Retirement

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SReh26
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#41

Post by SReh26 »

Bob cruise director wrote: Sat May 08, 2021 1:42 pm
SReh26 wrote: Sat May 08, 2021 12:09 pm
Bob cruise director wrote: Fri May 07, 2021 9:38 pm
One thing to note on defined benefit plans is that because of all the problems in the early 70's, the government in 1974 passed the Employee Retirement Income Securities Act (ERISA) which did several things to make pension plans less likely to not be able to meet their obligations - first they limit how much of the pension can be invested in the company stock and second they had to be fully funded by 1980 using government approved rates of return and actuarial statistics. These alone helped a lot.

Unfortunately for pensions, most of us are living too long which is why in the late 90's pensions converted from defined benefit plans to defined contribution plans (like 401K's). The defined benefit plans became unaffordable. As a result, defined benefit plans are pretty much limited to legacy employees and government workers.
I have been in the workforce full time for 28 years and ten years ago joined a unionized employer with a defined benefit pension. So I have a 401k and will most likely (barring unforeseen events) have modest pension income to add to the mix. My employer offers fairly decent early retirement options, which is kind of what prompts the issue.

Anyone retire early due to mid life malaise or office annoyances or to start a business and then regret it? I certainly don’t want to make that mistake, but it seems to be not completely uncommon.
If maximizing your retirement income is the only criteria you are almost always better off staying where you are and accumulating assets through maximizing your defined benefit plan and making maximum contributions to your 401K

Starting your own business is risky and takes financial investment. Statistically you business will survive but not make as much money as staying with your job. You may make a lot but you also may lose some. Also if you go that way, look at the exit strategy for the business. Most small businesses do not sell out when you want to retire but they close.
Yes, thank you, Im maxing out my retirement plan and catch up contributions, savings, as well as other workplace benefits, including long term disability and long term care. Ive reduced my equity exposure somewhat also.

I’m not planning to start a business, but I mention it because Ive seen unrealistic concepts of being your own boss lead people astray with the results you describe.

Maximizing retirement income, fortunately, isn’t my only criterion at this point. I actually like working, like my field and being engaged in something larger than myself. I think I’ll be more or less ok financially but will wait for the market correction and inflation developments rather than make the classic mistake of retiring overoptimistically into a bull market.

I’m 54 and work offers a scaled back early retirement option at 56, which seems too early to me but is interesting to have as an option. At this point, its my plan B or C if health concerns arise or some other horror occurs that necessitates leaving work early.

I’ll probably just stay in for a while longer if I can, just to keep active, contribute to society, keep learning and growing hopefully, and see how I feel at 57/58.
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Bob cruise director
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#42

Post by Bob cruise director »

SReh26 wrote: Sat May 08, 2021 2:10 pm
Bob cruise director wrote: Sat May 08, 2021 1:42 pm
SReh26 wrote: Sat May 08, 2021 12:09 pm

I have been in the workforce full time for 28 years and ten years ago joined a unionized employer with a defined benefit pension. So I have a 401k and will most likely (barring unforeseen events) have modest pension income to add to the mix. My employer offers fairly decent early retirement options, which is kind of what prompts the issue.

Anyone retire early due to mid life malaise or office annoyances or to start a business and then regret it? I certainly don’t want to make that mistake, but it seems to be not completely uncommon.
If maximizing your retirement income is the only criteria you are almost always better off staying where you are and accumulating assets through maximizing your defined benefit plan and making maximum contributions to your 401K

Starting your own business is risky and takes financial investment. Statistically you business will survive but not make as much money as staying with your job. You may make a lot but you also may lose some. Also if you go that way, look at the exit strategy for the business. Most small businesses do not sell out when you want to retire but they close.
Yes, thank you, Im maxing out my retirement plan and catch up contributions, savings, as well as other workplace benefits, including long term disability and long term care. Ive reduced my equity exposure somewhat also.

I’m not planning to start a business, but I mention it because Ive seen unrealistic concepts of being your own boss lead people astray with the results you describe.

Maximizing retirement income, fortunately, isn’t my only criterion at this point. I actually like working, like my field and being engaged in something larger than myself. I think I’ll be more or less ok financially but will wait for the market correction and inflation developments rather than make the classic mistake of retiring overoptimistically into a bull market.

