Retirement

[boharr]

First thing was that I am lucky that I worked for one company for 38 years that had a defined benefit retirement plan and I had the advantage of getting into 401K's when they started. Income is one factor for each of us. Also your general financial health - how much debt do you have and how much savings do you have.

Much of this was true for me too. I was with one company for 30 years and had a defined-benefit retirement plan, two actually (I also had two other fairly small defined-benefit plans from previous jobs). Defined-benefit retirement plans are wonderful but very rare these days.

When my defined-benefit retirement plans were frozen in a shift to a 401K matching-contribution plan, it meant that my defined plans would remain intact, but would no longer grow as my employer would stop contributing to them and start contributing to my 401K. So after a few years, at 62, I took a buyout (an extra year's pay plus bonus). I could then tap into the frozen defined plans, and I could switch the 401K tax-free into an IRA (in which I had more control of investments).

Emotions, of course, aren't so easily planned, but I really cashed in by being able to spend much more time with my family.

[SReh26]

Right, declining marginal economic benefit of working, increasing marginal benefit of rest/free time.

[oldjudge]

Share your thoughts/tips/strategies for health, personal finance or retirement here. Is it better to retire relatively early, on time or late? Is there anything you wish you could tell your 45 or 50 year old self about the second half of life?

Answering these backwards, the thing people need to realize is that their situation at any point in life is an aggregation of what their past actions have been. If you don’t save when you are younger then you will be forced to rely on others (government/family) when you are no longer working. If you don’t take care of yourself when you are young then you may have physical conditions that plague you when you are older.
In terms of when to retire, I think that one should only voluntarily retire when they have a solid plan for what they will be doing with the rest of their life. This involves asking the questions: 1. Will I be fiscally able to do these things assuming I live to be ___ (you pick an age), 2. Am I really sure I want to do these things (have I tried them before retirement), 3. Do these things involve a degree of physical activity which I may not be able to maintain throughout retirement.
Another important point to consider is who will manage your finances. If you are doing it yourself what is your backup plan if you become unable to continue doing it. While everyone likes to be fully invested in rising markets, if the majority of your savings are in the stock market, how will your retirement be impacted if there is a substantial pullback (S&P drops 50%). If you are invested in alternative assets, are you prepared for the volatility and lack of liquidity.
I wish I could say that I followed my own advice on all of the above, but at least I did on most of the things.

[SReh26]

Part of the reason Im asking is that my mom retired in her mid 70s from her salaried job and still runs a small business at 87. My dad runs a small business at 85. At my mom’s retirement party someone came up to her and said, congratulations, but aren’t you a little YOUNG to retire?? Apparently she didn’t look mid 70s to him.

[SReh26]

Another important point to consider is who will manage your finances. If you are doing it yourself what is your backup plan if you become unable to continue doing it.

Great point, oldjudge. I don’t hear that mentioned too often. Is there anyone you suggest doing it, or not doing it? Such as family, banks, CPAs, trust account trustees? I’ve heard various horror stories but I think I would want it to be someone with a fiduciary obligation rather than impose on family.

[Bob cruise director]

First thing was that I am lucky that I worked for one company for 38 years that had a defined benefit retirement plan and I had the advantage of getting into 401K's when they started. Income is one factor for each of us. Also your general financial health - how much debt do you have and how much savings do you have.

Much of this was true for me too. I was with one company for 30 years and had a defined-benefit retirement plan, two actually (I also had two other fairly small defined-benefit plans from previous jobs). Defined-benefit retirement plans are wonderful but very rare these days.

When my defined-benefit retirement plans were frozen in a shift to a 401K matching-contribution plan, it meant that my defined plans would remain intact, but would no longer grow as my employer would stop contributing to them and start contributing to my 401K. So after a few years, at 62, I took a buyout (an extra year's pay plus bonus). I could then tap into the frozen defined plans, and I could switch the 401K tax-free into an IRA (in which I had more control of investments).

Emotions, of course, aren't so easily planned, but I really cashed in by being able to spend much more time with my family.

Defined benefit plans disappeared because we are living too long. in 1980 if you were 60, your life expectancy was 17 years. Now it is 24 so plans became unaffordable. The growth was primarily because we stopped smoking

[boharr]

Another really good tip: Don't smoke! I did. I quit.

[SReh26]

Another really good tip: Don't smoke! I did. I quit.

Love this! No worries, I won’t! Congratulations on quitting and staying off it!

