Question For Currently Retired Members

[NE Woodburner]

I am approaching a point in my life where I am seriously considering retiring soon. I think it makes sense for me to wait until I am 59 1/2 (about one year away) so I am not penalized for accessing my retirement accounts. I have no pension of any kind and would be too young for SS, but I have saved for years in 401k and IRA plans. My only hesitation is worrying if I have enough money to last, especially since I'm thinking my account has taken a hit this year that may get worse before it gets better. I may be starting to take money out of my account while it is down, which I was hoping to avoid.

My situation, without revealing more than I am comfortable doing, is that my wife and I both work and make what most would consider a very comfortable combined income. We have a home and camp both paid for, no debt of any kind and kids are on their own now and self sufficient. My wife is a few years younger and would likely continue to work for several years after I retire. Our expenses with property taxes, insurance, cars, home/camp upkeep, etc. are significant but we don't spend a lot on entertainment or eating out. While we are both working we have no financial issues and manage to pay as we go for home repairs and other expenses without loans or credit card debt and still put savings away every year.

I have a to-do list a mile long and would love some time to travel to see the kids who live out of state. I have plenty of hobbies to keep me busy, so I don't think I'd be bored at all. When things settle down I plan to buy a bandsaw mill for personal use and would probably build a solar kiln as one of the first projects for wood off the mill.

I think we are well prepared, but it is still a big leap to consider. For those who retired at a similar age, how did it work out compared to what you planned? Did you have more or less money than you thought you needed before you retired? Any regrets for those who retired early?

[Magicman]

You discussed "money" but in actuality the only asset of any value that you have is your time.  Use it wisely.

And just for the record, I was downsized/retired at age 51. 

[IndiLina]

The rough rule that's popular is to have 25x your annual spending saved (invested). The Trinity study showed that if retirees didn't spend more than 4% of their invested savings a year, they would not run out, based on past market performance. There are some assumptions involved in the study (that past market performance will continue in the long term) so some limit their spending to 3 or 3.5% annually of their savings if they want to be extra cautious. 

[pineywoods]

Magicman speaks with wisdom. I concur. Don't become a slave to a "to do" list. You will never figure out how you had time to work. The real hidden killer to retirement plans is unforseen medical situations. I retired age 60. A massive stroke 2 years later changed everything. BUT, don't waste your remaining years worrying about what MIGHT happen. I'd say go for it with reasonable caution and roll with the punches. 

[Ljohnsaw]

My wife passed at 50 and I had a 19yo and 6yo - 12 years ago.  I reassessed what I was doing at that time.  I diverted as much money as possible into a deferred income account (457?) and accelerated payoff of my house along with paying off pretty hefty credit card balances.  We were doing fine on that greatly reduced income.  I'm fortunate to have a pension plan.

I built up a pretty fancy spreadsheet to compare my current "take home" pay with what my pension would be in a given future year (as years of service would increase it).  I came to the conclusion that I could live on early retirement (53-3/4) and get my young son out of after school care for a happier life.  An extra year and a half would get me maybe an extra $5-600 a month but at the expense of my son's childhood.  I left work in June of 2013, my son was 9 at the time.

It was scary the first year getting everything working smooth (had to lower the payoff for the house a little) but I am so glad to be rid of that life.  Currently my house is paid off, all vehicles are paid off, my cabin property is nearly so and carry no credit card balance.  I do have one big expense of buying a LTD care/life insurance package but that is almost self-funding now - that will free up a chunk of cash monthly in the next year or so.

So, long story short, I think you are already doing this - really buckle down to see what you need to live on and add a little for "date night out" every once in a while.

Also, I have more work than I can ever get to with building a cabin and helping out friends with projects.  Don't worry about being bored or having nothing to do!

[PoginyHill]

Not retired yet, but having the same sort of thoughts as you. I would avoiding taking money out of any investments that have tanked recently. Or, take money from the stock, mutual fund, ETF, etc... that has lost the least amount of money. If you have a Roth account (assuming you've had it for at least 5 yrs) I think you can withdraw money before 59-1/2 without penalty. Healthcare is probably the biggest nut to crack. Hopefully you can participate in your wife's plan until you qualify for Medicare. Part time work might be a good option to avoid or minimize taking money from investments that have a negative return.

