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My questions are in bold italics and his responses follow in black.
Let’s get started…
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 70 and my wife is 73.
We have been married just over 50 years.
Do you have kids/family (if so, how old are they)?
We have a son and two daughters ages 46, 44, and 40.
What area of the country do you live in (and urban or rural)?
We live in the Mountain West in a small town (population about 75K).
Is there anything else we should know about you?
In the 1970’s we were called WASPs (White Anglo Saxton Protestants).
How do you define retirement?
Retirement is not having to work for a living.
How long have you been retired?
I have been retired almost 16 years.
Is your spouse also retired?
For personal reasons my wife chose to work an extra year so has been retired 15 years.
What was your career and income before retirement?
I worked as a state employee. My starting salary was $7,200 a year.
When I retired 30+ years later it was just under $50,000 a year.
My wife was a school teacher and started at about $23K a year and finished at about $54K per year 16 years later.
Why did you retire?
I mostly enjoyed my job until the last year or two but by the time I retired I was suffering from burn out.
Happily, I was able to retire when I needed to.
My wife was pretty much in the same boat.
PREPARATION FOR RETIREMENT
When did you first start thinking seriously about retirement and when did that turn into a decision to do it?
As civil servants, we were fortunate enough to have pensions. We were always aware of the value of those pensions and assumed we would work until 65 or so.
In my late forties I became interested in finance and one night watched the PBS video Affluenza. At the end of the video they talked about further information including Joe Dominguez and Vicki Robin’s book Your Money or Your Life.
I read it and read it to my wife as we were traveling (she didn’t want to read it but would drive and listen to me).
After discussion, we decided to follow the ideas in the book and began making plans for an earlier retirement.
What were the major steps you took from deciding to retire to developing a plan to do so?
Initially, we obtained information regarding the functioning of our pension plans.
We learned that it was possible to add extra work time to our pension by identifying public service employment that was not covered by a retirement plan, thus increasing the retirement benefit. We aggressively pursued that option.
Also, we had been paying down the mortgage on our home; we re-emphasized the acceleration of retiring that debt.
When we moved to a larger house as our kids got older, we rented our first home as an investment toward retirement.
What did your pre-retirement financials look like?
The good thing about our financials was we had virtually no debt except for a mortgage on our primary residence and a small mortgage on our rental house (our “starter home”).
Our primary residence was worth about 140k and we owed about 70k on it. Our rental house was worth about 50K and we owed about 8K on it.
Not counting the houses or pensions, our net worth was probably in the vicinity of 50K, some in a small 403b (which was virtually a passbook savings account – I did not know much about investing and “wanted my money to be safe”) and in bank and credit union checking and savings accounts.
Around the time that we retired our parents passed and my wife received an inheritance of about $10K and I received an inheritance of about $30K.
What was your overall financial plan for retirement?
Although we were not very financially literate through much of our married life, we did recognize the need to live within our budget and had fairly extensive records as to our past living expenses. That enabled us to make a pretty good estimation of our current living expenses while we were discussing our retirement plans.
As I mentioned earlier, we had access to pensions. Our primary plan for retirement was to increase our retirement benefits, as much as possible from those pensions.
My wife was able to identify about eight or nine years of public service employment not covered by pensions. At that time, to buy a Year’s worth of retirement time cost around 15 to 20% of your annual salary. We decided to “sprint” to retirement and put nearly all her income toward her buyback for about two-and-a-half years. Once that arrangement was entered into it was a non-revocable contract, we could not change or get out of it.
We planned to live only on my income, which would give us an opportunity to test our ability to live on a reduced income (actually, reduced more than it would be at retirement). We are pretty conservative so we agreed that while we did the buyback if we had financial issues, we would draw from a $20K savings account we had. This gave us a safety net and a yardstick as to our spending and financial needs.
At the time, I was contributing to a 403b. We determined that we would continue doing that unless finances got too tight at which point I could suspend that contribution as needed.
We found that although sometimes the money got pretty tight at the end of the month, we were able to live only on my paycheck — we never had to use the $20K.
Later, I identified a couple of years of public service employment not covered by pensions and bought that time back.
Some time later, I found a calculator online which estimated the “value” of pensions, using the monthly payout. The calculator put the “value” of my wife’s pension at about $1.3M and mine at about $980K. Hers was more valuable than mine because her last 5 year average income was higher.
Once we had completed our buyback, we were able to obtain from the retirement system a fairly accurate estimate of our retirement income.
By this time we were in our early 50’s and knew the date(s) at which we could retire with no penalty — that became our target retirement date. (Basically, the formula used by the retirement plan was age plus the number of years of service. That total had to be 80 or more to retire at full benefit. It was possible to retire sooner but there would be a permanent reduction of benefit.)
