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Thinking Retirement?


sam.fitzpatrick
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Lately I've become obsessed with getting my personal finances in order to be ready for retirement. While I'm at least seven years from actually retiring, I know several forum members already have or are nearing that date as well. What things go into the equation when you are making that big decision?

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keep track of how much $$ it costs you to live over a period of time. then see if your retirement income will be enough for you to maintain your lifestyle once you retire. there are several books out on the subject and it would be to your advantage to read them. too many to discuss here.

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Lately I've become obsessed with getting my personal finances in order to be ready for retirement. While I'm at least seven years from actually retiring, I know several forum members already have or are nearing that date as well. What things go into the equation when you are making that big decision?

 

I agree with Holden. First do a lot of reading. The more information you have, the better you will be able to make an informed decision. I tracked total spending for several months, and then added to that, car repairs, and the potential cost of replacing that car, travel, yearly expenses like insurance, taxes etc. and came up with a dollar amount that I would need to live on monthly. I also added to that figure a series of financial goals I wanted to accomplish that would make my retirement stress free, as an example I wanted the house free and clear. When all those goals were met, then I would allow myself to retire and not before.

 

Set some goals, stick to them. Most people spend more time planning a vacation than they do their retirement. And should you feel that perhaps you are getting a late start in all of this, there are books that deal with that issue as well. Good luck.

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Finaancial security is the number one concen, but a very close second is the question of what to do with the time that will now be available to you. This will vary from individual to individual, but for me it has been volunteer work, in areas that I truly enjoy, travel and the gym.

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Holden and BVB - thanks for the suggestions on reading. Hadn't gotten there yet. Besides financial, anything else that comes into the equation?

 

Yes, numerous things. Health care, what kind of health care was provided in the areas that I wanted to retire near was a big concern. I wanted to make sure that a major medical hospital was near by. For me that eliminated places in more rural areas of the country, where it would take longer to get to a hospital, should an emergency arise. As an example, I at one time considered retiring along the rural part of the California Coast, but decided that it was to far from any major city, an emergency ambulance ride would have been too long.

 

What to do with my time, never really concerned me. I have numerous interests that keep me very busy. Travel, both for pleasure and to see friends, and boating are all consuming interests in my life. But I have friends who came out of retirement because they did not have any interests outside of work and became restless fairly quickly.

 

I am not one of those guys that needs to keep busy every second of the day. I knew that about myself, and thus realized that restlessness would never be an issue. Some people can't slow down or let go of their previous life, I understand that, and for them, retirement can be more difficult. Try and visualize yourself not having to go to work and think about how you would fill your days. It can be a bit of an eye opener.

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Most of all use common sense. Determine what type of lifestyle you wish to have in retirement. If is it pretty much the same as your lifestyle while working, you will know what income level you require, if different, then you will have to accurately determine how much more, or less, your income requirement in retirement will be. NEVER rely on the many "retirement calculators" that available on-line - they are worthless and will only mislead you. NEVER assume more than a 5% rate of return on your investments. Overestimate your expected expenses a bit and underestimate your expected income a bit - about 10% each. NEVER put all of your investment eggs into one basket. Do not go chasing the mutual fund that has the highest rate of return for any recent period, by the time you are aware of it, its run is pretty much over. The best situation is if a 4 or 5% rate of return on your investments generates your required income. For a few years you will not draw down your principal and you can safely increase withdrawals over time to cover inflation as it takes a toll on spending. Have a "shit happens" fund in addition to your investments. This amount could be what you expect repairs to your home will be over the course of your retirement including replacing major appliances, or a fund to cover expected insurance premiums including out of pocket costs over your retirement. These expenses cannot really be accurately predicted, but the fund will provice some addtional safety.

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All good advice. Don't just pay off your home or car, pay off all debt. That way you only have to control what you choose to spend money on. DO NOT "count" on any government retirement plans like social security or medicare. They will not look the same in seven years. I'm not even sure what private or government pensions will look like. Get a good financial adviser (unless you're good and want to do this yourself) who can help you plan goals and investment strategy. Personally, I decided definitely to retire a year before I did. I then spent that year both working harder than ever and doing some very careful planning. Oh, a difficult unknown right now is the rate of inflation (or will it be deflation??), so nycguy's advice is particularly relevant. Good luck!

