Retirement thoughts/plans/dreams

[NYCfixie]

For those retiring early in the USA, how did/do you plan for the years from "early retirement date" through to 59.5 (when you can access IRAs and 401k) or 65/67 (when you can collect Social Security)?

- My wife and I are not planning on getting social security so it will be an added bonus if it is still around when we retire.
- We have maxed out IRAs and 401k (unless we were not able too for tax reasons) and been aggressive with our asset choices since our 20s so we have more than enough in those accounts to retire now.
- Our new accountant made fun of this year when he realized how much we have been saving all these years, how conservatively we live, and said "You know, you don't have to live that way".

Our issue is that we probably do not have enough in non-retirement savings and resulting investment income (currently being reinvested) for both of us to retire at 50 and I do not really want to use the principal of the non-retirement investments to cover those years.

How did you cover the interim years?

[defspace]

- Our new accountant made fun of this year when he realized how much we have been saving all these years, how conservatively we live, and said "You know, you don't have to live that way".

How did you cover the interim years?

Good question, and I'd like to know the answer too.

Also, is that person still your accountant? I would suspect that aggressive saving and living below your means is a huge part of why early retirement is even a topic of discussion.

[PaMtbRider]

My wife and I are 52 and just got home from a week's vacation. I expect to do a lot of what we did this last week in retirement. Travel with the Airstream, bicycle, motorcycle and kayaking.

Worst case is we both work 10 more years to age 62. Luckily we both work for companies that provide pensions. Between 401K, pensions, and other investments our financial planner tells us we are ahead of the game.

For those asking about retiring early and covering the years before 59 1/2 to access 401k money. If you retire from a company, you can withdraw money from that 401k without penalty. Money has to come from that account, and not a previous 401k from a former employer. I have several friends who have done this. My employer offers full retirement after 30 years regardless of age.
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[NYCfixie]

Also, is that person still your accountant? I would suspect that aggressive saving and living below your means is a huge part of why early retirement is even a topic of discussion.

Yes he is. Yes it is.

He was being somewhat sarcastic. The next line from the accountant was, "you could probably loosen up a bit at this point since you have been so good about saving and you are close to the finish line". Then we started to talk about Roth IRA conversions and my wife tuned out with this statement, "as long as it makes us more money and we pay less taxes go for it".

[jclay]

Yeah, this part of Provence is really cheap but for most part of the year also totally dead.

That's where the wonderful European rail system comes into play!

[Too Tall]

Lionel, that is exactly why I like that berg.
Caleb. My day job was never my passion so retiring early was always the goal. My other business pursuits paid the bills. Funny thing, if you have three side gigs it adds up. Nothing earth shattering but when it comes time to stop your day job the financial change is lessened. Mrs TT retires in three yrs. Than the real fun begins.
Fwiiw we put our entire faith in some good financial planners who act as surrogate parents....we do what they say.

[ldamelio]

Question for all the older guys who are feeling like they've had enough: Did the feeling that work wasn't indefinitely sustainable always exist, gradually build, come from some particular event, or have a different trajectory?

Probably different in each individual case. Without boring you with details, my career since 1981 has varied between 60 and 120 hours a week. Not unusual in my profession, especially for guys of my generation. Not sustainable mentally for me any more as I turn 57; I think I can crawl to the line I've set at 60. I suspect I'll recharge a few months after retirement and seek some part time work, whether paid or volunteer. But if not, I have a few languages to learn, books to read, trails to hike, continents to visit, fish to catch, gardens to grow, food to cook, wine to drink, and roads to ride. And the icing on the cake, hopefully, grandchildren to spoil.

Unlike many of my colleagues who rail against millenials as 'lazy', I think they get it. Work/life balance = sustainability.

[Saab2000]

I do not have a financial planner. I would like to hear what a planner offers that we can't learn ourselves. This is not a loaded question.

