A theoretical, simplified road to retirement income without a pension. I’ve learned it doesn’t exist. 

Many discussions on HD make it clear my retirement is unique, mainly because our income consisting of a pension and SS is more than adequate to live in the way we did when I was working.

Other than monitor my pension as it grew, there was no financial plan except to ensure receiving the employer match on the 401k so that meant saving at least 8% for a total of 12%. I also invested the compensation I received above base salary, both cash and equity.

But HD posts often get me thinking, what if there wasn’t a pension, what if it was all on me, what would I have done? Of course I don’t know, but knowing how I think about money and security, I can speculate. 

Let’s see, no pension. First, I would keep track of what Social Security would provide to us. Second I would use two separate ways two save and invest. First in the 401k but also outside a retirement plan. 

Those brokerage savings would be thought of as two pools of money. 

One part of the account to keep investing and growing in retirement and the other for the sole purpose of buying an annuity at retirement to cover basic living expenses.  

I would periodically check to see the amount of annuity income those investments could buy so between that and SS I would know our retirement income stream.

Back in July 2007 Jonathan wrote in the Wall Street Journal

“If you try to pay for retirement by slowly drawing down your nest egg, there’s a risk you will outlive your savings or your finances will get derailed by rotten markets. To protect yourself, you’ll want insurance-in the form guaranteed of lifetime income.

Your Social Security benefit will provide some of this insurance, and you may have a pension as well. If you want further protection, consider buying immediate annuities that pay lifetime income.”

That is exactly what I am saying. 

I would also have saved all forms of compensation above base salary as I actually did. Today the dividends on the company stock I saved and accumulated for the last twenty years generate $25,000 in annual income. Bond interest is about $1,600 a month tax free. 

Fidelity says my brokerage account asset allocation “resembles a Growth with Income strategy and my retirement account investment “resembles a Growth strategy. The growth and income strategy in the brokerage account is where bond funds reside, including muni funds. 

Is that good? Is it the way it should be? I don’t know.

With all this speculation I am still faced with determining the best investment strategy and also the dreaded withdrawal strategy. I like to think I have minimized the withdrawal issue by using an annuity with my withdrawals limited to the income generated by interest and dividends – at least that’s what I imagine, but then there are RMDs to deal with. 

Has this theoretical retirement allowed for survivor benefits? Hopefully, but not with the certainty of a pension survivor annuity. 

This world without a pension is scary and complicated. There are many decisions to be made, many unknowns to deal with. 

My hat is off to the great majority of Americans who live in my theoretical world. It’s not an easy road to a secure retirement. And for sure an early start to saving and investing is very important.