When to Retire

[Seevee]

Wow, a lot of interesting comments.


What I've seen over the years, is most people have no clue how to plan for retirement. Not necessarily bad luck, but no luck. Just need some asset(s) that throws out enough for expenses and grows enough for inflation.



I could argue that the worst thing to do is borrow money for a car... which leads to the mentality that one can borrow their way to toys and fun. Never works.


In the beginning the 401K does work well, but the Roth works WAY BETTER.... but both need time. So the planning has to start when one is young and has the time to build wealth for retirement.

 

[Bacchus]

I've seen several arguments pro and con on pre-tax vs after-tax investing. I have also seen an analysis that compared the two over a "normal" / avg earning/ saving and retirement spending that showed in the end they are roughly equal. Pay taxes early or pay later you can't avoid them... and not a significant difference in most cases. The lower income in retirement doesn't hold for the majority that do a credible job of planning & investing.

 

[smitty477]

Wow, a lot of interesting comments.


What I've seen over the years, is most people have no clue how to plan for retirement. Not necessarily bad luck, but no luck. Just need some asset(s) that throws out enough for expenses and grows enough for inflation.



I could argue that the worst thing to do is borrow money for a car... which leads to the mentality that one can borrow their way to toys and fun. Never works.


In the beginning the 401K does work well, but the Roth works WAY BETTER.... but both need time. So the planning has to start when one is young and has the time to build wealth for retirement.

Although we have both Roth and 401K's...the 401 has been a better choice for a few reasons.
Although not commonly used well borrowing when done with a plan and purpose can be a good tool in the financial tool box.

 

[MurrayM]

One thing people (I think) forget is that there are two sides to the retirement equation - Income/savings and SPENDING. You don't HAVE to keep up with the Jones' in retirement - if you don't want to.

We quickly realized that, just like compounding interest operates while saving, reducing your planned spending over retirement GREATLY reduces what is required.

We both said that when we decided we were done working in our 60-80hr per week tech jobs, we were done working - period. We said that if we had to live in a trailer and eat bologna sandwiches - but didn't have to work - then so be it. We would enjoy life anyway. We would just lower our standard of living based on whatever we had saved at that time.

Fortunately, saving the majority of our income for 30+ years (Scion instead of Mercedes, 1200sqft instead of 3000, driving vacations instead of Cancun/Italy, etc.) allowed it not to come to that, but we were prepared for either case.

Anyway, want to say, don't forget to look on the right side of the equation, too!

to what boathealer & Menzies are saying about spending during your working life.

We chose 'humble & happy' a long time ago and lived within our means. The thing that's allowed me to retire early was simple, uncomplicated, never lose any sleep no matter what the stock market was doing principle and interest guaranteed RRSP's.

Our daughter will inherit our house, so we set up the RRIF to last 25 years. That pads our other monies by about $400.00 per month. Without it, I would of had to work another five years. When the RRIF runs out I'll be 85, and chances are (if I'm still alive) I won't be all that active.

I've read there are 3 phases to retirement; the honeymoon phase, the reality phase, and the five mile radius phase. The last one is where you pretty much don't go more than five miles from where you live, and become increasingly house bound. From observing older people around me, the five mile radius phase really kicks in at 80 years of age.

Pretty sure the average Canadian retirement income for a couple is $44,000.00 per year. We're about 1/4 shy of that, but have been living frugally all this time anyways.

 

[MurrayM]

Just read that the poverty line for a couple in Canada is $22,000.00 after taxes per year, so we are pretty much 1/2 way between the poverty line and the average.

Good enough for us

Our mindset is we have a guaranteed annual income which we can pad by selling photographs, many of which are taken while exploring aboard Badger.

All is good.

 

[smitty477]

I've seen several arguments pro and con on pre-tax vs after-tax investing. I have also seen an analysis that compared the two over a "normal" / avg earning/ saving and retirement spending that showed in the end they are roughly equal. Pay taxes early or pay later you can't avoid them... and not a significant difference in most cases. The lower income in retirement doesn't hold for the majority that do a credible job of planning & investing.

"Pay taxes early or pay later you can't avoid them... and not a significant difference in most cases."
You can avoid some taxes as well as get matching funds in 401K's that are not available without participation. If you can defer taxes when you are in a higher marginal rate and perhaps even in a higher marginal location there is a large opportunity to reduce taxes overall.

