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Getting Myself Ready

Bruce Roberts

BEFORE I RETIRED TWO years ago, my first thought—as a software engineer—was to come up with a detailed project plan. But that proved too difficult. Instead, I decided to settle on some tenets to guide my retirement.

To aid in my thinking, I listened to podcasts and bought books. The usual list of prerequisites for a successful retirement were clear: financial means, good health and a robust social network.

I worried most about the last item. Could I feel happy and fulfilled without the work structure that had sustained me for the past 35 years? As for the financial aspect, what decumulation strategy should I use? Here’s what I landed on as my top four retirement strategies:

  • Before retiring, try activities I might enjoy, so that I could ramp them up once I quit the workforce.
  • Have something that gets me out of the house each day.
  • Keep two years of living expenses in cash as a cushion against a bad sequence of stock market returns.
  • Use a three-bucket approach for decumulation. The first bucket would hold cash, the second bucket would hold short-term financial instruments like certificates of deposit and bond funds, and the third bucket would consist of stocks. Rebalance every year.

Now that I’ve been retired for two years, and am older and wiser, I can look back and ask how well these tenets have served me. Here’s my assessment, from the least to the most surprising:

Getting out of the house. This hasn’t been a problem. It happens organically from the activities I’ve picked up over the past two years.

Two years of cash. I underestimated how much cash I should have on hand. I thought of myself as a “rational person.” I could just sell investments when my cash cushion got close to zero, right? Wrong. It turns out I needed a larger cash buffer to sleep well at night. In my defense, it’s hard to predict this number without living through a year or two of retirement spending, and watching your dollars dwindle. The lesson: Err on the conservative side.

Another factor in favor of more cash: Our spending rate was higher than I had predicted in my many spreadsheets, for two main reasons. First, we finally got around to some major remodeling projects, including redoing our deck and fixing a crack in our kitchen counter that turned into a full replacement. The second area of unexpectedly high spending was travel. Unlike others, we didn’t take big trips with the pandemic winding down. Rather, we’ve been seeing more of family, which has entailed flights, long car trips and so on.

Three-bucket strategy. As simple as it sounds in principle, it doesn’t work for us. Each bucket, and the funds assigned to it, are spread across multiple accounts and account types. That makes it complicated to track changes in each bucket’s contents and to decide what to sell when rebalancing. Taxes further complicate this calculation.

Instead, we simplified the accounting by breaking our funds into two categories: cash and cash equivalents on the one hand, and everything else—meaning stocks—on the other. You could describe this as a two-bucket strategy or a barbell approach. These two numbers are relatively easy to calculate. We discovered our stock exposure was higher than we wanted. By selling some of our stock holdings, we killed two birds with one stone: reducing our stock market risk and increasing our cash pile.

Test-drive retirement activities. Of the four strategies, this played out in the most surprising way. How so? Starting new activities before retirement never happened. While working, limited leisure time made trying new endeavors feel onerous. I worried that, with these new activities, I’d end up wasting time with people I didn’t like—time that was in short supply while I was still working.

But something wonderful occurred when I retired. I now have the time to try new activities, and it doesn’t feel like a big risk if I pick badly. This, I’m finding, is retirement’s surprise gift. The worry is there to a smaller degree, but failure doesn’t feel as bad. I can easily cut my losses by dropping an activity and moving on to something else.

This happened with my tutoring efforts. I started working with first graders, but it wasn’t my cup of tea. I quickly stopped, and instead I now tutor high school and college-level subjects, and I love it.

I’m exploring my alma mater’s various alumni groups. I picked up playing bridge again and enjoy it. I’m playing more tennis than before. And, as you can see, I started writing essays on topics of interest to me that I think could also interest others. And why not? I’ve got nothing to lose, except a little bit of time.

Bruce Roberts retired from IBM after a 35-year career as a software engineer. Degrees in math and computer science served him well during his career and when investing. In retirement, Bruce enjoys tennis, playing bridge and tutoring math. His previous article was A Pretty Penny.

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Patrick S
1 year ago

Very good article. I am about two years away and thinking of the same strategy (Risky % and Non Risky%).

I am curious about how you found tutoring opportunities once you retired. Are there websites that list volunteer opportunities in the area?

One other thing I am trying to train myself is being comfortable in doing nothing. In other words becoming a “human being” not “human doing” it is awfully hard!

Jonathan Clements
Admin
1 year ago
Reply to  Patrick S

I wouldn’t put too much effort into training yourself to be comfortable doing nothing. I readily admit that I’m no good at sitting still. That said, I do believe most folks are far happier doing rather than simply being.

