flow and it scored at 97%. . We then created two more plans with higher monthly withdrawals. This was the best part of the meeting because it provided confidence based on data. We don’t have firm plans at the moment and I’d like to knock a couple of big ticket items off the list before pulling the rip cord.

This service was provided free of charge. The company is a fiduciary. Quarterly fees are based on your assets under management. I’ve been a financial DIYer for most of my life but seriously thinking about handing them most of the keys. Their strategies and options go beyond my skill level. They just need to convince me how they protect against a 30-40% wipeout when fiat currencies fail.

I was a DIYer for years and turned over the keys at 58 - It was the best thing we did as I'm getting close to retiring.
You need help getting across the finish line and the pitfalls that come along with it.
It's about being smart and knowing when to say "When"

 

[tequila4kapp]

We sat down our Edward Jones guy a couple of weeks ago. Still a long way to go but we're getting there.

Good on you guys! It is a long term endeavor, so being on track is a definite positive.

I decided to in for a 2nd opinion (we have a relationship with 2nd bank and they offer the same service). Two objectives: 1) confirmation (or not) of the big picture narrative; 2) different voice about certain particulars, such as when to start taking Soc Sec, etc.

 

[Triple Lindy]

I was able to retire at 55 at the end of 2017. Interestingly, that was the age I had targeted back in my 30s, but it wasn’t something I really went after. It just kinda happened - private equity buyout that closed one door, but opened another. I had targeted 55 because that was the age that my youngest would graduate college and my mortgage would be paid off. Turns out we paid off the mortgage much earlier, which leads into the most important element of my early retirement - stay out of debt. Yes, housing debt is almost unavoidable, but all other debt should be avoided like the plague. Debt in retirement is even worse than the plague. My .02.

In terms of transition, I was surprised at how easy it was. I’m still a relatively early riser, but I no longer panic if I can’t go to sleep because I know it doesn’t matter what time I get up. And a boring day in retirement is SO much better than the best day at work - zero stress. We travel, hike, ski, golf, and spend time with family, which was way overdue for me, since I traveled so much during my career.

I’m 61 now, so I still have 4 more years until Medicare eligibility. My wife has 5 more years. Yes, health insurance is expensive, but the ACA subsidy makes it affordable for most. Our only income is investment income, so in most years, we qualify for a decent subsidy. In years where the market does really well, we have to repay a portion of it, but that’s not a horrible problem. We don’t have any chronic health problems, so we opt for the lowest premium plan, which is also the highest deductible. That can leave a mark when injury occurs, like my wife’s torn ACL this year. $9400 out of pocket before coverage and that’s on top of the premium.

And while I 100% agree that getting professional advice is necessary, it’s not a guarantee. When COVID hit, we lost almost half of our portfolio. No one saw that coming. Luckily, it came back and has doubled since then, but it could have been a disaster, as most recoveries don’t happen that quickly. Use common sense. Set a realistic budget. Understand your income sources, including Social Security (you can log on and see your expected monthly benefit.) Have a cash reserve for unexpected expenses. There are LOTS of free resources that can help you determine if your savings are adequate. There’s an early retirement forum much like this one that has an easy to use tool. I’ll post a link when it’s back up - it’s down for maintenance right now.

For those of you with a plan, you’re well ahead of most people!

 

[leftshot]

...Turns out we paid off the mortgage much earlier, which leads into the most important element of my early retirement - stay out of debt. Yes, housing debt is almost unavoidable, but all other debt should be avoided like the plague. Debt in retirement is even worse than the plague. My .02.

^^^^THIS^^^^

...and save early and often towards retirement. Time and persistence are your greatest assets.

We had a daughter that had a 4-year life-threatening illness that wasn't covered by medical insurance. We took a hit, but because of the above, we were still more than okay.

 

[CTRosarian]

I did most of my travel in my 30s and 40s. My employer would send me to places like Estes Park Colorado and it was OK back then to stay a few extra days.
Then I learned from Galen Rowell, a National Geographics photographer, went to exotic places like Nepal, that there are many great places to visit close to home. Day trips can be done inexpensively without the cost of hotel and airline tickets!

Paid off the mortgage before I was 50.
Invested in index funds as I didn't think it was worth the time needed to choose individual stocks.
Instead,I studied how to legally save on taxes, as the tax code has provisions that reward retirement saving and long term investing.

