THE LAST TIME I HAD a job where I was eligible for a pension was 1994. People with pensions seem to count the days till they’re eligible to collect their monthly check. That makes sense: They know there’s gold at the end of their working life. I didn’t have this sort of “golden parachute.” If I didn’t save, I couldn’t retire.
From 1994 on, funding my 401(k) and IRA were my only paths to a comfortable retirement. I never had a target amount. I just kept setting aside a portion of my salary in my 401(k) until I left that particular job. I’d then roll over the money to my IRA, being sure to advise the human resources department what I was doing. The first job I left, I didn’t make it clear to HR that I wanted to roll over the money to an IRA, rather than spend it, and a big chunk was withheld for taxes. Lesson learned.
Based on my history of getting laid off, I knew the day would arrive when I couldn’t get another decent job and I’d need to accept retirement. This was a scary thought. I knew having enough money for retirement was important, but what would I do with my time?
I kept a look out for articles that described the cost of retirement, places to live and things to do. They all sounded great for people with pensions. But what about people like me, who needed to rely on their savings?
Then I found a quirky book titled The Joy of Not Working by Ernie J. Zelinski. There’s joy in not working? I never allowed myself that luxury. Working and making money were all I wanted and all I knew. I wasn’t that good at either, but it was what I knew. Zelinski’s book made me look forward to having the freedom to decide what I wanted to do with my time.
I next focused on how to make the most of Social Security, Medicare and the pensions I’d qualified for early in my career. For the pensions I was eligible to receive, I decided I’d wait until age 65 and take them as annuities, rather than as a lump sum. The knowledge that money would hit my bank account every month would help me relax.
For Social Security, I studied how benefits were calculated. In computing your benefit, the Social Security Administration uses your highest 35 years of inflation-adjusted earnings, regardless of when you earned them. This was important to me because my salary changed based on each new employer—and my earnings didn’t always climb steadily upward.
I created an Excel spreadsheet to identify my highest 35 years of earnings. I used that information in my 60s, when I was searching for my final job. As long as my annual salary would be among my 35 highest inflation-adjusted years, my lower salary years would drop off the lifetime earnings formula, boosting my Social Security benefit.
I could have started benefits at age 62. But if I continued to work, I’d lose a significant sum to Social Security’s earnings test. Waiting for benefits until after my full retirement age meant I could work and collect Social Security, without the need to return some of my benefit because my earnings were too high. Waiting until 70 would mean the maximum benefit possible. Armed with this information, I knew that my last job’s salary would boost my Social Security check, while also allowing me to hold off until age 70 to collect benefits.
For Medicare, I saw the premium I’d be charged was more than my wife paid for our family’s health plan through her work. I studied the rules and found out that I didn’t need to pay for Medicare at age 65 if I had coverage through my wife’s employer. There was no problem signing up at 65 for Medicare Part A, which provides hospital coverage, since it was free. The only issue is that, once you sign up for Part A, you can no longer add to your health savings account. Meanwhile, thanks to the coverage from my wife’s employer, I was able to hold off adding Medicare Part B, which includes outpatient coverage and involves paying premiums, until I was age 70.
My wife and son both stopped working about the same time I did, so there was no imbalance between my wife working and me being at home. We learned retirement together. Upon retirement, she became more involved in caring for her parents, which was a blessing because she now had the time to do so.
My definition of retirement is no work—meaning no work that’s dictated by others. This includes volunteering. I consider that unpaid work. This also includes part-time work. I consider that another job. I even consider work to include mandatory grandkid babysitting, where your children decide you need to be at their house at certain times on certain days.
Instead, for me, retirement is my chance to decide how I spend my time. Of course, I still need to do things, but I try to schedule just one thing a day. If there are multiple things to do, I spread them out. I’ve now got the time. Why not use it as I choose?
One of the gems I picked up from The Joy of Not Working was to focus on whatever I’m doing at the moment. Focus allows you to enjoy the activity more. I no longer have to worry about what will happen tomorrow or what happened yesterday. I can focus on the now, which might sound like something a hippy would say, but it helps calm me down.
When I was young, my mother would get on my case every time I watched television. She worried I was wasting my life. The beauty now is that, if I’m watching TV, I can focus on enjoying it without feeling guilty that I’m wasting time. Rather, I’m using time as I choose. I don’t consider watching TV a waste of time unless I’m doing it because I can’t think of anything better.
I’m not suggesting others do what I do. If volunteering is your thing, do it. If you love watching the grandkids seven days a week, great. The important thing: Do what brings you the most joy with the time you have left. Don’t be on your deathbed regretting all the things you would have done if you’d had more time.
David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave’s earlier articles.
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After my older sister retired, she warned me that it took her over a year to find successful volunteer opportunities. That if you are unhappy with the people, the commute, the work, or the color of the paint in the building, you can say goodbye. It’s not a job, so it needs to be enjoyable. The best fit was something that uses skills you have, but isn’t what you did for work, or why retire?
