Retirement

['Scales]

Hey all, I've been thinking about retirement lately and trying to do some planning. I'd like to retire in 8-10 years time (in mid 50's). I'm sure many people would have that plan these days, but we live longer on average than previous generations :) and it all needs to be paid for :( and I doubt the Government will have much left to assist.

 

One of the common 'guides' is the % of current income you need to retire on - in our case it would be nice to be able to do some travel and fun things, certainly not to be constantly worried about bills and expenses, but we are simple folks really and don't desire fancy trinkets to impress the Joneses.

 

It occurred to me that there are a good many folks here who are retired or approaching retirement, so any views on percentage of working income needed each year (up to say age 75-80) to live reasonably well would be appreciated as it's all about the maths between now and 2025 for saving and so forth. I'm not prying (or interested) re $ amounts as that tends to be very variable - more about the % of working income needed in retirement compared to what you need when working.

 

Any thoughts from those in that position are welcomed and will go into the mix of ideas for planning. :)

[rct]

My date was May 30th of last year. I'm waiting for my Mrs, so September of 2018 is what we've decided.

 

We live in the highest taxed state in America, so we will move to Florida in order to lower our taxes.

 

We will have less coming out of our pay after we retire. We won't pay into retirement anymore, or any of the taxes that go to the general Social Security system, so that will help.

 

We both have defined benefits, both from the same company, the federal government.

 

Mine is the older system, hers the newer. Mine will be around 80%, hers closer to 60%. After our defined pensions we both have been putting some into our 401ks, which are with the stock market, so we've done pretty well last 25 years. That's extra money the way we see it. All plans are made using my pension as our income, everything else is just good stuff.

 

We went to a real retirement planner in 2014. We sat in the parking lot afterwards, literally in tears and holding on to each other that have been together since early high school, and there we were, in one morning we went from no idea what we would do to knowing without doubt we can do this.

 

It has been exhilarating and exciting. Mrs will get her Bachelor Fine Arts. I'm going to start an old guy band. Imagine that.

 

rct

['Scales]

That is very cool, congrats! - good to know someone is living our dream at least

My wife doesn't work so won't be superannuation there (we don't have employer pension but they pay a lot into our 'super' which I think is like your 401). So it's all down to me - no pressure then

 

Couple of kids to put through University in the meantime and the young fella is disabled so who knows what will happen there, but I am putting extra into super now and have borrowed to invest as we can't actually get at super til age 60 so there's a few years gap that needs to be covered. Still, you gotta have a plan !

 

Thanks for the advice - 75% as a base with any extra as a bonus is what I read into it. Cheers!

[SmokeyGhost]

Such a hard one, 'Scales, as you fully appreciate. This is gonna be a long post I'm afraid.

 

I am not qualified to say what is suitable for one family group is suitable for another. In my case, I am 64 yo and out of the workforce.

 

The general rule of thumb is that you need about 12 times the income required in capital, e.g. if you want AU$60k pa you need AU$720,000 in capital to produce that income which would include I guess the actual income generated by the capital plus drawing down on some of the capital.

 

However, I did start to plan my exit about 10 to 15 years beforehand by gradually reducing my take home pay to the level I expected I would need in retirement taking into account standard overheads such as rates, insurances, internet, telephone, car registration, utilities. Stuff like that. Then adding on what I considered I would need for matters like food, clothing and other essentials. On top of that was discretionary spending. You know what those include, guitars, strings, etc :)

 

The thing I twigged to was not to listen to the so-called experts who I feel do little but add a fear factor or to surveys sprouting what a couple or singles would need in retirement. Run my own race and take the consequences of my decisions is the way I play the game.

 

Having said that, my approach when reducing my take home pay was to contribute the difference to a retirement fund which I run myself. As an Australian you are aware they are called a Self-Managed Superannuation Fund. In taking that course, initially I believed it was really difficult according to all the information espoused by planners, the media and heaps of self-interested groups who I now consider were just pushing their own book. Later I found it was not necessarily the case but it did require me to ignore all the white noise concerning investing.

 

Yet I do not rely only on that SMSF as I have for many years invested in the sharemarket outside of the retirement structure. Those shares provide me with additional income via dividends (I don't trade having given that game away many years ago.) Those dividends together with the income from the retirement fund provide me with a comfortable income, some of which I reinvest in the sharemarket to provide additional dividends – I aim for the external income stream to increase in order to cover increases in my set annual household overheads.

 

On the somewhat morbid side I also had my Will rewritten to establish a Testamentary Trust on my demise taking into account all my assets (home, retirement fund, shares, guitars, etc). Many people ignore that aspect.

