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The Winter Solstice occurred today at 4:21 AM, Eastern time. The Winter Solstice is defined as the point in the Earth’s orbit when the sun is furthest south, and the Earth’s northern hemisphere is tilted furthest from the sun. It is the shortest day of the year; days will start getting longer.
When I was an aerospace engineer, designing thermal control systems for geosynchronous satellites, the Winter Solstice was one of 4 important dates in the year, along with the Spring and Fall Equinoxes, and the Summer Solstice. Somewhat surprisingly, the Winter Solstice is the closest point in the Earth’s orbit to the sun. This means it was the warmest condition for satellites orbiting the Earth’s equator. The Equinox points were the coldest because they created the longest eclipse periods for the satellites. Knowing these extreme conditions allowed us to bound the worst-case environments, and design a system, using the proven analytical tools, verified material properties, and qualified design features that would work effectively within these extremes. We did extensive ground testing of our designs to make sure they would perform during the satellite’s planned lifetime.
I used this approach on our financial plan. I wanted to make sure it was designed to survive during worst-case conditions. These conditons might include falling markets, failing health, expensive home or auto repairs, and many other risks.
The tools we can use included hard work, career advancement, saving, investing, insuring, tax planning, and careful spending.
A satellite needs to do more than just survive the extreme conditions of space. It needs to perform its mission. We tailored the design to try to optimize the mission performance. This was often complex and contradictory, since different equipment worked better at different temperatures. It takes more time, resources, and effort to optimize a complex system.
Similarly, we want to enjoy (optimize) our retirement, not just survive it. This includes prioritizing family, travel, dining out, entertainment, and the many things that make our lives pleasant. This takes more resources than just a survival plan.
This is how I approached our retirement plan. We first made sure the plan was solid enough to withstand the extreme conditions and risks we could possibly face in the future. My pension, two SS retirement benefits, and Medicare give us a strong floor against financial risks. Retirement savings, and some lucky real estate purchases give us additional resources to allow us to live a comfortable retirement, and pass on something to our children.
Finally, once the satellite was launched and operational, we regularly monitored its performance. If we saw issues or unexpected trends, we could make changes, or predict what future performance was expected to be. If things went really well, the satellite could last significantly longer than expected, and perform better.
I monitor our financial plan’s performance in several ways. I look at our spending, assets, and market performance. This is more critical since we’ve chosen a more complex retirement, with 2 homes and lots of travel while we are still feeling good. So far things look OK, but I want to keep my eye on our trends. We have levers we can utilize if things trend in the wrong direction. The biggest lever is selling our second home.
Happy Winter Solstice.
I agree with 1PF that it was a great analogy, Rick, and I learned a lot both from your article and, as usual, from the comments as well. It’s nice during this busy time of year to see so many regulars take the time to read and comment. Best Holiday Wishes to all.
Thanks Linda. Glad you enjoyed. I agree – I learn so much from the contributors. Happy Holidays.
Rick, you are right on top of things and way ahead of most of us. Congratulations on your great financial planning.
Thanks Marjorie. You are too kind.
I enjoyed reading about your career and the worst case scenario testing and how it relates to testing your financial plan. Thanks for sharing.
Robert, thanks for reading and commenting. I’m glad you enjoyed it.
Brilliant analogy! I bet you had a lot of fun crafting it.
Thanks. It was fun, and I was happy that I retained a small amount of knowledge from my working days.
Good article, Rick. I like the Winter Solstice for another reason. I have vision issues and am limited to daylight driving. I am always happy when we have WS, b/c it means the days are getting longer again Chris
Thanks Chris. I remember during my working years that it felt like you never saw the sun at this time of year. You would drive to work in the dark, and it would be dark when you drove home. Longer days were very welcome.
When I was working I suffered from Seasonal Affective Disorder. Like you said it seemed like I was forever waking up and driving home in the dark. Now that I am retired that has almost completely vanished.
I like to joke that like a lot of satellites I am solar powered.
Well said David. My wife also has SAD. February is the worst month for her.
Hi Rick, this is a great post. I had to google more – I see there are about 580 geosynchronous satellites in orbit – some must be those you worked on? ! And I have learned too about the term ‘graveyard orbit’, for satellites to avoid collisions with active satellites. Graveyard orbit could be an apt term for some financial decisions that still linger but are mitigated to avoid future damage. I can think of some decisions I’ve made that fall into that category. I appreciate your analysis and recognition of complex factors. I own two houses and am keeping an eye on housing affordability/options for my young adult children. A family mortgage may be in the offing for one of the properties (using the same firm Jonathan mentioned previously). My financial orbit will definitely evolve and revolve based on values, goals and resources. Thanks.
Eileen, Thanks for the kind words. U=I had the chance to work on dozens of Geosynchronous Satellites, as well as GPS and a bunch of NASA science satellites. In addition to the graveyard orbit for Geo Sats, there is a portion of the South Pacific where low earth orbit satellites are deorbited. Have a great Holiday Season.
Wow, I have to say that I find the science side of the analogy as interesting as your retirement planning process. Very well reasoned Rick.
Thanks Dan. Happy Winter Solstice.
Rick, always enjoy your postings and comments here. What an intriguing career! Satellite scientists don’t seem to be picked on like the rocket scientists. Here’s to Voyager 1, at 47 years of service and now nearly 15.5 billion miles from earth traveling at 38,000 miles per hour and it can still call home (23 hours of travel time). You sure know how to build ‘em!
The original mission length for Voyager 1 was three years and three months, plus nine days.
