Retirement Interview 36, Part 2

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.

This interview was conducted in April and is part 2 of an extended post. You can find part 1 here.

This post is a bit different as it includes thoughts from both a husband and a wife (separately).

My questions are in bold italics and their responses follow in black.

Let’s get started…

THE ACT OF RETIRING

How did you ultimately retire?

Husband: About 6 months before leaving, the management changes started, starting with a new boss for me (see my comments above) as well as some corporate reorganization that reduced my responsibilities.

I had a great relationship with the head of HR and my new boss (who was a friend). I let the HR head know that I wasn’t thrilled but would give the new arrangement time to work. My new boss basically told me I could do anything I wanted but did have a few long-term role requests. I declined the long-term roles, telling him I couldn’t commit to the time frame. I think he got the message.

I continued talking to the head of HR and finally said I wanted to figure out an amicable way of leaving. We worked out a nice severance package (one year salary plus 18 months of healthcare for my family plus some vesting of options) and that was it. I informed my boss, my team and then the CEO. What I actually told people was that I was taking time off to evaluate my options.

The day before I left, we had a party on the floor of our department and it felt like the whole company stopped by to say goodbye – it was a fun day just hanging out and talking to people. During the party, a number of people told me they had never seen me so happy.

Interestingly another senior person was also retiring that day and his party felt more like a wake – I think he was less happy about leaving.

The actual day of leaving was anticlimactic – I handed in my computer and other tech, and walked out with my last box of stuff. I vividly remember everyone saying goodbye as I walked to the elevator, then I looked back and saw everyone back at work. Life goes on without you; that’s a new thing to get used to.

Wife: My department celebrated me at our end-of-year department meeting. They gave me a card signed by everyone and said nice things.

I went to graduation. I love graduation. This felt like a big goodbye because it was my last one. I had pictured throwing a retirement party for myself and inviting all my friends, but with COVID that was not possible.

When the bell rang on the last day of school it felt really good. I mean, the last day and the first day of school are always good, so that wasn’t especially new. I had heard many times that for teachers the big day isn’t the last day of school; it’s when school starts again in the fall and you are not there. Because teachers are used to the hard drive for 10 months and then a 2-month break. So I had my 2-month break and when September came, I was traveling!!

What went well?

We spent a lot of time planning for our retirement plus planning when and how we would actually step away from full-time jobs and were pleased that just about everything went well.

This is how we plan our travel as well. We spend a lot of time figuring out how to get places, what to see, and how to structure our days. We both enjoy this kind of planning and, in the case of vacations, believe it has its own kind of pleasure. I suppose it’s a version of “it’s not the destination; it’s the journey.”

The planning for retirement was similar, but instead of planning for a year and then taking a vacation, we planned for decades. In that time, we reevaluated, discussed priorities and spending, and rebalanced our assets.

What didn’t go so well?

Nothing. We are happy with outcomes.

How did you ultimately find the courage to do it?

Husband: When I left my company, we knew that we had enough money to retire, so I was excited to take time off without a specific plan for my next job. We had talked a lot about retirement, so one option for my plan was to retire.

As it happened about 8 months after I left my company, I did join a startup for about 9 months (see above). That was enough time to convince me that the retirement option was the one I should actually select and follow through on. In other words, it felt like a long time coming and when I finally made the choice deliberately, it seemed easy.

Wife: I was jealous watching my husband have a life where he could do what he wanted when he wanted. He was exercising all the time, cooking, and seeing friends for lunch.

I asked myself if the positives of my job still outweighed the negatives, and the answer was yes, but not for much longer. I guessed 3 years would be it, and then had that as a goal in my mind.

For those three years it shaped the projects I chose to take on, and those I didn’t, so I had some time to get used to this idea of not working, and to make exciting plans with my husband about how we would use the new time together.

RETIREMENT LIFE

How was the adjustment, especially the first few months after retirement?

Husband: The first few months after the main retirement move, I struggled with the lack of schedule and wondered if I should get another job or not: the nagging question of who am I if I am not my job? I started running for exercise.

