When to Retire

[MurrayM]

Part of the retirement process, if you're lucky to work with a great bunch of people, is the retirement gift. We would leave an envelope out and people could pop a 10 or 20 dollar bill in, then put it on a pre-paid credit card so the retiree could buy their own gift.

These just came today: (grey version) https://www.salewa.com/mountain-tra...00-0000063458?number=00-0000063458_0000000058

Niiiiice

Our daughter & I did some bushwhacking this summer that had us working through rock bands and up steep creeks. Love how these cinch down around the toes like rock climbing shoes...my old time leather hiking boots would ooze off small edges in the most distressing slow motion way.

I consider good boots essential north coast BC boating equipment, helping to ensure one gets back to the boat in one piece after rummaging around ashore where no trails other than game trails (which fade in and out) exist

Also ordered a variety of heavy weight 100% cotton papers to put through our pigment ink printer, and some transparency film to make digitally enlarged negatives with an eye towards making platinum/palladium toned Kallitypes.

Loving this retirement thing!!!!

 

[Cruising Sea Venture]

Rosy and I were lucky enough to be able to both retire at 55 and have never looked back.

Our trawler was a big part of the decision. We sold our home, moved aboard and started cruising full time without any permanent moorage.

After 25 years working I spent about a year in transition with the company. Of course, I thought my work / legacy was important and I wanted everything just right before turning the reigns over. I couldn’t have been more wrong. After I had been gone a year or two I stopped by and it seemed I hardly recognized anyone. Certainly, my legacy of 25 years, whatever that was, was gone.

It just reminded me of that old saying, “The worlds cemetery's are full of indispensable men.”

Life seems too short and time is too valuable and can not be bought - so I would say, if you can, pull the trigger and look ahead.

Jim
M/V Sea Venture

 

[rgano]

Rosy and I were lucky enough to be able to both retire at 55 and have never looked back.

Our trawler was a big part of the decision. We sold our home, moved aboard and started cruising full time without any permanent moorage.

After 25 years working I spent about a year in transition with the company. Of course, I thought my work / legacy was important and I wanted everything just right before turning the reigns over. I couldn’t have been more wrong. After I had been gone a year or two I stopped by and it seemed I hardly recognized anyone. Certainly, my legacy of 25 years, whatever that was, was gone.

It just reminded me of that old saying, “The worlds cemetery's are full of indispensable men.”

Life seems too short and time is too valuable and can not be bought - so I would say, if you can, pull the trigger and look ahead.

Jim
M/V Sea Venture

Jim, your story sorta reminds me of the traditions a couple of ships I was on had for seeing off retiring or transferring officers as they made their way down the gangway for the very last time. All the officers would gather at the quarterdeck to witness the event. On one destroyer, you got hosed down with a firehose about halfway down. Rude. On the battleship they would all yell, "And stay off!" as you left. Geez, work your butt off for years getting things to run like a top and then that! Six ships, I was on and never set foot back on one of them even though they might be across the pier. Three years after I left the battleship as Weapons Officer, they blew up turret II killing 47 men. Good thing I never went back to give them any advice because I'd have been a party to the investigation!

 

[markpierce]

Had a great retirement gift: operating a 3-foot gauge, steam-powered Shay locomotive for a day in Felton eighteen years ago.

https://images.search.yahoo.com/yhs...-eOmxlBSwCLcB/s1600/IMG_9212.jpg&action=click

 

[Pete Meisinger]

I should have explained myself more fully. I never left any company money on the table. They matched up to (I think) 5%. I contributed around 20% at the end but I had other plans in place

It just makes me cringe when I talk with younger people who do not take advantage of a company matched retirement plan.

pete

 

[markpierce]

If there are no 401k matches by the employer, 401ks are a fool's errand. 401k profits are taxed at a high rate compared ordinary investments concerning capital gains and dividends at the federal level.

 

[smitty477]

If there are no 401k matches by the employer, 401ks are a fool's errand. 401k profits are taxed at a high rate compared ordinary investments concerning capital gains and dividends at the federal level.

