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Get to Choose

Richard Connor

AS A YOUNG ENGINEER at General Electric, I took a three-day class on career development. That class strongly influenced my thinking about my career—and my life. The class made use of a great little book by David P. Campbell called If You Don’t Know Where You’re Going, You’ll Probably Wind Up Somewhere Else.

The premise of the book is that life is a journey, not a destination. We should set some basic goals that help guide our journey, but—as with all journeys—there are choices to be made along the way.

Campbell believes the foundation of a happy life is the ability to control those decisions to the maximum extent possible. If you come to a fork in the road, you want to be the one who chooses which way to go. You don’t want to be forced in one direction or, worse yet, have no good options.

How do you get to control your choices? By doing the necessary work throughout your life to gain the assets needed to make the decision. These assets are the attributes, skills, experiences, family, friends and knowledge you develop as you grow. The more assets you acquire, the more choices you’ll have.

This is also true in our financial life. The more financial assets we have, the more choices we’ll have. But we also need to acquire some non-financial assets. You probably possess many of these assets. They include innate intelligence, an ability to learn and some facility with numbers. Some of us are born into families where finance is openly discussed. That’s a terrific advantage, especially as you start your financial life.

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If we lack knowledge, there’s a tremendous amount of free educational material to help us learn how to save and invest. There are great books, websites such as this one, and courses. Many of us can point to investing icons whose teachings were pivotal in our growth. Names like Munger, Buffett and Bogle are responsible for much of my knowledge.

There’s one more asset that I think is critical to acquire. I liken it to emotional intelligence. We need to develop self-awareness of how we think about money. Studying behavioral economics, and then examining ourselves through that lens, is one key to building wealth. If we’re in a committed relationship, understanding our partner is also important. Building these insights, and applying them to our life, can help us to build wealth.

I’ve studied financial planning for three decades, including reading dozens of books on investing. I helped found and run an investment club. I completed the coursework and passed the test for the Certified Financial Planner designation. I also completed the Retirement Income Certified Professional certification.

Despite all this, I’m struggling mightily with completing a retirement income plan for my wife and me. I’ve taken early retirement, and the thought of spending our hard-won retirement savings is scary. I also tend to overanalyze things, looking for the perfect solution.

Over the years, I’ve learned that when I get into “paralysis by analysis,” the best thing to do is pick a relatively easy task and finish it. In this case, I set up a recurring withdrawal from my Vanguard Group IRA, enough to cover the gap between my pension and our expenses. We’ll run this way for 2022, while I think about our next moves, such as signing up for Medicare and when to claim Social Security. It isn’t optimal, but it’s one small step on our retirement journey—and the good news is, we control where we’ll go next.

Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.

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Andrew Forsythe
Andrew Forsythe
8 months ago

Rick, your analyses are always thorough and insightful so, as John commented, I hope you’ll post what you ultimately come up with.

As with your interim plan, I likewise tried to keep it simple as I planned for my retirement (5 years ago at age 65). For me, that was to pay the small price for the Social Security analysis provided by Laurence Kotlikoff: Calculate Your Highest Benefits | Maximize My Social Security which told me waiting till 70 was my best option. In the meantime, I simply built up an oversized cash allocation which would do the heavy lifting till then, and could continue for a while as a supplement afterwards.

In a couple of years, RMDs will kick in, and that plus SS will pretty much cover our basic income needs.

R Quinn
R Quinn
8 months ago

I know some people may not have a choice, or at least a good one, but your article triggered a question I frequently ponder. Why do people seem to retire early and then spend time worrying about their income and assets and of course, when to start SS? I see it all the time on various retirement planning FB groups. It seems to me retiring at 60 or in the 50s, makes the retirement income challenge that much more difficult.

mytimetotravel
mytimetotravel
8 months ago
Reply to  R Quinn

I retired at 53 with a pension and medical benefits. It has always been a concern that the pension has no COLA, but that is one reason why I waited until 70 to take SS, since it does have inflation protection. The medical benefits have gone, aside from an annual $3,000 contribution. I have not, however, spent the 22 years since I retired in a constant state of worry. I enjoyed 15 years of extensive travel before being grounded by a medical problem, and meanwhile my investments have quietly grown without requiring attention. Perhaps you only see worriers on the boards you frequent because others are too busy enjoying themselves to hang out there? Now that travel is problematic I am so glad that I had those 15 years.

Jackie
Jackie
8 months ago
Reply to  R Quinn

Retiring at 60 does make the income challenge difficult. But that doesn’t mean its not worth while. The alternative is to continue to work, despite not wanting to, while sitting on a pile of assets that will almost certainly be enough.

But “almost certainly enough” is not equal to “definitely enough”. This choice involves some risk, especially inflation. It seems many early retirees who post on HD will wait to 70 to collect SS while we burn through a sizeable chunk of assets. Waiting until 70 is all about risk mitigation (inflation, longevity), not income maximization.

parkslope
parkslope
8 months ago
Reply to  R Quinn

Being financially secure doesn’t mean you can’t worry about how to maximize your retirement income.

R Quinn
R Quinn
8 months ago
Reply to  parkslope

I agree, but that is, to my way of thinking, maximizing your annual income not the aggregate of what you may collect. Waiting to age 70 to collect SS, but then having to use other assets between retirement and age 70 to live on makes little sense to me. What is being maximized, a benefit that may or may not be received? If one is in a position live without the SS or equivalent fine, take the risk and save SS for later. The Kotlikoff software seeks to maximize the lifetime benefit – example on website is the difference between age 62 and 70. How is that relevant to anyone in terms of aggregate benefits received.

Last edited 8 months ago by R Quinn
Mik Cajon
Mik Cajon
8 months ago

“Sometimes the best decision you can make is the one you don’t”…Donald Trump

Last edited 8 months ago by Mik Cajon
Mike Wyant
Mike Wyant
8 months ago
Reply to  Mik Cajon

That doesn’t even make sense.

Nate Allen
Nate Allen
8 months ago
Reply to  Mik Cajon

This is like the one place I go where people aren’t constantly arguing over politics. Can we at least try to keep it that way?

Jonathan Clements
Admin
Jonathan Clements
8 months ago
Reply to  Nate Allen

I agree, Nate. This is a personal finance site. If folks want to push their political point of view, there are plenty of other places to do so.

John Goodell
John Goodell
8 months ago

Because I’ve seen your Twitter post (at least I think it was a tweet) on this topic, I knew about the reorganization to more tax efficient drawdown strategy. I’d be very curious once you complete your strategy (and if you’re willing to share in generalized terms), how you ultimately decide to utilize each account and type of asset especially given your pension.

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