I think the old rule of 4% withdrawal has been ticked down to 3 -3.5% by many analysts to account for longer average lifespan. When to withdraw from SS (as soon as eligible or at 70 or somewhere in between) is another consideration and involves many more factors than we can reasonably discuss here.

A general thought to consider, apart from retirement timeline: With most retirement accounts smaller now than say a year ago, it might be a good time to consider converting a traditional IRA to a Roth. You'd pay regular income taxes on the (much smaller) amount and never pay taxes again on it, not matter how much it gains in value.

[peakbagger]

I have been part time since 60 and should have been fully retired by now (62)but committed to see through two projects that should be over by fall. I have one minor pension good for " beer money" but my retirement is IRAs and Roth IRAs with some mutual funds. I thought I did a good job by building up my funds (buy and hold) but I ended up handing everything over to Vanguard Personal Financial Services. I have used Vanguard for investments for years but I managed it. Vanguard is already commission free and the lowest fees around including PFS (I think I pay .003% of the managed funds. PFS has me far more diversified than I would ever be able to manage, it makes big difference in weird markets like this. They also moved things around to make my investments a lot more "tax friendly" when I start taking money out. Just these two things pad for the .003% fee several times over. 

They will set up a fairly detailed financial plan based on the rep asking various risk questions. The one thing they really cannot do is figure your yearly budget. If you are used to working to a budget its not a problem but few folks really work to budget. They can help with suggestions but if you are not good at planning for big ticket items they will end up carrying some low earning funds to cover it. They use something called Mont Carlo Analysis on the plan which means seeing how it responds to random market changes over the life of the plan for many iterations (10,000) ultimately they come up with a likelihood of meeting the goal with a percentage. 

Check around Vanguard has one of the best reps out there and they are mutually owned company so no stockholders or stock prices to worry about. Hard to beat free to have PFS look at your portfolio and its all done by phone. 

[TroyC]

I retired at 55 and was worried if I had enough assets. My dad used to tell me I would run out of money and have nothing to do. Did not happen. I do run out of time however.  I do have a pension and took SS at 62.

I estimated my retirement income and for the last 2-3 years I worked, and I lived on what my retirement income would be. Rest went in savings. When I retired I did not have to change my lifestyle at all. No bills or obligations is the key to retirement- I support 3 properties and still have enough to do what I want.

Problem I had was that most retirement calculators base investment (income interest) at about 5%. Hard to get nowadays without substantial risk.  I bought a bunch of tax free municipal bonds in 2009, they paid good, between 5-8%. Most of them have been called, so now investing that cash at 1-2% does not look good. Broker wrote me last week, bonds are up around 4% now, not good enough for me to jump back in. Getting ready (hopefully) to buy another property. I have not tapped the retirement accounts, waiting till I have to as I'd rather pay Uncle Sam later.

Retirement is better than you can imagine (if you can live your lifestyle). I've never regretted it at all. Doing what you want when you want is priceless!

[YellowHammer]

I second the notion. Retirement should be for the rest of your life, you have good questions and plans, so hire a pro to give clarity on estimates, net income, and all that.

I was a great example.  I ran my numbers.  Martha ran my numbers.  I could not retire.  We are not professional retirement experts.  A friend told me to go see a pro, and we gave them all our information, and a week later we get called in for the results and he goes through it line by line, even to what trips did we see taking, how frequently, what vehicles we wanted to buy, etc, everything.  All was based on us retiring from sawmilling and our day jobs, and any other work, everything.

After a lengthy review of their analysis, he looked at me and asked "Why are you still working?  You have more than enough to cover your plan."  So I retired within 6 weeks, and he was dead on the financials, and we never looked back.  I am so glad I didn't stay working when I didn't need to.

Find a pro, hire a pro, and find out.  

[rusticretreater]

Have you thought about transitioning to part-time?  

[fluidpowerpro]

3 years ago, after 34 yrs at one company and the last of many pay restructuring events, I decided to quit. I was 56 at the time and planned to keep working. After meeting with my financial advisor learned that I could retire if I wanted to. Did look for a job for awhile but eventually decided to retire. Every so often I still get calls from someone in the industry asking if I would come work for them but the answer is no, I've moved on. It took some time to be able to say that. Your work becomes part of your identity so that was hard. 
One of the best things I ever did was about 15 years ago started working with a certified financial planner. Wish I had started earlier. 
In conclusion, I would highly recommend you speak to one before making a decision. They can tell you if it's possible. Make sure they are a Certified Financial Planner, not just someone selling investments. A CFP is held to a higher standard.

