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I enjoy my work, so I invested to be able to retire in my early sixties, while planning to work as long as my health permitted. Given the stress of 2020, I took a close look at whether it’s really feasible to retire at age 62. It is, but I have too much in tax deferred accounts and too little in Roth accounts.
I’ve increased contributions to my Roth accounts and started planning for Roth conversions. I’ve started building my cash reserves. I’ve also signed up for accounting clerk classes, with the goal of taking temp jobs when I retire. I’d like to retire from management, not retire completely.
Diversification (across equities) is overrated. When the stock market crashes there are few hiding places. Nevertheless, in spite of market crashes or perhaps because of them equities are the place to be. A good business is capable of adjusting to changing economic environments and therefore is most likely to be the best all weather investment.
Almost any money since I got married spent on family vacations or experiences with my family was money well spent.
I’ve gotten more conservative. Part of that is just stage of life (late 60s and retired), but not all of it. Right now I’m reading The Investor’s Manifesto by William Bernstein and he stresses the fact that the pain from a loss greatly exceeds the happiness from an equivalent gain. I know that’s true in my case so I’ve nudged our investments in a more cautious direction—though it’s not easy with bonds’ current performance, not to mention the (non) yield on savings and money market accounts!
To my own surprise I have lightened up on spending. The pandemic has changed my thinking a bit. Eleven years after retiring I’m no longer saving for retirement, so I have started spending a portion of interest and dividends on special projects and looking forward to spending again in travel.
I’m so proud to have maxed out my 401(k) / TSP (federal employee version) contributions over the years. Set it and forget it, combined with low cost indexing. In passive hindsight, it’s been the best type of investing. My younger version might have wanted to tinker or pay an outside professional to do the same tasks. I see little upside now.
I am less judgmental on myself when I come in over or under my budget. The past year has shown me that many things are not under our control and if I come in slightly better or worse on a small budget to begin with, what does it really matter? What matters is to keep investing, focus more on diversification as I just hit 50, keep learning about retirement topics I’m not very familiar with like LTC and SS strategies in the future, etc. Coming off of a trial retirement and realizing I have more to give in the workplace, I need to figure out how long I will work and until then, be intentional with our money. The rest will sort itself out…
I have more tolerance for things not going to plan. In fact, I fully expect life not to follow my plans. There’s a tremendous amount of freedom that comes with being okay with things not being okay. Hakuna matata.
I have financial aid letters denoting first year costs for my twins starting college in five months, and I am no longer employed full-time. My financial perspective has become foreshortened. I have set aside sufficient funds for “further out there” per my current understanding of my future needs and am letting those ride. Meanwhile, my front burner financial thinking concerns the adequacy of cash/cash equivalents and cash flow necessary to get the kids through college and on their own.
When I spend time thinking about “retirement” and my money “further out there,” it’s questions of how to use money to make my life easier/better now and later. I don’t believe it will run out, so I think I can let bits of it go now in ways that help me. That’s a new perspective after decades of saving first and foremost.
I think it is very wise every few years to reread The Intelligent Investor by Benjamin
Graham. The is the “Bible” of value investing and it always reinforces my sense of fear when others are greedy. I not sure how these crazy SPAC/NFT/Bitcoin manias will play out but I really like sleeping at night without the sense of excessive risk.
The past year has reinforced what I’ve come to learn over thirty years of investing – nobody (especially me) can predict the future, and how markets will react. Develop a well diversified portfolio with an asset allocation you can sleep with. Continue to invest through highs and lows (dollar coast average) and have faith in the future.
With each year that passes I become ever more convinced of one investing truism:
Simpler is Better.
Too many talking heads like to say cash is trash these days. I disagree cuz I may know I’m going to lose $$ after inflation but at least I don’t risk a significant stock market decline or harm from interest rate increases. So I’ll stick with my 60% stock, 40% cash allocation thank you very much.
Oh and don’t even get me started on the whole “People are investing in stocks because there is no alternative (TINA)” garbage.
With ultra-low interest rate and an all-time high stock valuations, I think the 4% rule (25x rule) may create a false sense of retirement readiness. Until the dust settles and the rate goes back up to a sensible level, I’m using more conservative numbers for planning purpose.
For over 30 years I’ve kept a diverse mix of stock funds and bond funds. We’re approaching retirement age at a moment when bond prices and rate risks are not attractive. Since our portfolio is close to target, and I won’t retire with a pension, I’m saving new money this year in low-cost deferred income annuities from the two strongest mutual insurers, with annual increases to account for inflation. The income should help us defer Social Security until I’m 70 and helps with longevity risk. Would never have imagined buying annuities until now.
Thanks for your comment. Can you share as to how a deferred income annuity is better to bridge the gap to social security from say 62 to 70 than just using the money to cover expenses? Are the insurance companies giving a much better rate than money markets (.5% currently)? Does the annuity end at 70?
Hi there. I’m almost 60 and am planning to retire some years before age 70. I have a few savings buckets to use as income between stopping a paycheck and starting SS or tapping retirement savings. Deferred income annuities are like fixed immediate annuities in that you pay a premium in exchange for committed income amounts paid to you each month which continue until you and your partner both die (if you purchase joint annuities). Like all investments they have drawbacks and benefits. You can read how I thought about those in this HumbleDollar article. My first annuity purchase was aimed mostly at longevity risk. This year’s purchase is also aimed at boosting income between the end of full-time work and the start of my full retirement.