The good news was that buyback time was treated as regular employment time so even though my wife had less work time, with her buyback she was able to exceed the 80 Point threshold.
As mentioned earlier, we also had been paying down our house mortgage. I used part of the inheritance from my parents to pay off the last about 15K of our mortgage prior to our retirement.
In addition, we sold our rental house shortly after we retired which netted us about 70k (that is a lot more than the 50K I listed above – just before we sold the house, the real estate market got red hot in our area – good luck, not careful planning!) That money went into savings.
At the time of our retirement, we were far from Social Security age so did not take that into account in our planning.
Who helped you develop this plan?
We spent most of our life as financially ignorant but conservative, careful, money managers. In my late 40’s I had an epiphany that money management was not a God-given gift given to only a lucky few (assuming there are a few such people in the world), but a skill that can be learned and developed.
I began reading the newspaper financial pages, money books, took a couple of accounting classes and, ultimately, watched the video Affluenza, which provided ideas I had never considered.
We used the ideas in Your Money or Your Life, the assets we had, some advice from our accountant, information we obtained from our pension plan and lots and lots of discussion between ourselves.
We also had discussions with friends we felt would have expertise on specific issues.
Our plan started out as a wish, progressed to a goal and evolved to an action plan over several years. A number of times it was necessary and/or desirable to revise or update the plan. It was all worth it!
I don’t see a question about it so I’d like to include a partial list of books that were especially significant to me just starting out:
- Your Money or Your Life
- The Tightwad Gazette
- The Wealthy Barber
- The Millionaire Next Door
- The Richest Man in Babylon
- Getting a Life
What plans did you make in advance to leave your job?
As a part of my retirement planning, about two years before my estimated retirement date, I began looking for things to retire to.
I had seen a number of people retire, go home, sit in front of the TV, and die in three years. I was not interested in any of that.
Since I believed I would not have to work for money after retirement, I restricted my search to volunteer opportunities. I found a number of possible volunteer activities and other things I thought would be worthwhile.
I talked to administrators of programs in which I was particularly interested. I found there are many places and many people who would love to have a willing capable person to work in their program — some wanted to start me right then!
Although I had done substantial research on post-retirement activity options, that still was a concern. As a result, at the beginning of my retirement I actually over extended myself and my time and ultimately had to cut back on the things I was doing.
Once we were reasonably sure we could make retirement work, we set a date (my wife later changed hers).
When appropriate, we notified personnel offices and immediate supervisors and began the process of disentangling ourselves from work.
By that time we had our finances pretty much set up and ready for retirement. We had extra money set aside because it would take one to two months for our pensions to start.
We also made arrangements for the continuation of the modified health insurance available through employers (we just had to pay extra), and began budgeting for once-a-month paydays.
What were your pre-retirement concerns (financial or non-financial)?
Leaving paid employment and living on other income is a big and frightening step. Even though we were certain we were going to be able to retire successfully and had spent a lot of time and discussion on the transition, we were still nervous.
In a way, my wife choosing to work an extra year was a blessing since it gave us an intermediate transition between employment and retirement.
How did you handle deciding on and paying for healthcare?
We had several options for healthcare through my work and through our pension plans.
We looked at all of them and ultimately chose to continue with my employer’s health plan. It was fairly expensive, but was also quite comprehensive, we had been in the same plan for several years and understood its programs and foibles.
Since we both have health issues, it was important for us to have good, comprehensive health insurance.
How did you tell your family and friends of your plans?
When we began discussing early retirement we did not tell anyone.
Over time we did involve a few friends with whom we were consulting and told our (by then) adult children that we were considering retiring early.
As we got closer to retirement and it became more of a sure thing, we widened the sphere of people we told.
We were surprised how few people were “shocked” about our plans. Primarily we were asked questions about when and how we were going to do it and could we afford it?
THE ACT OF RETIRING
How did you ultimately retire?
By the time we were at the point of retirement, pretty much all of our coworkers, family, and friends were aware we were retiring.
We had investigated the separation procedures of our respective employers and knew the time frames, the paperwork, and required notifications. We were able to do all the required actions relatively quickly and easily.
I spent a couple of weeks culling all the paperwork I had accumulated over 30+ years. I took a box of stuff home and a couple of pictures; my wife took a carload home, after giving most of her teaching materials away (teaching takes lots of stuff!)
We did participate in various going away activities, many of which where prior to the actual day of separation.
For me, the last drive home was as though I had never done it before. I had a whole new appreciation and outlook on the world.
What went well?
What went well in retirement? Almost everything.