 

However, I have been the executor (reluctantly) for a couple of estates. I can assure others it is a right PITA batting off all the bloody vultures who had no legal right to anything according to the deceased's Will but all the while claiming “He/she said I could have this!” Hint: if you want somebody to have a particular item give it to them now or write the darn bequest in the Will!!!

 

None of my children are the executors of my Will as it will appoint joint administrators from an accounting firm and a firm of solicitors. Way, way less expensive than leaving it to the Public Trustee – those mongrels charge a flat 4% of the assets whereas the joint executors will undertake the administrative work for around AU$10k initially and then at hourly rates for maybe 10 hours work a year. And it removes some angst from my children plus they will not have to deal with the possible parasites as per the previous paragraph.

 

All the above is only my view. Others will adopt different courses of action which suits their financial circumstances and their attitude (surprisingly, attitude does come into the whole shebang I've found.)

 

I wish you all the best with your planning. It will never be certain or guaranteed I reckon and it will probably have to be altered as circumstances dictate. It'll be an on-going process.

['Scales]

Thanks Smokey mate, sounds like you worked hard to set yourself up well. My super is in a wrap of about 8-10 funds with a spread of underlying investments, local and international so I'm hoping that provides some diversity. I'm maxing the non-concessional now as well (all that just started as I started planning). It's in a trust to best manage tax with my wife. I took a loan to purchase direct shares (another wrap) as I had no shares - interest only at low rate but I am paying it off via an offset to clear before principle is due (or repeat the exercise) as a form of forced saving. Reinvesting FF'd divs.

 

I set up a test.trust as the very first exercise in this 'journey' last year. Kids are not executors.

 

You have provided me some confidence in my actions to date - thankyou for that. And yes, I know it's all a bit of a lottery but I have a sense of relief at getting started on it.

[Digger]

I've been retired for 18 years and hated every minute of it! We both always had high paying jobs.

 

I loved my work and was shattered when Illness forced me out of it!

 

For the last 16 years I have had a TPI Veterans' Affairs pension and because we were careful enough not to owe anything, we survive.

 

 

Survive is all you can do on a pension though, and so no new cars or overseas holidays for us I'm afraid. Not that I especially covet those things but to have your potential cut short so suddenly is a shock to the system!

 

When contemplating retirement the only advice I would give is to plan plenty of activities to keep giving yourself a reason to get out of bed every morning. Take up interests before you retire.

 

Good luck.

[SmokeyGhost]

Wise advice, Digger, regarding activities. And to go from doing something you loved must have been very hard.

 

Plus you really have touched on a point I have noticed with others who actually are in a more fortunate position than yourself financially.

 

Big money earners. When it came to retirement because they were used to a certain standard they had great difficulty adjusting to what they considered constrained circumstances. As I stated in my reply to 'Scales, attitude has, in my view, an extremely important part of play once a person is no longer in the workforce

[Versatile]

Interesting post for a (mostly) guitar players' forum....

 

Points well covered so far....

 

The main change in UK retirement finance came about 12 months ago....when the previous annuity 'lock in' was removed by our erstwhile Chancellor...

 

It is now possible from age 55yrs to cash one's whole pension fund in in one go... :blink:

 

Taking a lump sum to have a huge party, go ape, buy a Maserati, travel the world etc etc with a personal choice of responsibility and/or fiscal rectitude...

 

Shades of grey in between allow considerable choice between 'draw down' from a pension fund and 'the old way' of a 'safe' fixed annuity income...

 

Everybody's circumstances and aspirations are unique

 

One hopes that stock markets and the Big 100 or so public companies can be kept reasonably stable to allow planning ahead and retention of pension funds' value

 

IMO it is a great time for retirement and personal financial planning....more individual control possible than for many decades....

 

 

V

 

[badbluesplayer]

I ain't got no Chris Craft to cruise....

[Searcy]

You guys have got me checking my Vanguard 401K now...

[Cougar]

I've been retired for 18 years and hated every minute of it! ... When contemplating retirement the only advice I would give is to plan plenty of activities to keep giving yourself a reason to get out of bed every morning.

 

Wise words. If you've worked full time for most of your entire life, and then on one day you stop working altogether, for a short while you're going to think "man, this is great," but after the honeymoon, it's like "OK, now what do I do with all this free time?" Relaxation is good, but you can't just relax all day, every day, or it turns into stagnation. You've got to do something first so that relaxing afterwards has any meaning. Who was it, Alan Watts? who noted that you can't even have the idea of a mountain if you don't also have the idea of a valley. Or something like that.

[jdgm]

Save as much as you can.

I got a job in education admin at age 47 after some 12 years self-employment as a guitar teacher.