The second time I retired the first few months were easier. As I wrote before, I did take one more job which did not last very long. When it ended, I had already started many pieces of my schedule: household care, cooking, exercise, volunteering. I tried cycling. I added yoga. I got some consulting gigs.

Wife: The first 2 months we had college kids at home, so that felt the same and very busy. I told my husband that we should share more of the cooking and cleaning chores now. We are still getting used to that because we do meal planning and shopping differently, but it’s kind of fun to figure out how to share in this new stage.

When school started for the college kids, we really got moving. First, we visited them at their respective schools. We explored the towns their colleges are in.

Then we went to Europe, choosing a destination based on plane flight prices.

We came home and visited my elderly parents whom we had not seen for 2 years because of COVID.

We were home during winter break for our kids and then when they left, we took off for another country. (Remember, we have to be out of the US for 3 months to make our health care work.)

How is retirement life now? What do you like about it and what do you dislike?

What we like:

• Rarely using an alarm clock
• No Sunday night anxiety about work
• No worry about how we will catch up on work after our vacation.
• Jumping on a plane to visit a sick child.
• More gardening
• Exercising every day
• Being out in the middle of a weekday with fewer crowds
• Exploring our own city like tourists
• Focusing on one event a day

What we dislike:

Husband: Full-time work provides built-in social interaction and I think we do miss that. Now, I am in touch with only a few colleagues from that time, though I tried to maintain contact with others. Not everyone turned out to be more than a work friend.

Wife: I also miss the social interaction with students and their parents. I also miss the gratification from a job well done, which are the rewards my profession offers.

I can point to any year of my teaching and know that I made a pivotal difference in the life of another person–usually multiple people. I have really specific stories of helping teens survive or gain confidence, or being the first teacher to understand or support a parent or child in a certain way. That’s a pretty incredible feeling and not something I have access to in my life now.

What do you do with your time? What does an average day look like?

At home…

Husband:

• Wake up between 6-7 am.
• Go for a run (typically 4-5 miles; longer on weekends when I meet up with a group of friends to run).
• Go to yoga class – sometimes with my wife.
• Breakfast together.
• I then either volunteer at a local museum (1-2 days a week), or have one or two consulting calls or maybe do some work for the companies, read, do errands or other chores.
• Make and eat dinner together.
• Pay bills or other planning for a while, then TV or a movie before bed.

Wife:

• Morning walk and yoga.
• Breakfast usually with my husband and then we talk about other meals of the day–who is cooking and if we are eating together.
• Afternoon one or more of gardening, cooking, cleaning, seeing friends, going to appointments (doctor etc).
• Evening tea and TV.
• Weekends we try to see friends.

When traveling…

So far, we are traveling together. Vacations in the old days, when we were working, were very organized, with our time maximized and planned out.

With more time now in each city we visit, and no feeling of desperation about how much we need to relax while away from work, we are much more likely to wander or come up with a plan at the last minute.

We still keep our morning exercise routine, but then we talk about what we’d like to see that day.

We spend the evenings writing about what we’ve experienced.

Are there any new activities you’re planning to try?

Husband: I started yoga when I retired and really enjoy it. I’m always open to new activities, and I have tried a few (e.g., cycling) that haven’t stuck. I’m also interested in learning some new languages – I haven’t done much in that category yet.

Wife: I’m volunteering for one new organization. So far it’s not a great fit. They are not really using me yet. I’m on the lookout for something that is a good fit.

We think of our travel like returning to college. We’re getting sociology, archeology, history, language, fine art and more.

We would like to do more volunteering overseas and at home. We had picked out some organizations we wanted to work with overseas, but COVID has made them inaccessible. We hope as travel restrictions and health concerns ease we will be able to start that.

We also wanted to live in one place for an extended period of time, like 2-3 months instead of 2 weeks, and instead of being a traveler see what it’s like to be a local. We are waiting for COVID restrictions to ease in order to do that.

What is your social life like?

Before we retired, we had a friend social event 1-3 times a month. Everyone was so busy with work and kids, including us.

