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JUST A HANDFUL of weeks ago, I posted about achieving a $1 million net worth. Now my status as a millionaire is already in jeopardy. While the value of some of my financial assets have held steady—and some have seen gains—the portion of my retirement account invested in the stock market has suffered significant losses.
My retirement account balance peaked on Jan. 4 at $478,000. Today, it hovers around $430,000. Since I retired in late May, I’m no longer adding money to the account. Without those regular contributions, I know it could take months—and perhaps years—for the balance to rebound.
Am I worried? Not yet.
For now, I feel financially secure. I pay off my credit card in full every month. I haven’t had to dip into my emergency savings. Between my husband’s retirement income and the money we made from the sale of our Portland home, we can easily cover all our bills.
My hope: It’ll be at least a decade before I need to begin taking withdrawals from my retirement accounts. In seven years, at age 62, I’ll likely start drawing Social Security. That income, combined with my husband’s, should provide us with enough money to cover all our expenses.
In the meantime, the portion of my retirement savings that’s invested in a guaranteed return fund will continue to grow. I’m earning close to 5% on that money. My state pension fund also continues to grow at a rate of 7.5% a year. I plan on leaving that money in place until I turn 72. At that point, I’ll be required to take withdrawals.
It feels good to know I have other options besides tapping my retirement accounts. I’m confident I could land a part-time job if the need arose. I’m also in the early stages of starting my own dog training business. I don’t know how successful the business will or won’t be. Since the overhead costs are low, the financial risk is minimal.
For now, my status as a millionaire depends on the whims of the stock market. But by having a substantial portion of my retirement portfolio invested in guaranteed return accounts, I know I can afford to ride out the current market volatility.
As Fred Schwed put it long ago, “Like all of life’s rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature,” (Where Are The Customers’ Yachts?). I do sympathize. Glad you are secure.
Is the fixation on a $1 million net worth for your family based on some analysis of your needs because you believe that a $1 million net worth is needed to support your family over 30 plus year period of time or is it because $1 million is some magic number that boomers should aspire to? The only logical way to determine how much of a net worth is needed is based on the fixed and variable expenses that need to be covered over time. A huge net worth is not needed if things like SS, pensions, annuities cover, at a minimum, the fixed costs and much more that you will incur over time on a yearly basis. Ideally, if your SS, pensions annuities etc cover the preponderance of your expenses then a very high net worth is not necessary. Millions of Americans have very limited retirement assets and are often mostly “house wealthy” if they own a home. These people have fixed costs like mortgage, if any, utilities, telephony, property taxes, car and car repairs, as well as car, health and LTC insurance(which is not appropriate with low total assets). People with low net worth get by using tools like reverse mortgages to provide additional funds for emergency use purposes. It is possible to come up with very detailed projections for the future using an Excel spreadsheet.
Yep. My 401K has crossed the threshold 20 times… 10 complete round trips above and then back below. It’s simply a result of fixating on certain numbers and the current market fluctuations, but it does get my attention.
Congratulations on your retirement. Best of luck with your dog training business. I enjoy reading your posts and am interested in hearing other strategies. Please keep writing and sharing your financial journey.
Thanks Jiab! Retirement suits me well and I am hopeful the dog training business will be successful. I’m definitely planning on continuing to share my financial stories—both good and bad—with HumbleDollar.
x2!
When you say “guaranteed return fund” is that code for some sort of annuity or something else?
The fund that I refer to is the TIAA Traditional account. It’s primarily designed to be annuitized, but it doesn’t have to be. There are lots of options to draw funds out of it–interest only payments, a total pay-out over a 10 year period, etc. But yes, they promote it as an account that can be turned into an annuity.
Cool. 😎
Thank you for taking the time to answer. Loved the article! Sounds like you are on firm financial footing.
I am generally leery of annuities, but given your history I am sure you investigated it.
Good luck and I look forward to more articles from you!
I’m glad you enjoyed the article.
The TIAA Traditional account is definitely a financial product people either seem to love or hate. I know people who won’t even consider keeping any money in it.
I spent quite a bit of time researching the account before I opted to put a large sum of my retirement savings in it. For me, it’s a product that I think will serve me well in my particular circumstances.
Thanks for the well wishes. I hope to continue to write for HD for years to come.
Given your frugality and the fact that you are a skilled dog trainer, I have no doubt that you will be okay. As you know, there is a very high demand for dog trainers and you will have the freedom of setting your own hours and doing something you love.
Have you thought about tapping your TIAA annuity when you reach 62 and delaying filing for SS? It would seem that the 8% increase in SS benefits you would gain each year you delay might be a better strategy than leaving your 403(b) money in place until you are in your 70s.
Thanks for your comments. Our dog training business is still in its infancy (two weeks old), but I think we landed our first client yesterday. So, yes, I’m hopeful I may actually be able to earn some money doing something I truly love to do.
That’s an interesting thought about delaying SS. In an ideal world, my husband and I won’t need any additional money (beyond his retirement income and, hopefully, some income from a dog training business) when I turn 62. But, if we do, I’ll have to examine all the options and see what makes the most sense.
Congratulations on your unretirement to do something you love.
I recommend organizing your dog training business to eliminate or mitigate the IRS IRC 183 hobby loss criteria and also give some thought to organizing as a single member LLC to protect your personal assets from disaster and lawsuits. I hope my thoughts help.
It’s kind of scary seeing any hard earned money disappear, even temporarily I sure get that.
When you say retirement fund, are you referring to an IRA or a 403b because sounds like with that state pension you have more than one retirement fund which is a good place to be.
If I were you I wouldn’t stop saving, I’d be gradually putting some money into the market each month to take advantage of the long-term return of the market. You have a long retirement ahead.
Like you I have a portion of assets in fixed income, but right now with inflation at current levels, we are actually losing money each month.
The majority of my retirement funds are in a 403b. About 50% of the money is in a guaranteed return fund (currently earning about 4.5%). The other 50% is in an index fund.
I also have a small pension and an even smaller Roth.
Since my husband and I are still in the very early stages of retirement, we’re still getting all the financial issues figured out. We could probably get away with less cash, but the cash makes me feel more secure right now.
Feeling secure is important, I like that feeling too, but I’m 78 and you are young at 54. I’m thinking at 78 you will want to be feeling even more secure.
I’m still young, but I’m 55 now :-). Obviously I have no idea if I’ll be more–or less–financially secure when I’m 78. Or if I’ll even make it to age 78. I do know I have a variety of financial assets I could tap into if needed. I’ve got my 403b, my pension, Social Security, home equity, etc.
I’m also in the unusual position of not needing to concern myself with leaving any assets behind. Obviously if I die before my husband, he will inherit all of the money in my accounts. Should I outlive him, I don’t need to leave any assets behind.
Time will tell how our strategy works. I hope to continue to share my financial journey with HD readers for many years to come.