[NE Woodburner]

Well, I just typed a long response and hit post but it disappeared somewhere into space. So, I'll try again, but shorter this time...

I really appreciate all of the thoughtful responses. We have used professional financial services and run the numbers ourselves as well. I think we are fine and it's just the nervousness of taking the leap and the current market conditions that have me second guessing and looking for some reassurance.

I totally get the comments from @Magicman and others about the value of time versus money and it is definitely not all about the money, but we do need a certain amount to live like we want to live in retirement. We actually live a fairly modest lifestyle and don't need to keep up with the Joneses to be happy.

Transitioning to part-time, short work week is an option for me and I may consider doing that for a time.

I will run numbers again, set a date and work the plan. Thanks again for all of the responses. It really is helpful.

[gspren]

I retired at 59 years and 8 months because that's when I could without penalties, actually I worked an extra 11 days to finish the month. When word got out that I was retiring in a few months I had several people tell me how bored I'd be but that hasn't happened, like most people on this forum I enjoy the outdoors and can always find something to do.

[Ron Wenrich]

I didn't retire all that early.  I was 64, and its been 10 yrs.  I could do it because my younger wife had a really good job, and she had the healthcare benefits.  Not that I had health problems, but you have to cover that until you're 65.  That can be a major expense.

I didn't collect SS until 67, and that was because I didn't like asking my wife for money.  We have separate accounts.  I also wanted to wait to build up my monthly benefit.  Besides, I didn't really need the money.  We have lived below our means all our lives.

We have no debt.  We have a lot in savings.  The wife is now retired, and we still live below our SS benefits.  We can travel, eat out several times a week, and not really worry too much about the price of gas. 

But, life at 73 is a lot different than life at 63. That to do list will end up looking like a job.  I painted my barn, did the repairs, even did a lot of the cooking.  Then my back decided it was going to restrict things.  That's taken a good deal of those to do things and put them by the wayside.  It took a lot of time and treasure to get the back back (Tom) into working order.  But, the body still has its limits.

I also thought about getting a mill and doing a bit of work.  But, I could never get beyond the investment and whether the return would be worth it.  I wasn't really wanting to put myself into another job.  Besides, I've sawn more logs than most guys in a previous career. 

Life at 83 is going to be a bit more different than 73.  How much money do I need for those really big late life expenses?  Who knows?  Nobody knows what economic conditions will be in 10-30 yrs.  They use the current market conditions and use those projections into the future.  They also use assumptions that markets will always return to some sort of normal.  No results are guaranteed. 

[Poquo]

Check out IRS rule of 55. It allows workers who leave their job for any reason to start taking penalty free distributions from their current employer's retirement plan once they reach age 55.

[SawyerTed]

I retired at 53 which is soon to be 7 years ago.  The only regrets I have are that I thought I needed to go to work somewhere.  I spent three plus of those 7 years feeling tied to an inconsequential job.  I am done with that. 

Financially, both of us have pensions that are about 80% of what our final year salaries were.  By timing our home payoff and some other investments, our lifestyle hasn't changed.  When SS kicks in at 62, we will get a raise.  We are taking our SS at 62 because we will draw a significant amount in those 3 years-between 62 and 65. 

[YellowHammer]

There are no certainties in life except death and taxes.  Everything else is a gamble that is, in reality, just a guess, but with dire consequences if the guess is wrong. The market will never be "right," the economy will never be "right" and there is always nervousness, which is mitigated by doing the homework.

Typically, retirement is a three legged stool composed of retirement annuity, social security and investments.  It's a good idea to be able to retire on any two legs and keep the third in reserve.  

Or supplement the second leg with additional income from a part time job, again, using the third leg as reserve.  That's based on you confidence and ability to return to the job market if required.  

People move to this retirement phase with different ease, and when I retired, another guy, a friend of mine, 80 years old, with 50 years experience hesitated and almost didn't do it.  He did, and had all these great plans, and about a year ago, passed on, I hope getting some of it done.

Only you can make the decision.  I say jump, jump early, and enjoy the ride.  

 

[WV Sawmiller]

  I think Yellowhammer is giving the best advice about hiring a professional. That's what you'd do for a mechanic, doctor or other professional who had a skill you needed but did not possess.

