Retirement Thoughts

As I get closer a few things I used to hear from retirees are now becoming clearer to me. Things such as inflation being tough on many retirees since their income doesn’t go up as much as inflation causes prices to rise.

Or my uncle (80, and a very good investor) telling me you should set up a stream of money to cover your expenses and not rely on the stock market. I did part of this with some MYGAs to cover the first 4-5 years. Sure inflation is chewing up some of this right now but at least I’m not losing to inflation and another 20% in the market.

Housing. Personally I think the best way to do this would be to buy a house in your 30s and have it paid off by retirement and it greatly reduces your expenses. I was set for that but ended up selling the house and will now have to pay an inflated price (likely) for a place to live. Fortunately I can still afford a nice place somewhere (helps not to be tired to a work commute any longer) but not the ideal situation IMO. And sorry, I just don’t see renting in retirement as a smart solution, I’d like to have my costs fixed in retirement and rents aren’t in your control and moving is painful at any age and more so 60+.

Depending on health and offers I might work another 6-12 months passed my initial plans just to have a larger buffer. An extra year, even at 32 hrs a week, probably saves me at least $100K or more. Since I’ve only been married about a year, I’m still working out our expenses, fortunately not high but clearly going up with inflation.

The current downturn has been painful but I was a bit lucky in that I tend to have a decent amount of cash and in this case had even more cash due to moving money around to try and consolidate my accounts. So I probably have more of a 40% cash/60% stocks at most. Obviously the cash is losing to inflation but I can hopefully deploy that to pick up some stocks at good prices in the near future.

Things definitely change the closer you get to retirement since the amount you save in a year is much less than what you can lose in the moderate drop in the market. And for many employment can be tougher with some companies definitely avoiding older folks but I’m pretty lucky in that area.

I’m also lucky in that I can get health insurance at 60 and that is one less “game” to play and then use it in conjunction with medicare.

Looking back I’ll honestly list a few things I’ve done in my life investing wise:

  1. Enjoy my money: During my life I did a number of ski trips and later Europe vacation instead of maxing out retirement accounts. No regrets at all. Honestly have no bucket list at all.

  2. Buy houses (often small or fixer uppers) in nice neighborhoods. Made all but my first one (in bad area, oops) easy sales and saved a bunch with corporations picking up 4 sales.

  3. Don’t go all in on anything. Kept me from possibly making a fortune when certain investments looked great (i.e., real estate in 2008-2011) but also avoided any disasters in investments.

  4. Biggest mistake is trying to stick with a downtown and then panicking near the bottom and missing the rebound. Definitely did this previously, lesson learned.

  5. Didn’t chase the money with jobs. I’ve always taken jobs where I mostly enjoyed the work, kept hours to 40 a week and enjoyed my personal life. A few rough years and I can relate to those stuck in bad situations, a bad job can ruin your entire life including your health. And I never had to deal with layoffs, firings, bad performance reviews. A combination of skill and observing how things work at companies.

I was lucky that my father took care of my college expenses and my goal was to finish school in 4 years and never have to rely on anyone else for anything. Thankfully I was able to do that and never had to ask for money from family, friends, etc. Fortunately I had no major health issues.

I’ll re-evaluate things later this fall and decide whether I will retire completely or take a contracting position (if I can find one that interests me) for 6-12 months.

Good luck everyone. Sadly life goes all too quickly, especially for some.

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Funny timing on this thread. I just informed my employer a few minutes ago that I am retiring effective September 1.

PSU

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Congratulations!!!

(Ever time I see your name I imagine you design power supplies, despite knowing better.)

Funny timing on this thread. I just informed my employer a few minutes ago that I am retiring effective September 1.

Congrats, PSUEngineer!!! Enjoy, enjoy, enjoy.

I retired 3 years ago and I consider the best career move I’ve made.

Oddly, my boss told me the same thing when I handed her my resignation letter.

AW

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I did part of this with some MYGAs to cover the first 4-5 years. Sure inflation is chewing up some of this right now but at least I’m not losing to inflation and another 20% in the market.

I expect somebody (ahem, intercst) to come along and tell us about the hidden expenses and downsides of MYGAs. I did my usual goggling for “problems with MYGA” and got nothing but pages and pages of ads and insurance barkers cheering for them. google is getting worse and worse about tossing up ads when you are just looking for information.

About “first 4-5 years” ---- is there something special about the first 5 that is not the case for any other 5 year period? Whenever you are, the next 5 years are the first 5 of the rest of your life. Whether you are 50 or 80.

Personally I think the best way to do this would be to buy a house in your 30s and have it paid off by retirement and it greatly reduces your expenses. I was set for that but ended up selling the house and will now have to pay an inflated price (likely) for a place to live.

