I have a number of friends already retired and am trying to talk them into visiting this blog- could certainly learn from them. For starters:
- Did you lay out a post-retirement budget ahead of time? How’s it holding up?
- I’m thinking that any budgeting exercise was accompanied by a look at cash flow options to consider during retirement?
- Did you conduct this pre-retirement planning by yourself, or with the help of resources (pre-retirement seminar, self-help references, etc.), or with professional help? I actually did some of this budgeting and cash flow planning on my own, but the more time I put into it, the more I felt it necessary to have the assistance of a professional.
- Was part of the retirement plan to consider cash flow supplement through a part-time job? Or were you able to step down to part-time work at your last job for a period?
- (I’m not forgetting about full time job benefits like medical coverage- I’m just counting on you to bring that up on your own.)
Not every retiree who reads this is going to want to share such information. But there’s a bunch of us on the “pre-” side of retirement who are interested in hearing about whether we’re considering all the factors. Actually, we know we aren’t.
I’ve always hated those pitches that start off by saying something like, “You don’t want to run out of money before the end of your life, do you?” I’m thinking that no one is going to put themselves in that position. They’ll just start reducing their expenses. Then someone suggested that even with a well-planned financial roadmap, all it takes is an unplanned long-term care situation to put one’s retirement in extremis.
On a totally unrelated note. One of my brothers hinted at meeting down in Florida during baseball Spring Training (yes, they are allowing limited fan attendance with a premium cost). Flight reservations are booked. The thought of non-stop five day work weeks in DC in the Winter can be very depressing.
And then maybe there’s some golf around here by mid-April.
When I was considering retirement, I did look at a budget and the associated cash flow. My wife and I gathered how much we were spending and what we were spending it on. The charge card covers so much for us (paid off monthly) that it was just “where else” we were sending money. Took a look at money coming in and determined there was a small deficit monthly that could be covered with cash set aside (savings, CD, or other) until social security kicked in at full retirement age. In our case, we would not have to tap into the 401ks that we had put aside to take care of the month to month routine. While I worked the numbers, we worked with USAA (when they did it) and with Schwab when it transferred to them. I wanted an organization to look at our investments from a consolidated viewpoint…and I did not have the background to do it myself.
To date the budget plan has worked…I probably overestimated some expenses and COVID helped keep spending down…but it appears that we are on track. I considered part-time employment, but in the end, I did not need it for the plan to work…it just would have provided more cash in the near term.
With Tricare for now, things are on track…biggest unknown is Medicare monthly costs as I turn 65. Travel expenses are down (Covid) but There are funds that we have set aside and have access to when we start up again. We are not going to “lots of places, but have a couple set aside (i.e., not extravagant world travel). I agree with you about the sales pitch…how much money do you need…but you know that (or will pretty closely) if you look at what you have been doing over the last few years.
See DB, I want to be like you when I grow up. You touched on a bunch of the little details I keep reading about. Thanks for sharing. We’ll see what else comes up.
1) Agree with everything Don said.
2) Keeping your retirement accounts at USAA, Vanguard, Fidelity or TD-Amerirade offer several mgt options. They all have great planning tools you can use for free. Personally, I don’t think one needs to hire a full service professional financial planner. Today’s electronic tools can do the same thing if you know the numbers to plug in. The Motley Fool is a great place to self-educate easily. If you still aren’t comfortable with a self managed account, Schwab is also a great choice. Would avoid Merrill-Lynch, Fisher and others.
I would not hire a broker either. I have in the past. I gave them half and I kept half and my half was always bigger the end of the trial period (1-5 years).
3) Part time job? I don’t have time for it. Too many church, volunteer & hobby activities…and then there are the grandkids! Due to the nature of my job, I could not spin down and work part time…in Tunisia. But I think if you can go to a part time status before you retire, then that is a good thing. Makes the transition less dramatic…especially on the homefront.
4) If you have not been doing it, recommend you guys track your expenses for a few months to get an idea of where your money is going each month by categories. I can send you a budget/expense template Helen and I use, if you want to compare.
If you like it, then you can modify it to fit you. Try living for a month or so on what your retirement is going to be before you retire, realizing you probably won’t be putting anything into your 401K any longer.
5) I planned to work until I had $500K in the 401K and the house paid off. I ended up retiring early right after my 61st birthday with $600K in IRAs (which has grown to $750K in 3 years even after taking out $120K for vacations/new (used) cars/investing in children’s businesses/etc). I manage it on my own. With Navy and Northrop-Grumman retirement… plus social security now, we are not having any problems. Helen took SS at full retirement age. I took it early at 62. Works best for us because she is 5 years older, so she draws HALF of my FULL retirement since I filed and started SS. (The rules changed in 2017! Used to be able to file & defer.)
6) I am pulling about $24K a year out of my IRA money market to supplement our income for a nice vacation or two/house renovations/etc. COVID killed our 2-month trip to Europe in 2020. Not sure what we’re doing in 2021. Just got back from taking parents & sister/Bro-in-law to a 4BR VRBO at the beach for the week.
7) We keep a 5-year ladder of about $120K ($24K x 5 years) in money market to pull from each year instead of having to liquidate any stocks or mutual funds during times of market calamities. That allows us to ignore most stock market perturbations. The stocks we buy are usually held 3-5 years…mutual funds are held almost forever. I’ll sell off and replenish the $120K if the market is high…or not replenish if the market is low. Gives us a five-year window to “wait-n-see.”
8) MEDICARE and TRICARE FOR LIFE are great so far. We were on our own for dental and visual for a few years. Did the math last year and decided to get visual and dental insurance thru the Fed employee program this year. Vote is out if it will pay off.
9) Recommend put as much as you can in your ROTH 401K while you are working.
10) More later.
Hey V, reading your comments…..it’s like reading a book on retirement planning. You’re answering questions before I can ask them. This is why I started this. Thanks for your insight. Going to be asking about taxes and travel soon.