[BarbaraK]

It was a great idea to ask here for retirement advice as it's hard to find good books about it. The problem, IMHO, is that the books are written either by people who haven't actually retired and are just full of untested theories, or by people whose retirement plans failed - either they ran out of money and needed to write a book to pay the bills or they got bored and writing was their way to go back to work. People who have enough money and are happy with what they're doing don't take a year to write a book. But they may well take a few minutes to come here and share their experiences with their friends.

And probably for that reason, unlike most retirement books/articles, I haven't seen anything here I disagree with.

Most of my suggestions have already been mentioned, but I will offer a cautionary tale about pensions. My husband worked for a big company with a defined benefit plan. Several years before he retired, his company went though bankruptcy, PBGC took over the pension, and he ended up getting about half of what he'd been promised. Being cautious/cynical (take your pick) I'd always done our planning so we'd be fine even if he never got any of it. But some of his colleagues who'd done all their planning counting on that promise were in a world of hurt and had to make some major changes in their lives.

So if you can have multiple sources of income, you'll have flexibility if one of them doesn't work out the way you expect. And I also recommend closely tracking your income/spending/net worth the first few years of your retirement. It will never work out exactly the way you expected, and if you do need to make adjustments, the sooner you know the better.

[SReh26]

Thank you Barbara! I was young during the 1970s pension crisis and seeing all those folks who relied on pension promises to their detriment made a huge impression on me, as did the various market drops and of course the great recession. But since I am covered by, among other things, a defined benefit plan, it’s a timely reminder not to rely too much on any one aspect of expected retirement income.

I’ve read some retirement books, including the NYT bestseller, The Number, Ready Set Retire, and Women and Money: Ultimate Retirement Guide for Fifty-Plus, and I’ve taken a planning course at my job.

I like your point that it’s better to ask people who successfully retired, rather than rely solely on books. Thank you for your observations!

Believe it or not, I hadn’t planned to share my retirement musings with the Muggles, but it turns out you are the perfect demographic for these questions: smart, happy, literary and retired in many cases, or close to it.

I’m almost tempted to put up a new topic - dealing with difficult family members and coworkers!

[SReh26]

Al Sisti wrote:

Here's a formula that worked for me (though I don't recommend it, and certainly didn't mention it to my kids): I retired until I turned 30 -- just playing music and generally having fun -- and got my first real job at 30 and worked for 34 years, and retired again. I have never been less bored in my life...
[/quote]

I did something a little similar - traveled and did most of what I wanted relatively early in life, and was much more content while working later in life. I don’t feel I have a lot to make up for and I don’t resent my job for limiting my opportunities because it didnt. I’m a little bored in the pandemic but have found things to do to keep active.

[SReh26]

Just thinking ahead here, has anyone had experience lining up services like home health aides, executors, accountants, health care POAs, trustees and the like, when family can’t serve in those roles?

[SReh26]

I'll add an additional consideration to Bob's considerations and the other considerations presented here. Are you satisfied with your current work/job/profession, and if so whether there is a continuing role for you in a less time consuming capacity. Such an opportunity may not be common, but I've witnessed a few who have taken a quasi-retirement path, perhaps examples of not letting go, but in general they appear very satisfied.

Good questions. I’m fortunate in that I enjoy my current work and field and it’s already only a 40 hour week. I do think there are possibilities for working 4 day weeks but I will look into it. I have a side job I did in the past (translating) that I could reactivate and I have some retirement career interests (writing, other) that might lend themselves to part time work when I leave my current employment. My parents run small businesses (RE) that I’m not really interested in running but that’s also a low time commitment option.

[SReh26]

Wsj has been screaming lately that equities are in a bubble, never more so than today. Thoughts?

A friend of mine went all to cash but with the s and p up a crazy percentage in the past 12 months, it seems silly to leave the party now. Ive played defense since 2016 so I’m already in a conservative allocation, whatever that even means today, what with so many asset classes seemingly inflated.

[TPS]

I am 45 and I think the best advice I got was from a millennial - YOLO. I've travelled to a lot of places and done a lot of things - the result has only been that I want to do a lot of other things many of which I realized I probably wouldn't enjoy or maybe even able to do at 60+.

[Bob cruise director]

It was a great idea to ask here for retirement advice as it's hard to find good books about it. The problem, IMHO, is that the books are written either by people who haven't actually retired and are just full of untested theories, or by people whose retirement plans failed - either they ran out of money and needed to write a book to pay the bills or they got bored and writing was their way to go back to work. People who have enough money and are happy with what they're doing don't take a year to write a book. But they may well take a few minutes to come here and share their experiences with their friends.