Paid as much as I could into the pension scheme from the start. I was made redundant end of 2014.

Coming up for 62 now and that pension pays a small amount each month, just about enough to cover services and bills.

If you have a pension scheme, contribute as much as you can from now on.

When you do retire it takes at least a year to even start getting used to it. Still need a routine to help stay positive..easy to drift.

Best wishes.

[Cougar]

We will have less coming out of our pay after we retire. We won't pay into retirement anymore, or any of the taxes that go to the general Social Security system, so that will help.

 

I started collecting full social security a couple years ago (well, I paid into it my whole working life). My job was pretty interesting, so I decided to keep working 3 days a week (4-day weekends every week!). Due to unrelated circumstances (long story), even before my "semi-retirement," my boss had to fire me from "normal" employment with his firm, dissolve his firm, then rehire me the next day as an "independent contractor" with his new firm. So I was paid without any federal or state or social security taxes taken out. I knew I'd have to pay income tax on that income, so I sent in quarterly payments to avoid having to pay it all at once (plus a penalty).

 

WELL, just last week I got a letter from the IRS. Even though I'm collecting social security, I still have to pay into it since I'm working as an independent contractor. Normally, an employer pays half (3%?), and 3% is taken out of your pay for social security. So last year I had to pay the whole thing, but I hadn't paid any of it. IRS wanted another thousand bucks.

 

In other words, if your work income is reported to the IRS, and your employer is not automatically taking out and sending in the fed & state taxes, etc., you still have to pay not only the income tax, but also the social security/medicare tax, even if you're already on medicare and collecting social security! The monthly payments you get from social security will go up the following year, but not by that much.

 

I don't know if the income of a working musician such as yourself is at all similar. But I imagine you're like an "independent contractor." Just a heads up. Otherwise, it sounds like you've done everything right and you're set up pretty well. I bet that's rather uncommon among working musicians!

[OldCowboy]

Been in a state of retirement for @12 years now. It is what is. Sometimes good, sometimes not. It won't change your outlook on life, though. The positive person will be the same, as will the negative one - only the reasons change. Everybody fixates on planning for $ and that's important. My suggestion is to be sure your health insurance will be top drawer, and that isn't much discussed.

[Karloff]

I ain't got no Chris Craft to cruise....

 

in the late 50's till about 1970 my dad worked at the local Chris Craft factory. i got to tag along every once in awhile and crawl around in the boats.

 

I'll be 56 this May. so I've got 9 years to go. My main goal is just staying alive along enough to consider retirement.

[ZettaVita]

I'm three years into retirement now, living comfortably on less than half what I used to earn. These are some of the things I did.

 

Start thinking of the kind of lifestyle you want, visualize what your daily routine would be, and write it down.

Research Forbes and Money and other publications that put out a "best places to retire" list. Compare your lifestyle list to the best places and decide on one or two that might make the best sense for you.

Get Quicken or Money, and track your expenses to the penny for a few years. Examine your spending, and decide what your core list of expenses should be, and what that totals. Contact Social Security, and get a report of what your monthly SS income would be. Remember it is taxable income if you reach a certain level.

Would you downsize your home, move to a tax-free state, have no need for boats or toys? Try to envision what your retirement expenses might be - even to the point of practicing what it would feel like to live on 1/2 of your current income with your current lifestyle.

 

Some other stuff. This worked for me, your mileage may vary.

Before you retire, get as much medical and dental work done with your current employer medical plan. If you wear glasses, I highly recommend LASIK. I highly recommend LASIK. I highly recommend LASIK. Best decision I ever made, hands down.

Get your teeth fixed, all crowns, root canals, etc. Hair plugs, face lift, whatever body maintenance you have always wanted, go get it.

 

Purchase a reliable four wheel drive vehicle. Pay it off. You don't want a car payment, and the versatility of 4WD also pays for itself. Pickup or an SUV is best for moving things or people. Thinking of a camping trailer? Figure the purchase price, registration, maintenance, camping fees and insurance, and compare that to overnight in a nice hotel room.

 

Have the mother of all garage sales. Simplify your life. Heirloom stuff you want to hand down, give it to the kids now, or put it in storage.

 

I moved from California to Tennessee, and immediately cut my cost of living in half. Consider moving to a less expensive state from where you are.

 

Simplify your life. Trade in the smartphone for a no-contract flip phone. Get Neatworks or other paperless software and scan all your documents and shred them. Use online banking and set up autopay on your routine bills.

 

But, right now, save, save, save. However much you have it will not be enough.

[milod]

Some good advice...

 

Also, don't count on much of anything, dollars, health, whatever.

