Here’s our latest interview with a retiree as we seek to learn from those who have actually taken the retirement plunge.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
My questions are in bold italics and his responses follow in black.
Let’s get started…
GENERAL OVERVIEW
How old are you and your spouse? How long have you been married?
We are both 71.
I have been married 50 years and it was all to one woman, not a collection of women.
Do you have kids/family?
We have a daughter, 43, who is married with two children, 12 and 10, and they live in Lake Tahoe, NV. She is an entrepreneur in the wedding industry.
Our son, is 38, married with two children, 4 and 2 and they live in Nashville, TN. He started his own manufacturing company in the golf industry.
What area of the country do you live in?
We live in a top-rated country club community in west central Florida.
As a golfer, I wanted some day to look out over our pool and lanai, see all of that green grass and know that I didn’t have to mow any of it.
We moved here 15 years before I retired, as soon as our youngest went off to college. We were tired of living in Northern New Jersey with the high state and real estate taxes, bitter winters, traffic congestion, crime and road rage.
It is nice to be able to play golf 12 months a year in the Sunshine State and have the added security of living in a gated community. The only crime I have ever experienced inside the gates is me, not having a Rolls Royce to drive to the clubhouse.
Is there anything else we should know about you?
Before I retired, I was a financial advisor for 31 years specializing in advising wealthy clients who were in the Red Zone, the five years before retirement and the five years after retirement. Therefore, I know more than a little about retiring successfully.
RETIREMENT OVERVIEW
How do you define retirement?
It is a time of life where I have the freedom to do what I want to do, not what I am required to do by my clients and/or boss.
I feel a huge weight lifted off of my shoulders as I was responsible for the financial well-being of my clients. Instead of managing investment portfolios for my clients, I now only have one investment portfolio to manage – ours.
How long have you been retired?
I have been retired five years.
Is your spouse also retired?
My wife retired some 40 years ago. She only taught school for a few years before the children came along.
What was your career and income before retirement?
I was a financial advisor. My AGI at retirement was $290,000.
Why did you retire?
Just as I advised my clients, I retired when I was convinced that I had more than enough dough to get us past our life expectancies and have some left over for our children and charities and of course, Black Swan events.
I would often ask my wealthy clients “what is the point of working when you don’t have to?” I would often tell the story of too many hard workers found dead at their desks.
PREPARATION FOR RETIREMENT
When did you first start thinking seriously about retirement and when did that turn into a decision to do it?
When the 401(k) was offered to me, around age 35, I signed up and I maxed out every year thereafter, including the after-50 catchup provision.
I started thinking then about what I needed to do to retire before I was too old or infirmed to enjoy it. I decided around age 56 that we would have more than enough dough to retire at age 66.
What were the major steps you took from deciding to retire to developing a plan to do so?
Fortunately, I had access to great financial planning tools through my employer, plus, “pretty good” outside financial planning tools.
I would update my data at least annually to see if I continued to be on target to retire at age 66. Not totally trusting computer software, I also used a great “back of the envelope” formula to determine if I had more than enough dough to retire.
It goes like this: For 30 years of retirement security, one needs 25 times annual expenses less Social Security and pension.
Our expenses, as per Quicken software, says I averaged $135,000 annually over the previous 10 years, and that is after fully funding two college educations, two weddings, two luxury cars, country club living, and nice vacations. Our gross SS and pension totaled $100,000. Our total assets totaled $3,500,000. Therefore, $135,000 less $100,000 = $35,000 X 25 = $875,000. Since $3,500,000 is far greater than $875,000, we were good to go.
Since we elected to not buy Long Term Care Insurance, we decided that we would self-fund possibly many years of Assisted Living Center/Nursing Home care. Just to make sure I didn’t overlook anything, I asked my Certified Financial Planner friend to review our financial plans. She blessed them and that is when I went ahead and locked in my retirement age of 66.
What did your pre-retirement financials look like?