With 401K's in many cases you can avoid paying large current taxes and pay smaller or no taxes when you retire. Planning is best done by each person to see what might work best for them.

 

[BandB]

If there are no 401k matches by the employer, 401ks are a fool's errand. 401k profits are taxed at a high rate compared ordinary investments concerning capital gains and dividends at the federal level.

As 401-K's replaced other pension plans, the point was to spend the money previously spent on pensions as matches in the 401-K. Now, every employer is different. Some have greatly reduced their contributions and that really defeats the benefit. We make a contribution not requiring any employee contribution and we also make a matching contribution.

Not taking advantage of an employer's match is a mistake for most people. Basically on that part of your contribution you're earning a 100% return before doing anything else. Overall, we have a very young employee group but their level of participation is nearly 100%. For some it's a sacrifice, but it accomplishes two things. First, it gets them a start on some long term and/or retirement savings. Second, it is a mechanism for teaching people to save and helping them develop the habit. Even if they only have a small amount in their 401-K, they make the investment choice among those offered and they track their investments. The vast majority of young people and a sizable percentage of people of all ages have no retirement savings or plan other than social security. It's rewarding to see an entry level employee after a year of making $35,000, looking at their statement to see they contributed $1400 and we contributed $2100 and it earned another $200 for a total of $3,700 and without the 401-K they'd have nothing saved.

For the issue of taxes on the money at retirement, an employee can choose to put their contribution in a Roth IRA so it would be taxed initially and tax free when withdrawn. I wouldn't generally recommend that.

I'm also going to point out and praise a company that I couldn't imagine doing so 15 or 20 years ago and that is Walmart. In addition to their effort to wage their minimum wages and their average hourly employee now making very close to $15 per hour, with incentives this year even more, they've done a great job of adding benefits. They match up to 6% on 401-K's. Their education benefits are excellent. Their health insurance is decent. In the years post-Sam Walton, the company has really become a much better employer. Why is this important to me? Because it helps the lower wage earners and retailers traditionally haven't done so. As an employer, I don't worry about whether my retirement plan is going to help those making millions or hundreds of thousands or even $80,000. It's all those making under $50,000.

Now I realize most of these are probably not trawler buyers, but building a large 401-K and withdrawing when you turn 59 1/2 to buy a trawler to retire on might just be a decent plan for some.

 

[smitty477]

As 401-K's replaced other pension plans, the point was to spend the money previously spent on pensions as matches in the 401-K. Now, every employer is different. Some have greatly reduced their contributions and that really defeats the benefit. We make a contribution not requiring any employee contribution and we also make a matching contribution.

Not taking advantage of an employer's match is a mistake for most people. Basically on that part of your contribution you're earning a 100% return before doing anything else. Overall, we have a very young employee group but their level of participation is nearly 100%. For some it's a sacrifice, but it accomplishes two things. First, it gets them a start on some long term and/or retirement savings. Second, it is a mechanism for teaching people to save and helping them develop the habit. Even if they only have a small amount in their 401-K, they make the investment choice among those offered and they track their investments. The vast majority of young people and a sizable percentage of people of all ages have no retirement savings or plan other than social security. It's rewarding to see an entry level employee after a year of making $35,000, looking at their statement to see they contributed $1400 and we contributed $2100 and it earned another $200 for a total of $3,700 and without the 401-K they'd have nothing saved.

For the issue of taxes on the money at retirement, an employee can choose to put their contribution in a Roth IRA so it would be taxed initially and tax free when withdrawn. I wouldn't generally recommend that.

I'm also going to point out and praise a company that I couldn't imagine doing so 15 or 20 years ago and that is Walmart. In addition to their effort to wage their minimum wages and their average hourly employee now making very close to $15 per hour, with incentives this year even more, they've done a great job of adding benefits. They match up to 6% on 401-K's. Their education benefits are excellent. Their health insurance is decent. In the years post-Sam Walton, the company has really become a much better employer. Why is this important to me? Because it helps the lower wage earners and retailers traditionally haven't done so. As an employer, I don't worry about whether my retirement plan is going to help those making millions or hundreds of thousands or even $80,000. It's all those making under $50,000.

