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backwardsk

Retirement

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In the thread about a potential Orioles move to Nashville, I saw good conversation about retirement plans  particularly living in FL and OH.  I thought that was really cool.

I know this board ranges from those already retired and those who haven’t started their career.  

I was hoping this thread could be a place where people can share their strategies and planning techniques for retirement.  I’m about 15 to 25 years away (if I have control over it) and have an outline of a plan that I’m executing, but as I’ve seen, it’s hard to hold assumptions. 

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On 1/2/2020 at 11:29 AM, backwardsk said:

In the thread about a potential Orioles move to Nashville, I saw good conversation about retirement plans  particularly living in FL and OH.  I thought that was really cool.

I know this board ranges from those already retired and those who haven’t started their career.  

I was hoping this thread could be a place where people can share their strategies and planning techniques for retirement.  I’m about 15 to 25 years away (if I have control over it) and have an outline of a plan that I’m executing, but as I’ve seen, it’s hard to hold assumptions. 

If you’ve got the outlines of a plan that you’re executing 15-25 years away, you’re way ahead of the game.    I think there’s really two aspects to any retirement plan - how much money are you going to need, and what exactly do you plan to do once you’re retired?    I’m probably 3-4 years from retirement, and I’ve got the financial side pretty well handled, but really haven’t given much thought to how I’ll fill my time.    One of my vague thoughts is to attempt to write a novel, but I’m not sure I’ll have the discipline or imagination to do it.    At least for now, with two kids living in the area, I’m not planning on moving.    

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5 hours ago, Frobby said:

If you’ve got the outlines of a plan that you’re executing 15-25 years away, you’re way ahead of the game.    I think there’s really two aspects to any retirement plan - how much money are you going to need, and what exactly do you plan to do once you’re retired?    I’m probably 3-4 years from retirement, and I’ve got the financial side pretty well handled, but really haven’t given much thought to how I’ll fill my time.    One of my vague thoughts is to attempt to write a novel, but I’m not sure I’ll have the discipline or imagination to do it.    At least for now, with two kids living in the area, I’m not planning on moving.    

You will find so many things to do. So many. 

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1 hour ago, weams said:

You will find so many things to do. So many. 

I can’t say I’m worried about it.   But, I do think I’ll need to have some activities, in addition to posting on OH 12 hours a day.   

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I did an exercise to estimate my 401k balance 20 years out using historical S&P returns.  But then I took actual returns from 1980-1999 for one run and actual returns from 2000-2019.  There was about a 600k delta between the two runs.  There’s a lot of luck in that timing.

 

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19 hours ago, Frobby said:

I can’t say I’m worried about it.   But, I do think I’ll need to have some activities, in addition to posting on OH 12 hours a day.   

It keeps the brain sharp.

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In an era where employers have by and large abandoned defined benefit pension plans, I'm not sure how much this advice is worth.

However, when I retired five years ago, I had a defined benefit pension plan.  The portion of the account that represented my employer's contributions was automatically applied to provide a lifetime income.  For the portion of the account that represented my own contributions, I had an option.  I could either apply that money to increase the lifetime income, or I could withdraw it and invest it in a traditional IRA account.

I figured out that if I applied the money to increase the lifetime income, I would be earning the equivalent of four or five percent interest every year.

People told me I would be crazy to apply it to increase the lifetime income.  I was told nobody applies it to increase the lifetime income.  If I withdrew it and put it in an IRA account, I would surely earn 10% return every year, at a minimum.

Well, I withdrew the money and put it in an IRA account.  Not trusting my own financial acumen, I got a financial professional to invest it for me.

Five years later, the return on that account has averaged a little over 2% per year.

My advice to anyone who's offered a similar option on a defined benefit pension account would be, unless you're certain that you are a financial wizard,  apply your contributions to increase the lifetime income.

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If you don’t mind me asking, what percentage of your final salary is your employer’s pension contribution.

In other words, if you made $100 in your last year does your employer pay you $20, $50, $100 each year in retirement?

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I had a child late in life so I probably won’t ever retire.  

6 hours ago, WillyM said:

In an era where employers have by and large abandoned defined benefit pension plans, I'm not sure how much this advice is worth.

However, when I retired five years ago, I had a defined benefit pension plan.  The portion of the account that represented my employer's contributions was automatically applied to provide a lifetime income.  For the portion of the account that represented my own contributions, I had an option.  I could either apply that money to increase the lifetime income, or I could withdraw it and invest it in a traditional IRA account.