Our AGI was $290,000. We had financial assets of $3,500,000 with an asset allocation of 5% in cash, 35% in fixed income (laddered zero coupon municipals, corporates, gold coins, fixed rate preferreds and an income for life annuity), and 60% in equities (mostly common stocks with a long record of growing dividends every year. (The Aristocrats.)
Our home was worth $350,000, mortgage free.
What was your overall financial plan for retirement?
It was to continue the lifestyle we grew accustomed to of spending an average of now $140,000 per year. With net after tax income of $300,000 and only spending an average of $140,000, we were very comfortable with our plan, knowing someday we will have to self-fund LTC expenses, plus future “Black Swan” uncertainties.
Did you make any specific moves to prepare your finances for retirement?
Yes. I sold some long-term municipal bonds at a nice profit and paid off the remaining mortgage of $150,000, about three years prior to retirement.
I knew it didn’t make financial sense as the mortgage interest rate was so low, and tax deductible, but it was worth it anyway for the psychological benefit of being absolutely debt free entering retirement.
Who helped you develop this plan?
That would be me, with the help of our company’s Retirement Planning Software.
What plans did you make in advance to leave your job?
Five years prior to retirement, I contracted for the monetization of my book of business. I entered into our company provided contract with a younger financial advisor friend to take over the management of my client’s accounts. His payment to me consisted of monthly checks for five years after retirement.
I used the five years prior to retirement to introduce my clients to my partner which made them feel comfortable with my retirement and him. I assured my clients that they would be in good hands with their new, younger financial advisor.
What were your pre-retirement concerns (financial or non-financial)?
First, I thought that I would not have enough to do in retirement and I might just sit at home and get bored. In my first five years of retirement, that has never occurred and I do not expect it to happen in the future.
Then I thought that with my knowledge of successful financial consulting for 31 years, I might want to coach younger financial advisors. I looked at becoming a certified coach, but working as a coach ultimately sounded too much like work, and since I didn’t need the money, I abandoned that idea.
How did you handle deciding on and paying for healthcare?
Since I retired at age 66, it was an easy transition to go from my company provided healthcare plan to Medicare for the both of us.
We use an insurance consultant to analyze our prescriptions, etc. every year and he advises us about our supplemental plans.
How did you tell your family and friends of your plans?
Since most knew I was near retirement age, I simply told them of my retirement date.
THE ACT OF RETIRING
How did you ultimately retire?
Since my boss knew exactly when I was retiring, I simply gave him my letter of intention to retire with the exact retirement date.
He was pleased with my plan and supported my entering into a contract to transition my clients to my partner. My partner and the boys in the office game me a great retirement party.
What went well?
Everything went well as almost all financial advisors used the same company provided five-year payout plan with the new younger partner.
What didn’t go so well?
Fortunately, there were only a few clients who were concerned about me retiring and they did not connect well enough with my partner. We were pleased that there were only of handful that moved their accounts to another advisor.
How did you ultimately find the courage to do it?
It did not take any amount of courage. I was fully prepared financially and I was confident that I would have plenty to do to keep busy and happy in retirement.
RETIREMENT LIFE
How was the adjustment, especially the first few months after retirement?
The adjustment was easy. I had thought long and hard about retirement and I knew what to expect and knew what I wanted to do in retirement.
How is retirement life now? What do you like about it and what do you dislike?
Retirement life is great. I knew I would enjoy it, but not to this extent. I am happy that I retired when I could, and in good health to enjoy it fully.
I like engaging in all of my activities, traveling, clubs, and volunteer activities. I enjoy the freedom to do what I want and when I want with no guilt of neglecting my clients.
I am even more confident that I made the right decision on when to retire. I can’t think of one thing about retirement that I dislike.
What do you do with your time? What does an average day look like?
Mondays: I still get up every morning of the week between 5-6 am.
I catch up on my reading of various newsletters, magazines and three newspapers; a national paper, a local paper and my 53-year subscription to the Wall Street Journal. It is nice to read all three newspapers without rushing through so I would not be late for work.
I review email, monitor the bills that are automatically paid from our joint checking account or credit cards. I review all of the checking and credit card charges that got posted on Quicken to make sure those charges are authorized.
