FREE NEWSLETTER
I READ QUITE OFTEN on HumbleDollar about the trials and tribulations of those planning for retirement—questions like when to retire, where to retire, what will my expenses be, when to take Social Security, how to minimize taxes, how much money to save, how much to spend.
I approached retirement quite differently. Even I’ll admit I’m not typical, and perhaps only questionably normal. I tend to set major long-term goals with modest attention to details.
Before I retired, I never thought about our taxes, monthly expenses or where to live. Would my life be all that different than before I retired? Nope. Our mortgages were paid off years before I left my job, so our spending had already adjusted.
Where to live was easy. With our entire family within an hour’s drive, we weren’t going anywhere. We eventually downsized to within a mile of our home, so our activities, friends, doctors and church remained as they were.
In a recent Nationwide survey, 40% of workers said they plan to move to a different city or region after they retire. The most common reasons given were to lower expenses and pay less in taxes. We didn’t want those sorts of financial worries, so I kept working until age 67—three years longer than average.
When you’re retired, you still pay taxes. You also have mostly the same fixed monthly bills, face occasional unexpected expenses, need health insurance, a place to live and—from time to time—to buy a new this or that. No surprises there.
I never used a spreadsheet or software to plan retirement. What I did do was track my pension and Social Security benefits. From 1982 on, I also saved at least enough in my employer’s 401(k) to receive the company’s full matching contribution.
My working compensation included base salary, an annual cash incentive bonus and—in the last few years before retirement—stock options and restricted stock awards. Our standard of living was always based on my salary alone. Bonuses were invested except for one year, when the money was used for a home addition.
I was a bit afraid of retiring because I never accepted we could live on less than my working base pay. I took the leap when I realized my pension and Social Security met that goal. I never considered our investments in the equation and still don’t.
My income stream is my pension and Social Security. I also have a supplemental income stream as an inflation hedge, which is comprised of bond interest—most of it tax-free—and dividends from two stocks that I’ve accumulated over more than five decades. I reinvest these streams of income now, but I could use them for spending money, increasing our monthly cash flow by 16%.
Pensions are dwindling in the U.S., although 59% of retirees reported receiving some pension income in 2021. Defined benefit plans are still common for state and local government workers, but only 15% of private industry workers had access to a defined benefit plan in 2022. If I hadn’t had a pension, I would have saved more and focused on building additional income streams, including buying an immediate annuity with a portion of my assets.
My wife and I started collecting Social Security at my full retirement age of 66. I was still working, so we saved and invested the proceeds until I retired. There are many arguments against that move, but it worked for us. We built up a tidy sum in investments that contributed to the supplemental income stream I mentioned earlier.
So, where do we stand on spending versus income? Our expenses are just about equal to our net monthly income. Our expenses include travel and renting a house in Florida in the winter, contributing to 11 grandchildren’s 529 plans, saving in our emergency fund and occasionally helping children pay medical bills.
In other words, just like before retirement—almost.
The money that we saved in payroll taxes and 401(k) contributions has largely been offset by higher spending on health-care premiums and travel. At the end of the month, my net income after taxes and deductions has been fully spent.
Oh, yes, what about the question of how folks spend all their free time in retirement? What free time? I still get up by 6 a.m. and the days are filled. We’re attending grandchildren’s activities, playing golf, and sometimes reading, writing and drawing.
I’ll admit that, if I stop moving around 3 p.m., I might add a nap—but that’s only possible because I’ve been practicing retirement for nearly 14 years. I don’t have a rocking chair, though only because the Cracker Barrel model won’t fit in my car.
So, what have I proved? That there’s no one way to retire. The only right way is the one that makes you not only happy, but also content.
Don’t overthink it because you’re never going to account for everything anyway. It’s your retirement that needs to work, not just the numbers on a spreadsheet.
Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on Twitter @QuinnsComments and check out his earlier articles.
Want to receive our weekly newsletter? Sign up now. How about our daily alert about the site's latest posts? Join the list.
As I approached retirement, I used the most dirt-simple, no budgeting required, method to determine readiness.
Over the years I had worked up to contributing 14% of my gross salary to my 401(k). Far above what was required to max out the company match, but saving a little more never hurts.
But, when I thought about this I realized that at 6.2% to SS and 1.45% to medicare, if I replaced 80% of my pre-retirement salary with post-retirement income I was going to be doing just fine.
Now if we throw in some other savings from not going to work, that was a cushion, but 80%, which could be a combination of SS, pension and 4% guideline savings withdrawal, was how to keep my current lifestyle.
Hit the number right before 62, and net worth has kept increasing for 16 years…
Nice summary. I think the math on retirement is sometimes made more complicated than it needs to be. The reality is, you can’t account for every contingency, and you don’t necessarily need to. The older I get, the more I realize a simple plan that’s easily followed is better than a complex plan that can’t be followed.