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Lately I've become obsessed with getting my personal finances in order to be ready for retirement. While I'm at least seven years from actually retiring, I know several forum members already have or are nearing that date as well. What things go into the equation when you are making that big decision?

 

Don't know your situation but in some occupations/professions there are people you can consult(free) who will go over your finances in retirement with you and delineate exactly what your income will be, monthly and yearly. Several others have pointed out retirement finances that you need to consider. If you are already paying for your own health insurance, you are aware how much that will cost in retirement; if not, be prepared for major sticker-shock. If you are going to depend solely on your savings, IRAs, and other portfolios, you need to sit down with a financial advisor, if you have one, and determine what you can expect with what you have. No one can predict the future, but you can at least find out what your income would be for next year, given what your investments are and how long that would last. Things change and what is true now, might not be true in seven years.

Other than financial concerns? Family responsibilities, if you have any; stay where you are or re-locate; what will you do with the time you will have at your disposal; have a thorough physical and find out possible problems that you can ameliorate with changes in lifestyle; examine your circle of friends, acquaintances away from work and find out if they are planning to retire and when.

I have been retired for ten years and find that almost everyone who is also retired has a different approach, philosophy, reaction to retirement. Final suggestion: I'm big on list making, so if you make a list of what you are looking forward to in retirement as opposed to what you are dreading or fearing, it might help.

Good Luck and let us know how things work out.

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Gentlemen - great suggestions - thanks for your thoughts.

 

BVB - I'll need to carefully think through your comment about staying busy. I typically work 12-hour days (or more) M-F and use the weekends to catch up on my personal life. I'm not sure I can be completely retired - either a second career or a part-time option might be in order.

 

Samai - Thanks for the reminder on insurance - I've helped my mother select hers and know how expensive it is, yet it is always easier to accept when it isn't your own $$$.

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My partner, who is several years older than I am, retired impulsively at 62. That's when I started to seriously plan for my own retirement. I had some advantages most people don't have. For instance, I started putting 5% of my salary into a retirement investment plan (matched by my employer) when I was 24, so by the time I retired at 60, I already had a reliable base to depend on. I also had a job that allowed me to cut my worktime in half, for half pay but the same guaranteed benefits, so I could experiment to see whether I really could live on a reduced income. The free time also allowed me to start a parttime career that I was able to continue into retirement, for extra income; I would be uncomfortable if I had no way to make something extra when I want it (no, it is NOT escorting). Even if you don't have those possibilities, before you surrender your regular income, you should try living for a while on no more than three-quarters of it, to see what you have to give up.

 

One important condition of my early retirement was that I was allowed to stay in my employer's group health insurance plan, for life, which saved me from the problem of obtaining health insurance on my own. My partner had to obtain health insurance on his own, and it is a considerable expense compared to what I still pay my employer for coverage. If necessary, you should shop for it before you decide to retire. If you think you might need longterm care insurance as well, the earlier you get it, the cheaper the premiums are (which doesn't mean that they are cheap--I pay $2200/yr, but only because I was in excellent health when I got the policy).

 

If you are planning to move somewhere else to reduce your cost of living, there are reference books that will give you plenty of comparative information (among the best that I found was "Retirement Places Rated" by David Savageau), but they become dated quickly, and your individual expenses may be quite different. We found when we moved that some things became cheaper (e.g., housing, utilities, insurance), and others more expensive (we had never before had to spend money on gardeners, pool maintenance and a tree surgeon), and in the long run it seemed to be a wash. We were accustomed to live in the center of a major city and use public transport, and hadn't thought about the desirability of having two cars in a place with limited public transport. Some things you just won't find out until you have moved.