Mondays are good for various medical appointments, and weekly massage therapy appointments.
Later in the afternoon I walk for 45 minutes, relax in our spa and swim laps. Every other Monday, I participate in our local Toastmasters Club meeting by either giving a speech, evaluating someone else’s speech, or handling any of the other functions of the club meetings.
Every Tuesday, I get up, read, practice golf and then spend four hours playing duplicate bridge with my favorite partner at our local bridge club.
Wednesdays I drive my golf car to the club to play golf with a group of 12-16 fellow members of our country club, and have a leisurely lunch afterwards to discuss a whole range of topics.
Wednesday night I play duplicate bridge with a different group of players at the country club.
Thursday, I relax, read, practice golf at the several practice facilities. While I am waiting for dinner, I improve my bridge playing skills on the computer using Professor Jack software.
Thursday night, we eat at the club and then play on a 10-person team at our Trivia Challenge game with between 50 and 200 players.
Friday, I read, walk for 45 minutes, relax in the spa, swim laps and play duplicate bridge in the afternoon with a different group friends at the club.
On Saturday, I again play golf with the same 12-16 fellow members at the club and then have a leisurely lunch afterwards.
On Sunday, I like to read the Sunday papers and watch the talk show programs on TV.
In the afternoon, I drive my golf car to the golf practice area to work on my game and then I walk for 45 minutes, relax in the spa and swim laps. We usually go out to dinner afterwards.
Looking back, what would you have done differently?
Since we are more than financially secure, maybe I would have retired one or two years earlier.
But I wanted to error on the side of retiring a little too late rather than retiring too early and regretting it.
Was there any emotional impact from leaving the workforce?
No. Because I am in contact with my partner fairly often, and have lunch with the boys from the office periodically, I don’t feel that I am cut off completely from my career and friends at the office.
I invite the boys and their friends for golf and lunch at our club and they appreciate getting on a highly rated golf course and catching up with how I am handling retirement, among other things.
What surprises (financial or non-financial, good or bad) have you had since retiring and how have you handled them?
I am pleasantly surprised that I am happier that I thought I would be in retirement. I am able to handle retirement happiness very well.
What are your future plans?
[Editor’s note: This interview was conducted in July.]
In September, we are looking forward to celebrating our 50th wedding anniversary by taking our two children, their spouses and our four grandchildren on a Disney cruise. We will have a great time watching our grandchildren have the time of their lives on their first cruise ship and Disney’s private island in the Caribbean.
Immediately thereafter, we head to Universal Studios in Orlando for more fun with the same crew.
In addition to the Disney Cruise, we take one or two cruises per year, for free. I am an Enrichment Speaker aboard cruise lines. In exchange for giving 45-minute presentations on the days we are at sea, we cruise for free.
I am qualified for two areas of expertise; Retirement Planning for cruises originating in the U.S. and Identity Theft for cruises originating internationally. I just completed my 14th speaking cruise and we have traveled to six of the seven continents. I will continue to take these speaking assignments in the future.
RETIREMENT FINANCES
How has your financial plan performed compared to what you had estimated before retirement?
My plan has performed exactly as estimated by our financial planning software.
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?
Quicken Personal Software says our 10-year spending now averages $140,000 per year. During these early years of retirement, we are traveling extensively, worldwide and across the country to visit the children and grandchildren and friends we have met on our cruises. Our expenses vary widely, depending on the year, for auto purchases, international travel, gifts, etc.
Our monthly net after-tax income between taxable and tax deferred account is as follows: Wife’s SS: $1128, my SS: $3092, Pension: $2044, Annuity $11,400, and investment income $7400. (Both our SS deposits are also net of Medicare and Plan D deductions.)
How are you handling Social Security, required minimum distributions, tax issues and the like?
When I turned 66, my wife started taking her spousal benefit, which was one-half of my benefit.
Then, when we turned 70, we both started taking our own benefit. We have SS deduct 20% federal tax. We take our RMD’s and we have 20% federal taxes withheld. (Florida, thankfully, has no state income tax.) My pension also has 20% federal tax withheld.