 I am not really sure when I retired. I'm thinking it was about 10 years ago. I worked overseas in some high risk, high pay, lots of time off assignments. (Think war zones and places with poor medical care and lots of fancy tropical diseases most people could not or would not work in.) I spent a ton of money on vacations in remote areas. Some were for tax reasons due to limited time allowed in the USA to meet certain tax exemptions if I came back to the USA so I just considered them subsidized vacations. Either the IRS or some remote African or Amazon village was going to get my money so I chose the latter. My wife was a free lance photographer, had a real spirit of adventure and was more trusting in my judgement and abilities than anyone should have been. (Think surviving a Coup d'etat in February 2008 in a remote African country or camping in old Farc camps in the Amazon while we were there.) and I have never claimed to be or been accused of being normal and wanted to see people and places so I have memories and pictures beyond imagination.

  Finally I worked myself into a position where I was too expensive to hire for the overseas assignments I was interested in and had enough money squirreled away and with relatively inexpensive life style at home I did not need to accept less so the assignments quit coming. I had excess time on my hands and followed up on my interest in sawmilling, liked what I saw and heard from the WM dealer in NC and bought my mill and set up a portable milling business and piddle with some projects at home to salvage and market some wood off our property and from friends and other sources that sometimes unexpectedly materialize.

  My scuba diving partner from Saudi/Red Sea left his assignment and became a Financial Advisor and I contracted with him to handle my finances. He died a few years ago and I selected a co-worker of his he had told his wife to use if anything ever happened to him. I had made and saved a lot of money the last few years I worked and we pretty much put all my wife's teachers pay into her retirement 403B. She retired from the school system at 55 and worked a couple years at a local college till they merged with others and she lost that opportunity.

  I finally started drawing SS when I turned 67. My financial advisor works up which accounts to take disbursements from and when and discusses with us. I hate it and wish he'd just handle it and tell me later. : My dive buddy used to do that and he made us a bunch of money back when the economy was great and I was working big paying jobs and spending nothing except vacations and such. (When you're in a camp in Mongolia, Africa or Iraq/Afghanistan/mid-east all living and medical costs are provided by the employer and there are not a lot of places to spend money anyway.)

  If you do pick a financial advisor, questions he is going to ask you is about your goals, health, responsibility to others, assets, liabilities and risk tolerance. You will find some of both you likely had not thought about. We found out right away I am more risk tolerant than my wife and our advisor had to plan and invest accordingly especially until she had something unexpected and found we were prepared for it.

  I typically ask my advisor for the bottom line. What do we have available, what was it last time and is it growing or being depleted? For many years it has held steady or grown faster than we spend.

  Back to my sawing business - I call it a cost neutral hobby as it pays for itself and a little more and is growing as more people know about me and pass the word to their family and friends and keep coming back.

  I call retirement shifting gears. Before I did what I had to do to pay the bills and cover the expenses of raising our kids. The kids are grown, the bills are paid, medicare and supplements handle medical costs and I am staying entertained with my hobbies and milling.

  That is another big factor. You do not realize the social aspects of working till you are not around others. it can be significant and is something to consider and address. What are you going to do with the extra time? Spend more time with existing hobbies? Pick up more hobbies? Volunteer?

  Good luck.

[Gearbox]

I'm going on 20 years of retirement . What I tell people is add up what you spend in a year . that is what you are going to need to maintain your lifestyle  . You may need a little more or less . There are good mutual funds that will earn a solid 4% . This has worked for me .

[Wlmedley]

An older man told me years ago that the most valuable thing you have is your time.You can sell it but you can never buy it back.I retired at 62 after working for the same company for 42 years.Health insurance was my main problem as my wife has had two strokes in the last five years.I got insurance through the marketplace and it has worked out pretty well.l don't regret retiring at all.Only wish I could have did it sooner.I seem to be doing better financially than when I was working but like you I don't owe for anything and seem to spend less.Sawmill,garden and firewood keeps me busy,plus doing all the things my wife used to do.All in all I'm pretty content  :laugh:

[peakbagger]

Odds are the OP figured the health insurance aspect in. I used COBRA as long as I could from my former employer and have a high deductible health care plan so I could keep building up my HSA . My part time work does impact getting a subsidy on my insurance as I make too much, so for one person I pay  around 7K a year with a maximum out of pocket of 7K. If I went with a regular insurance plan my out of pocket would be less but I would pay more every month. I did hit my maximum out of pocket last year but every other year I was well ahead. Its been invested in Vanguard funds for close to 10 years so the earnings have long ago covered any health care expenses. 