 

And Digger nailed it in terms of having something positive to do.

 

My brother and I had a long talk when he looked at retiring a cupla years ago, and the bottom line of it is that old cops and old newspapermen have a bad habit of dropping dead six to 18 months after retirement.

 

He's doing security for federal courts half time, I'm working part time (only 40 hours regardless of paycheck for less, 'stedda the 80 I'd been doing for decades) and we're both doing other stuff that has fun or meaning to us. His wife is working, but they take more time off; mine is maybe two thirds retired but hellishly active in the local museum and visitor center as board member and volunteer. I'm head of the museum foundation board and chair of the historic preservation commission, plus helping a high school class every now and then (two days this week with a small high school's yearbook staff)

 

Money? We figure we'll get by at least with necessities until it doesn't make any difference. No boats or RVs, but no time or special desire for 'em either. Did the boat thing decades ago and it's fun, but work. The yard sale idea ain't bad. I've given away some guitars and likely will give a cupla rifles to a cupla nephews.

 

But again, Rob nailed it: If you ain't got a reason to get outa bed, you may as well croak.

 

m

['Scales]

Lots of interesting and insightful advice guys! Having seen both my parents (late stage of retirement) and my wife's (early stage) make sure they are actively involved in community and group activities has reinforced the value of keeping busy and involved - albeit on their own terms and of their own choosing, which seems ideal. It's definitely not about sitting in front of the tv. The financial side of planning for me is to try and make sure all that 'doing what you want to do' stuff is viable, and equally to try and avoid having the worry of trying to deal with unforeseen expenses. Thanks all :)

[pappy]

One thing that I had found is that you really need to have a reason to get up each day. We sold our company back in 1994 after 22 years of being a certified Orthotist/Prosthetist and the company that bought us was the largest in the world. Not being a corporate person I left and did some consulting for a few companies and after 2 more years retired. I found that after three months of being home I needed to do something and got into the internet side of Ebay car sales. I went to work for a the oldest chevy dealership in the country and it was a great run. I learned a great deal and once the original owner sold I left and did private consulting for dealers across the country. Once again retired. At this time we downsized and moved into a smaller home, smaller yard. I spent a year doing a lot of work around the house while still doing some work from home doing web design and social media marketing. Loved every minute of it but found that I was becoming a recluse. Never getting out of the house working 15 hours a dsy. It got so bad that my wife finally said that I was becoming a hermit.I finally heeded her advice and closed shop in the internet business and started working for a dealership in their parts department three days a week. It affords me the opportunity to socialize and get out of the house , and the opportunity to be there with our 15 grandchildren. Ion my days off I am the chauffeur for the kids,taking them to baseball, football, ballet etc.

Long and short, have something to do,Get out meet people,volunteer, something to keep you interested and moving.My wife has one more year before retirement, and one of our goals is to travel out of the country, if it has not been blown to kingdom come.

Oh and yes we have pared down our expenses considerably , except for grandma, she can not say no to the grandchildren and spoils them to no end.

[Retired]

Lots of great advice! And as Smokey Ghost said, this could be hard. Mainly because what works for one individual doesn't necessarily work for all. As you said, your wife didn't work. It helps me that my wife did. It also depends on the country you live in. Cost of living, ect. I worked at the railroad which is different then many jobs. My wife was a teacher with a Masters degree in district 66 schools and taught gifted education. We both had 401-k's we put money in every check for decades. She earned a school retirement which she collects but gets social security on top of that when she turns 67. I paid into Tier I and Tier II Taxes which came out of my checks. When you retire from the railroad you no longer have to pay into either since you paid for it your 30 some years working, so social security is not an option since I never paid into it. We get Federal railroad retirement benefits which we do not have to pay state taxes anymore at retirement. So without paying state taxes, Tier I and Tier II, no more high priced union dues and cheaper insurance rates at retirement the Fixed income you get from the railroad is slightly less then when you were working. I just pay Federal Taxes but my wife has to pay state as well. I also put in a check by check savings for decades for retirement. As she also did. We also have a farm in South Dakota that we rent out. It basically pays for our taxes every year and an emergency fund. Say if the water heater goes out or such. Or a furnace. Gotta plan on stuff like that because it may happen. She won the teacher Shrager award at retirement which was very unusal. They give them out to the two top most hard working deserved teacher each year if there are any. That was a $10,00 bonus we didn't plan on. But everyone is right about finding things and hobbies to keep you busy. At retirement, I picked up the guitar again. I'm more then busy here in this house. It's over a hundred years old farm house that we bought and went through and totally remodeled and updated. The Medlans who owned it, sold off much of their land to develop our neiborhood. We own two lots. If I want I play Chess, Draw, since I'm an artist, I can paint houses if I want for cash since I used to do that when I got laid off. We love going to concerts, hiking, I bought a Doberman show dog to spend time with at retirement, we go to movies and out to eat. To prairie life to exercise 3 to 4 days per week. Now we have a grandson, so we're very busy. My wife draws half of my railroad retirement also this May when she turns 60. But one thing I did do, I stopped buying expensive things like guns for my collection so expect to cut some things. If your the only provider it could be tough, the more you save and plan the better your off. There are guys from the railroad I know that got very bored and went out to get part time jobs. I thought about it once but didn't. My wife wanted us to work as ushers for the Omaha symphony, but I have a bad lower back and can't hear too good and can't stand for long periods of time in a spot. But we have both been retired for 3 years as of May 31st and we both love it. Your smart in planing way ahead. PS. A friend of mine waited till after his daughters were married and the bills paid off before he retired from the same railroad. I thought good decision!