Now I realize most of these are probably not trawler buyers, but building a large 401-K and withdrawing when you turn 59 1/2 to buy a trawler to retire on might just be a decent plan for some.

"Overall, we have a very young employee group but their level of participation is nearly 100%."

Exceptional - regardless of our no fee, company match, and even auto enroll we have never been able to get 1/2 participation. I heard that was about average for larger plans with generally higher payrates and a best case for our situation at the time.

 

[cardude01]

Congrats Murray on the retirement!

 

[Spinner]

My financial planner says more like 3% annual withdrawal. She is fairly conservative though!

Some here are a bit more optimistic than me regarding their future earnings from saved money.

I use a simple 5% rule.

If I have X dollars I can remove 5% per year and never run out of money.

Many will say I can do better tyhan that, and I hope I can. But I am counting on at least being able to follow my 5% rule.

 

[SteveK]

Pensions, north or south of the 49th have been a topic of discussion forever.
Walmart was given as an example. Then it was suggested that not everyone , 50% maybe put money aside and the company matches.

Here is where I see a flaw. Most min wage workers back in the day needed every cent of that min wage just to live. Retirement and pensions were far away in their thoughts. They need to worry about getting by paying the bills, raising a family. Min wage is not enough to be worried about a savings plan.

Any employer knows that $15 min wage is not their total cost per employee, it may be $18, but the employee never sees or appreciates this extra cost, so would it not be better that entry level jobs have a min wage where they take home the extra employer costs?

^^^ perhaps why the underground economy continues to have a reason to continue.

 

[ksanders]

My financial planner says more like 3% annual withdrawal. She is fairly conservative though!

and I thought I was being conservative!

The wife and I just discussed this very thing tonight. We looked at the balances, and our income and decided not to make any automatic withdrawals from our savings.


Between our fixed retirements and our business we just do not not need the extra tax burden. At some point we might sell the business but it pays well and takes just a little of our time, none of with requires a physical presense.

 

[BandB]

Pensions, north or south of the 49th have been a topic of discussion forever.
Walmart was given as an example. Then it was suggested that not everyone , 50% maybe put money aside and the company matches.

.

Walmart has far more than 50% participation.

 

[Al]

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.

BINGO IN EACH AND EVERY DECISION, WE COULD BE RETIREE TWINS.
Retired at 59 , now 81+ more $$$ coming in that going out.

 

[smitty477]

My financial planner says more like 3% annual withdrawal. She is fairly conservative though!

"My financial planner says more like 3% annual withdrawal"
Curious - is your financial planner compensated by assetts under management by any chance?

 

[Leonard Atkins]

One of the best threads I have read this year.



My wife and I retired at 61 this year. We actually retired 2 years early due to my company restructuring, but in the end retiring pre-Covid this year became very good for us.


Returning to the OP's original question of "When to retire?". Our answer was to retire debt free when we had sufficient income stream without touching savings for living today and investments that would improve our financial worth as we age. We engaged our tax accountant and a financial planner to validate our financial plan including tax liabilities.



Eleven months later our "actual" retirement costs in an unusual year are on target and that equals low stress for me. We started with a 4% investment withdrawal rate simply because it provided the travel money we wanted while the investments continue to grow. Initially, every 3rd year we intend to increase our annual withdrawal to maintain the 4% rate, more than offsetting inflation.



Leonard

 

[boathealer]

"My financial planner says more like 3% annual withdrawal"
Curious - is your financial planner compensated by assetts under management by any chance?

3% is the "new normal" for protected long-term safe withdrawal rate according the general consensus of the forum at early-retirement.org (at least at the time I was doing all my planning for retirement). It used to be 4% according to all of the retirement pundits.