 

[Camjr]

I turned in my retirement papers that set my date a few weeks ago. Odd feeling having always worked. I have always done my own planning and have degrees in Finance and a network of people who work in industry. About 5 years ago I started preparting for retirement by making all my big asset purchases without loans, and gettting the shape of my assets in a form that I have some liquidity. Still, I sought the help of a wealth manaement firm last year to look over my shoulder. Much more advanced models but same conclusion as my models. Where they have helped me is thinking about tax strategies in retirement and long term wealth transfer. I pay a fixed fee for annual review and we don't talk about them managing my money directly. For the review this year, I met with the analyst a few weeks ago and gave them in writing my plan and asked them to critique it and improve it in our formal review. Paying a bit for industry people to provide me a view point is well worth the money.

This is exactly our approach. I've got a BBA and a MBA, but still wanted a professional with a critical eye looking over my shoulder as well.

Cheers

 

[badolds]

Hard to believe I have been retired over two years now. I am in Loa Utah on a vacation that started 14 days ago and I have no return date. Am I doing it right?

 

[Acesteve]

Hard to believe I have been retired over two years now. I am in Loa Utah on a vacation that started 14 days ago and I have no return date. Am I doing it right?

I love the US west. I have multiple routes planned and will start the first summer 2025.

Are you camping or just finding some place to stay whereever you are?

 

[badolds]

I love the US west. I have multiple routes planned and will start the first summer 2025.

Are you camping or just finding some place to stay whereever you are?

I have a 32" travel trailer behind a Chevy dually. We try to stay at state parks whenever possible but use rv parks when needed. I have a small Honda generator that allows us to boondock without issue. We started out in Tucson AZ on the 11th and have been working north since then. A week in Moab was absolutely spectacular and now we are doing the Hanksville Utah area. We are going to boondock out by Goblins state park for a couple days then head back to civilization. Heading over to western Colorado to look for a summer place to escape the Texas heat June-sept. Not looking to buy a house but a place to store the camper and be a home base for many more adventures out west. Looking close at the Montrose\Ridgway area

 

[Acesteve]

Moab is awesome but Utah has a ton of great parks and is underrated

 

[badolds]

Sitting in bed listening to the coffee pot load my generator is very relaxing. Carol is cooking some bacon for breakfast tacos then we are off for another day exploring the Utah wilderness. Hopefully tonight will be clear and we can get some dark sky views of the milky way. Last day out in the wild then we are headed to Montrose Colorado for some golf. Several nice courses over that way.

 

[Triple Lindy]

Here’s the link to the retirement calculator (Firecalc). I haven’t used it because my brokerage runs a Monte Carlo analysis on my portfolio every time I log in.

FIRECalc: A different kind of retirement calculator

www.firecalc.com

And if you’re interested in the forum:

https://www.early-retirement.org/

Just be aware - lots of VERY opinionated people on that site that can get really aggressive - social media muscles. That would never happen on a golf forum….

 

[tequila4kapp]

Sitting in bed listening to the coffee pot load my generator is very relaxing. Carol is cooking some bacon for breakfast tacos then we are off for another day exploring the Utah wilderness. Hopefully tonight will be clear and we can get some dark sky views of the milky way. Last day out in the wild then we are headed to Montrose Colorado for some golf. Several nice courses over that way.

Your retirement scheme has inspired me. We are eyeballing an entirely different part of the country for retirement. Unlike now, summers there will be brutal. Getting back to the west for outdoors will be a heavy lift, but we will have time. Anyway, I mention to the wife last night how you handle summers and that we could do the same. She asked, “Can we see baseball games too?” I married well.

 

[Chef23]

Lots of inspiring stories. I am almost 58 and figure I am going to work 5-7 more years. I have little debt on a second home our primary house is paid for. In retirement we will consolidate to our second home and be debt free. Our kids are both out of college (with no debt) and gainfully employed. I am sure we will help with weddings and maybe purchasing their first homes but our major child focused expenses are gone and can cover anything we decide to help out with out of income.

I am in technology sales so the job tends to be fairly consuming. I like what I do but having done it for 35 years it would be nice to not be in the grind every year.

I could probably retire now but have a reasonably expensive life style mostly driven by my golf habit and country club membership which I don’t want to give up in retirement. We have been working with a financial advisor for a bit more than 20 years and it has been a good decision for us. Health care costs are a concern as I am a two time cancer survivor (weird things not connected to lifestyle) but am healthy with no expectations of future issues but history has said good health care coverage is important for me.

I am not expecting issues staying busy but we will see. My Dad retired in his mid 50s with a pension and health care and doesn’t wish he worked longer. Both my parents are in their early 80s and are healthy (knock on wood) and mentally still seem to be all there. I hope that bodes well for me.