Couldn’t agree more. . . My job became intolerable to me earlier than I planned. I didn’t think I had enough to retire. But a little time with a financial advisor and some DIY calculators and budgeting along with the sale of my interest in some family property launched me at the age of 67. My husband, 72 at the time, and I became full-time travelers. We used savings/investments for the first 3 years throughout the Caribbean, Europe and Canada and over a dozen cruises.
I took SS at 70 (after a lay-off, my husband took it at 62). The $70K it now provides covers 70% of our expenses during what we know are our go-go travel years. We don’t know anyone in their 80s travelling with our level of intensity! When we settle into an apartment somewhere (we’ll never own a home again), SS will cover all our expenses easily. And it looks like our nest egg of only $750K will last until we die (we are die with zero people).
Live your life. Live your life.
As a longtime HD reader, I’ve long been fascinated by the correlation between many of the more prolific writers and, generally speaking, their significant financial resources. Seems like folks like Dick either do not know how to avoid a 60 hour work/leisure week or do not desire it.
I have a masters degree and work in a professional setting but never have I adhered to a 6 am to 6 pm schedule as Dick practiced. I’m self-deprecating by nature so take it gently when I say I’m lazy. Yet, I mostly am. Not in the best physical health I need more discipline in my life. Ironically, this tendency toward lethargy has immensely contributed to my financial success. Broadly diversified across asset classes and tax strategies in passive funds where available, I have zero compunction to trade. It has made all the difference.
Good point. There is an old say along the lines that if you enjoy your job it is not work. I enjoyed mine for nearly five decades mainly because I was able to help people in different creative ways. I regularly worked 12 hour days, had my laptop on every vacation and all the rest. But I didn’t miss the children’s activities. I started at the very bottom as a mail boy – literally the lowest paid of 15,000. I’m a lazy investor too.
Where can we see your drawings? You have a way with words. I’d like to view your drawing creativity.
I will post a few samples on my blog on 10/22. Let me know what you think. Quinnscommentary.net
I tried posting one, but it doesn’t work. Maybe I will post a few on my own blog
Dick, you did well by your family doing it your way, and it worked for you, along with frugal living and judicious spending. None of us can arguing with success.
And a lot of good fortune for many years.
I know dozens of people that “did the math” and took SS early. You are only the 2nd one I know who followed through by investing the earlier payments for the future.
I said i was questionably normal😜
I am a spreadsheet guy, but you are right. Spreadsheets do not cover everything. Unplanned major expenses, replacing HVAC or a new roof, a new car, and the list goes on. Fortunately, between our savings and slack in our expenses, we have been able to cover everything.
One thing that surprised me was the amount of dental work seniors can have. Another was the expense of removing old trees. I live in a 2 acre forest of trees. Like people, they get old and diseased. Removing them is not cheap. Our medical expenses have been minimal thanks to Medicare and good supplements, even though I have had lots of issues.
However, I am very thankful for how our retirement has gone and feel very blessed.
Dick, part of it for me is inertia. Once I’m settled on a path, I like to keep moving in the same direction. It takes me time and analysis and thought and more time and so on to make a change. I married a woman with similar habits. Don’t ever get hooked into a shopping trip with us.
My wife would be happy on such a trip though. I’ll wait in the car on my iPad. Now that carriers have added hot spots to phones, I can use the iPad anywhere. Many a HD article have been started in the car.
I have a terrible allergy… to spending money. The wife shops while I’m at home reading finance articles. Clothes worn at home are only replaced when holes wear through the fabric, and even then I’m apt to pull a Bill Belichick, cut off the sleeves and keep going. My wife might call this habit a terrible disease.
I understand. I’m more involved with research and planning. She does most of the fieldwork.
Ah, Dick, but playing with those spreadsheets is so much fun. Wordle, Connections, and spreadsheets…three tiny daily activities that add a little sparkle to my semi-retirement routine.
We play Wordle and my husband has recently taken up Connections. We also try Immaculate Grid (baseball trivia), though neither of us is that good at it. We’re both pretty good at Wordle, though, and compete against each other using golf scores. Four guesses is par, three is birdie, five is bogey, and you get the idea.
Ah, my brain doesn’t work that way. If I had to rely on the results of a spreadsheet, I’d still be working.
I worked with engineers all my life and they used to drive me nuts using spreadsheets to figure out which health plan to select.
I’ve played around with a few planning tools, but when they ask how long you want you money to last, they won’t accept “forever.”
The health plan decision was pretty obvious for me (HDHP with HSA) even without a spreadsheet.
My work offers 6 different HDHPs with HSA. I used a spreadsheet to figure out which one to pick.
The Paradox of Choice.
My wife has to have her daily fix of Wordle and the like before bed.
Good for her, Ed. I play my games on an iPad…that way I’m not addicted to my iPhone like Dick is to his. 😉
I know people who carry around those books with that Japanese game with 9 or something. I’d rather be addicted to my iPhone – which I am of course. I drive my wife nuts. My phone has given new meaning to the phrase “Will you put that thing away.”
Thank you for sharing your strategy. It sounds like you have crafted a wonderful retirement!
We have, but good fortune has always been with us even when I did dumb things.