The one hassle with part time is that for many jobs there is not such thing as part time. Ideally make a clean break with a new employer as in my case, there is far more work that can be done than I can do in my allotted hours when things get busy and with my type of work (consulting) during construction and startup I cannot plan ahead as much as I would like. That means occasional site visits and telecons on my planned days off. I am professional and want it done right so I will put up with it until the projects I am on are over but will probably make a clean break when they are done. I will keep my licenses active for a couple of years in case something with far less commitment comes up, preferably in the winter months. I do not ever see my self taking part time work for the sake of part time work, I see too many older folks working retails jobs where its obvious that they are not getting a lot of fulfillment. 

One thing your planner will have figured in is inflation. In the old days when folks retired, they had 5 or so good years and then passed by 70, these days healthy folks may be looking at being retired as long as they worked. With the exception of SS most pensions are not inflation indexed, so even a good pension (increasingly rare these days) are worth a lot less after 10 years of retirement.  Thats why I am delaying SS as long as I can as it least its inflation indexed. Obviously, inflation is a big issue this year but if the investments are diversified it hopefully will just be a couple of year blip. 

[WV Sawmiller]

   We went by Wal Mart 2 days ago and since I was in a hurry I naturally got in the slowest moving line in the store.  : (On principle I will not use the self checkout - I figure the next step is the store would have me unloading trucks and stocking shelves. >:(). A lady apparently several years older than me (which is getting pretty old) with an O2 bottle hooked up was slowly scanning the purchases. She looked like dead lice would not fall off her at the speed she was working. I am glad they hire the elderly and moderately handicapped but I sure felt sorry for her. I am guessing she needed the work as she did not seem like a chatty catty talking to all her patrons. (I am told the ideal Wal Mart greeter was a formerly retired man or woman who knew everybody in the community and loved talking and really did greet and make everyone feel welcome.) Maybe this is their plan to force me in the self-checkout line after all? :

   Part time work is fine for some people for the extra cash or social aspects but not for me. I might take a job for 1-2 days at a time but would not want anything that tied me down. That is one thing I like about the portable milling. I work real hard for a day or two at a time but on my schedule.

[kantuckid]

We like the "self-scan line" with the belt as we go once a week not often. Clerks help when issues arise and often no wait lines either. 
  
Retirement is a 100% personal decision. Any other way is sort of weird to me. I do see that some folks are worried about making ends meet and so on as they carry debt into retirement years. Matters a bunch as to how well you could manage your income when you still worked in my mind. 
 
My year of choice was based on the first year I got a 100% full pension. It mattered more for us as my wife's 6 years younger and she stayed at home to be a FT Mom when it mattered for our 3 sons so her pension took a hit, mine did not.
I was 58.5 years old  and taught PT (100 day contracts) for 3 more years while she finished a partial pension with 20 years service.
 We both had multiple "careers"-i.e., work areas which left behind other pension plans. My days at Goodyear plant you either got in 30 years or you got zilch. No 401K's in most of my work life. 
Honestly said, if we had used the parameters that most professionals or advice books advocate, I don't suppose we'd have ever been able to afford to retire? As it is we live like kings as we are highly self contained.
Time & health, certainly not wealth is our heavy factor. We were fortunate to have zero debt most of the 50+ years we've been married.   

[farmfromkansas]

Think if you are looking at your 4O1K about retirement, you better look again.  All through the Obama terms, the fed was supporting his administration with "quantatative easing".  They tried stopping it during Trump's term, but could not as the economy started to tank.  So now they are doing this Quantatative tightening.  Which means they are selling the bonds they created then bought, which somehow went into the stock market, and now they are selling.  So that means the money they created is coming out of the stock market. So look at where the stock market was 13 years ago, and that is where it is headed.  Unless they reverse their policy.  The fed has caused just about every financial upheaval that has happened since it's creation in 1913. They had this easy money policy in the 1920's, which led to the great depression, since even small town Americans were buying stocks on margin before the 29 crash.

[kantuckid]

Great post!