 

Some people have mentioned finding things to do with your retirement time. I didn't want to retire and have nothing change except the fact that I didn't have to go to work. I wanted to move someplace with a milder climate, meet new people and do new things. It took about a year in our new location to find those things. Each of us had some false starts. We figured that volunteering was the way to go, so my partner tried one volunteer organization that didn't work out, before he found one that was a good fit for him, and I tried two, before I realized that what I really wanted was not to tutor kids or answer phones at a gay community center (both things I had done in my earlier life), but to play tennis every day, even though I had never previously touched a racquet. I have never been happier. Willingness to experiment is the key.

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All good advice in the various responses. One thing that wasn't mentioned was long-term care insurance. I was fortunate enough to be reminded of this about seven or eight years before I retired and when I was in excellent health. I was able to join a company-sponsored group plan that I have continued into my retirement. It will cover most of my costs should I have to be in a nursing home or other similar institution. These are VERY expensive and a long-term illness can wipe you out. Also you should max out your 401(k). The only other advice would be to STAY ACTIVE.

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Your second life in Retirement will depend highly on your health, stamina and outlook at that time. Although I agree with the idea of planning, finalization of any plans can quickly turn to disappointment if you are physically not capable of meeting your goals. I would recomemend having your financial future in place, and then playing the rest by ear.. I was always more of a spontaneous person, and over the years have found that many plans are quickly just distant memories because of things we couldnt forsee.

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Your second life in Retirement will depend highly on your health, stamina and outlook at that time. Although I agree with the idea of planning, finalization of any plans can quickly turn to disappointment if you are physically not capable of meeting your goals. I would recomemend having your financial future in place, and then playing the rest by ear.. I was always more of a spontaneous person, and over the years have found that many plans are quickly just distant memories because of things we couldnt forsee.

 

My plan was to get a Master's Degree in a completely new field--not for employment, just interest. Got as far as writing the thesis only to discover that I was not a good writer. So, as JJ says, keep your options open.

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Some great advice offered here. As I have not yet retired, I can't speak to what the other side of the rainbow looks like. However, someone whose path I hope to emulate shared with me some rules I have faithfully followed:

 

- do away with all debt

- diversify your savings into different options to give you flexibility with use and access

- plan ahead for the expected (health care, travel, recurring expenses, will/ durable power of attorney, and charitable giving)

- plan ahead for the unexpected (long term health care, what you want to do, and emergency expenses)

- live and do what makes you happy

 

I'm working very hard to make all of these a reality now.

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I cannot stress how important it is to begin the conversation about retirement with friends and family. Ask them what they are planning. Ask if they have a financial advisor. Ask them for a recommendation if they do. Seek out investment advice from a certified pro who comes highly recommended. If you can't find anyone, then begin with the big investment companies in your area and set up interviews to discuss your situation and finanical requirements.

 

ED

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how long do guys expect to live realisticly these days???? I ask because in my new home location of central/south florida I am in a demographic of mostly senior citizens. More and more of my clients are working well past retirement age and loving it. Continuing to work seems to keep them energized and very few trust government benefits at all. Also with our amazing health care system alot of my senoir clients are telling me they fully EXPECT to make it to 100! Now that would in my mind greatly complicate retirement planning. I have a GREAT long term client who just made his tenth, "last final international trip," LOL! I called him CHER because he has had more farewell tours than her. Fact is the guy is the PICTURE of health and is not dying. He probably will make 100. Lastly I find this to be true: when a person winds up on a fixed income (like most retirements) they usually become a bit more careful about money. Some would call this cheap. I have antother client who was debating an expensive trip that he was physically up for. He told me he was not sure he could afford it. Well, I helped the guy do his taxes last year and he could afford a thousand such trips! lol! My two cents is this: If you can keep working then keep working or start a small business to keep you busy after you retire. We do not know with any certainy what the future holds. We may all live to be 100. I hope so. Mikey @ http://www.rentboy.com/mikey9nola1

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how long do guys expect to live realisticly these days???? I[/url]

 

While life span is much longer now to Miracles of Science and life style changes, noone can predict how long they will live under Natural circumstances. However death by unnatural causes cannot be dismissed. This is not an exact science, so planning to some degree is wise, but driving yourself insane over it is not.... I know many people who planned their lives out by the book, had provisions for retirement, and dropped dead unexpectedly before they had planned I am sure..