 

[JZ777]

Am 60 and the FAA mandates that airline pilots have to retire on our 65th birthday. No reason to leave before then. It’s a pretty good gig, only work 9 days a month (3 long haul international trips a month), pays the bills and then some. No one ever retires early from this scam. Also retired from the USAF after 28 years of service (10 active and 18 in the reserves) and was more than happy to retire from that.

 

[JZ777]

I am 60 and still 5 years away from mandatory retirement. Am still 99% in stocks with some ETFs sprinkled in. Talked with financial advisor at length about this and I think a lot has to do with how much you actually have. If our portfolio was half of what it is, I would be much more conservative to preserve wealth. I think if you are in the position of not trying to preserve (your young), now is the time to be aggressive since time is in on your side. Also, you have to take into consideration how much you might need in 401k to supplement your pension, social security, etc. Takes money to make money. Have to stay ahead of inflation and average return of the market has historically been over 9% a year averaged out. Don’t chase it and expect highs and lows.

I’m only 41 but one thing I have been curious about is what’s the guidance for 401k’s insofar as how to invest after one retires? My strategy is all stocks; 50 large cap/ 25 medium cap/ 25 small cap.

Are retired folks slowly transitioning to bonds, do it all at once etc? What are financial managers advising with that?

 

[Iceman!]

Here’s the link to the retirement calculator (Firecalc). I haven’t used it because my brokerage runs a Monte Carlo analysis on my portfolio every time I log in.

FIRECalc: A different kind of retirement calculator

www.firecalc.com

And if you’re interested in the forum:

https://www.early-retirement.org/

Just be aware - lots of VERY opinionated people on that site that can get really aggressive - social media muscles. That would never happen on a golf forum….

This is what I want to know from Retirees, Is this method correct?

In direct contrast with the 4% rule is Financial Planner Ty Bernicke who published his white paper in the Journal of Financial Planning suggesting that retirement spending actually decreases on average by about 15% every 5 years.
And that by the time a retiree reaches their late 70s, their spending drops to less than half of what they were spending in their late 50s.

Bernicke states that traditional financial planning widely assumes that retirement spending will stay the same throughout one’s entire lifetime, with the only adjustment needing to be inflation.

This approach, Bernicke says, requires one to adjust their income upward every year throughout retirement to account for a rise in inflation. Furthermore, this method requires a retiree to save more money than they’ll actually really need, while spending less, and potentially retiring later.

To counter this, Bernicke’s approach believes that the 4% rule is too rigid and that since retirees wind up spending much less in later years as they age, they could safely afford to retire earlier or spend more in the earlier years of retirement. This static rule dictates that the retiree does not change spending, up or down, no matter how the market performs. As a result, the retiree may run out of money.

 

[Triple Lindy]

This is what I want to know from Retirees, Is this method correct?

The reality is that there’s no single cookie cutter model. Sure, as an analytical tool to help determine your financial circumstances and the affordability of retirement, it’s a good guide and it gives you something to plug into the model. But you learn to live with what you can. Either establish a budget and figure out if your savings will support it, or in more dire situations, learn to live within whatever your income stream is.

Having said that, you definitely need to factor inflation into your withdrawals. As far as planning to spend less as you age, there’s an element of logic to that, but there’s also the unknown - health issues, long term care needs, etc. My spending model adds an inflation rate, and thus increases the budget annually, but does not decrease with age.

As far as the rate goes, we only started pulling from our retirement portfolio last year. I didn’t really pay attention to the withdrawal rate - just validated that the portfolio survival rate could sustain it. Our model shows a 99% success rate with us living to 100 and the mostly likely end result being a nice inheritance for our kids. The target is a minimum of 85% success rate. We have less than a 1% chance of running out of money, assuming we remain within the established budget. But I still worry about it. Not as much as I used to, though. If another COVID-like disaster hits, all bets are off.

After reading your post, I calculated our withdrawal rate. For 2024, it’s 3.6%, which is an increase of last year’s 3%, because we knew we had some big expenses this year. I doubt that we’ll dial it back down because our model supports an even higher withdrawal rate.

I’ll end by saying that at first, we had a very hard time spending money. It’s a difficult psychological transition to go from thinking about saving and have your employment income stop, yet move into spending mode. And we had 2 years of a lockdown where we didn’t travel and didn’t spend very much.

 

[Triple Lindy]

and doesn’t wish he worked longer.

I’ve yet to meet anyone who did.