I’ve written previously – albeit just a couple of times – about my decision to “retire.” Not that I don’t have stories to share, and perhaps even insights to impart.[i] I’ve mostly held off because (a) people keep telling me I “suck” at retirement, and (b) I have come to believe that every retirement experience is unique.
That said, of late, I have become aware of just how many folks write and counsel about retirement – who are actually well short of that milestone. I’m not saying that guidance is irrelevant – I’m just saying that I have found that the reality is… different.
In the most recent episode,[ii] Fred thought it would be good to turn the tables, so to speak – and interview me about my experience(s). As I contemplated that discussion – bear in mind, I’ve already had the opportunity to share some of that experience with Fred – and considered my current retirement realities, I felt that we (and it was DEFINITELY a joint project with my wife) had – though perhaps accidentally at times – done a pretty good job.
That said, and as unique as I (still) think each retirement is, there are a number of key touchpoints that I think are worth sharing here that gave us a solid foundation for “retirement.”
Can You Afford to Retire?
That turns out to be the $64,000 question (literally). It’s a question that our industry tries to help people answer in a variety of ways, generally with some relatively simplistic heuristics. It really requires the answer to two fundamental questions: (1) how much it will cost you to live in retirement, and (2) what financial resources do you have available to fund retirement.
Since most people have NO idea of the answer to either of those questions 30 years in advance, we tend to provide the aforementioned heuristics; things like 70% of pre-retirement income as a stand in for the former, or a “swag” simplistic number like “15 times your current pay” (at, say age 30) as targets for the latter.
That said, there’s nothing like precision in planning. The good news is, the closer you get to a retirement date, the more accurate such projections are. The bad news is, the closer you get to a retirement date, the less time you have to fill in the reality gap. I will say this – we have been able to live comfortably on far less than 70% of pre-retirement income.
Where Will You Live?
Let’s face it, a big part of “can you afford” is the cost of living – where you’re living. While there’s a lot of talk about downsizing or moving in retirement, statistics support the notion that many stay put, whether because of family or social connections – or just the comfort in being “home.”
As it turned out, we did our budgeting based on where we were living at the time – which can be impacted based on where you plan to live in retirement (and then we decided to move to a more financially friendly locale).
(When) Will You Move?
We knew (pretty much from the day we moved in a decade earlier) that the multi-story home we had that accommodated us and three kids was not only more house than we needed, but would – at some point in the not-so-distant future – be impractical considering the inevitable physical declines that come with aging. So, yes – we were targeting ranches or split levels (which, at least in the areas we were considering, turned out to be a limiting factor).
We decided to make that shift now, rather than later – let’s face it, moving is a big undertaking, and it doesn’t get any easier with age. And my wife wisely pointed out that if we were going to do some travelling (and we do) that it would make sense to establish our new “home base” first.
We did so with several factors in mind. We were focused on (1) access to good healthcare, (2) proximity to a college – figuring that would be good for access to culture, concerts, economic impact, etc., (3) warmth, but with seasons (we’re not fans of winter), (4) no or diminished worries about mother nature (tornadoes, earthquakes, wildfires, or hurricanes (and then, Helene!), and an improved cost of living (including considerations of state income tax).
When Should You Do This?
My wife and I spent a lot of time talking about retirement – and we had done interim planning with a couple of financial advisors – though it didn’t get “real” until I crossed that age 65 “threshold.” Not that I hadn’t given it thought over the course of my career. Indeed, we had done some planning prior to that – and it pretty well validated our status.
I was pretty focused on the financial side of things. Once we had outlined the costs[iii] – built in a monthly cushion – we had our target. The next item of business was to get a reading on Social Security – not only the timing of claiming, but – since both of us had Social Security benefits to claim – how/if we’d deal with joint and survivor issues. I’d highly recommend signing up for an account with Social Security (if you haven’t already done so) – and to take advantage of the calculators on their site to get a solid idea of what you can expect.
Step two was to look at existing lifetime income options (if you’ve ever worked for an employer that offered a pension, even if it’s small, it’s worth considering). While full pensions in the private sector are rare, every little bit – particularly “little bits” that are guaranteed for life – helps.
And then you see how the established lifetime income compares to the projected monthly costs. If there’s a gap – well then you look at your other assets (notably your 401(k) or 403(b)) – and then either figure out a plan for withdrawal, or a plan to acquire/invest in retirement income.
But that’s a topic for another post.
- Nevin E. Adams, JD
[i] My retirement journey is still being mapped out – but of course I’ve written about it…some…
The Biggest Surprise About (My) Retirement (napa-net.org)
Retirement Industry Leader Nevin Adams to 'Retire' (napa-net.org)
My 'Retirement' Account (napa-net.org)
[ii] You can check it out at https://podcasters.spotify.com/pod/show/nevin-adams5/episodes/Season-1--Episode-3-Nevin-E--Adams--JD-e2ouquf/a-abi5pcl (or on your preferred podcasting platform).
[iii] One big cost variable is health care premiums – Medicare – which, as I have written about previously (see The Biggest Surprise About (My) Retirement (napa-net.org)), is probably more complicated than you may appreciate – it was for me, though we’ve been pleased with the outcome.
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