I figured out that if I applied the money to increase the lifetime income, I would be earning the equivalent of four or five percent interest every year.

People told me I would be crazy to apply it to increase the lifetime income.  I was told nobody applies it to increase the lifetime income.  If I withdrew it and put it in an IRA account, I would surely earn 10% return every year, at a minimum.

Well, I withdrew the money and put it in an IRA account.  Not trusting my own financial acumen, I got a financial professional to invest it for me.

Five years later, the return on that account has averaged a little over 2% per year.

My advice to anyone who's offered a similar option on a defined benefit pension account would be, unless you're certain that you are a financial wizard,  apply your contributions to increase the lifetime income.

If your financial advisor only is getting you 2 percent a year the last 5 years they must have put all your money in short term bonds.  I think I have averaged about 20 percent return the past 5 years with a very conservative strategy.  Maybe your investor thought you wanted zero risk investments. Who knows what the future will hold but the stock market pretty didn’t make any money between 2000 and 2009.  Getting a fixed retirement income is best for the vast majority of people.


 

I told my mom to keep all her money in a lifetime income account but she didn’t listen and took the lump sum to invest herself.  She did luck out and sold her house at peak value back in 2007.

 

 

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On 1/4/2020 at 7:30 AM, Frobby said:

If you’ve got the outlines of a plan that you’re executing 15-25 years away, you’re way ahead of the game.    I think there’s really two aspects to any retirement plan - how much money are you going to need, and what exactly do you plan to do once you’re retired?    I’m probably 3-4 years from retirement, and I’ve got the financial side pretty well handled, but really haven’t given much thought to how I’ll fill my time.    One of my vague thoughts is to attempt to write a novel, but I’m not sure I’ll have the discipline or imagination to do it.    At least for now, with two kids living in the area, I’m not planning on moving.    

Go for it.

Too many people hang on and keep working until they are unable to enjoy their retirement.

Im slightly ahead of you, looking at 1-2 years, almost stayed out, this past summer, but like the extra financial cushion to do what I want to do.

Ive been blessed, been very conservative with my 401K and T Rowe Price has invested nicely and really giving me a nice cushion to supplement my different retirement checks.

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On 1/13/2020 at 4:22 PM, backwardsk said:

If you don’t mind me asking, what percentage of your final salary is your employer’s pension contribution.

In other words, if you made $100 in your last year does your employer pay you $20, $50, $100 each year in retirement?

My pension plan was negotiated as part of a union contract.  The union did very nicely for me.

If I had gone with a single-life annuity without any guaranteed period, the benefit would have been equal to my final year's salary multiplied by 2.5% multiplied by my number of years of service.  I retired with 20 years of service, so that would have been 50% of final salary.

I signed up for a joint and survivor annuity with a guaranteed period, so the benefit is somewhat less than 50%.

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That’s pretty strong to have that 50% (if it was just you), the IRA, and SS.  You seem to be set up well. Congrats.

As you mentioned, pensions are scarce these days with more reliance on individual accounts.  I’m trying to use real estate as the third rung of my plan: 401k, RE, and SS.

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I'm just a single guy, no kids, no wants or warrants, and 2 cats.  If anything happens to me, my cats are taken care of.  That's all I care about.  I only have SS  waiting for me (yeah, right) and a few bucks stored away.   If I have it, I spend it.  Any extra, extra, money I have I donate to a cat shelter.   If something happens to me, let me go.  I have people and animals on the other side waiting for me. 

I just hope the O's are somewhat good when it's time for me to go.  My mother who was a big Red Sux fan, she died the year they won their first series in 100 years.

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On 1/15/2020 at 7:26 PM, backwardsk said:

That’s pretty strong to have that 50% (if it was just you), the IRA, and SS.  You seem to be set up well. Congrats.

As you mentioned, pensions are scarce these days with more reliance on individual accounts.  I’m trying to use real estate as the third rung of my plan: 401k, RE, and SS.

I’m very jealous of anyone who has a pension as opposed to (or in addition to) a 401 k type plan.    One of the real perks of being a government worker, for example.   I’ve made a nice living as a lawyer but what I’ve saved is what I’ve got coming to me, and nothing else.    My firm won’t be paying me a dime after I retire.   

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