I am a relatively new reader of Humble Dollar, so I don’t know about any rules related to comments. But after reading that David has an adult disabled son, I feel compelled to share the new book Retire Secure for Parents of a Child with a Disability that James Lange is making available for Amazon download for only $1.99 through January 15th. He is offering many other resources for free with this offer, as well. He considers this book a culmination of his life’s work, as he has a disabled adult daughter. Here is the link to the email I received from him about this offer: https://mail.google.com/mail/u/0/#search/jim%40jameslange.com/FMfcgzGwJckFhLwXTzVQhzBnFNGFWWJG
If this link does not work, I would suggest emailing him at jim@jameslange.com. I have not contacted him about sharing this information, but he has stated multiple times that his goal is to get this book into the hands of as many parents of disabled children as possible, so I cannot imagine that he would not want me to share this.
You can also put in the book title on Amazon and the discounted Kindle price comes up.
I wouldn’t normally allow such a promotional comment, but I know Jim and he’s a good guy.
Thanks for this post, Dave … your article resonated with me on several levels. I just turned 64 and am also navigating the same kinds of things you write about and that many here are dealing with. I like how you’ve carefully thought through the components of being “retirement ready” in coordination with your wife and son. I have a wife and daughter with whom to consider these issues.
Like you, I’ve had to pay particular attention to my Social Security earnings record as part of the equation. I basically had no SS earnings in my 20s because of being in seminary and graduate school that entire decade. So two or three more years of full-time work now will increase my eventual benefit when I claim at age 70, even though I’d really like to retire sooner. I’m just starting to learn about how Medicare works, and your observations here are helpful. I have an excellent health plan with my college, so our Medicare premiums will probably be larger than what I’m paying now. One great thing, though, is the cap on out of pocket prescription drug costs ($2,000) that comes into effect in 2025 in Medicare Part D. That will be huge for me, since I take a speciality drug for chronic leukemia that is very expensive (though I currently pay nothing for it). At least I know that, once I switch to Medicare, there will be some constraints on drug costs.
I think the biggest financial decision for me going forward will be whether to annuitize part of my portfolio to augment my Social Security benefits with additional guaranteed income. I had been inclined not to do this, and to instead take withdrawals from the portfolio, but recent articles and conversations here on Humble Dollar and elsewhere have me reconsidering that strategy. I’m still reluctant, though, for the obvious reasons: lack of inflation-adjustment, loss of liquidity, possibility of early mortality, etc.
I appreciate learning about the book The Joy of Not Working. Seems like you’ve also framed the non-financial aspects of retirement very wisely. Having the opportunity to decide each day what that day is going to look like sounds like a pretty wonderful thing. I’ve struggled at many points in my working life to develop a strong identity around my work and career; ironically, that may be to my benefit now, as I won’t have a deep sense of losing a core part of my identity when I do retire. And there are plenty of other activities that I look forward to retiring “to,” most of which I’m already engaged in to some degree.
Cheers to you and your family!
Morris, if your college connection means your portfolio is with T-CREF, try to get a copy of The Prudent Professor by Brian and Edwin Bridges. Though dating to 2011, the material is still relevant and extremely useful in understanding T-CREF and the variety of withdrawal and annuitization options they make available.
Thank you Jo … yes, a significant portion of my portfolio is with TIAA-CREF, and in fact I will be meeting soon with a representative who comes to campus regularly. I will definitely check out The Prudent Professor, as it sounds like a resource that would be very helpful to me.
David, I really enjoyed your article and some of it seems very familiar. I worked in insurance and have several designations and, one day a few years into my career, I realized I could lose my job any day. So, I planned that way. I just assumed I was going to lose my job and developed a financial plan to handle it. That seems kind of negative, but it was basically reality. This insurance company advertising story also reminded me of retirement savings.
A Legend
One night in ancient times, three horsemen were riding across a desert. As they crossed the dry bed of a river, out of the darkness a voice called, “Halt!”
They obeyed. The voice then told them to dismount, pick up a handful of pebbles, put the pebbles in their pocket and remount.
The voice then said, “You have done as I commanded. Tomorrow at sunup you will be both glad and sorry.” Mystified, the horsemen rode on.
When the sun rose, they reached into their pockets and found that a miracle had happened. The pebbles had been transformed into diamonds, rubies, and other precious stones. They remembered the warning. They were both glad and sorry – glad they had taken some, and sorry they had not taken more.
And this is the story of Insurance.
Ernie Zelinski’s book How to retire wild, happy and free best retirement book out there.
I had a very similar path and choices to retirement.
Regarding the HSA, be sure to get into the details on this great program. Just watch out for this:
From Google AI: If you apply for Medicare Part A or Part B after age 65, you are automatically given six months of retroactive health coverage. This means you can’t contribute to your HSA for any of those months. You should also stop contributing six months before you file for Medicare to avoid potential tax issues. If you are retiring at age 65.5 or older, you should stop contributing to your HSA so you have six months of no contributions before filing for Medicare.
