Retirement Question

[CurlyDave]

...My question: before you decided to retire from your "career" job, what percentage of your "fully employed" income was necessary as a retirement income?

A lot of the answer is "it depends".

Let me give you an example. While I worked, I was putting 14% of my salary into a 401(K) plan. This meant that I really was living on 86% of my salary already. So if I looked at the typical advice that one needs 85% of his pre-retirement income to live comfortably, in my case it was only .85 x .86 = .73, or 73% of my pre-retirement income. If this math is unclear, consult a financial advisor.

The other thing I would strongly advise is to look at inflation and how you might be protected from it. DW and I have a mortgage in retirement, but it is a fixed rate mortgage and the payment is less than 25% of our retirement income. We are protected from inflation in that area. A variable rate would not be a good idea.

Part of our income comes from rental properties. This is another protection from inflation, rents go up as prices rise. But, be aware that most financial advisors are not big on rental property. They understand stocks and bonds, but do not like rentals.

 

[TomSeller]

I would hesitate to retire with Obummercare up in the air as much as it is..

Have't followed it that much, are there any candidates stating they would reverse it? Which ones?

 

[NY_Yankees_Fan]

Have't followed it that much, are there any candidates stating they would reverse it? Which ones?

Yes anyone from the "R" party.

Let's not turn this into a political battle, retirement is a good thread to discuss here given how many baby boomers we have in TBN.

 

[NY_Yankees_Fan]

One of the other things we did was downsize from a big house, 3500 sq ft to a 1200 sq ft home. We also moved from NJ to PA, this reduced our property taxes from $13k a year to $3k, not to mention our kids are now 35 min away instead of 90min. Also in PA your pension is not taxed along with SS. we are spending the winter in FL , being a snowbird is a wonderful thing.

 

[Fossil Farm]

There are a lot of questions only you can answer, and you need to be as truthful as possible. There are many things you need to consider. Below are only a few, and the other posters have listed some good information also.

- If you have never done so, track all of your expenses for at least a full year. I am not talking about a budget, but what your really spend. I did it for over 30 years and it really helped see where the money went. Mortgage, utilities, groceries, eating out, medical, vehicle, clothing, hobbies, house improvements, insurances, etc.

- How secure is your pension and what percentage of your current pay will your pension be? Some of the companies around here have cut their pensions, and after being retired for 20 years or more, a few guys are not in very good financial shape.

- Does your pension allow for yearly COLA's?

- How long is your commute and what do you spend on it versus what you plan on in retirement? My wife's job got moved over 30 miles further from home after 25 years. After she retired, she drives much less and even without a COLA, she basically got a raise from less gas and vehicle maintenance.

- Does your company cover any medical insurance in retirement? This is a big one. Especially if you have had any medical issues in the past that may need addressing. You must be 65 to get Medicare.

- Do you still have a large house mortgage or other debts to pay off if you retire?

- What do you plan to do in retirement? If you plan to work part-time elsewhere, will that affect your pension amount? Do you have hobbies or travel plans that will eat up additional money in your savings?

- What other income sources do you have that are reliable?

- Are there updates to your house that need done if/when you to sell or make it more comfortable for you later in life?

There are other things, but spend some time looking at life after retirement and do not make any snap decisions. Good luck to you and enjoy !!

 

[dmccarty]

... health insurance / dental/ prescriptions/ vision coverage until 65 is a BIG problem !!

My parents are retired and well over 65 but they are paying a huge amount of money for health care coverage. :shocked:

Later,
Dan

 

[ultrarunner]

Part of our income comes from rental properties. This is another protection from inflation, rents go up as prices rise. But, be aware that most financial advisers are not big on rental property. They understand stocks and bonds, but do not like rentals.

This is also my experience... rentals owned and managed are outside the realm of expertise... also hard for them to generate management fees.

We had a mandatory review a couple of years back of our 100% employee funded 401k.

I mentioned I had rentals and the conversation flipped as the adviser had a lot of questions as to how I came to have paid off investment property?

It's hard concept for some to believe I did not inherit or otherwise given property or come from a family background with investment property.

The upshot is I'm very glad to have them as there is no company funded plan...

In my case... the day stop working... that is the end of my work derived/sourced income since 1991.

The real nut to crack is Healthcare... now even more since it seems more unsettled than ever.

 

[jtygoku]

Thanks to those that have contributed their thoughts/advice. I had previously sat down with my financial planner and his "best" advice was to retire, start drawing my pension (about 60% of my current salary) then get another full time job in my occupation (civil engineering) and continue to "bank" that entire salary in my existing 401 for five more years.
That approach is probably the best if looked at strictly from the $ standpoint.
My father passed away just as he was within a year of retiring and that has got me thinking that I'd rather err on the side of retiring too early versus too late
As many have said, healthcare is the huge piece of the puzzle.

 

[murphy1244]

Thanks to those that have contributed their thoughts/advice. I had previously sat down with my financial planner and his "best" advice was to retire, start drawing my pension (about 60% of my current salary) then get another full time job in my occupation (civil engineering) and continue to "bank" that entire salary in my existing 401 for five more years.
That approach is probably the best if looked at strictly from the $ standpoint.
My father passed away just as he was within a year of retiring and that has got me thinking that I'd rather err on the side of retiring too early versus too late
As many have said, healthcare is the huge piece of the puzzle.

Yes better more time than money.

 

[buckeyefarmer]

I'm in a similar situation, can't help much but am also interested. Thanks for The CFP link. Seems like the CFP's near me want you to have .5 - 1M before they will talk to you, and it seems they want to invest your money for you, for a commission. I did find my credit union will do a free session with you, and they have a CFP, so I'm going to go talk to them.

I'm eligible to retire early from my present company. The company is no longer contributing to the pension, so I've been thinking about drawing it early, and putting it into a Roth. However I need to work a few more years to pay for kids college, so I would retire and work elsewhere for a few more years.