We have our CPA review our taxes towards the end of the year in case we need to make any adjustments.
On when to take SS, I always preached to my clients to wait, if at all possible, like we did, to age 70 to max out.
Of course, that depends on a longer life expectancy (see yours by logging in at www.livingto100.com) and not needing to live on the SS income prior to age 70.
Do you want to return to paid work? Why or why not?
I have no desire to work as it would interfere with the fun we are having.
Do you find it hard going from being a saver to a spender?
It has been said that opposites attract. I have always been the saver. My wife is the spender, although she said if it wasn’t for me, we would be not be in good shape to ever retire.
Her philosophy on money has always been “Why save the money, let’s spend it now! That’s what it’s for.”
I don’t know how I will feel going from being a saver to a spender. That is because, over the first five years of retirement, we haven’t even gotten close to spending all of our income in any year. We are, in effect, still in the savings mode at the rate of around $160,000 per year. Maybe when we have to pay for both of us at a premier Assisted Living Center or Nursing Home, I may have difficulty seeing our assets start to go down each year instead of up. But I’ll get over it.
Looking back, what do you wish you knew in advance?
I have been in the retirement planning industry for so long, and advising clients on planning, I’ve seen it all. So, there is nothing I wished that I knew in advance.
What advice do you have for those wanting to retire?
This is my favorite section of the interview and I have some very important advice.
First, is the subject of asset allocation of retirement assets.
All humans are creatures of habit. Since most of us have always invested in common stocks, we continue to do so in retirement, albeit to a lesser extent. I had all of my clients answer the following question: “Do you need to get rich or do you need to STAY rich?”
If they truly needed to still get rich, then they need to stay invested to a large extent in common stocks and hope there will not be an extended huge decline in the stock market just when they start withdrawing their recommended 4% annually.
However, if they need to STAY rich, then they need to greatly reduce or eliminate their exposure to common stocks.
Then I quote William Bernstein: “When you’ve won the game, stop playing.” The game is defined as building your assets and income to such a level that you are confident that you have more than enough dough to get you both through your life expectancies, and some money left over to leave to your children and/or charities, plus some money for unexpected Black Swan events.
But how does anyone know how long they will live? No one knows for sure, but you can get a pretty good idea. Go to www.livingto100.com and the result of you answering about 30 questions will be your life expectancy. Mine is 93 and my wife’s is 103.
If you have won the game, but you persist in your habit of being exposed to common stocks when the market is at a new all-time high and the economic expansion is in uncharted territory, then you run the unnecessary risk of a prolonged downturn in both the economy and the stock market. What is the point of taking unnecessary risks and blowing up your retirement? Do you want to risk having to go back to work and/or greatly reducing your lifestyle? If you won the game, get out of stocks and into principal preservation of fixed income.
If you have not won the game yet and still need to take the risk and uncertainty of common stocks, stick with index ETFs. Log onto www.bogleheads.org. Also look at the two Aristocrats ETFs with ticker symbols of KNG and NOBL.
Then there is the study done by the Federal Reserve Bank of Philadelphia that concluded, on average, we peak at age 55 for good financial decision making. We decline, on average, every year thereafter until age 70 when we really start to go downhill.
When we get older, we just make more dumb decisions plus we are more vulnerable to fraud and identity theft. Just leave investing to the index funds at extremely low costs.
The next piece of advice is on the non-financial aspects of retirement. You must anticipate well in advance of what you want to do in retirement. You can’t just play golf every day of the week. You must find other activities and volunteer opportunities that will get you out of the house.
Gentlemen: I had a wife of a new retiree tell me what she said to her husband: “Honey, I married you for better or for worse, but not for lunch.” You must cultivate things that interest you outside of the house. Your wife is not liking you being underfoot.
Another piece of advice is the importance of maintaining marital harmony. Don’t be a divorce statistic like more and more baby boomers. It used to be that the biggest cause for marital discord is arguing over money. It has now been replaced with fighting over the remote control of the TV.