Bruce Roberts
1 year ago
Reply to  Patrick S

For tutoring, there are many sites, Facebook groups etc. where you can list your services. Since I’m not tutoring to maximize income, I decided to become a contract employee at a company that does all the administrative work of finding students and billing. That way I can concentrate on working with students. As a W2 employee, I guess I’m not really “retired” LOL.

Linda Grady
1 year ago

You’re so right about finding the best-suited-to-you retirement activities, Bruce. Eight years ago when I retired, I had big plans to work or volunteer for non-profits working with low socioeconomic families by giving classes in child development (my nursing area of expertise). No takers. Volunteering in a couple clothing and food pantries didn’t go well either when I discovered that some of the other volunteers had very different ideas than mine about who and how we were serving. Moving to a small town five years ago changed everything: I found myself with myriad new opportunities volunteering with people of like mind, as well as plenty of socializing with new friends. Good luck on your retirement journey.

Bruce Roberts
1 year ago
Reply to  Linda Grady

Kudos to you for realizing your first ideas for post-retirement activities weren’t a good fit! That flexibility is key for fulfillment I believe.

DrLefty
1 year ago
Reply to  Linda Grady

That’s interesting, Linda. I too have ideas about adding more volunteer work once I’m retired. My mom tutors kids in the library to help them learn to read. I’ve thought about doing something like that (or similar with writing, my area of expertise), but it will be interesting to see how I like it. I’d like to have at least some of my time spent using the professional expertise I spent years acquiring, but it might also be nice to try something completely different.

Bruce Roberts
1 year ago
Reply to  DrLefty

I’m doing things unrelated to my career skills and enjoying it. I find I don’t miss software coding as much as I feared before retiring.

John & Marty Long
1 year ago

Excellent article Bruce. I also found that two buckets instead of three is easier to manage. One for growth which is invested in stocks (mostly mutual and index funds) and another for safety which is in cash & bonds (bond mutual funds, T Bills and a money market fund).
I also found that getting into and out of activities is much easier when you’re retired and no longer workings.
Thanks for your thoughtful article.

mytimetotravel
1 year ago

Sounds like your retirement is progressing well, even if not exactly to plan (and how often do plans work flawlessly?). I do disagree about getting out of the house every day, but I am an introvert whose favorite activity is reading, so a day at home is no hardship. In fact if I spent time around people several days in a row I need time alone to recharge.

Ken Cutler
1 year ago

Bruce, thanks for the great article. I’m a couple of years behind you in this retirement thing so I was especially interested in reading about your experiences with the fourth strategy.

Bruce Roberts
1 year ago
Reply to  Ken Cutler

Thanks. The “decumulation” phase is a challenging problem. I have more thoughts on that…may dive on it in another article. “Keep it Simple” is a good maxim as you approach your situation.

Rick Connor
1 year ago

Bruce, thanks for the interesting story and continued luck in retirement. I have also found retirement to be a”process”. We continue to evolve our personal and finical plans as we go.

R Quinn
1 year ago

Your financial strategy doesn’t sound like it includes SS or a pension. Is that correct?

Bruce Roberts
1 year ago
Reply to  R Quinn

Hi. That is correct. We’re living from our financial holdings to bridge us to maximum SS at age 70.

Mark Gardner
1 year ago
Reply to  Bruce Roberts

Are both wage earners planning to claim social security at 70? I tried out https://opensocialsecurity.com/ and it seems to say to indicate that that higher wage earner should claim at 70 and the other at 62.

Linda Grady
1 year ago
Reply to  Mark Gardner

We did this. I claimed at 64.5 and Doug almost made it to 70, passing at 69.5. I immediately switched to his benefit and, with only six months until he would have maxed out, it was negligibly less than he planned. He had done a ton of research. Just wish we had been able to share a little more time …,

eludom
1 year ago

Excellent. I’m a couple years behind you, so in exactly the situation you describe. Similar background (Computer Science, 40+ years of geeking in engineering/security circles), very similar thought processes.

One of the things I’ve observed as I get older is there is an increasing desire to share one’s wisdom (per Shakespeare “wise saws” https://www.poetryfoundation.org/poems/56966/speech-all-the-worlds-a-stage), and a corresponding desire on the part of those could benefit from the wisdom to go stumbling in the dark and learning for themselves. C’est la vie.
Maybe I’ll take my own advice and learn from you. Thanks.

Bruce Roberts
1 year ago
Reply to  eludom

I’m with you! Thanks for the laugh.

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