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Have you house paid off and get rid of all your debts, and make sure anything you charge you can pay off when the bill comes in. The secret to living on a fixed income is not to owe anything, and pay off all your bills as they come in. Also, never ever spend capital money. Live off your social security, pensions, and interest from your savings. If you start dipping into your capital, it's all over.

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Have you house paid off and get rid of all your debts, and make sure anything you charge you can pay off when the bill comes in. The secret to living on a fixed income is not to owe anything, and pay off all your bills as they come in. Also, never ever spend capital money. Live off your social security, pensions, and interest from your savings. If you start dipping into your capital, it's all over.

 

So instead of enjoying your Capital in your declining years, which is when you would need to spend it, you recommend leaving it towards your Estate ? Even my trusted financial planner never suggested that....

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The best thing that happened to me before retirement was having my financial advisor try to screw me. I had been with him for years, and always felt that I was getting the very best advice, then he started talking with me about a whole new approach. It was quite radical, and he did a magnificent sales job, including a day of golf at a premiere course and several fancy dinners. Something spooked me one day, and fortunately I was able to extricate myself just in time. At that point I took over all my own financial planning. It's amazing how much information is available for the personal investor. I would highly reccomend educating yourself on financial matters, so that even if you do start working with an advisor, you will have a better understanding of what he's doing. It was a whole new world for me, but I took classes, found a few reference books with solid explanations, and opened an account with one of the large investment firms that caters to personal investors.

 

I do agree that you should be debt free and plan to stay that way, before you stop working. Also you need to have an honest understanding of yourself and what you can deal with. I had to give up my beach house fantasy, and come to grips with the fact that I really don't like extended trips away from home. I did decide to live near family, but that has not worked out so well, so I am king of planning a move to another area of the country, where I used to live and find more appealing. It is essential for me to live in an area with an active gay community.

 

I did not find volunteer work very rewarding, until I eventually found some groups that I clicked with. That was a surprise, since I had planned to hook up with my favorite charities, but after working so hard for so many years, I had zero tolerance for some of their bullshit. I did go into a slump for the first year, and that worried me, until I reconnected with an older friend, who had also gone through a slump. His example was very helpful, so I would encourage you to chat things over with some older friends, just to get some ideas. Facebooking with old friends, gay and straight, has been helpful. I wish I had built stronger friendships over the years.

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The best thing that happened to me before retirement was having my financial advisor try to screw me. I had been with him for years, and always felt that I was getting the very best advice, then he started talking with me about a whole new approach. It was quite radical, and he did a magnificent sales job, including a day of golf at a premiere course and several fancy dinners. Something spooked me one day, and fortunately I was able to extricate myself just in time. At that point I took over all my own financial planning.

 

Good for you!!! Early in my professional career (from mid 20s to early 30s), I tried 3 different financial advisors with different firms. Each one demonstrated that his interests were more important than mine. One of them got pissed with me when I ignored his "sure" advice, cancelled a standing monthly buy order for Worldcom stock and actually sold alot of it against his recommendation. This was several months before the accounting fraud was announced. I told him that I'm not a financial whiz, but even I knew something was wrong with that company's earnings reports. I asked him to explain to me how that company could keep posting record earnings, and yet its cash-flow was negative every quarter, and was burning cash on its balance sheet. He tried to use sophisticated terminology discussing financial engineering, debt management, ebitda, blah blah blah. He was trying to blow smoke up my butt, but I didn't buy what he was selling. He was the 3rd and last financial advisor I ever used. I fired him, closed my account with his firm, and took control of my financial future. 10+ years later, I'm doing ok managing my portfolio. It can be time-consuming to do the proper homework on each investment, but I much prefer being in control of and responsible for my financial future, rather than outsourcing my portfolio to someone who will never put my needs/wishes above his own.

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