I’m 54 and work offers a scaled back early retirement option at 56, which seems too early to me but is interesting to have as an option. At this point, its my plan B or C if health concerns arise or some other horror occurs that necessitates leaving work early.

I’ll probably just stay in for a while longer if I can, just to keep active, contribute to society, keep learning and growing hopefully, and see how I feel at 57/58.
It sounds like you have thought this out well. Any plan is better than no plan which I have seen people at your age just starting to think about retirement. Also if you enjoy the work you are doing, all other factors being equal, there is no reason to stop working.

Good luck.
Bob Stevens
Cruise Director
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SReh26
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#43

Post by SReh26 »

Many friends and coworkers of mine were devastated by the popping of the internet dotcom bubble in 2000, and by the real estate crises in 1993 and 2008.

I really would like to protect myself and my retirement from whatever is going on today. But its unclear if that means shifting into treasuries, just not buying into these prices or generally just holding the fort with my current allocation (30 percent equities) for now and battening down the hatches.
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SReh26
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#44

Post by SReh26 »

Ok Im going to revisit my favorite topic.

One of the best pieces of advice I ever got was not to change something good out of dissatisfaction with some other unrelated issue. Ie, it’s been a challenging year with the virus and so on, but some people are channeling that dissatisfaction by changing their hair color, moving, divorcing, quitting jobs, retiring early or what have you. We don’t want to make that mistake, right?

So if we are dissatisfied, we need to identify the real problem (illness, aging, boredom, midlife crisis, virus fatigue) and not change something good - our jobs - for relief that isn’t the real problem. I knew someone who retired when a close relative passed, for example, but then wanted to get back into the work world and it was hard.
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SReh26
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#45

Post by SReh26 »

If any muggle is a CPA, CFA/CFP or otherwise in finance, or just generally a good advice giver on any topic, and interested in giving 2cents of advice to a confused midlife muggle, feel free to DM me.
Last edited by SReh26 on Fri Jul 30, 2021 6:04 pm, edited 1 time in total.
hoover
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#46

Post by hoover »

SReh26 wrote: Sat May 08, 2021 8:43 pm Many friends and coworkers of mine were devastated by the popping of the internet dotcom bubble in 2000, and by the real estate crises in 1993 and 2008.

I really would like to protect myself and my retirement from whatever is going on today. But its unclear if that means shifting into treasuries, just not buying into these prices or generally just holding the fort with my current allocation (30 percent equities) for now and battening down the hatches.
I have lived and worked and invested through all three of those bubbles. I lost 40% of my nest egg in at least one of them, but I kept putting money into my 401(k) and considered it an opportunity to buy shares on the cheap. Ditto with the COVID crash of 2020. The way the market has come roaring back after the crashes, I'm not sorry I did.
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SReh26
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#47

Post by SReh26 »

hoover wrote: Sat Jul 03, 2021 6:15 pm
SReh26 wrote: Sat May 08, 2021 8:43 pm Many friends and coworkers of mine were devastated by the popping of the internet dotcom bubble in 2000, and by the real estate crises in 1993 and 2008.

I really would like to protect myself and my retirement from whatever is going on today. But its unclear if that means shifting into treasuries, just not buying into these prices or generally just holding the fort with my current allocation (30 percent equities) for now and battening down the hatches.
I have lived and worked and invested through all three of those bubbles. I lost 40% of my nest egg in at least one of them, but I kept putting money into my 401(k) and considered it an opportunity to buy shares on the cheap. Ditto with the COVID crash of 2020. The way the market has come roaring back after the crashes, I'm not sorry I did.
Thank you!

2020 was my first real downturn in which I was invested. I didn’t sell any equity funds and largely kept dollar cost averaging in. But I could not withstand a 40 percent decline in my portfolio, so Im 70 percent in treasuries, money market mutual funds and investment grade corporate bonds. But that is also not the smartest. 😔
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SReh26
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#48

Post by SReh26 »

ABC& D are family members but the family is like Tolstoy‘s, which means not everyone gets along and not everyone is brilliant, unflappable and capable.