Over the past decade I've done tons of reading and it all seems to come down to the same few things, namely:

1. Max out your 401(k) and your Roth IRA (or regular IRA if applicable)
2. Do so-called "Catch Up" contributions if eligible
3. Beware of expenses - go with low cost index funds like those offered by Vanguard or something similar. These days if we're paying more than a small fraction of 1% we're paying way too much.
4. Ride the fluctuations

What does a financial planner do that's different from this? When I moved a bunch of 401(k) money last year to a nationally known, quality brokerage house the representative tried to get me into one of their services. I declined and instead invested into a variety of very low fee index funds and ETFs and I think I'm paying less and getting the same thing.

What do people get from their planners? Again, not a loaded question. I'm honestly curious about this.

[ron l edmiston]

--- i am smart enough to know what i am not smart enough to know..
i have had the same financial planner for the past 15 years ---- we have been very successful as a team..

ronnie with a smile

[summilux]

What do people get from their planners? Again, not a loaded question. I'm honestly curious about this.

Think of them as personal trainers. They encourage you to do the things that you know you should and are a good emotional crutch to reinforce "buy and hold" when there is a market downturn. Planners also know a lot about all financial instruments out there. I suggest getting one of those fee for service planners so you know that their advice is not based on their commission. My wife used to be a stock broker/financial advisor for a big firm and I know first hand that the advice you receive from big brokerage houses is tainted by the desire to earn commissions.

[Lionel]

Lionel, that is exactly why I like that berg.

Yep but living there full time may be a tough call.

[NYCfixie]

I agree with you, all the necessary basic investment information is out there and it all says the same thing. As a result, I am not really sure what you get with a financial planner since I did my own research at 18 when I realized I needed to pay for college. Later in my 20s, my wife's aunt reaffirmed most of what I knew and turned us onto Vanguard.

I would change your #4 as follows: Hold and Buy during downturns.

And read these books:
The Millionaire Next Door: The Surprising Secrets of America's Wealthy
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel
Berkshire Hathaway Letters to Shareholders by Warren Buffett (Kindle)
And any, or all, of Jon Bogle's books.

I do not have a financial planner. I would like to hear what a planner offers that we can't learn ourselves. This is not a loaded question.

Over the past decade I've done tons of reading and it all seems to come down to the same few things, namely:

1. Max out your 401(k) and your Roth IRA (or regular IRA if applicable)
2. Do so-called "Catch Up" contributions if eligible
3. Beware of expenses - go with low cost index funds like those offered by Vanguard or something similar. These days if we're paying more than a small fraction of 1% we're paying way too much.
4. Ride the fluctuations

What does a financial planner do that's different from this? When I moved a bunch of 401(k) money last year to a nationally known, quality brokerage house the representative tried to get me into one of their services. I declined and instead invested into a variety of very low fee index funds and ETFs and I think I'm paying less and getting the same thing.

What do people get from their planners? Again, not a loaded question. I'm honestly curious about this.

Good info here as living the good life is not about stuff. Get the stuff you need and sometimes get the stuff you want.

In the USA, probably 30-40 years ago the company pension disappeared and people needed to start saving for their own retirement which so many people did not do. Social Security is just not enough for 95% of people and it is no surprise that our health care system is effed up and not going to get better anytime soon.

With that said, retiring early or even at standard retirement age with enough money is very easy if people would follow some basic rules:
- Live below your means
- Pay off "good" debt (house, education, car you can actually afford) as soon as possible
- Do not have any "bad" debt (credit cards, car that you cannot afford, private loans, payday loans, paying for anything on credit like furniture)
- Put 20% down on a house, take a 15 year fixed rate loan, the monthly cost should not be more than 25% of your income, do not take a second mortgage for any reason (if you cannot meet this standard you can probably not afford it)
- Max out your retirement accounts
- Max out your IRAs
- Have 6 months of expenses in cash as a rainy day fund
- Put more money away if you can
- Plan/Save for big purchases and pay for them once you have the money for them (braces, education, cars, home upgrades, etc.)


This advice was given to me and my wife by her Aunt who was a financial planner and retired in her 50s.

[davids]

What do people get from their planners? Again, not a loaded question. I'm honestly curious about this.

Here's what I get: Someone who (1) knows more than we do, (2) has access to a lot more resources than we do, (3) has analytical distance from our concerns/fears/hopes, and (4) is a sounding board for our questions and wants.

