Early Retirement: Year Four Milepost

Source: Clip Art Extras

“Oh, God. Not another of these posts from him.”

“Yeah, ‘fraid so.”

“Sneak away for a beer?”

<expletive deleted> yeah! I’m outta here…”


My apologies ahead of time to those who come here solely for the inanity and preposterous-laden content; I do promise a return to absurd ramblings soon. But unfortunately bylaw #1.7(a)(4-3) of this blog’s charter requires that “a topical post relevant to retirement must be published at least three times a year.”

I hate that requirement. It prevents me from engaging in mischief, such as with the recent news about White House capo advisor Stephen Miller, his uncle, and his former rabbi. These are three people who are in obvious need of an apples-and-honey intervention during this current high holiday season. Sadly, though, that’s going to have to be fodder for another time.

Today it’s instead all about my old age, or at least how I’m either paying attention to or ignoring its later arrival. So bear with me here, particularly you international readers who might find this country’s retirement protocols to be somewhat of a labyrinth. Trust me, you’re not alone.

It turns out that only 47% of Americans over the age of 50 managed to pass a true/false MassMutual quiz on Social Security back in 2015. Clearly, we find our own earned entitlements to be confusing also. Your braggadocio, not-so humble blogger, on the other hand, earned a perfect score. So do give it the old college try and tell us how you fare with the quiz. It remains vital that we each know how the system is supposed to work, especially before Congress and the president get their grubby mitts on it and try to enact their so-called “reforms.”¹

A recent article in Barron’s on the current stock market also got me thinking about the shape of my savings. With stock market valuations at near record highs courtesy of this ongoing nine-year bull market, there is an easy tendency to fall into a false sense of security about how well one is doing. For instance, the S&P 500 market index — the same one in which so many American worker 401(k) savings are invested via retirement index funds — has gone up an astonishing 330 percent since March of 2009.²  That makes all of us really, really smart, right?

Source: Stockflare.com. Warren apparently reads my blog!

This past August I hit the four-year anniversary of my taking early retirement. I turn 59 in December.

So how has this “grand experiment” gone for me?

Retirement Savings:

Except for taking a very small distribution (less taxes) to help “pad” a down-payment on our new home last year, I have left my nest egg alone. It has grown exponentially along with the rest of the market these last four years.

While I’ve been slightly aggressive in my allocation between stocks and bonds since retiring, I only recently put myself into a defensive posture with a more “traditional” 60/40% apportionment. For me it’s all about a better night of sleep. If a market correction does eventually hit, as the experts in the above Barron’s article feel it will, then at least I’ve taken some measures to be slightly less exposed.

My plan is to start monthly 401(k) distributions at age 62, which is in three years.

Curiously, Gorgeous and I are at somewhat contrarian positions with our respective nest eggs. While I am in partial protection mode, she is actually eager for a market correction because she wants to become even more aggressive than she’s been. She continues to make up for years of not having an income prior to our marriage, and so she hopes to increase her IRA contributions if (when?) market valuations start to fall. It does makes for some interesting cocktail hour conversations between us.

Income:

The plan all along was to be able to live on our joint income prior to the start of 401(k) distributions and Social Security. Fortunately this has so far worked out precisely as we had planned.

I receive each month a basic annuity from my government pension, less an amount that is deducted for my ex-wife as specified in my divorce decree. Also subtracted from my income is a monthly alimony obligation that I pay to her directly. However, the earnings which I receive from my part-time librarian job help to defray some of these payments.

Gorgeous, on the other hand, literally works seven days a week catering to the needs of her clients (she is a professional psychic). Getting her to take any time off involves bruising negotiations between us over the amount of time involved, how far away from home we can go, etc. I complain about it endlessly until she reports how much she’s made at the end of each month. Then I keep quiet for a couple of weeks until I conveniently forget again.

Bottom line? I never would have been able to retire without my wife’s income included in the total equation. As a good friend of mine consistently reminds me, “Hold onto her like the grim-grip of death, my friend.” (Hi, D.).

Source: Pinterest

Social Security and Medicare:

Neither of us plan to start Social Security payments until we each reach our Full Retirement Age (66 and 10 months for me; 67 for Gorgeous). Depending on the general health for both us and the stock market at that time, I am hoping to even delay that by one or two years in order to get a larger benefit.