A and B are divorced silent generation parents in a certain industry, same industry, individually, entirely in High Tax State Ugh.

C and D are their single childless Gen X offspring. C and D were not ever involved in the business or the industry. C is employed full time in a high bracket, D doesn’t work and trades a few stocks. Everyone resides in State Ugh. C and D get along, but don’t always agree.

A and B expect C and D to assume responsibility for the two businesses in the same industry when they pass. The percentages that go to C and D are known and not in dispute. Is this:

A. A terrible idea.
B. A great opportunity, as long as the businesses are profitable.
C. A very common situation and C and D will just do the best they can and get help if needed.
D. Dallas and Dynasty redux.

What should A, B, C and D consider and do now while everyone is still reasonably healthy to prevent this from having an unhappy ending?
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oldjudge
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#49

Post by oldjudge »

Have A and B asked C and D what they want to do? If the children have shown no interest in entering the business to this point perhaps A and B need to groom someone outside the family to run those businesses after they are no longer able.
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SReh26
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#50

Post by SReh26 »

oldjudge wrote: Mon Jul 12, 2021 7:44 pm Have A and B asked C and D what they want to do? If the children have shown no interest in entering the business to this point perhaps A and B need to groom someone outside the family to run those businesses after they are no longer able.
Yes, good question, they both asked.

C has no interest in active involvement at this stage since C works full time, but C realizes extra retirement income would be nice and long term cap gains taxes in State Ugh make it sort of a waste to sell the businesses, which could be sold at a nice gain. D sees it as an opportunity but realizes D has almost no experience in it.

C looked into hiring a manager or mgmt company since the businesses are profitable but A, B and D are wary of nonfamily outsiders - and even C is starting to see their point. While profitable, these businesses are not low-maintenance and there is risk.

Both A and B have very sporadic assistants for occasional projects but C and D don’t want them involved.

C told D to try to learn about running these businesses but D does not have a track record of accomplishment. C does, but not in this tricky field of endeavor. So they would have to work together if at all.

The opportunity cost is also not small. If C and D take this on, it means giving up possibly other things they could be doing. This is more A and B‘s thing, not C and Ds, whose personalities, priorities and abilities are different from those of their parents.
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#51

Post by hoover »

Is D self-sufficient, or has D been supported by A and B for 50+ years?

Regardless, if C and D don't really get agree, but C and D each inherits part of the business, and each has a different idea of what to do with the business, then my answer is A) this is a horrible idea, but also C) this is probably a really common occurrence.
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SReh26
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#52

Post by SReh26 »

A (and not B or C) supported D, but D gradually reached a level of self sufficiency with his stock portfolio.

C and D could just sell out and be perfectly fine, but income from the business would make both C and Ds lives um, higher income in retirement. C and D are very different in their outlook, approach, habits, experience, strengths and risk tolerance.
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SReh26
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#53

Post by SReh26 »

Thanks to many thoughtful public and private replies received on this board, C and D have discussed getting valuations for the parts of the business, possibly selling off pieces or shrinking it over time as needed depending on economic conditions and whether operating vs selling is more profitable.

C doesn’t want to be too tied down to it and D doesn’t view the opportunity cost as being too high.

We‘re going to make sure there is an exit strategy if it’s too much hassle. Fortunately with longevity in the family maybe we won’t have to deal with this too soon. C just likes having ducks lined up in advance.
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iggystan
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#54

Post by iggystan »

As someone pointed out, sometimes life makes the decision for you. I was actually planning on retiring at 55 but in 2013, I had two back surgeries, the second one was a major spinal fusion of my lower back. That surgery left me with permanent nerve damage in both of my lower legs. I ended up having two more surgeries - one to remove an extra screw that had been left in me and the second to redo the fusion because the bone wasn't fusing properly. I had a final surgery to implant a spinal cord stimulator to help with pain management since I refuse to take pain pills. Anyway, I was fortunate to work for a company that had a pension plan and I worked for them for over 33 years, so my pension is pretty good. I didn't start my 401K as early as I should have, but tried to make up for it later in my career with larger donations. We have a good money manager as well, so things are okay. I keep myself fairly busy with things, although we probably watch too much TV. We have a fairly good-sized collection of modern board games and we try to play in the afternoon fairly often. It amazes me that life isn't boring and we get along together very well (we've been married for 37 years). I stay active with walks after lunch and riding a stationary bike in the morning. It has a book holder so I read at the same time. I also do a lot more puzzles, even these crazy meta puzzles.
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SReh26
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#55

Post by SReh26 »

Pretty soon I will find out my employer’s new policies on remote work for the long term. Obviously, remote work would make it easier to keep working as one ages.