There’s always plenty to do. The difference being if you really, really don’t want to do it you say “no” and no one can fire you. But there are many worthwhile activities and sometimes you have to say no even though they’re all good.
The money turned out to be less of an issue than we expected. In retirement we have more money than when we worked for a living.
We have been able to visit our children and grandchildren as they have scattered across the country in their lives.
We also have more time for church service, hobbies, and friends.
When it came time to make decisions about Medicare and Social Security, our research experience with our retirement stood us in good stead and we were able to make what we believe were the right choices for us.
What didn’t go so well?
Health insurance turned out to cost even more than we had expected ($1,200 a month).
We also found that the free time in retirement is much more limited than expected. The plus side of that is we never get bored.
How did you ultimately find the courage to do it?
I’ll talk here about my wife’s decision to work an extra year.
When she told her aid she was retiring, the aid was upset.
A couple of years before, I had counseled the aid about the state retirement program. As a result, the aid was working on early retirement, but had one more year to go.
My wife made an agreement with the aid that she would work one more year and they could retire together. I don’t think it was “cold feet” exactly, the problem was my wife is a really nice lady…probably the only reason she put up with me for so long.
How was the adjustment, especially the first few months after retirement?
Almost immediately after our retirement we took a two-month cross-country trip visiting with our children. For my wife that happened at the beginning of summer so it was like being on summer break.
I had been retired a year, but had been very busy with various volunteer activities and our un-done house chores. The trip was a vacation for me!
By the time we got home after 2 months, retirement was in the bones. The transition felt very natural.
Of course, it was also helpful that we had been planning and working toward retirement for about seven or eight years.
How is retirement life now? What do you like about it and what do you dislike?
About 8 years ago (so we had been retired about eight years) in a moment of madness I asked my wife if she would like to move back to our home state. She said yes.
We took a trip shortly thereafter and found a house in a senior adult community. We liked it, made an offer, and it was accepted. A month later we purchased the house, with a mortgage, and moved a couple of months after that from a large city in the southwest to our scenic little city in the middle of nowhere. We have been here about seven and a half years. Being retired made that possible.
The retirement community is an “active lifestyle” 55+ community. It has lived up to the promise — we are very active and busy in the community.
Part of that move involved moving into a smaller (but not less expensive) house, which has been nice in terms of housekeeping.
The interesting thing is even with a new house payment and maintaining the house in the other state we’re still doing fine financially.
The one thing we have discovered as we have aged is that we spend more time with doctors, who have become our “new friends.”
But even so, with the emphasis on activity and fitness, our overall health has been good.
I hate to think about working all that time with a little less energy and occasional health problems. Had that happened I might not have been able to retire with a year’s worth of sick leave (for which I was compensated).
What do you do with your time? What does an average day look like?
Prior to our move, we spent time doing volunteer work, church activities and service, and hobbies. Our life was busy and active. We also spent time doing yard work and house chores.
Since our move, we spend more time with friends and neighbors and participating in community activities.
We volunteer time for community programs and clubs and spend more time than we did prior to our move going out to eat and attend community and city events.
We also do some volunteer work for our local city.
I have also started a couple of new hobbies, which take up time each week.
Typically in a normal day we get up when we want — sometime between 6 & 9 am.
We eat, watch a little news, attend some kind of a community function then have lunch.
We may take a nap and then do some afternoon activity or visit with friends within the community.
In the evening after supper we may stay home, we may do some sort of church activity, or we may attend some community group.
Participating in community activities may be simply attending as a spectator; some of them may involve our participation, or may involve actively assisting with the presentation.
Our community has multiple clubs that cater to the interests of various residents. I’m a volunteer in several clubs and am a (very minor) volunteer community official (I use “community” here as our active living community, not “the City”).
At the end of the day (sometime between 10 + 12 p.m.) we go to bed.
Some days we go see one of our friends, the doctors (that sounds kind of grim but, in fact, for our ages I believe we are in quite good health).
There is a joke in our community that everyone is gone half the time. It’s somewhat of an exaggeration – for most it’s not really half — but many people, including us do travel.
Most of our travel is to kids and grandkids, but others do cruises (we don’t care about them) or are even “snowbirds” spending time in more hospitable climates for part of the year (we’re a little guilty of that, if our weather is bad, we like to go someplace more temperate).
Looking back, what would you have done differently?
I don’t know. Nothing.
Was there any emotional impact from leaving the workforce?
For me, I felt relief.
I enjoyed my work and felt it was very worthwhile, but I also found it very emotionally wearing. Retirement lifted a great weight.
My sleep improved and I was easier to live with.
What surprises (financial or non-financial, good or bad) have you had since retiring and how have you handled them?