[Tman]

Interesting thread Scales. My retirement savings was donated to my first wife when we divorced in 2001. I didn't really start to contribute much until about 10 years ago.

 

My wife and I had a meeting with a financial planner in 2010 when we married. We went out to the parking lot right afterwards and cried too, just like rct, but for the opposite reason. He told us we were screwed unless we did something drastic, like saved big time.

Then I cashed out my entire 401k to buy our house in 2013. Great decision but against all advice by everyone except my Mom.

 

Now I put away ~40% of my income into retirement savings. I turned 56 in February and would love to go half time at age 60. Then I'll work until I go into the great beyond because I want to spend the rest of my life doing 4 things: having fun with my younger wife (notice I said that first), continuing my work part time, recording and writing music, and getting some sort of exercise. So... The answer to your question is that I am currently putting away about 40%. A bit draconian but hey, there you have it.

['Scales]

Appreciated insights again. Phillip, 40% sounds in the ballpark so that's encouraging. Interesting that you could use your retirement fund to buy a house - we can't really do that until age 60. I saw a tv show the other day where they were bulldozing old houses in Cleveland because they can't even give them away at auctions - horrible if someone had used their savings to buy one before everything went bad with jobs and people all moved away - very pleasing to hear it worked out much better for you! Divorce is a hard one to avoid sometimes but I'll try. Cheers.

 

Retired, I love when regular folks in regular jobs work hard and get to do the fun things in retirement. - good for you

 

Pappy, your retirement sound more way intense than my work!! but you're enjoying it and that's very cool!

[Murph]

Too much math.

 

I'm going to handle it the way I've handled every situation in my life, for my entire life.

 

I'm just gonna wing it.............

[Cougar]

She... gets social security on top of that when she turns 67.

 

Retired, the current age for full social security payments is 66! Make sure your wife applies for it on time or you might lose some payments.

[SmokeyGhost]

Lots of good information and perspectives.

 

This post of mine really relates only to Australians as retirement aspects are different in each country although the basic issues of health, activities and the rather tawdry issue of money (never fall in love with the stuff, it's just a tool to use and has no value in itself in my view) do apply.

 

I have no tertiary qualifications and, in fact, I failed miserably my last year of secondary schooling. A complete academic klutz.

 

However, I think I do have a small ability to observe people. Again this is only my view but the one major issue is those nearing retirement start comparing their situation with others. I've lost count of the number of times I have heard "They say you should...." If ever anyone discovers who "They" actually is, please let me know because "They" need a jolly good talking to given the damage "They" has caused.

 

You can only work with what you have and not what others may have. Very dangerous to start chasing another person's situation. It happened over here (and likely in other areas) where a large group, maybe 4,000, listened to a "guru" telling them their retirement circumstances were going to be dire. He was followed (it involved doubling down on sharemarket investing) and as a result BOOM! when the 2007/2008 correction came. Millions of dollars evaporated, suicides occurred, families lost their homes. You name it, it happened.

 

So many times I have read advice from financial people that you need at least AU$1M to retire comfortably. Yet what people are not told is that, according to the data I have seen, only 5% of couples aged 65 yo will retire with that amount - at least in this country. Riiight, so bet everything on black rather than work with what you can accumulate without undue risk and worry? Crazy in my opinion.

 

I now view the majority of so-called advice from the financial media (and also from our various Governments on the subject) as the equivalent of porn.

 

I am a cynical, hard-nosed SOB when it comes to these matters. So much so I turned down a job offer to become a financial planner after I retired and the reason I gave was the firm would likely have lost most of its clients in the first month as I would have throttled them. The fellow who offered me the job laughed his head off as he understood where I was coming from.