And probably for that reason, unlike most retirement books/articles, I haven't seen anything here I disagree with.

Most of my suggestions have already been mentioned, but I will offer a cautionary tale about pensions. My husband worked for a big company with a defined benefit plan. Several years before he retired, his company went though bankruptcy, PBGC took over the pension, and he ended up getting about half of what he'd been promised. Being cautious/cynical (take your pick) I'd always done our planning so we'd be fine even if he never got any of it. But some of his colleagues who'd done all their planning counting on that promise were in a world of hurt and had to make some major changes in their lives.

So if you can have multiple sources of income, you'll have flexibility if one of them doesn't work out the way you expect. And I also recommend closely tracking your income/spending/net worth the first few years of your retirement. It will never work out exactly the way you expected, and if you do need to make adjustments, the sooner you know the better.

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.

[TPS]

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.

There is a fair argument to make that there is a strong correlation between defined benefit plans becoming "unaffordable" and executive compensation growing exponentially.

And I would point out that there were $200 billion in share repurchases for S&P 500 companies alone in April 2021 - so “unaffordable” seems more like a choice.

And I’m sorry I am not a socialist but I did read The Grapes of Wrath last week.

[SReh26]

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.

There is a fair argument to make that there is a strong correlation between defined benefit plans becoming "unaffordable" and executive compensation growing exponentially.

And I would point out that there were $200 billion in share repurchases for S&P 500 companies alone in April 2021 - so “unaffordable” seems more like a choice.

And I’m sorry I am not a socialist but I did read The Grapes of Wrath last week.

Steinbeck, wasn’t it great? I recently reread The Great Depression: A Diary. Written by a midwestern attorney who lived through it. Incredible book, highly recommend it for its day by day account and personal anecdotes.

[SReh26]

It was a great idea to ask here for retirement advice as it's hard to find good books about it. The problem, IMHO, is that the books are written either by people who haven't actually retired and are just full of untested theories, or by people whose retirement plans failed - either they ran out of money and needed to write a book to pay the bills or they got bored and writing was their way to go back to work. People who have enough money and are happy with what they're doing don't take a year to write a book. But they may well take a few minutes to come here and share their experiences with their friends.

And probably for that reason, unlike most retirement books/articles, I haven't seen anything here I disagree with.

Most of my suggestions have already been mentioned, but I will offer a cautionary tale about pensions. My husband worked for a big company with a defined benefit plan. Several years before he retired, his company went though bankruptcy, PBGC took over the pension, and he ended up getting about half of what he'd been promised. Being cautious/cynical (take your pick) I'd always done our planning so we'd be fine even if he never got any of it. But some of his colleagues who'd done all their planning counting on that promise were in a world of hurt and had to make some major changes in their lives.

So if you can have multiple sources of income, you'll have flexibility if one of them doesn't work out the way you expect. And I also recommend closely tracking your income/spending/net worth the first few years of your retirement. It will never work out exactly the way you expected, and if you do need to make adjustments, the sooner you know the better.

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.

[Bob cruise director]

It was a great idea to ask here for retirement advice as it's hard to find good books about it. The problem, IMHO, is that the books are written either by people who haven't actually retired and are just full of untested theories, or by people whose retirement plans failed - either they ran out of money and needed to write a book to pay the bills or they got bored and writing was their way to go back to work. People who have enough money and are happy with what they're doing don't take a year to write a book. But they may well take a few minutes to come here and share their experiences with their friends.

And probably for that reason, unlike most retirement books/articles, I haven't seen anything here I disagree with.

Most of my suggestions have already been mentioned, but I will offer a cautionary tale about pensions. My husband worked for a big company with a defined benefit plan. Several years before he retired, his company went though bankruptcy, PBGC took over the pension, and he ended up getting about half of what he'd been promised. Being cautious/cynical (take your pick) I'd always done our planning so we'd be fine even if he never got any of it. But some of his colleagues who'd done all their planning counting on that promise were in a world of hurt and had to make some major changes in their lives.

So if you can have multiple sources of income, you'll have flexibility if one of them doesn't work out the way you expect. And I also recommend closely tracking your income/spending/net worth the first few years of your retirement. It will never work out exactly the way you expected, and if you do need to make adjustments, the sooner you know the better.

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.