Thanks for another good article, David. I can relate to your memories of being discouraged from watching tv as a kid. I always felt there so many shows that the other kids talked about that I had missed because of studying, reading and helping with my two younger siblings. When I began to think about how I would spend time in retirement, watching more tv was one of my goals! In reality, old habits die hard: I very rarely turn the tv on before the 6:30 pm news, and often not until 8 pm or later. And I enjoy volunteering, especially, to my great surprise, serving on the board of a non-profit child care center. Never imagined that recruiting new board members and fundraising would be as interesting and enjoyable as they’ve turned out to be. One joy of my retirement has been the chance to try new things and if they turn out not to be for me, to politely stop doing it.
The only TV I watch during the day are some of my local professional sports teams games that I had DVRd the night before. That way I can skip the ads and it’s almost like being there. Other than watching the news I feel most TV is a waste of my time
Yes indeed, do what you enjoy doing, that is what I do and sometimes that’s quite mundane. I too watch TV although mostly documentaries and history on YouTube.
Over the years we have also watched grandchildren, taken them to school, etc.
On a more basic note you pointed out two key points I harp on – the relaxing value of an income stream.
Second, your experience demonstrates the decline of the employer pension is not as significant a loss as is sometimes made out.
Barely 50% of workers ever had a pension, ever, but more important you need to stay with the plan sponsor for decades to build pension value otherwise the 401k makes more sense. For a long time job tenure has averaged 4-5 years which will not get you a livable pension, if any.
ERISA mandates vesting after 5 years of employment for both defined benefit and defined contribution plans (or gradual vesting from years 3 to 7). While workers can get their contributions back under a 401 plan they won’t get what their employer contributed if they aren’t vested. Thus, employees who leave before vesting in 401 plans will have a difficult time accumulating adequating retirement income.
My wife worked exactly 5 years for Citi to qualify for a pension (1989-1994). She decided to take a 200k+ lump sum when it looked Citi might go under during the mortgage loan meltdown. She was a VP for HR so her pension is not representative of what an average level employee would receive. Nevertheless, it seems that multiple vested defined benefit pensions could provide meaningful retirement income.
Interesting, vesting requires 8 years for the pension at the community college where I teach!
Many 401ks these days have immediate vesting. Pensions are generally back loaded so several short service pensions will likely not add to much.
Too bad companies used 401k’s as an excuse to get rid of pensions. The 401k was created to supplement retirement plans, not replace them. Businesses saw the opportunity to save money, so pensions dropped precipitously. I disagree that the 401k makes more sense because the average 401k is very low. Even if boomers have $500k in their 401k (which puts them in rare company), using the 4% withdrawal suggestion, that’s only $20k a year. Take civil servants for example. Whether police or firefighters and others, many retire with pensions that the average worker in business will never come close to with their 401k. Some get $8-10k a month. Also, they can get this great pension with 20-25 years of work, not the 35-40 years the business worker has to work and contribute to a 401k to secure a decent retirement.
401k were not the cause of further demise in the relatively few pensions that existed in the early 80s ERISA was the start of the decline followed by other laws and accounting rules that made maintaining pensions more costly with more direct impact on earning with too much fluctuating from year to year.
If you work for a company for 4-5 years or so and move on, a pension has little or no value. They are based on growing and long service. The flaw with the 401k is largely with the people who have them and don’t use them as intended.
With worker saving, an employer match and adding an annuity option, a 401k can be a great retirement vehicle.
About 90% of public workers have a (often quite generous) pension – paid for by taxpayers, but they also have greater tenure, less risk of layoff. Some have both a pension and DC plan
I could relate to everything you are saying. Now I need to read the book! Don’t feel it’s self absorption at all…when you say yes to others, make sure you are not saying no to yourself
Dave doesn’t mention this in the article — you can’t include everything in every article! — but not only does he spend considerable time writing for HumbleDollar for free, but also he devotes himself to his special needs son:
https://humbledollar.com/2023/12/cats-in-the-cradle/
Seems like an astoundingly self absorbed retirement.
A self- absorbed retirement is as it should be, a self-absorbed life not so much. That clearly is not the case with David.
Yes, if you’ve read Dave’s previous article which Jonathan mentions in the comments above, you know that Dave’s life may be less self absorbed than overcommitted. Dave did actually sneak in a reference to that when he mentioned his “son” with a link on son to a recent article about that.
My takeaway? Overcommitted people may need to pay attention to self, and they have very little danger of becoming self absorbed while doing so since we all have great difficulty changing too much. So if you’re overcommitted, don’t worry about being self absorbed, and if you’re self absorbed, don’t worry about being overcommitted. If you change a lot, that will probably still only be maybe 10%, not 100%.
I don’t know how you meant this but didn’t he earn that privilege? He mentions caring for family and volunteering which can be a privilege many of us couldn’t enjoy in our working years.
All we retirees earned that right. I don’t feel the same as David does about volunteering or working part time but that doesn’t make him wrong or selfish. I think those activities are fine as long I have the ability to wake up in the morning and decide that I ain’t gonna do this no more.
Check out his article Cats in the Cradle from a couple weeks ago. I just did, and it’s wonderful 😊.