One example only...
- 401K contributions matched during participation (+ 3% to XX% extra funds)
- marginal taxes deferred during peak earnings year 39% Fed / 7% State
total tax deferred %46%
- retire early before collecting SS and/or pension
- Convert some or all of collected 401K funds to Roth prior to SS pensions 'using' up marginal brackets
- move residence to a no tax state before conversions
- Convert sums as large as $250K per year at a tax rate less than 1/2 of the deferred rate (approx 18% vs 46%)

 

[MurrayM]

We had Spousal RRSP's under my wife's name, and used the resultant tax refunds from my earnings to pay our house mortgage off early, then used them to pay Badger's moorage.

 

[FoxtrotCharlie]

Does anyone here have a company pension (not government/military)?

Yes, from the bank where I worked for 15 yrs. Not huge, but not bad

 

[MurrayM]

Another good side to the steady-eddy, start early, live within your means approach is that it gives you freedom to choose when to retire.

I had to submit my paperwork at the end of June this year. I saw Covid-19 seed the entire planet starting from one person by that time, and had a feeling this fall/winter/spring was going to be especially brutal.

Better to get out now than make a few more dollars for 'stuff' and risk my life.

Now we're filling our memory banks instead of a money bank.

 

[menzies]

Re pre or post tax. My opinion;

If you are in or near the 39% bracket while working and/or living in, say, New Jersey or Pennsylvania, and a big part of your retirement income will be capital gains, and you move to a no state income tax state like Florida, then load up the pre tax savings whatever way you can.

 

[syjos]

I cringe when people tell me I am lucky. Luck had nothing to do with. Hard and smart working. Good planning. And not being frivolous or stupid with money was the key.

I got a lot of the "you're so lucky" comments from people when they learn about my first early retirement. And when they hear that I have a boat, they assumed that I came from rich parents and have a Trust Fund. I wish.

For a long time, I told people that I was unemployed instead of retired. Once I hit 62, I could finally say I'm retired.

Menzies is right about hard work. Signing up for employer offered profit sharing/pension and having part time "side hustle" jobs or businesses. Obtained a RE license and got into real estate sales part time while working for another employer and started a part time DJ business also at the same time.

I'm not sure how I was able to handle two side hustle jobs while working full time while I was in my 20's to early 30's. I still partied and had a daysailor. Not having children was a big factor.

 

[tiltrider1]

I’m not disagreeing with the 401k comments but one size does not fit all. In my 20’s I signed up for the companies non matching 401k. Five years later I realized I was a better investor than the 401k team. I removed my money, paid the taxes and penalties invested that money in just 10 different stocks. That money is now 4x greater than it would have been if left in the market.

In the end you don’t need to be a great stock picker, you just need to save some, invest some, not spend some and not borrow some. Easy to say but so few do it.

My love of living on the boat might be the true secret to my success. It has kept my housing expense at half of average. Makes it stupid to spend money on nice cars only to be parked in a parking lot. With no yard work I have lots of time to read investing news.

 

[smitty477]

Re pre or post tax. My opinion;

If you are in or near the 39% bracket while working and/or living in, say, New Jersey or Pennsylvania, and a big part of your retirement income will be capital gains, and you move to a no state income tax state like Florida, then load up the pre tax savings whatever way you can.

I think you will find this article by Kitces interesting....
https://www.kitces.com/blog/hierarchy-tax-preference-savings-vehicle-roth-high-income/

 

[boathealer]

I cringe when people tell me I am lucky. Luck had nothing to do with. Hard and smart working. Good planning. And not being frivolous or stupid with money was the key.

I got a lot of the "you're so lucky" comments from people when they learn about my first early retirement. And when they hear that I have a boat, they assumed that I came from rich parents and have a Trust Fund. I wish.

For a long time, I told people that I was unemployed instead of retired. Once I hit 62, I could finally say I'm retired.

Menzies is right about hard work.

I get a little bit of that "luck" push back, too.


I made the CHOICE not to smoke pot or do drugs school when all of the other cool kids were
I made the CHOICE not to get anyone pregnant or other things that could destroy my future
I made the CHOICE to sit in the basement of the engineering building night after night at school while everyone else was out partying
I made the CHOICE to work 3 times harder than anyone else at for the last 35 years when it was very easy to slack off and "get by"

DW and I made a DECISION to save 50 to 60% of our income for 30 years, living WELL below our means.
DW and I made a DECISION to raise our family in a 1200sqft house and not buy a $400,000 house when all of our friends were doing so and I could "afford it"
DW and I made a DECISION not to fly to Cancun and the Bahamas twice a year, every year, like most of our friends did
DW and I made a DECISION not to buy the latest Lexus or Mercedes like most of our friends, and instead drive Scions and Mazdas

I made the CHOICE to spend hours researching and studying investment and retirement strategies while everyone else said I was wasting my time.

