Looking Forward

Dennis Friedman

I WAS LISTENING recently to a Bob Dylan song, From a Buick 6. One of the song’s lines is, “I need a dump truck, baby, to unload my head.” That’s how I sometimes feel about the churning in my own mind concerning retirement.

I turned 67 this year. This is probably one of the most critical periods for me as a retiree. There are things in my life I need to sort out, so I can develop a more accurate financial plan that will support my retirement. The following are some of my thoughts about my life moving forward.

I don’t want to die where I currently live. This might sound morbid. But it’s the truth. I spend the majority of my time taking care of my elderly mother. When I’m not with her, I stay with a friend at her house. I’m only home one day a week and it no longer feels like home.

When I was younger, I thought it was a great location for me. As I grow older, I’m not so sure. It would be difficult to walk in the neighborhood because of the traffic and the uneven sidewalks. The building I live in is not very accommodating for an older person.

The new home I’m considering is in an area that is walkable, has good medical facilities, and is located close to stores and restaurants. The home would be easier to navigate and has a small yard. This, however, would also increase my housing costs. Until I make a decision, I have decided to use those costs when calculating my future expenses.

I have a close friend. I want to make sure she is financially secure. I decided to wait until I’m age 70 to claim Social Security, so I receive the maximum possible benefit. As a result, if we decide to get married, she would be eligible for a larger survivor benefit after my death. She should outlive me. I like her odds because she is a female and six years younger. Also, I think delaying my Social Security is a smart thing to do. If one of us lives a long life, the larger payment would be extremely helpful.

I have a mother who will be 95 years old this year. I have power of attorney over her finances. I use the “do no harm” approach when managing her finances. I decided this year to move her remaining money from stocks to bonds. I believe her money should be in liquid assets because of her age and short time horizon. I don’t want her withdrawing from her portfolio in a bear market. If she doesn’t need long-term care, I believe she will have enough money to last the rest of her life. If she needs additional money, I will step in and help her as much as I can. This could be a major expense.

That brings me to my thoughts on how I will fund my own retirement. I’m not comfortable with current stock market valuations. At this point, I’m not trying to grow my portfolio. Rather, I’m trying to preserve it and protect it from inflation. My portfolio has approximately 75% in bonds and 25% in stocks. The bonds plus my Social Security should fund my projected living expenses during retirement. The stock side of my portfolio will be used as a hedge against inflation and for funding possible long-term-care needs.

When I’m 70 years old, I plan on using the IRS’s required minimum distribution table as the percentage I will withdraw each year from my overall portfolio. That will force me to be conservative with my spending, with small percentage withdrawals, especially in the early years.

How will I know my portfolio is performing well? I’m using the Vanguard Target Retirement Income Fund as a benchmark. It isn’t a perfect match, but close enough. As of June, my portfolio was slightly ahead of the Vanguard fund for the year to date.

Dennis Friedman retired at age 58 from Boeing Aerospace Company. He enjoys reading and writing about personal finance. His previous articles include More Than MoneyLeap of Faith and Lessons Learned.

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