Now that we don’t have work or kids keeping us busy, our friends do still have work (and a few still have kids at home). It means they are less likely to be able to go out on a weeknight with us, but also we have more time to initiate social gathering plans, which our friends appreciate.

I think we are just as social now as we were before, or perhaps a bit more.

We’d also include in social life meeting colleagues from our old work. They often reach out to us. Sometimes it’s to talk about work or career change advice. Other times it’s just to catch up and share what’s happening.

Looking back, what would you have done differently?

Nothing. We are planners by nature. We think about things, discuss them together, make decisions, and then – whatever the outcome – we are generally happy with the results because we know why we made the decision.

Was there any emotional impact from leaving the workforce?

Sure. Any homemaker knows this feeling. You are doing a good job of cooking, cleaning, and managing kids, but it is endless and nobody thanks you and that’s hard, whereas your spouse goes to work and people say “thanks” and “we need and appreciate you.”

At work, people tell you that you are doing a good job. There are physical signs of this, like pay, pay raises, commendations, mentions at meetings, nice emails, and interactions with colleagues and customers. So, not having that tangible and consistent reinforcement that you are doing ok, by society’s measure, is something quite different and confusing, and sometimes we miss it.

We spend more time reflecting on the things we appreciate. We ask ourselves a lot, “is this enough?” By that we mean, what is life supposed to be? Now that we don’t have a product and a job-related purpose, and the “good job!” that goes with that, is what we are doing enough? The more time that passes post-retirement, the easier this has been.

What surprises (financial or non-financial, good or bad) have you had since retiring and how have you handled them?

Husband: Probably the only surprise (and it’s a positive) is how well markets have done since I retired.

Fortunately, we haven’t had any health issues or significant, negative family issues since retiring.

What are your future plans?

• Living in one place, outside of the US, for 1 month or more.
• Buying real estate elsewhere–perhaps wherever our kids settle.
• More travel while we are young and healthy.
• Volunteering at home and abroad

RETIREMENT FINANCES

How has your financial plan performed compared to what you had estimated before retirement?

Husband: I did not spend a lot of time trying to predict what our financial plan might do. I focused on getting market returns (i.e. not ‘beat’ the market) with an asset allocation/risk tolerance we felt comfortable with.

So, while the market has done very well over the last ten years, our plan has met expectations while our actual net worth has gone up much more than we thought would be necessary.

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?

Our retirement income:

• ~$25,000 from consulting (most of this goes into a Solo 401(k))
• ~$150,000 from dividends/capital gains from our after-tax brokerage accounts.

As part of our income plan/expectations, I thought we would be selling a small portion of principal each year, in addition to receiving dividends/capital gains. We have not yet needed to do that.

Our annual spending:

• Mortgage plus property taxes: $30,000
• Charity: $10,000 (out of pocket. We also have a donor-advised fund https://esimoney.com/the-advantages-of-using-a-donor-advised-fund/, but that doesn’t affect our annual budget.)
• Household (clothes, supplies, tools, gardening, utilities, etc.): $20,000
• Entertainment (eating out, shows, etc.): $12,000
• Travel: $40,000
• Food: $12,000
• Transport (gas, maintenance, insurance): $3,000
• Taxes: $28,000 (combined state and federal)

Total Spend: $155,000

• Kids’ Roth IRAs: $12,000 (We put 100% of our kid’s summer/school year income into a Roth in their name)
• Non-deductible IRAs (converted to Roth same year): $14,000
• Solo 401(k): $20,000

We continue to put money into Non-deductible IRAs and convert them to Roth (part of our overall strategy to get more of our retirement money into our Roth).

On our budget this looks like we are overspending versus income. The amounts invested in these non-deductible IRAs, as well as the solo 401(K) and kids’ Roths are taken from our cash savings (for now).

Also, we don’t include college expenses here because we have tuition money in a separate bucket.

How are you handling Social Security, required minimum distributions, tax issues and the like?

Husband: Since we are still in our early 50’s, RMDs and Social Security are not an issue yet.

We are actively planning and doing Roth conversions from our Traditional/Rollover IRAs, and eventually our 401(k)/403(b)s.