No, that’s called suboptimal (I would say d*mb, but TMF doesn’t like that word). You bury a big part of your net worth into an illiquid poorly performing asset instead of keeping it invested to grow with the economy. Sure, you lower your expenses in retirement. Because you gave up the dividends and growth that being invested would have given you. That’s a bad tradeoff.

A 30 year fixed rate mortgage is great for retirees. Keep your money out of the house, keep it in investments that grow with inflation while your monthly mortgage payment stays fixed no matter what inflation does.

As you say, “Obviously the cash is losing to inflation …” so you are paying the mortgage with less and less inflation adjusted money.

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No, that’s called suboptimal (I would say d*mb, but TMF doesn’t like that word). You bury a big part of your net worth into an illiquid poorly performing asset instead of keeping it invested to grow with the economy. Sure, you lower your expenses in retirement. Because you gave up the dividends and growth that being invested would have given you. That’s a bad tradeoff.

Did you do the math? The person said buying a house in your 30s and paid off in retirement. Since many people retire in their 60s, the math is 60s minus 30s or around the length of a 30 year fixed rate mortgage.

PSU

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I’m nearly there with ya, hopefully 1 1/2 to 2 years away from switching from full time to 6-7 mo a year contracting and the rest golfing and traveling for a few more. Fortunately, my project/program management skills are in demand. Unfortunately I have no idea what to do once I retire to stay busy, that doesn’t involve IT, and the money is too good to pass up (for the right roles).

And congrats to PSU!

I’m also slated for early September retirement, at age 62. I have a raft trip down the Grand Canyon booked for Sept. 8 as a means of disengaging from nearly 40 years of office work and sitting at a desk and computer all day. I’d like to retire sooner, but the way things are looking I’ll probably be working up to the day before then. They haven’t yet started interviewing for my (two) replacement(s), and there is likely a lot of training to be done once they get on board.

On the plus side, with the markets as they’ve been for the last several years I have more money than I expected to at retirement. The flip side is that with a falling stock market and high inflation, among other various world and domestic problems, it’s not hard for me to imagine the current time as ending up being one of the “worst case scenarios” that you find in Firecalc so I’ll probably be cautious in spending for the first couple years. (That would also be in keeping with my usual timing for major financial moves.)

I’m looking forward to experiencing and enjoying the great Beyond Work, and am very fortunate to be in a position to do that.

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Regarding real estate. My wife and I are both retired, as of 2020. House that we have been in for 26 years has been paid off for quite a long time now. For a variety of reasons, we’re looking at properties today, closer to where I grew up. We’ve got enough liquid funds available that we can make a down payment without selling our current place, though we will have to finance it, unless we realize a bunch of cap gains or take too much in distributions for the year.

Lots to think about, but leaning towards carrying 2 properties for a few months while we wrap up a few things at the old place and get settled in a new place about 2 hours away, and then selling the old one. Since we’re downsizing, we expect to net about 100k after all is said and done. Expecting to buy something for around $200k and selling ours for around $350k.

We will probably finance with a 5/1 ARM or similar and see how things go. So, we’ll have some extra funds to invest after the sale, that may throw off enough income to pay the mortgage or a good portion, anyway. Eventually, we may end up with a winter place and a summer place, but that remains to be seen.

Hoping that one of the places we see today is suitable.

I did my usual goggling for “problems with MYGA” and got nothing but pages and pages of ads and insurance barkers cheering for them. google is getting worse and worse about tossing up ads when you are just looking for information.

I got curious and tried the query at DuckDuckGo. (https://duckduckgo.com/?q=MYGA) The first two entries were ads.

Expecting to buy something for around $200k and selling ours for around $350k.

Hints as to the part of the country? This is far, far below so many places.

One plus for keeping a place a long time - many locations have tax breaks if you are over a certain age and have owned for a certain period of time.

One data point - owning for a long period of time will usually involve significant maintenance. When selling new owners may have quite a few code upgrades to do if choosing to renovate.

For me, buying the cheapest house in an expensive neighborhood has added considerably to the value. But whatever the home, spending less than the income and grabbing every matching penny also did quite a bit.

There’s really no one special sauce and luck is at least a tiny piece.

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A 30 year fixed rate mortgage is great for retirees. Keep your money out of the house, keep it in investments that grow with inflation while your monthly mortgage payment stays fixed no matter what inflation does.

Most retirees can’t live with all their money in stocks.

Other than stocks, what do you suggest for investments that grow with inflation?

“A 30 year fixed rate mortgage is great for retirees. Keep your money out of the house, keep it in investments that grow with inflation while your monthly mortgage payment stays fixed no matter what inflation does.”

Most retirees can’t live with all their money in stocks.