Talk about over engineering 😂
Thanks GW. It was a very fun career, to a large degree because of the great people I got to work with.
Nice comparison. Also nice that you recognized major (neo)pagan holidays while building modern satellites. I’m glad the days will get longer, I miss Daylight Savings Time.
Happy Winter Solstice, and best wishes for the New Year.
Thanks Kathy. The thermal engineering group at GE was affectionately known as “The Firegods”, because we controlled (or tried to) the sun. The group that hired me was willing to celebrate just about holiday at our local watering hole.
Sounds like a solid plan. Now Rick save me from future slings and arrows and tell us what percentage of pre retirement base salary that all adds up to. 😎
Thanks Dick. I’m not sure there is a clean answer to your question. I stopped working full time at 60, and then consulted at various levels for the 5 or 6 years. Also, my wife worked and she took on her career took off during the last 15 years of work. So I’ll answer your question as a fraction of each of our last full year salary.
My pension is about 33% of my final salary. That includes about a 12% reduction since I chose a 75% Joint and Survivor option. Had the company not frozen our pension before I retired it would have been about 8-10% higher.
My wife does not have a pension. We started her SS at 65, while holding off on mine. Her SS benefit is about 28% of her final salary.
If I started my SS benefit on Jan 1 it would be about 25% of my final salary.
So I guess that works out to about 33% of our final salaries. If I claimed SS it would be about 50%. The last 10-15 years of our career we lived on much less than our combined salaries. We maxed out our 401k savings. When I consulted I was able to save in my solo 401k. And taxes took a big chunk.
If we need more income than my pension and Vicky’s SS benefit provide, we have savings in a variety of accounts, including after-tax, Trad IRA, and Roth IRAs. We also had funded 2 HSAs which we’ve used of various medical expenses. We keep a few years of expected expenses in cash for near term needs. I considered purchasing an annuity but I felt I could accomplish the same thing with MM and bond funds.
Our current spending is likely the highest we’ve ever experienced, with our recent homes purchase in Monmouth County, NJ and keeping our beach home. We are also traveling, and doing some home remodeling. Our retirement plan is still somewhat in flux, as we monitor our spending and lifestyle.
Rick, I too own a beach home in Monmouth county that we spend a lot of time at (as well as money on) especially during the summer. The amount of family enjoyment we get there is impossible to measure.
I’ve sometimes thought that selling this 2nd home that has appreciated in value significantly in the 8 years we’ve owned it would be a great enhancement to our retirement financial plan (both in additional liquid resources and reduced expenses). Although not a serious consideration at this point, it is nice to view that home as a “lever” if ever needed.
Thanks luvtoride … Although we now live in Monmouth county, our beach home is in Cape May county. We are new to the Monmouth County beaches and are enjoying getting to know them. One big difference between the two areas is the prevalence of beach clubs in Monmouth. Our Monmouth home is about a 10 minute ride to some nice beaches, so in some ways it feels like we have 2 beach homes. My understanding is that beach homes in Monmouth have appreciated dramatically in the last decade, especially in places like Long Branch.
But you have to count the income that can be generated by your IRAs What happens when you get to RMDs or say 4% today?
I’m not sure what you mean when you say “have to count”. We are still 6 years away from RMDs. We may do some more Roth Conversions to reduce them. Currently, I use our accounts to make up the difference between our fixed income (Pension & SS) and what we spend. I try to do it in a tax efficient way.
Just alluding to withdrawals adding to income replacement at some point.
You’ve pushed the need for retirees to replace 100% of their preretirement income in countless posts, while also acknowledging that everybody’s financial situation is different. Isn’t it time to buy into the “everybody is different” notion and stop insisting on a high income replacement percentage? I think, at this point, that the topic has been beaten to death. Or, if you really want to illuminate readers, go ahead and explain in detail — yes, give us the dollar numbers — why you and Connie need 100% of your preretirement income when most of us done.
I can’t understand why when I state a position or opinion someone accuses me of pushing others to agree or do the same.
What anyone else does is none of my business and I am aware sufficiently to know everyone is different and also that the majority of retirees live on less than 100% replacement.
I asked Rick purely out of curiosity based on the resources he described in the post.
My position has been that replacing 100% of base pay is highly desirable. Our retirement income does not replace 100% of my preretirement income. However, we did not live on my total compensation- we saved virtually everything beyond base pay.
My pension was calculated in 2008 even though I fully retired in Jan 2010. That means our buying power has decreased by 47% from inflation. So, starting with a cushion seems desirable.
Equally important to us is maintaining our lifestyle without being required to change what we don’t want to change and even to do more like travel.
No relocation for us, no cutting back, no reduction in supporting family when desirable or on occasion as necessary, or giving to charity as we did before retirement.
Nothing was to change and since we paid off mortgages five years before retirement, that was no gain. Yes, we save a fraction of pre-retirement amounts, but much of that was replaced with other things like health care premiums we didn’t have before to a great extent, travel as I mentioned.
So, can one live on 60% or 80%? There is no question and many feel comfortable and so be it. It was too risky for me so my tradeoff was working to 67 which i understand turns many people off.
An added bonus is that survivor benefits for Connie are higher as well so she will be able to maintain her lifestyle if necessary.
Disagreeing with me is not a problem for me. I don’t know why it is for others. If living in retirement on far less than pre-retirement income works, I’m not going to complain.
When you keep raising the same issue again and again and again, it’ll strike most reasonable observers that you’re “pushing others to agree or do the same.”
Some great thoughts here Rick. I love the comparison.
Thanks Laurianne.