My wife and I have completely opposite viewing preferences. She is a self-described bleeding-heart liberal and loves to watch the most liberal news channels and political commentary shows she can find. A friend once asked her “Just how liberal are you?” She answered “I am so liberal, TREES hug me.”
I am the opposite. We would both be miserable, and annoying, watching TV together, so we have our own TVs to watch in separate rooms. It works. We also have a marital agreement to never discuss politics. What is the point? Neither of us will convince the other to change. To this day, neither of us have even uttered the names of Trump or Clinton within earshot of each other.
My last piece of advice is to take good care of your health, because if you do not have your health, nothing else matters.
Enjoy your retirement in good health!
Bernd 3 says
Excellent read and i particularly like the advice sbout getting out of the house periodically. Makes sense as most happily married couples enjoy a moment or two of separation from each other. Bravo Zulu!!!
Joe says
Thanks for sharing some very practical viewpoints from your personal and professional viewpoints.
Just curious…..what factors went into you decision to self-fund future Long Term Care vs. insuring for the cost?
RI-18 says
Like I told my clients and myself, if you have more than enough dough to self fund LTC, then self fund. Then you don’t have to depend on or fight the insurance company to pay your claims. With the tremendous numbers of Baby Boomers retiring, living much longer than expected, and needing LTC, insurance companies are realizing that they did not charge nearly enough to pay all of the future claims. They have been getting out of the LTC business. Those insurance companies that can’t sell may go under, just when you are making a claim.
Rather than plug into the Retirement Plan just the average of two years in LTC, I would plug in six years, plus the cost of both the husband and wife entering the facility at the same time.
Mike H says
Thanks for sharing your interview!
I have a question- if you are invested in blue chip dividend aristocrats that have a proven dividend growth rate of several decades and are diversified across companies and sectors and living off of less that the dividends received each year, is it still a problem to experience a prolonged downturn in the market? It seems like an opportunity to keep accumulating especially if you have a surplus.
What do you think?
-Mike
RI-18 says
“Past performance does not guarantee future success” also applies to “proven dividend growth.”
Also, the operative word is “prolonged.” How long is prolonged? A decade like the lost decade? Who says “prolonged” would never be two or three decades? Why are you jeopardizing ruining your well earned retirement by unnecessarily staying in risk assets like common stocks when you don’t have to. Like I quoted Dr. William Bernstein: “If you’ve won the game, stop playing.”
MMiguel says
This interview is so useful, I am going to bookmark it for future reference.
Thanks!
P.S. Curious to understand how the formula for valuing your book of advisor business worked if you can share?
RI-18 says
I am happy you found it useful.
The formula is complicated and is also open to negotiation between the retiring advisor, the inheriting advisor and the employer.
Bernd Doss says
Enjoyed reading this interview and especially the advice on family separation. In almost every case, i have found that happiness sought resulted when individuals enjoyed a modicum of separation, even if it was only and hour or two. Good fortune to you and your family, enjoying an active retirement can also help prevent serious health issues. Thanks for your views.
RI-18 says
I am happy to share what works for us.
Monika says
I am very curious as to what sort of annuity pays out $11,400/month, where it is part of the 35% fixed income allocation on $3,500,000?
RI-18 says
At age 55, I bought the variable annuity with $1,520,000. At age 66, or 10 years, it guaranteed me a double to $3,040,000. The income is $152,000 per year for life. $152,000/12 months is $12,666 gross and $11,400 net after tax.
That was a long time ago, and I don’t think highly rated insurance companies offer the same today.
RI-18 says
Correction to the above dates and ages. At my age 59, in 2007, I did an in-service distribution from my 401(k) to my IRA. Then I was able to buy the annuity in my IRA. Then at age 69, in 2017, I completed my 10 year waiting period for my double and I started taking my Income for Life annual withdrawal of a gross $152,000.
Brenda says
Thank you for your lens. Question—you stated that $11,400 of your monthly income was an lifetime annuity —what year was this purchased and for how much? Thank you.