On a tangential note, both of my parents took a reduced benefit starting at age 62. I don’t recall (or was made privy to) the full details of why they made that decision, but I do know from having responsibility over their affairs before their deaths that it was a very costly choice. They used up all of their savings by the time they reached their early eighties, and a larger Social Security monthly payment would have certainly made a huge difference in their final years.

Currently I am fortunate to be able to continue health insurance for both of us from my former employer (on a shared cost basis, the amount deducted from my pension). Our plan is to continue with this coverage up-to-and-through signing up for Medicare at age 65. It will then revert to secondary coverage with Medicare as the primary. Once again, I watch with great worry at what measures Congress might  take in enacting “remedies” to the program. If you feel the same, please join me in donating regularly to the National Center to Preserve Social Security and Medicare.

Travel and Leisure:

This is the one area where my pre-retirement hopes haven’t (yet) been met. What with relocating to Florida, moving three times since our arrival here, eventually buying a new home, and finally being married to a workaholic who has this crazy notion that things like furniture and new kitchen appliances are important, we’ve only made a handful of meaningful trips. I yearn for road trips up the northeast coast and into Canada, to the deep southern states, and west to the Rockies.

I’ll have to wait for this for a few years yet. I only  learned yesterday that we need to look at new washer and dryers soon.

Conclusion:

Fortunately things have for the most part worked out very well, especially considering that we started this adventure with no firm plans or even a specific location to live. It’s not a strategy that I’d recommend to everyone, nor has it been completely free of bumps and detours. But the financial parameters we counted on at the start have for the most part been consistently there for us. Starting next year, we plan on working with a financial advisor who will help guide us to those important next milestones.

Has your retirement plan worked out as you initially hoped? Please share what did and didn’t work for you.

Until next time…

 

¹ See: NYT, 9/17/2018.

²  USA Today, 9/14/2018.

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27 thoughts on “Early Retirement: Year Four Milepost

  1. Sounds like things are working well for you! A financial adviser convinced my husband to take SS at age 62. There is spreadsheet that shows you are ahead of the game up until age 80 (or something close to that because you started payments early). If you save a portion (which no one does) you can be ahead of the game. However, I wasn’t having any of that and waited until my full retirement age before I starting getting it. Having been retired 7 years, things are going smoothly. The only thing that worries me is a health crisis. Medicare has done diddly squat to negotiate prices with big pharma. Drugs under an employer’s plan are considerably cheaper and more of them are covered. I always say we are one big health crisis away from the poor house. Other than that we are doing well. We still have 2 cars and a house that is larger than we need so if necessary, we could downsize. Three serious posts a year are doable. Still waiting for a cat post from you! With pictures!

    Liked by 1 person

    1. I think you were very smart to wait. I’ve seen those same charts that show — in theory — how you in time you end up getting more out of the system if you start payments at 62. But really, no matter how you put a label on it, it’s still a reduced payment. I’m just not willing to give up the approximately 8% a year that you give up. Having said this, if you’re in dire financial straits and /or your health is questionable, then by all means starting at 62 is a prudent decision.

      I’m grateful for the health insurance offerings that I get in retirement. Not everyone is as fortunate, and that’s why I spend so much of my time advocating (and agitating) to my local congressman and state senators about the need to preserve benefits for everyone. Trump ran on controlling drug costs; I hope he remembers that.

      Oh, Kate, I’ve been ignoring that request of yours about the cats. Sadly, we had to re-home them (fortunately through the breeder). Gorgeous was allergic to them and it was playing havoc with her allergies and immune system. She still wants another cat someday (one that she won’t be allergic to), but that’s on hold for now. I’ve been really quiet about this, but I knew you’d ask again eventually! 🙂

      Liked by 1 person

      1. I am so sorry about the cats. I know Gorgeous wanted them. I don’t know if there are breeds that are less allergic. I doubt it. Hopefully they got homes with someone who loves them as much as Gorgeous! Not sure Trump remembers anything except people who slight him.

        Liked by 1 person

      2. Oh, geez, it’s the second one for me in less than a month! I absolutely hated the one I chose while on my hiatus, and I desperately needed to change it. But I also don’t like making that many changes to the page because it gets disorienting. I’m sticking with this one for the next year no matter what! Oy, it’s such work making theme changes in WordPress; there’s absolutely no uniformity in the selection process.