We all have our limits on what we are willing to live with currently in lieu of future "rewards".
Yes, luck IS involved, but it is ALSO what you do with that luck, the choices you make, and your determination can alter your retirement capabilities.

 

[ksanders]

I cringe when people tell me I am lucky. Luck had nothing to do with. Hard and smart working. Good planning. And not being frivolous or stupid with money was the key.


I get a little bit of that "luck" push back, too.


I made the CHOICE not to smoke pot or do drugs school when all of the other cool kids were
I made the CHOICE not to get anyone pregnant or other things that could destroy my future
I made the CHOICE to sit in the basement of the engineering building night after night at school while everyone else was out partying
I made the CHOICE to work 3 times harder than anyone else at for the last 35 years when it was very easy to slack off and "get by"

DW and I made a DECISION to save 50 to 60% of our income for 30 years, living WELL below our means.
DW and I made a DECISION to raise our family in a 1200sqft house and not buy a $400,000 house when all of our friends were doing so and I could "afford it"
DW and I made a DECISION not to fly to Cancun and the Bahamas twice a year, every year, like most of our friends did
DW and I made a DECISION not to buy the latest Lexus or Mercedes like most of our friends, and instead drive Scions and Mazdas

I made the CHOICE to spend hours researching and studying investment and retirement strategies while everyone else said I was wasting my time.

We all have our limits on what we are willing to live with currently in lieu of future "rewards".
Yes, luck IS involved, but it is ALSO what you do with that luck, the choices you make, and your determination can alter your retirement capabilities.

I’ll play devil’s advocate a bit

Others made a DECISION to save reasonably and enjoy life along the way instead of saving 50 to 60% of their income.

Others made a DECISION to buy the $400,000 house and after 30 years of mortgage payments they own a really nice house outright. They could have stayed in their 1200 sqft starter home but they wanted something larger and nicer.

Others made a DECISION to fly twice a year to the Bahamas and Cancun and hade a GREAT time escaping from the cold. They explored beaches, and Myan ruins and have a ton of fantastic memories.

Others made a DECISION to drive a nice vehicle, and recognize that yes it is an expense.

Others WERE NOT able to retire in their 40’s but chose to trade their time for the lifestyle they wanted, but were still able to retire prior to their social security eligibility.

You see what works for one does not work for all. You have to do what is important to you.

My father in law pressured me for many years to retire in my early 40’s like he did. Yes he was able to leave work early because it was important to him.

But... He never had a boat. He never had a nice vehicle. His house still looked the same as it did in the 60’s when he bought it.

He would ironically tell me these things while sitting on my boat.

 

[MurrayM]

My father grew up during The Depression, so his overriding goal was to provide for his family. He was a late bloomer, so my Mom went to university first and was a hospital dietician while she put my Dad through university for chemical engineering. She was a stay at home Mom after that.

He did well, was key in the team which invented dry scrubbers for aluminum smelters, and traveled the world for his company helping to install them in other smelters. According to his world view, he did exactly what he was supposed to do.

Meanwhile, the 'mean kid' down the block who wasn't allowed to my birthday parties taught me how to ride a bike and play sports.

On my job, I got to see our daughter during recess sometimes at elementary school and will cherish those running hugs forever. I was home pretty much every day before she got off school, never worked shift work, and had weekends and all major holidays off. Summer holidays were aboard Badger letting the amazingness of BC's north and central coast seep into her bones.

I was playing at a playground with her once, and another Dad came over to chat. His wife was the area hospital administrator, so he was a stay at home Dad. He told me it was great to see a Dad so comfortable being around his kid...his observation was that most Dad's aren't.

Anybody care to put a monetary value on that?

 

[boathealer]

I’ll play devil’s advocate a bit

Others made a DECISION to save reasonably and enjoy life along the way instead of saving 50 to 60% of their income.

Others made a DECISION to buy the $400,000 house and after 30 years of mortgage payments they own a really nice house outright. They could have stayed in their 1200 sqft starter home but they wanted something larger and nicer.

Others made a DECISION to fly twice a year to the Bahamas and Cancun and hade a GREAT time escaping from the cold. They explored beaches, and Myan ruins and have a ton of fantastic memories.

Others made a DECISION to drive a nice vehicle, and recognize that yes it is an expense.

Others WERE NOT able to retire in their 40’s but chose to trade their time for the lifestyle they wanted, but were still able to retire prior to their social security eligibility.