Even though I was virtually certain we would be OK financially, I had this nagging concern that I might have to get a part-time job or start extreme couponing or something.
I am happy to say none of that happened. Financially things have gone very well.
I was also worried that I might be bored or have nothing to do. Retirement has been busy and satisfying. Every now and then I find myself wondering how I ever fit employment into my life, I’m plenty busy now.
What are your future plans?
Things are going very well. At this time, I’m not sure that we wish to make any significant changes.
How has your financial plan performed compared to what you had estimated before retirement?
Even better than projected.
We were doing very well only on our pensions. The move out of state, and maintaining two houses did put some strain on our financials, but it was manageable.
We were pleasantly surprised when our financial position significantly improved when Social Security kicked in (at age 66 for my wife and 70 for me) and we became eligible for Medicare (which lowered our medical insurance premiums a little).
In our retirement planning we had not really done much thinking or planning regarding Social Security. It made a significant difference.
The primary surprise in our financials is that there have been virtually no surprises. When we planned, we tried to make our plans and our financials as robust as possible, since we like to be pleasantly surprised when money goes well.
Can you give us some insights into your post-retirement spending and income? How much do you spend annually and on what? And where does the income to pay for your spending come from?
Last year between two Social Security payments, two pensions and some small income from interest and dividends, our gross annual income was about $110,000.
Expenses on an annual basis (rounded):
- 19K – Taxes – Federal, State & Property
- 20K – House payment (+ extra principal), HOA fees, maintenance, insurance and miscellaneous (for two houses)
- 8.5 k – Two cars free and clear – we pay gas, maintenance and insurance and savings toward next car.
- 15.7K – Tithe and various charitable donations
- 8.5K – Food, household expenses, and eating out
- 19 K – Medical including health insurance
- 6.5k – Utilities and cell phones
- 12.8K – Miscellaneous – hobbies, gifts, entertainment, clothing and savings
How are you handling Social Security, required minimum distributions, tax issues and the like?
My wife took her Social Security at 66.
I applied for and received spousal Social Security until age 70 when I applied for my own Social Security. That delay resulted in about a 30% increase in my Social Security payments.
Over about the past 5 or 6 years I have been rolling our IRA accounts into Roth accounts and paying the taxes on them. Our accountant would tell me the amount I could roll over without going into the next tax bracket and I moved money.
Last year was the final year, all of our retirement accounts are now Roth’s. We don’t have to do any RMD’s.
I chose to do rollovers because when I began drawing Social Security, I expected our income to go up.
As to taxes, we have our pensions withhold excess income tax for federal taxes. Last year, since the tax cuts reduced the amount of withholdings, I also paid an estimated tax payment on the advice of our accountant. That worked out nicely and we received a small refund instead of paying a penalty for under-withholding (although I believe the Treasury Department has recently announced a one-year grace period on penalties for underpayments because of the new tax law changes.)
I will monitor the withholdings this year and, if necessary, make another estimated income tax payment.
Our state does not require estimated income tax payments, a lump sum when due is acceptable.
I have money automatically transferred into a high interest savings account through the year and write a check at tax time.
Did you return to paid work? Why or why not?
For fun I returned to part-time work about 10 years ago doing mechanical work, which was something I have never done professionally (I was an office worker in real life). I worked perhaps 5 to 20 hours a week.
For a while, I found it interesting and challenging work but after about a year or so it was taking up too much time and other things happened, so I left that employment and have not worked for money since. The only reason I took that job was an interest in a new challenge.
Did you find it hard going from being a saver to a spender?
From my story it is probably apparent that I was never an OCD saver! I spend and spend and still have a little extra money to put in savings and I feel good about both.
Looking back, what do you wish you knew in advance?
I wish I had started earlier.
I cringe at some of the money mistakes we made that could have been easily avoided had we been more financially knowledgeable.
I also wish I’d had the internet and all the great resources, like this blog, to give me ideas and new ways at looking at myself, money and the world.
In large, things worked out well for us and I’m glad for our lives, but perhaps with a little more lead time we might have done even better…Or, maybe not.
What advice do you have for those wanting to retire?
It was very helpful for us to live on only one paycheck for a couple of years while we were “sprinting” toward retirement. It gave us confidence when we would be able to financially retire as planned. Plus, living on less gave us more resources to put toward retirement.
When we paid off the buyback, we stayed living on about one income and set money aside for other things like developing a larger reserve for emergencies.
I believe the most important element in planning for retirement, other than money of course, is to retire to something. As I said earlier, I have known a number of people who retired, went home, sat on the couch in front of the TV, and died within 3 years.
Retire to something that is important to you and that you can enjoy. Life is grand, make the most of it.