We are planning to start taking Social Security at 70 and 67 but we expect the rules will change by then so we will evaluate as we get closer to that time.

Our annual taxes are less because our earned income is very low – most of our income is dividends and capital gains. We have done some tax-loss harvesting in the past, but we don’t have much in losses these days (even when the market plummeted in March 2020) since we haven’t been doing significant investment since I retired.

Did you return to paid work? Why or why not?

Husband: Yes, since retiring, I have done some consulting, mostly for startup companies.

It’s fun and I feel like I’m having a positive impact on their success. Also, I am very selective about who I accept as a client — just about all my client companies have been run by friends or people I know.

I also have a lot of flexibility in how I’m compensated. I’m happy to take equity in the company and little or no cash because most startups don’t have much money.

For the companies in which I have taken equity, one company did really well (it was acquired for a significant sum), two have gone out of business and two are still in business.

Wife: No, but teaching is who I am, so I know I’ll return to it in some fashion, though it might not be paid.

Did you find it hard going from being a saver to a spender?

Not too much, though there have been some surreal moments.

We always organized our funds with a bucket system: one bucket for vacations, one for college, one for retirement, etc. It’s a little confusing for us now because when we have income beyond our annual spending we don’t know where to put it.

If our life now is traveling, and traveling is covered under annual expenses, what’s a vacation fund for? If college is covered, what other buckets do we need? So this isn’t really “hard” as much as it is a shift in thinking about where we put our money and why, and we are still working on that.

We have always donated to non-profit causes that are important to us. We have gradually increased the amount we give over the years and continue to do this. This kind of spending wasn’t hard for us. We already believe in the organizations we support and enjoy knowing we are part of their ability to do more good work.

Becoming spenders instead of savers is showing up in our travel. For example, we take business class instead of coach when we fly overseas. This kind of spending is easier for us to accept I think because we feel the effects; with business class flying, we are better rested when we arrive at our destination and that gives us more time to be active. It feels like we’ve earned these types of increased spending and that, even though the price points are much higher, they are worth it to us.

Another example: On a recent trip, we took taxis to and from the train and airport, when before we would have taken public transportation. Each ride was about $10, but we never would have done that before. We noted that we were much more relaxed and less tired taking taxis than dragging our luggage through metro stations. So we are still taking the subway in the cities we visit, but when we have luggage in tow we are learning to be spenders and get a taxi (usually).

On the first post-retirement trip we took, we spent more on both food and souvenirs than we usually do. There were many moments of “can we afford this? Yes, we can actually.”

When we got home from that trip we looked at these bills that were much larger than our usual monthly spending, calculated what would happen if we kept going like that, and realized we would still be within the 3% goal. So that has helped us get a little more comfortable with spending more than we are used to.

What advice do you have for those wanting to retire?

1. Choose fund investment portfolios with very low fees.

• We use Vanguard for this. If you worry about picking the right portfolio, just go for something that follows the S&P 500 or a Total Stock Market fund.
• We decided not to use a financial advisor. We considered an advisor when we were in our 20s. Some advisors pitched to the teachers at my wife’s school, so we thought it would be awesome. It turned out we knew more about investing and financial planning than the ‘advisor’ and his manager (who ‘stopped by’ to close the deal…). We quickly learned that investing was easy to make complex. We are certain that we have missed out on opportunities (e.g., tax optimization or asset allocation) but we kept it simple and educated ourselves. We have many friends and relatives who use advisors and we think they made the right choice. It’s a very personal thing.
• Don’t chase the highest returns. Inaction really helps. Decide on a plan that you can live with, save and invest and don’t touch it (except maybe to rebalance).

2. Maximize your employer retirement fund options, and the amount you and your spouse can put into a Roth IRA.

3. Assess your spending and savings with your spouse (and possibly kids) at least once a year. What are you spending on? Could you save more annually? If you can, put that additional money either into a retirement fund (if you have not maxed out your annual allowed) or into a non-retirement fund that, in your mind, is retirement only. Also, use that time to discuss goals – status, new goals, changes in priorities, timing, etc.