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MY WIFE AND I DROVE back from Arizona in June, so we could spend the summer months here in Minnesota. We took a longer but more scenic route through Utah and Colorado, and saw many natural wonders, including several national parks and the Rocky Mountains.
How did we spend our “windshield time”? Knowing we had an upcoming meeting with our financial planner, we discussed our work and our finances, along with when it might make sense for each of us to retire.
During the winter months in Arizona, we’d heard many couples having similar conversations. We both currently have rewarding careers, but we’re both also planners. Starting a phased approach to retirement, or retiring outright, is a substantial change in a couple’s life, one that can upend our routine and our identity. Combine that with the complexity of two people navigating retirement at roughly the same time, and the “dance of coordination” gets even more complicated.
We quickly realized that this should be something we navigate together, rather than making two independent decisions. We’ve heard from others that the failure to communicate and to jointly prepare can lead to misunderstanding and even resentment. Looking ahead to retirement? Here are five questions you might want to tackle.
First, will you opt for a slow, phased retirement or for full retirement on a specific date? Perhaps your employer would allow you to reduce your hours and phase down over time. Perhaps your career, like my wife’s career as a real estate professional, gives you the freedom to ratchet back the time you put in. Adopting a phased approach to retirement would let both of you adjust to your new routine together.
Second, what’s your overall financial situation? You’d want to consider income from your current positions, including any bonuses or other incentives, and your investments, along with your debts and other financial commitments. Both of you—or one of you—working longer means more opportunities to save and to collect investment returns, as well as the ability to delay spending down your savings and postpone claiming Social Security.
Third, what are your retirement lifestyle goals? If your plans include extended travel together, those trips may have to wait until both of you are retired.
Fourth, how healthy are both of you? Good health may affect your ability to continue working. But you also need to consider how long you’ll be healthy enough to do all that you want to do during your retirement. As a couple, remember that you’re forecasting health and longevity for two people.
Finally, should you get professional help—the financial kind? With so many variables in play, you might benefit from someone who can help you connect all the dots to create a holistic plan. Those dots include when to claim Social Security, health insurance benefits from an employer versus Medicare, long-term-care insurance, income from investments, where to live and more.
While you probably can’t get through all these topics over coffee, you also don’t need to drive 2,000 miles to have a fruitful discussion with your life partner. Still, that sort of captive time together does help you to have an in-depth conversation, rather than skirting topics that need to be discussed.
I would take SS as soon as possible, the only time it might pay to wait to age 70 is if you work to age 70, because you will pay big tax on the SS.I drew up 2 100 yr plans from age 62 collecting SS to age 162, and from age 70 (collecting SS), to 162. The age 62 plan had more money the entire 100 yrs so there is no breakeven. We would miss out on 160,000 in benefits to wait to age 70, invested properly it could be worth 250-300k, this makes up for the lower benefit.
I learned to be my own finance manager from Bob Brinker radio show. I won’t pay a finance manager 5% front load as some want and other annual fees.
Finance simplified you need 4x your salary in savings with a pension, 20x your salary with no pension. Invest the money in a total market stock fund, you will earn 8-10% a year ,keep 3 yrs of withdrawals in cash in case of recession. If salary was 50,000 a year, you need 1 million in savings with no pension , you will earn 100 k a year investing on average, if you spend 50k of it or 5% withdrawals your savings money will grow at 5% which is 2% over the 3% inflation long term average. Your money will last indefinitely
Best free retirement planner is here, a pension retirement calculator. https://www.dinkytown.net/java/retirement-pension-planner-calculator.html
I would definitely undergo a review of your finances with a fee only Certified Financial Planner like we did prior to retiring to have a second professional sets of eyes to review our finances. We also utilized this person in 2021 after my wife retired a little earlier than planned due to COVID, and the resultant double whammy of being hit with “sequence of returns” and high inflation.
David, having that additional perspective and assessments can help with your own analysis. They’ve seen many situations while we mostly see only ours! We still have to be our own advocate and can’t hand off the ultimate decisions. Thanks for your comment.
Dan,
You kind of dance around the issue but I believe a person, or a couple, should try to figure out what their BASELINE expenses might be.
Don’t forget to include possibly Medicare and other health insurance costs.
Also, talk with your children about the likelihood that “The Bank of Dad & Mom” might be shutting down.
WS is correct first step to retire is figure out expenses.Mine were less then expected. We planned to travel,we did for 3 yrs and grew tired of it ,so my retirement expenses are much less then expected. I have more money than I ever had ,both in savings and monthly excess or discretionary money. We are both healthy, We work out 6z a week to stay healthy.
The best way and easiest way to figure expenses it to take gross salary and subtract annual savings, this is your true expenses including income tax.
If you make 100k a year and save 20k a year it costs you 80k to live. I walked around with a pad counted everything I spent 1 month .My pad figure was same as my gross-savings= my true cost of living, figure. ,medicare is only 165 a month not a big deal it comes out of the SS so it feels like I pay nothing. SS gives the inflation rate as a cola raise, so this current 8% inflation has made my age 62 benefit = to my age 70 benefit by age 66 or 67.
Right you are, Winston. We covered all of that (and more, like the LTC I mention above) in detail when we had our financial “professional help” session last month!
Good article Dan. I love the term “windshield time”. My wife and I are two years into retirement, but we still have many “windshield time” discussions as we frequently travel 1-2 hours to see our children and grandchildren. Starting those discussions before you both retire will help with the inevitable follow-on conversations and choices in retirement.
On your final point, I’m sure many frequent HD readers and writers are confident in their knowledge and decision-making to plan their retirements. But I know many folks who aren’t. Engaging a comprehensive, full-service financial planner can be a wise investment. I’ve had several conversations recently with people who had a financial adviser who was only interested in managing their money. When they asked about tax planning and estate planning, they were told that was not part of their annual fee and would require bringing in other experts at additional costs. Finding a quality, full-service advisor is key in my mind.
Thanks for your reply, Rick. Very astute advice from someone who’s 2 years into the retirement journey. I hope you’re enjoying your retirement and continuing those fruitful conversations.
If, and only if, she is a fee-for-service fiduciary. I pay one of those for a check-up every few years, no way am I willing to pay an AUM fee. (Just add up that 1% over ten years, twenty years… Plus foregone appreciation.)
Right on, Mytime!
Dan, good list of considerations. My wife and I are engaged in an ongoing conversation on the details of detaching ourselves from work and other responsibilities. And I understand “windshield time” conversations. They have been among the most productive for my wife and me.
Agreed, Edmund. There may never be a “perfect time” to have these conversations but we can certainly make time in meaningful increments that help us understand each other’s perspectives. Drive time, even in relatively short bursts is a great way to ask your partner how they’re feeling about your readiness.
true ,we listen to music during drive time, very little talk.