You see what works for one does not work for all. You have to do what is important to you.

My father in law pressured me for many years to retire in my early 40’s like he did. Yes he was able to leave work early because it was important to him.

But... He never had a boat. He never had a nice vehicle. His house still looked the same as it did in the 60’s when he bought it.

He would ironically tell me these things while sitting on my boat.

Agree. That's exactly what I said, "We all have our limits on what we are willing to live with currently in lieu of future "rewards"."

My point was related to me being "lucky" to be retired.

 

[HiDHo]

Yes we also have heard “ you both are so lucky “.
I credit our LUCK to having been raised by parents that lived through the great depression, who new its not how much you make but how much you save. We also like Dave Ramsey’s financial advise. We took advantage of deferred compensation savings planning, driving cars and trucks for 7-8 years, buying and selling real estate and the biggy being able put off immediate gratification for long term financial success.
We both retired in 1982 debt free and now our retired annual income is greater than our working years. We sailed and boated for 40 years and now enjoy a Florida home and a Alabama home traveling with the weather. Our cruising on the Manatee may be ending but not our boating just a different type. We are so lucky.

 

[ksanders]

Agree. That's exactly what I said, "We all have our limits on what we are willing to live with currently in lieu of future "rewards"."

My point was related to me being "lucky" to be retired.

Thanks for your great sense of humor!

We live debt free except for my boat, and drive 20 year old trucks that are maintained both mechanically and cosmetically to the tees.

We also live in our first home, but that home is on a lake so why move?

 

[BandB]

Wifey B: We consider ourselves lucky. Yes, hard work, but a lot of people work hard and aren't as fortunate as we are.

As to when to retire, when you realize you can. That's the time. It happened to us on vacation and at night in bed in a Tampa area hotel when we got some news and everything was aligned right. We made that decision at that moment and put everything in motion and retired.

Now for us, other questions. How completely? We were still young, so would we keep active in our professions, he as a businessman, me as an educator? We chose to keep small parts of work in our lives.

Now, to unretire? When would you go back to work? Well, we've been working regularly and nearly full time since early March. We worked full time a few weeks after Irma. I guess our answer is when we feel it's called for and it is only temporary. Right now we can't do other things so why not work and why not assist those who run our businesses and our schools. We're on a boat today, cruising locally, another trip to nowhere. There have been major decisions required which needed our input, then we've created more work with our decisions. All the things we were doing in retirement were not available to us, so work made sense. For a couple of months we ran our businesses from our home with our key executives there as well in the protective bubble we created (see NBA bubble to understand the principles). It's just worked for us. Back to working during the week and boating on weekends.

So when to retire again? When we feel we can. When we feel we're not needed by the businesses or schools and when cruising is again possible and practical. Meanwhile in a way we have the best of retirement. We do what we want, when we want. Just right now it means working. Guess I learned that the true beauty of retirement isn't "not working." It is the flexibility in your life to do what you want when you want. So, technically, we're still retired, just working regularly.

 

[Seevee]

I'll take luck over skill anytime. What the heck.


I think most of us have been lucky as well as skilled to get to a reasonably good retirement.



I've been fortunate and started with nothing and still have most of it left. Probably spend it before I die.



I certainly can't complain. My ride thru life so far has been good. Always had whatever toy I wanted and had all the fun. Have always had a plane, boat, car and a home.... and income enough to support that without using much more than half of it all my life.



However, my toys were within my means. First plane cost $1500 and first boat was less. Cars were not my thing, so a good used throwaway car was fine. BUT, there was enough to save and invest so that future income was not a question mark. Have lived on the water as far back as I can remember, but would rather live in a shack on the water than a mansion off the water, so at times we sacrificed for that, however, we did have indoor plumbing most of the time. But, had no marina expenses, which are huge today.


And, hopefully will have enough luck to end up with the nothing I started with. So far, so good.

 

[HiDHo]

Our “your so lucky” came not because we retired but from those who have chosen “ immediate gratification” and have maxed out credit and find themselves in financial peril.

 

[Northern Spy]

In Canada, pensioners are at the bottom of the list of unsecured creditors to be paid if the company you work for goes bankrupt. Underfunded pensions mean you get a single digit percentage of what is owed you.

Hard to plan retirement if your company is repetitively raided by hedge funds prior to going insolvent.

I have one pension that might buy me a midline Hyundai in my retirement.

Defined Benefits pensions are virtually unheard of in the private sector in Canada.