        Liked by 1 person

  2. Perhaps I’m a little nerdy, but I actually enjoy these more serious and informative posts (not that I don’t like your nonsensical twaddle too). My husband and I haven’t taken social security yet (we are both under our “full retirement” age but older than 62) and probably won’t until we are forced to start taking minimum distributions, whenever that is. When we planned for our retirement, we didn’t even consider SS as part of the equation, just in case.

    Good for Gorgeous for recognizing the opportunity market downturns represent… many people panic and take everything out precisely when they should be investing. I’m curious, when you figure your 60/40 ratio, do you consider SS as part of the “bond” portion? No telling what the idiots in Washington will do but I think us old farts are relatively safe – most changes will impact younger people… unless the politicians are forced to reduce taxes on those poor, overburdened rich folk again thereby making SS and Medicare even more of a target. (Btw, thanks for the link to the National Center to Preserve Social Security and Medicare.)

    Oh, and I got 9 out of 10 right… I forgot about non-citizens being eligible for SS in some circumstances.

    Liked by 1 person

    1. Some of these posts I want to write about are nerdy and boring to the extreme, but I still feel a need to discuss the topics since this is ostensibly supposed to be a blog about retirement. I’m glad you enjoy these boring topics, and I do appreciate the feedback.

      Good for you guys in waiting to get your FRA amount. I have a sister who took it at 62, and her savings are way more than mine will ever be. I don’t really understand her thinking in wanting to preserve the retirement savings vs. giving up a guaranteed larger payment from Social Security. But she’s comfortable and secure, so I’m not really worrying about her regardless.

      Re: the 60/40 allocation between stocks and bonds. No, Social Security isn’t a part of that portion. I literally have 60% invested in the stock funds that are offered in my 401(k) — one is an S&P 500 index and the other is a small-to-medium sized fund of companies not in the S&P — while the 40% is invested in two different bonds of both corporate and government securities. This is considered a pretty plain vanilla “traditional” allocation formula for retirees. Next year when I start to meet with a financial advisor, I suppose it could change a bit. But for now I’m satisfied with it.

      9/10 on the quiz? Good for you!!!!

      Like

  3. We got off to a bad start retirement-wise. My husband worked for Enron and we lost every bit of his retirement when they crashed. So, we basically started over in our mid-40’s. I’ve taught sporadically, but we never stayed in the same state long enough for me to accumulate much in the way of retirement. We have made up a lot of ground in the last 18 or so years, but we need things to go just right for the remainder of David’s working days.

    Like

  4. Hi, Marty – I also enjoy your more serious, ‘taking stock’ posts. Our Canadian retirement system is slightly different than yours. So far, I am happy with the investment choices that Richard and I have made. As you say, diligent and active review and revision are necessary.
    All that being said, I would LOVE to read your take on Miller, his uncle and their rabbi. Please feel free to share that at any time!

    Like

    1. Thanks, Donna. I can’t imagine violating this blog’s charter! 😉 The Canadian model makes so much more sense to me (as does your national health insurance!). Fear not, I may not every get to Stephen Miller, but this White House offers so much I’m bound to find something!

      Liked by 1 person

  5. While I in NO WAY consider myself prepared for retirement in an educated-about-the-process fashion, I do think I am moderately prepared in a save-as-much-for-it-as-you-can way.

    Thanks for the helpful information. I took the test before reading the rest of the post and was uncertain about half my answers (the spousal ones, in particular). But I eked out a 10/10!

    10 out of 10 correct
    Congratulations! You’ve done your homework.

    Also, I shared your future fodder referenced articles with a friend I help care for — he will love them. Thanks!

    Liked by 1 person

    1. I am not surprised at all that you aced the quiz. I was pretty confident about most of my answers, but I guessed on at least two of them!

      Yep, save, save, save. I am still sending in to a Roth IRA that I started over 20 years ago. Not as much as I’d like, but I still try to contribute every few months just to at least mentally “stay in the game” as it were.

      I hope your friend enjoys the article. If we weren’t gnashing our teeth so much in horror, this administration does provide some humorous moments for us all.