We have been averaging 2.5 to 3% annual withdrawals since retiring - living very frugally until we pass a 5-year sequence of returns risk timeframe.

 

[smitty477]

3% is the "new normal" for protected long-term safe withdrawal rate according the general consensus of the forum at early-retirement.org (at least at the time I was doing all my planning for retirement). It used to be 4% according to all of the retirement pundits.

We have been averaging 2.5 to 3% annual withdrawals since retiring - living very frugally until we pass a 5-year sequence of returns risk timeframe.

"3% is the "new normal" for protected long-term safe withdrawal rate according the general consensus of the forum at early-retirement.org (at least at the time I was doing all my planning for retirement). It used to be 4% according to all of the retirement pundits."
Yes - I linked a site in post #62 of this thread that has a much more data driven approach to solving for a best fit solution. In addition there are numerous calculators out there that are valuable in figuring out a best approach and many are 'free' to be used by anyone. (IORP extended, RPM , etc)

My question on this most recent post is that if someone has a 'rule' to pull say 3% but they also have an AUM fee of XX% than their real withdrawal rate is 3 + XX.

"We have been averaging 2.5 to 3% annual withdrawals since retiring - living very frugally until we pass a 5-year sequence of returns risk timeframe"
Our goal was to not live frugally before or after any particular year but to strive for balance all along the journey. YMMV

 

[MurrayM]

On the topic of people working what some might call demeaning jobs in retirement.

We took a pre-retirement course where the instructor crunched the numbers for us and showed some of those workers might be bringing in more money than they did before retiring.

Take us for example...my annual retirement monies, after taxes (including our RIFF) is 88% of my annual take home pay from my job. Granted, we are scraping the bottom of the middle income bracket, but it wouldn’t take much of a job to boost me past what I was bringing in while working.

I don’t look at ‘those guys’ the same way any more.

 

[ScottC]

I can highly recommend the following book by Wade Pfau.
It goes into great detail about withdrawal rates (i.e. 4%; 3%, 3.14159%, etc.) and "sequence of returns risk" which is an absolutely critical topic to understand when planning for retirement or navigating through it. Check out the other books by Dr. Pfau too (covering such topics as reverse mortgages and annuities). They're excellent.


"How Much Can I Spend In Retirement?"

https://www.amazon.com/How-Much-Spend-Retirement-Investment-Based/dp/1945640022

 

[BandB]

On the topic of people working what some might call demeaning jobs in retirement.

We took a pre-retirement course where the instructor crunched the numbers for us and showed some of those workers might be bringing in more money than they did before retiring.

Take us for example...my annual retirement monies, after taxes (including our RIFF) is 88% of my annual take home pay from my job. Granted, we are scraping the bottom of the middle income bracket, but it wouldn’t take much of a job to boost me past what I was bringing in while working.

I don’t look at ‘those guys’ the same way any more.

I consider no job demeaning simply because it's unskilled or low paying. Many work part time jobs because they want something to do. Others to close the 12% gap you describe. Some to buy presents for the grandkids or to just have some extra money they don't feel a need to save but spend even on frivolous things.

I can say without hesitation that working has really helped us both mentally make it through the pandemic, whether working from home or very protected in our office. We will go back to 2 or 3 days a month when we feel like cruising again is practical, but for now it's a great diversion and with all the things we can't do right now, it's something we can do and enjoy doing.

 

[BandB]

I would caution against use of any given percentage withdrawals without looking at your total picture. Also, one needs to regularly reexamine things.

When we retired, we looked at total funds and then looked at specific expenditures we anticipated including house, cars, boats, business and other. Then we looked at the remaining funds and a comfortable rate for them.

Along the way, many things changed. The one we didn't figure on was our small hobby business growing and producing income. But then we didn't figure on operating a school or on buying and building small homes in SC and we most definitely didn't figure on a pandemic which put very significant funds at risk. On the other hand, this year, our boating and travel expenses have been way down.