RI-18 says
2003. $1,520,000.
fiberguyr1 says
Finally another Retirement interview. I love these. I need to know if your handicap has gone down in retirement?
RI-18 says
Unfortunately my handicap has steadily gone up, like almost all of my golf buddies my age, despite more time for practice and a few clinics.
We all are moving up to the forward tees. However, as we get older, we get less flexible, less strong, and therefore less distance. But most of us just accept our higher scores, just enjoy each other’s company, the beautiful golf course and wildlife, our competitors good shots and have a few ourselves.
The Serenity Prayer applies: Dear Lord, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”
Phillip says
Also curious about the annuity purchase. What type is it? How did you go about deciding to purchase it and the rational? How did you come up with the amount purchased?
RI-18 says
Type: Variable. Minimum guarantee increase per year was 7%. Guaranteed to double in 10 years, then lifetime payout of 5% or $152,000 per year, gross.
I spent some time evaluating many annuities and liked the guarantees and the highly rated insurance company. My paycheck went away at retirement and I wanted to guarantee its replacement. It also covered more than our average annual expenses. I just backed into the $1,520,000 to guarantee $152,000. It is like an additional pension check.
Ricardo says
This was the best retirement article so far and thank you for your insight. I do have a question as to you still having 60% into stocks. It certainly appears to me that you “have won the game”, so I question why such a high ratio still in equities? I am also 71 years old, have also “won the game” with 3.8 million in assets, and I currently have a 42% equity ratio and I am wondering if that might be a little high.
RI-18 says
I was a lot higher when I wrote the interview some time ago. With the stock market making new highs, I recently sold everything and I am now 100% fixed income.
Like you, I have won the game, so I stopped playing. We will leave the last few percentage points to those who still need to be in stocks to get rich and we will cheer them on and be happy for them.
When the inevitable occurs, we will be happy we made the correct decision.
Hospitalist says
I love this interview, thanks for the advice you have given to us.
I have a question about your annuity. Have you ever calculated how much you would have had if you invested the money yourself at the end of 10 years?, And how much immediate annuity you could have bought? I think your timing was great because of the 08, 09 recession.
Congrats on your success, very insightful. Thanks again
Paper Tiger (aka MI-27) says
You didn’t ask me but I did go back and look at the 10-year S&P performance at the beginning of 2003 when he bought his annuity to the end of 2012 when I assume he converted to annuity payments. His annuity returned an average annual rate of interest of 7% and the S&P returned an average of 6.5% over this same period so I’d say he did fine with his annuity return.
Paper Tiger (aka MI-27) says
One caveat to this, I did not consider dividends in the S&P growth so if he had invested his money into and S&P 500 Index Fund and re-invested the dividends then the S&P average annual rate of return was probably a couple of points higher. Either way, I think he did fine.
RI-18 says
No, I don’t bother to look back. I am more than happy with my decision for a GUARANTEED double in 10 years. I had plenty of money invested elsewhere and this $1,520,000 was the amount I allocated to a guaranteed double, then guaranteed income for life. I also have resisted calculating how much my 44 years of Social Security deductions, plus my employer cintributions would have grown to if invested in stocks. Its a waste of time.
Hospitalist says
Comparing variable annuity to social security is comparing apples to oranges.
For the ones considering buying a variable annuity, this is a prime example of why you should NOT be buying a variable annuity.
S & P 500 returned 7.3% per year from 2007 to 2017. The $1.52 M will more than double during this time and this is including a major recession 2008-2009. The annuity does not allow the investor to take out his money after the 10 year”guarantee” return, instead it goes straight to an annuity that pays only $152 K per year, starting at RI-18 age of 69. Average lifespan for male in USA is 77. He will need to live until 89 to only break even, and that’s not making a single penny from his pile of “guaranteed double” quick research on immediate annuity at current interest rates will pay around $210 k if you buy it at 69 years old.
Lee says
Thanks for sharing your personal retirement experience and advice. A very informative interview.