Other than stocks, what do you suggest for investments that grow with inflation?

What I meant was not 100% stocks but a typical diversified portfolio – 60% stocks & 40% bonds. Or 80/20 or whatever.

Agreed, most people can’t stomach 100% stocks.

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Did you do the math? The person said buying a house in your 30s and paid off in retirement. Since many people retire in their 60s, the math is 60s minus 30s or around the length of a 30 year fixed rate mortgage.

Well, if you buy the house at 30 and never move, then yes it is paid off by the time you retire at 60+. So the mortgage or not question is moot. But note that even the OP said that was his plan but he (unexpectedly?) sold his house before the 30 years.

Here’s some figures for the 15 years from 2007 to 2022. Scale to your liking for your own personal situation.

  • A $1000 mortgage payment in 2007 now only costs you $717 in 2022 dollars.

  • A $1000 Social Security benefit in 2007 is $1350 in 2022.
    If in 2007 you devoted your $1000 SS benefit to pay the $1000 mortgage, you now in 2022 have $350 left over.

  • $10,000 in a 60/40 balanced portfolio in 2007 has grown to $33,517 in 2022.

  • If in 2007 you had $100,000 in a 60/40 portfolio and withdrew $1000 per month for the mortgage, in 2022 that portfolio would still have $297,010.
    (Yes, I know that mortgages were 6.34% in 2007 and the payment on a 30 year $100,000 loan at 6.34% is $622.)

The topic of this board is Retirement Investing, so discussions about having a mortgage or having the house paid off should certainly also consider the alternate (read: invested) location for your money other than have it buried in the house.

As long as there is inflation it is financially better to have a 30 year FRM and keep the money invested.

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Cheers to PSU! Living the dream!

DH and I did indeed buy a house decades ago that’s paid for. $600/year in taxes is all we need to keep it, another $1400 or so for insurance. 4 bedroom 3 bathroom on half an acre.

My son rents. His landlord recently sent out numbers on renewing his lease. His $1350 one bedroom apartment is going up to $1850 on a 12 month lease. $1750 on a 15 month lease. I told him no hecking way, give notice.

At most our costs might go up $200 a year.

I’m happy to have a paid off house.

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What I meant was not 100% stocks but a typical diversified portfolio – 60% stocks & 40% bonds. Or 80/20 or whatever.

Right, so we’ve been over this before. Having a mortgage or not is an asset allocation decision.
It’s not d*mb to not have one, or to have one. Depends on individual circumstances.

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Congratulations PSU!

Making that decision is a big deal, no matter where you are, or were at the time… I bailed from LU in '02, had more work than we had talents, so the pressures were on to attempt to bring the newbies up to speed overnight, but without management support as they were thinning the herd, too… An offer to add to my pension came along, unexpectedly, I didn’t think there would be another, and if I didn’t go I’d be living on the road out of a suitcase until the end game… So I jumped at almost 62, working DW, a little tight, but we made it…

Best thing ever, although I miss the techs work, big projects, camaraderie of a lot of great fellow workers as well as customers… But our guys, my supervisor, his boss, and his boss had been pushed out over really doing too well, making money by playing the game as it ha to be played to survive… So it was time…

House we’d bought in '74 long since paid off, it all worked pretty well, a few glitches as we remodeled, I did a lot of it myself in the early days, now hiring contractors as needed… We traveled, mixing RV trailering with overseas wanderings, Viking riverboat cruises, etc… Glad we did, age is sneaking up, faster and faster. so get out ASAP and ENJOY! Grandkids nee a bit more of your time, maybe more of a chance to get to know them better…

weco

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Grandkids nee a bit more of your time, maybe more of a chance to get to know them better…

No grandkids. I do have two granddoggies my daughters want me to entertain while they work.

PSU

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“DH and I did indeed buy a house decades ago that’s paid for. $600/year in taxes is all we need to keep it, another $1400 or so for insurance. 4 bedroom 3 bathroom on half an acre.”

that is astonishingly low tax/insurance obligations, sounds like you all chose well, wherever
you live !

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We live in Huntsville Alabama.

Now the thing about Alabama is that the state constitution says you can’t raise property taxes unless people vote for it. Guess how often that happens? My brother in Michigan pays over ten times what I do.

Yes I know the rep is that this is a state filled with trailer park dwelling toothless banjo players. There are parts that might resemble that but Huntsville is home to wall to wall engineers. NASA, Boeing, more government contractors than I could list. Huge military base. Space Camp. Very well educated population.

US News and World Report just listed it as the best place to live in America.

https://realestate.usnews.com/places/rankings/best-places-to…

Occasional tornadoes, hot in the summer, but cheap home prices, low taxes, low crime.

The politicians are blithering idiots. What can you do.

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