It's not a one size fits all nor a constant, fixed number. It changes as a result of everything that happens along the way. That also means it's key to understand how you arrived at the number beyond just read it in a book, so you'll know when changes have occured which impact it. The most common change to impact huge numbers of people is a recession. That brings me to one other part of planning and that is contingency plans, basically thinking about what you'd do if this or that happened. Major medical costs is definitely something to think about and have a contingency for. I know one couple that was very comfortably retired until they had a three year old grandchild diagnosed with brain cancer. That changed everything and they sold some things and went back to work but the only thing that really matters to them is that 15 years later they went to their granddaughter's high school graduation. No plan should ever be inflexible.

 

[boathealer]

I would caution against use of any given percentage withdrawals without looking at your total picture. Also, one needs to regularly reexamine things. [snip] ...No plan should ever be inflexible.

 

[Spinner]

Nope. She is a for fee only, fiduciary.

 

[OldDan1943]

I never pay anyone to play with my money.
Some advisors have churned the account, leaving you busted.
My broker got rid of me because I was not buying and selling in the market.
I manage my own stock portfolio and in the last 10 years my net worth has increased 3 times and meanwhile pays a very nice dividend while sitting on my hands.
My advice, retire early because we never know when we will check out. If I live 4 more years and remain active, I will have established a new family record.
My older brother (2 years older) had a significant stroke, cant talk, sits in a wheel chair all day.

 

[boathealer]

I never pay anyone to play with my money.
Some advisors have churned the account, leaving you busted.
My broker got rid of me because I was not buying and selling in the market.
I manage my own stock portfolio and in the last 10 years my net worth has increased 3 times and meanwhile pays a very nice dividend while sitting on my hands.
My advice, retire early because we never know when we will check out. If I live 4 more years and remain active, I will have established a new family record.
My older brother (2 years older) had a significant stroke, cant talk, sits in a wheel chair all day.

One of my goals was to be retired AT LEAST as long as I was working - ................which means I will need to last until I am 93!

 

[Seevee]

I never pay anyone to play with my money.
Some advisors have churned the account, leaving you busted.
My broker got rid of me because I was not buying and selling in the market.
I manage my own stock portfolio and in the last 10 years my net worth has increased 3 times and meanwhile pays a very nice dividend while sitting on my hands.
My advice, retire early because we never know when we will check out. If I live 4 more years and remain active, I will have established a new family record.
My older brother (2 years older) had a significant stroke, cant talk, sits in a wheel chair all day.

Totally agree. I think financial planners are risky. If they were that smart, they would be rich... or at least above average. For one, I don't invest in the market and do everything on my own, with no regrets.



I'd agree with Band B.... setting a percentage as to what you take out is probably not wise. (Now, there are some IRAs that require a min distribution, personally don't like them)



One simply needs:
1. Enough to live on
2. Some inflation proof assets that will provide for No. 1 in the future.
3. A plan B, should major shxx hit the fan.



The actual numbers and percentages will vary a LOT between folks of different needs.

 

[Northern Spy]

This is a great thread. Keep the info coming.

That said, I actually like my work. I'm early 50s and have no desire to retire "early". As long as I find a job that is challenging and rewarding, I don't see a lot of incentive to retire. After 3 or 4 weeks of vacation, I'm ready to go back to work.

I really don't see any of my current hobbies as meaningful replacement. Bought the boat at 40 and kind of bored of it most recently. Still enjoy international travel ( up until this year), hiking and motorcycling.

Mind you, I have changed occupations and locations several time in my working life, which keeps things fresh. Always take ample time off between jobs. Most recently I take on short duration focused projects that keep me engaged.

Luckily my wife feels similarly and would like to work for another 10 years. 65 seems appropriate. We'll reassess year to year.

Great set of hikers you got there Murray. Very considerate of your co-workers. I'm sure you will use them a lot.

 

[MurrayM]

...The actual numbers and percentages will vary a LOT between folks of different needs.

(Bold type mine).

Interesting word, 'needs' vs 'wants'