Example 1: We inherited some money. We wanted to buy a new house. Cost of house was basically the same as the inheritance. My thought (after working through multiple cashflow projection spreadsheets) was - Pay cash for the house with the inheritance. Our guy: "You can earn (conservatively) 5.5% on that inheritance and pay 3.75% to borrow the money. Plus the tax deduction, and sharing the risk with the bank." Me: "Duh. Set me up with a mortgage broker!" Which he did. Along with an estate attorney.

Good question, and I'd like to know the answer too.

Also, is that person still your accountant? I would suspect that aggressive saving and living below your means is a huge part of why early retirement is even a topic of discussion.

Example 2: My wife has been a life-long saver/planner. And, after she converted me, we have saved aggressively. But our financial planning work began by setting goals. And then figuring out if we could meet them. We are extremely fortunate to have the resources to meet those goals. Our guy helped us realize that the money is a means to these ends, not the end in & of itself. That sounds simple and even obvious, but it took months of planning and discussion before we could begin to really adjust our mindset and feel comfortable spending some of our savings.

BTW, since retirement conversations inevitably involve money, if any of you guys knows when the stock market is going to take it's inevitable dive, let me know, so I can shift my 401k out of equities. ;)

Soon. Or later. But it will definitely dive at some point. Which leads to...

Example 3: Our guy gave us a risk assessment test. My wife & I took it independently and were amused to find a one-point (out of 100) spread between our scores. Anyways. Based on our risk (in)tolerance, our guy created a diversified portfolio of EFTs and mutual funds for us. And every fall we will sit down with him to rebalance and adjust.

[Mabouya]

For those retiring early in the USA, how did/do you plan for the years from "early retirement date" through to 59.5 (when you can access IRAs and 401k) or 65/67 (when you can collect Social Security)?

You can access your 401k before 59.5, just leave it at the company where you originally accumulated it.

There's tons of info out there on how to do it, but here's one link:

https://www.forbes.com/sites/advisor.../#2ac8f2945ff4

Edit: and there is at least one other way to do it, that one from an IRA involving something called SEPPs, but that's more complicated and restrictive compared to what's described below.

Here's how it works: if you are employed by a company and are participating in the company's 401(k) plan and you leave employment with that company at any time during or after the year in which you reach age 55, there will be no penalty for taking distributions from the plan. Normally, any distribution (other than specifically-qualified distributions) prior to age 59½ would result in a 10% early-distribution penalty being applied.
It is important to note that these distributions only qualify when received from a company-established defined contribution plan - NOT an IRA account. Just to be clear: THIS PROVISION DOES NOT APPLY TO IRA ACCOUNTS. In order to maintain this penalty-free distribution, the funds must not be rolled over into an IRA. This is a critical distinction that you need to understand - a mistake would take away this option completely. Make certain that you completely understand how this works before starting a distribution, as it could be costly to make a mistake.

[bigbill]

I'd like to spend a month a year back in Sardinia during May-September. There are many campgrounds on the Northern end of the island and some monthly rentals in town. Great riding, not expensive, and it's Italy much like Puerto Rico is America. I met many people who shipped a small container from the US or Canada with all their stuff including bikes and had it delivered in town. There are logistics involved but I don't think you have to invent anything new. Life is as complex as you make it.

[jclay]

Are any of you folks concerned with P/E ratios being at, on average, historically unprecedented highs for the past couple of decades?

I've run into no financial planners who can address that issue other than to repeat the same mantra: The stock market always wins, in the end; but that's not quite true, or really the entire point. Like most things the answer is that “it depends”.

It seems to me that the market has long been a bubble that keeps on growing simply because there are few other places to park investment $. That trend has been exacerbated in recent years bc interest rates have been in the toilet; admittedly something that doesn't seem likely to change appreciably in the foreseeable future.

I finally ran into an article that at least made a passing comment wrt high P/Es and it's comment was to simply say that investing in equities during periods of high P/Es could make sense during periods of very low interest rates! That's it, that's all it said. That begs a lot of questions to me and sounds more like justifying going to the casino. I wonder what Benjamin Graham would think? His most famous acolyte is doing well but then Warren Buffet is connected to the inside track and understands the underlying machinery and how it works. He'll sense the warnings long before the rest of us.