I was an extreme skeptic of remote work before the pandemic but now that I see it can work well and has MANY benefits, at least for me as an introvert (don’t laugh!) I would be hard pressed to go back to the daily commute etc.
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SReh26
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#56

Post by SReh26 »

My current thought is to retire around 57-58, spend part of the year in the big city where I currently live, part at our rural cottage and 3-4 mos/ year in Europe or Caribbean, varying the spot every year.

That way I get access to good medical care, don’t have the hassle of relocating overseas, don’t have to abandon an area where my family vacationed for years, and don’t have to commit to one location.

Update: most European countries let you stay for up to 90 days without any special visa if you have a US passport. That is very reasonable.
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SReh26
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#57

Post by SReh26 »

Omfg - deciding among Schwab, TRowe, UBS, Fidelity vs Vanguard? Doing a backdoor Roth conversion? Glad none of this is complicated, boring or annoying! And glad there is no one quick correct answer either!
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#58

Post by katnahat »

SReh26 wrote: Mon Aug 30, 2021 4:24 pm Omfg - deciding among Schwab, TRowe, UBS, Fidelity vs Vanguard? Doing a backdoor Roth conversion? Glad none of this is complicated, boring or annoying! And glad there is no one quick correct answer either!
My two cents of advice is this: never use a friend or a child of friends or a friend of your children as a financial advisor; it's brutal when they mess up and you have to fire them.
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BarbaraK
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#59

Post by BarbaraK »

SReh26 wrote: Mon Aug 30, 2021 4:24 pm Omfg - deciding among Schwab, TRowe, UBS, Fidelity vs Vanguard? Doing a backdoor Roth conversion? Glad none of this is complicated, boring or annoying! And glad there is no one quick correct answer either!
Figuring out whether to do a Roth conversion for money you eventually expect to spend is a simple matter. Just hop in a time machine and look up your future income in the future tax tables and see if the rate is higher or lower than now.

But for money you will donate after reaching the age for RMDs, the answer is always no. Since you can do a qualified charitable distribution and never pay taxes on that money, there’s no reason to prepay taxes now.
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SReh26
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#60

Post by SReh26 »

BarbaraK wrote: Tue Aug 31, 2021 11:35 am
SReh26 wrote: Mon Aug 30, 2021 4:24 pm Omfg - deciding among Schwab, TRowe, UBS, Fidelity vs Vanguard? Doing a backdoor Roth conversion? Glad none of this is complicated, boring or annoying! And glad there is no one quick correct answer either!
Figuring out whether to do a Roth conversion for money you eventually expect to spend is a simple matter. Just hop in a time machine and look up your future income in the future tax tables and see if the rate is higher or lower than now.

But for money you will donate after reaching the age for RMDs, the answer is always no. Since you can do a qualified charitable distribution and never pay taxes on that money, there’s no reason to prepay taxes now.
I get my financial planning lessons from A Raisin in the Sun (remember when Sidney Poitier gets ripped off by his business partner after borrowing grandma’s inheritance?), Grapes of Wrath, Les Miserables and Schindler’s List, so maybe that’s part of my problem. lol.

The time machine tells me my taxes in retirement will be a lot lower than they are now. But reddit told me earnings on a Roth IRA are tax free and I need to jump on that train (supposedly), whereas Suze Orman says just fund your 401k to the extent of the match, which I do.

Rmds are now at 72 and Im 54 so I’m not sure if I’ll be donating or being donated to haha. Not funny and I’m not really serious. It’s just you never know in life. Things seem good right now but famous last words.

But it’s a good point to bring up donating. I recently refined my Gifting Policy. Now I need a donation policy too. I love questions with a million possible good answers...
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