      Liked by 1 person

  6. Hey Marty, I admire you for sticking with your 60/40 allocation. We are about the same age, and when I retired a couple of years ago, I chickened-out and went to a 20/80 allocation. Like Gorgeous, I am trying to stay patient, waiting for a pull-back before investing in stocks again. Thanks for the honest and informative post. It helps to see how others are managing their nest eggs.

    Liked by 1 person

    1. Thanks, Joe. I decided when I started this blog that if I was going to occasionally write about these topics, I had to share more than just my broad thoughts. It helps to provide concrete examples of what I’m actually doing so that others can compare (and hopefully share their own situation, as you’ve just done).

      It hasn’t been easy being as “vulnerable” as I feel I feel sometimes. I’ve spent more than a few nights laying in bed wondering if I wouldn’t be better off putting nearly all of in a safer fund. But we do need to stay ahead of inflation and allow these nest eggs to grow, in spite of the market gyrations. So with a bottle of Pepto Bismol near me, I’ll stay the course. 🙂

      Liked by 1 person

  7. It’s right about now we should all consider going all bonds. Can you hear that ticking noise? That’s a detonator and its fuse is getting short. Your bride is a psychic? Maybe she can give you pointers.

    I’m so jealous. I’ll never be able to retire. I had children very late in life. I took my playtime up front in my 20s and 30s. Now I’m paying.

    Liked by 2 people

    1. I quiz her every day from matters as important to me as whether to switch to specific “safe harbor” funds such as precious metals or zero coupon treasuries, to what numbers I should pick for this week’s Mega Millions. She gives me that look and reminds me that her clients count on her for questions on matters of the heart or the health of a loved one. I feel like the shoe maker’s child sometimes. But yes, I hear you, the movement into bonds was certainly on my mind a few weeks ago and it probably will continue to do so as wen head into the holiday season. That the market zoomed up the other day at the same time Trump and China announced even more tariffs on one another, told me that Wall Street has truly lost its collective mind.

      I can be all high and mighty with satisfaction now, but all I had back when I was in my twenties were nights staring at my paltry 401(k) balance with a bottle of beer in front of me as I sat alone in my depressing apartment. I’d have traded places with you in a minute!

      Like

  8. As you observed, Marty, much of this post is region-specific but the themes at universal: planning, finances, dreams, uncertainties.
    My only substantive comment is a mild exhortation : your travel plans simply must include leaving Nth America at some point!

    Liked by 1 person

    1. Good G-d, Bruce, you’re right. The current regime here has successfully transformed me into a xenophobe without my even realizing it! Indeed, we must include some foreign visits, including your fine land. I promise if we make it there, I’ll be at your door requesting a tour of the best used record venues in Melbourne. 🙂

      Liked by 1 person

  9. I feel your pain about having a working spouse and not getting the full benefit of retirement. On the other hand, I too admit that the income is nice. Fortunately he loves his job, and I’m able to entertain myself for the most part. In fact I’m starting to worry about the day when he does retire and by then I will be deeply entrenched in my own activities 😉

    We have a similar thing with our Canada Pension. I could have started payments at age 60 but at a reduced rate. My financial planner also advised that I wait to age 65. I can’t remember what the breakeven point is, but it definitely makes waiting worthwhile – or so he tells me. We also have an Old Age Security Pension in addition to Canada Pension, but there is no option to receive it earlier than age 65.

    Like you I keep a 60/40 investment split while my husband likes his portfolio to be more aggressive. I may be leaving money on the table in this long-lived bull market, but I don’t lose sleep at night worrying about a correction. Corrections only hurt if you are forced to sell and I don’t ever want to be in that position. Given enough runway, a portfolio will recover.

    … ok, I lied. I always worry whether there is a need to or not. It’s in my DNA 😉

    Liked by 1 person

    1. Ha! Once again, we must be family because I have the same DNA. It’s all about sleeping at night, honestly. Forget profits, just give me eight hours!

      For a guest-post I did for Donna last year, I remember doing some cursory research on Canadian benefits so I could refer to them, but I think I missed the Old Age Security one, so I will read up on that. I love comparing to what other countries have. As with nearly everything, Canada has a much more progressive system than what we have here. I await adoption papers from you so I can transfer over. 😉

      I bitch and moan regularly about her work schedule, but really I’m just blowing hot air. Without that income we’d simply not be able to enjoy nearly as much as we have so far. So I’m hot and cold about her work schedule with huge winks going on.

      Like

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