 

[Seevee]

In Canada, pensioners are at the bottom of the list of unsecured creditors to be paid if the company you work for goes bankrupt. Underfunded pensions mean you get a single digit percentage of what is owed you.

Hard to plan retirement if your company is repetitively raided by hedge funds prior to going insolvent.

Defined Benefits pensions are virtually unheard of in the private sector in Canada.

Northern,


And they have been very questionable in the US in the past several years. Even ones that are separate from the company have been "raided", often by the bankruptcy courts and out federal government. That happened to me, but "luckily" I had some backups. Some guys committed suicide over that one.

 

[smitty477]

My father grew up during The Depression, so his overriding goal was to provide for his family. He was a late bloomer, so my Mom went to university first and was a hospital dietician while she put my Dad through university for chemical engineering. She was a stay at home Mom after that.

He did well, was key in the team which invented dry scrubbers for aluminum smelters, and traveled the world for his company helping to install them in other smelters. According to his world view, he did exactly what he was supposed to do.

Meanwhile, the 'mean kid' down the block who wasn't allowed to my birthday parties taught me how to ride a bike and play sports.

On my job, I got to see our daughter during recess sometimes at elementary school and will cherish those running hugs forever. I was home pretty much every day before she got off school, never worked shift work, and had weekends and all major holidays off. Summer holidays were aboard Badger letting the amazingness of BC's north and central coast seep into her bones.

I was playing at a playground with her once, and another Dad came over to chat. His wife was the area hospital administrator, so he was a stay at home Dad. He told me it was great to see a Dad so comfortable being around his kid...his observation was that most Dad's aren't.

Anybody care to put a monetary value on that?

"On my job, I got to see our daughter during recess sometimes at elementary school and will cherish those running hugs forever. I was home pretty much every day before she got off school, never worked shift work, and had weekends and all major holidays off."

Yes - we got to do all that as well. See all of her shows and get to all of her games and be a part of those times. Equally important we were able to take our parents places they would never had visited and help them personally and financially as 3 of them required help later on.
I could not put a monetary value on any of those ...

 

[boathealer]

I guess I should add that our boat *IS* our house.

We own only the boat and what is on it. Period. No storage locker - nothing. Contrary to conventional thinking, that part was surprisingly liberating!

Sold our house and all our "worldly possessions" to be able to do it.

After two years, not a single regret.

 

[MurrayM]

In Canada, pensioners are at the bottom of the list of unsecured creditors to be paid if the company you work for goes bankrupt. Underfunded pensions mean you get a single digit percentage of what is owed you.

Hard to plan retirement if your company is repetitively raided by hedge funds prior to going insolvent.

I have one pension that might buy me a midline Hyundai in my retirement.

Defined Benefits pensions are virtually unheard of in the private sector in Canada.

Yup. I might be one election away from everything changing.

I worked for a profit making 'stand alone corporation' who's profits go straight back into the federal government. Part of my calculous when deciding to retire was reading the tea leaves to see if it was safe to go.

We basically have a three party system, and it was the centrist one that proposed a bill to give the federal government, and any private companies/corporations that have contracts with the federal government, the unilateral right to change pension plans. Seniors rose up, and the bill quickly died.

I think I'm safe for now, because it's Canada's great shame how seniors were impacted in the first wave of Covid-19 and I read in the tea leaves that it would be political suicide for any government to hack & slash pensions any time soon.

My theory is if they did monkey with pensions it would come at the same time as guaranteed annual incomes, so should be okay. We'll see...

 

[AlanT]

Does anyone here have a company pension (not government/military)?

Yes a small one. Our company was purchased by an International Firm that offered a pension. They dropped it about 7? years after we sold to them. That was one of the factors that pushed my decision to 'retire' at 49. It now pays me enough to pay my medical insurance and my wife's medicare supplements,
~A

 

[Seevee]

I guess I should add that our boat *IS* our house.

We own only the boat and what is on it. Period. No storage locker - nothing. Contrary to conventional thinking, that part was surprisingly liberating!

Sold our house and all our "worldly possessions" to be able to do it.

After two years, not a single regret.

Boathealer,
A few years back I would have said, "no way in hell"... now I've been thinking about it. A few issues still have me tied to the dirt: The BIG one is a place to keep the boat, and I could live on it right there when not traveling. Also have a plane in my hangar, but both can easily been sold, and I could rent a plane or get in a club a lot cheaper, so there's an incentive to get rid of that.



Sounds like a worry and stress free life!

 

[markpierce]

After 18 years of retirement, I still have nightmares of having unretired back to my stressful job.