I was particularly pleased to read your advice on investing in equity index ETFs. Its great to see more financial advisors turning to these low cost passive investments vs higher fee alternatives.
Thanks again for being so generous with your time.
RI-6 says
Great story, thanks for sharing! And congrats on enjoying your retirement. Some great lessons in there too!
We’ve struggled a bit with routine and scheduling in retirement. Looks like you have that figured out.
My wife and I have also found numerous ways to keep from over doing the togetherness thing… hahaha. It’s important to have and pursue your own interests and sometimes spend time with different friends. For sure, retirement is a test of how much you like to be together.
Excellent advice on quitting once you’ve “won”. I think we all get caught up in wanting to continue to grow our investments when what we have may be plenty.
All the best!
-MM55 & RI-6
RI-18 says
Humans are creatures of habit. We mistakenly continue the habit of investing in risk assets when we don’t need to.
I don’t want to explain someday to my wife why we both have to go back to work and reduce our standard of living because I unnecessarily stayed in the risky stock market because of a force of habit.
To break away from this habit, we need to repeat as often as necessary: “If you’ve won the game, stop playing.”
ESI says
https://esimoney.com/youve-won-game-stop-playing/
Joe says
Thank you for the interview!
I got a little lost in the details. I think you are counting the $1.52 million annuity in your asset base as you listed it under fixed income. Assuming you are valuing it at your initial investment of $1.52 million rather than at the guaranteed double value (which it’s currently at), and that it accounts for the full 35% asset allocation meaning negligible value for the munis, corporates, gold, etc, you would have a financial asset total of at least $4.34 million rather than the $3.5 million reported. That annuity stream is over half of your income, so its valuation plays an important part in the retirement finances.
You also mentioned that you sold all of your stocks this year. Assuming you’ve been invested for a long time and sit on mostly capital gains, you’d have to pay 23% in federal taxes on the gains. Were the millions in stock all held in retirement accounts? Otherwise you’d lose a huge part of your asset base this year.
RI-18 says
Most of my stocks were in the IRA. Yeah, it is a little painful paying LTCG taxes, but I have plenty of cash and I feel a lot better knowing that I don’t have to worry about an extended downturn.
Lynn says
Thank you for the great post!
A couple of questions-
1. What do you mean by- when you’ve won the game? Do you mean the day you hit your financial number? I want to retire at 55 and should have over 1 mil by then but if I wait 10 years (65 yo) I may have double that. my number is 1 mil ( this could change) – so what is your advice for when to take money out of stocks. Just a ball park. I know you have little info on me.
2. Also, you recommend index etfs- why index ETFs over regular index funds? I’ve been heavily invested in vanguard index funds my whole adult life. Should I start etfs or keep doing what I’m doing.
RI-18 says
Hi Lynn,
I am pleased you liked my interview.
1. The “Game” is having to put away the right amount of money and then having to invest in risk assets like stocks to accumulate more than you need to get you and your spouse past your life expectancies, and have some money left over for your children and/or favorite charities. You will know that you have “won the game” when your financial plan proves the above. “Stop Playing” means stop playing with risk assets like stocks because you don’t need to as your financial plan proves you have more than enough dough. If you continue to invest in risk assets unnecessarily, you may end up blowing your retirement and having to go back to work.
Yes, hitting your financial number is paramount, when combined with your other sources of income like pension, SS and annuities.
My advice for when to take the money out of stocks is when “you’ve won the game.” It’s not about age 55 or 65 or $1mm or $2mm, it is about when your financial plan proves you have more than enough.
2. While you are still in the accumulation stage, I like to recommend the two ETF’s KNG and NOBL. Read up on them and you will see why.
John says
Where is the pension from? A job before you became an FA?
RI-18 says
No. The pension is from the years I worked as an FA in the 80’s. Our parent company, a large bank, had a pension for all employees. They since froze the pension, and I waited until age 70 to start taking the monthly payments to get the max. I did the same for SS. Since we didn’t need the money to live on and my wife and I have very long personal life expectancies, (93 and 103) we also chose to wait until age 70 to max out.