For many it's been a good 20 or 30 year ride but hard to believe, at least for me, that the party can continue indefinitely. To me the equities market feels more like a price bidding war, much like those that played out in the real estate market in the good times just before the object lesson on the value of the repealed Glass Steagal Act (and it's brethren regulations) arrived.

[David Tollefson]

Okay, all y'all people who've retired in your early 50's can stuff it.

Me: 53, I'll hit 54 a month after daughter-the-younger hits 4. That's right, I have a toddler in the house. I've realistically got another 14 years before I can feasibly court the notion of retiring. Add three editions of "rape the 401K to fund the ex" (worth it), and the current picture isn't pretty.

Fortunately, my company still has a pension, frozen for folks in my work-experience bracket. For those coming behind me, nada. They haven't cashed us out -- yet.

We just had a round of golden handshakes. If it were two years hence (when the child support for daughter-the-elder stops), I might have considered. Briefly. When I started working here at the tender age of 24, I already knew that work was not a sustainable long-term strategy for me. I emphatically said I'd retire at 55, maybe 50. That's creeping up on me really quick. Crow doesn't taste too bad after all.

My retirement plan? Well, if you believe my wife, I could say hasta la vista to my career in 4 years and build bikes while she goes to work full time (there's an 18-year age gap between us), but I know the history and have seen her not be able to sustain even a part-time job for more than 2 years. So I know it's up to me.

Lovely, eh? Yeah, I've got a portfolio of investments spread around. Some conservative, some aggressive. We're selling our current residence to buy another that fits our needs far better, resetting the mortgage clock. At least it isn't 2008 any more.

[BSUdude]

Are any of you folks concerned with P/E ratios being at, on average, historically unprecedented highs for the past couple of decades?

I've run into no financial planners who can address that issue other than to repeat the same mantra: The stock market always wins, in the end; but that's not quite true, or really the entire point. Like most things the answer is that “it depends”.

It seems to me that the market has long been a bubble that keeps on growing simply because there are few other places to park investment $. That trend has been exacerbated in recent years bc interest rates have been in the toilet; admittedly something that doesn't seem likely to change appreciably in the foreseeable future.

I finally ran into an article that at least made a passing comment wrt high P/Es and it's comment was to simply say that investing in equities during periods of high P/Es could make sense during periods of very low interest rates! That's it, that's all it said. That begs a lot of questions to me and sounds more like justifying going to the casino. I wonder what Benjamin Graham would think? His most famous acolyte is doing well but then Warren Buffet is connected to the inside track and understands the underlying machinery and how it works. He'll sense the warnings long before the rest of us.

For many it's been a good 20 or 30 year ride but hard to believe, at least for me, that the party can continue indefinitely. To me the equities market feels more like a price bidding war, much like those that played out in the real estate market in the good times just before the object lesson on the value of the repealed Glass Steagal Act (and it's brethren regulations) arrived.

I don't think it is foolish to consider stuff like this. Also, consider civilization has been around for a few thousand years...the stock market has been around for 100...not really that "long-term," if you contextualize it.

[summilux]

That begs a lot of questions to me and sounds more like justifying going to the casino.

The stock market is a casino. The only ones guaranteed a return are the brokerage houses. Practically speaking, what are the investment alternatives to stocks: real estate, bank GICs, commodities, precious metals and stones or cryptocurrencies. Stocks seem quite rational in comparison.

[fa63]

For those retiring early in the USA, how did/do you plan for the years from "early retirement date" through to 59.5 (when you can access IRAs and 401k) or 65/67 (when you can collect Social Security)?

How did you cover the interim years?

Wife and I are in our early 30s, and we have a plan in place to retire in our early 40s. By then, our houses should be paid off (we have a primary residence plus a rental property), and our plan is to downsize then use the equity to invest and provide us a monthly income along with the rental property. We plan to make up the rest by working part-time jobs (for me, that would be working at a bike shop; I currently work one day a week at one for fun). Barring some medical catastrophe, we think that is going to take us to 59-1/2 when we can start drawing from our IRAs.

We have no kids (and don't plan on having any), which helps tremendously.