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Re: Alright retirees, how'd you do it?


@ElLobo wrote:

@GLI2019 wrote:

MNfish observed:

"You can't know all the unknowns."

Right.  And they are likely to make an appearance in one way or another--just as they did in one's working life.

Retirement isn't one decision: it's about adapting.

Bob


The BIGGEST adaption was going from accumulating to decumulating.  25% pre-retirement salary going in, 5% coming out for me!


        I don’t know El. We’re taking out what we need (liberally - with slop) and saving the excess for the big one, maybe LTC, which I believe may never come. There’s only so much crap to spend on after the basics. We’ve already began to get rid of stuff in anticipation of a final move. That along with portfolio consolidation to what we perceive is the best of the best and thus needs very little oversight and we’re still accumulating. There’s always some kind of return in every market even unspent yield or unspent realized capital gains.

          We found our biggest hurdle was adapting to spending even though we think we’re all set with excess income for years. Much more difficult for us then investing.

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Re: Alright retirees, how'd you do it?

Holiday you may be amused by this clip from Bridge of Spies--a very entertaining movie.

https://www.youtube.com/watch?v=lXRcxk11LqE

Years ago I was taught deep breathing for stress, but I confess it has not eliminated my family worry gene and periodic anger. I recently finished watching the Netflix docuseries on Lenox Hill Hospital.  I noticed that the head physician, Dr. Langer, had three large different colored buttons on his desk: Y, N, and F.  I've been known to press the F button from time to time.

YMMV. :-)

Bob

Winner of an Academy Award. In cinemas now Book tickets: www.bridgeofspiestickets.co.uk Subscribe now for more: http://bit.ly/20thCenturyUK Directed by Steve...
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Re: Alright retirees, how'd you do it?

Hi Bob,

That is tooo funny!  I love Tom Hanks, and I will make it a point to watch this movie soon. WITH my wife of course.

Thank you,

Holiday

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Re: Alright retirees, how'd you do it?

Partially in jest I describe myself as "frugal" but my spouse as "cheap". When I got our first PC in 1984 one of the first tasks was to create a budget that we followed. When we retired, I revised the budget for our retirement years. 

We are not rigid about the budget but it is a strict guideline. If we want something not in the budget (trip, car,etc.) we think it through and just do it. In retirement we decided to add a line item we call "off budget" to collect and track non-regular expenses so that we can factor that into future budget decisions. 

When planning retirement, we realized that new car costs would be significant. We replace a car about every 10 years. We always buy new, keep it for years and then figure it is worthless which it really is not. Since cars are in the $30-40,000 range these days that is a hunk of bucks to find. For the last 2 cars and one for a kid's car, we used a company, Subaru, that allows us to pay, interest free for 48-63 months. That is more like a lease than a one-time off-budget buy that we have to sell something to get  and we own it for years after the last payment for "free".

 Our assets accumulate in good or bad years more than we need to live well. We never consider withdrawing a fixed amount like 4% or whether we should increase it this year. There's the budget. Does it need to be increased, yes or no. Fine, continue on. Excess is to insure that the spouse NEVER wants and the rest goes to the kids equally.

Many others here may not like this approach, but it fits our personalities and it works really well.   :-)))

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Re: Alright retirees, how'd you do it?

My approach was straightforward. When I began my second academic job, at age 31, I had only about $8,000 in cash savings -- carried over from my first academic job (the employer returned my contributions to the state retirement plan, with no interest or investment return). That money became the down-payment for my first and only home.

I took it on faith that if I managed my ordinary expenses, and if I got decent salary increases, and I added 15% of that salary (5% from me, 10% from my employer) to the retirement plan every year, I would be able to finance my retirement -- whenever that occurred.

We didn't budget our ordinary expenses in detail. No spreadsheets. But we were not big spenders. One car at a time, most vacations spent with our extended families. One income (my wife was a stay-at-home mom, who was also a neighborhood leader). One home:  when I retired we were still living in our "starter house." I walked to work, less than a mile from my home. Two children.

We did set up college savings accounts for the kids (this is before the tax-deferred college savings plans came into being) -- with a focus on having at least half of the expected costs in the bank when they started; the rest would come from current income flow. Got the two kids through (private) colleges without any loans for us or for them -- about 25% of the costs were paid by their grandparents. My father was an aeronautical engineer and made a good salary, and my parents supported the college costs of all of their 5 children as well as provided partial subsidies to every grandchild's tuition.

We didn't live like hermits in a shack. We traveled the world, most often with my employer footing the bulk of the bill. Other costs were covered by contracts and grants that I had received for my research. Using personal funds, we traveled to Canada and Western Europe (e.g., France, Italy, Spain, Great Britain, and Germany). Using grant or institutional funds (nothing from my pocket), I spent periods of research or professional meetings in Brazil, Russia, Ukraine, Azerbaijan, Georgia, Estonia, Latvia, Lithuania, Finland, Sweden, Hungary, Romania, China, South Korea, India, and Israel.

39 years after I started that second academic job, I retired at age 70. The "15%" annual contribution to my TIAA account had accumulated into a nice sum. As a bonus, we had Social Security income.

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Re: Alright retirees, how'd you do it?

Let’s separate the people who have social security + a pension/lump sum from work or inheritance that can supply all/most(or more) of their expenses. They can invest in any asset allocation with fewer worries.

For the rest who depend mostly on SS + their investment, my rule of thumb is to have at least 20 times their annual expense in investments/savings, not including SS for someone who needs it for at least 30 years.  In reality, most US households are far from that. The older you are starting your retirement the lower your investments/savings can be.

I retired after 23 years at the end of 2018 with savings in the mid 20" of our yearly expense.  After just 1.5 years savings are at 34 times our yearly expense.

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Re: Alright retirees, how'd you do it?

One should not underestimate the personality factor in both Holiday's and Judger's comments.

And for those of us who have partners/spouses it sure helps to be on the same page.

Bob

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Re: Alright retirees, how'd you do it?

Juris, I was not an academic, but I had my 5% + 9% employer + my supplemental contribution in TIAA for all or most of just over 1/3 as many years as you did at a national research lab. I also did some personal investing in many mutual funds after a job at an investment banker doing portfolio evaluation computer work. I also had minor stock plans. That's it. Without these I would be on SS only.    :-)))

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Re: Alright retirees, how'd you do it?

Judger, what little investing I did outside of the TIAA plan was purely speculation on startup companies recommended to me by one of my geologist-oilman uncles. I didn't give this enough attention and basically exited with a loss.

I didn't mention in my earlier post that our financial situation now is greatly enhanced by our having received bequests from both sides of our family virtually in the same year that I retired. And so on top of the 39-year TIAA plan investment, cash and securities from my parents and my wife's parents were put into Fidelity accounts. A chunk of that money was used to buy our new condo about 65 miles south of here. Right now, however, we're back/stuck in the "starter house," because of the governor's travel restrictions and our realization that the communal aspects of such condo living are risky in the COVID-19 era. We put a lot of cash into that new abode and we continue to pay condo fees and property taxes on the new place.

I should also mention that about when I retired we started putting money into a Long-Term Care Insurance plan, to help cover expenses if one or both us us should need that kind of program. This is also something that the bequest money has paid for. In that sense the LTCI insures against our losing our basic savings and investments. IOW, there will be something for our kids.

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Re: Alright retirees, how'd you do it?


@steelpony10 wrote:

@ElLobo wrote:

@GLI2019 wrote:

MNfish observed:

"You can't know all the unknowns."

Right.  And they are likely to make an appearance in one way or another--just as they did in one's working life.

Retirement isn't one decision: it's about adapting.

Bob


The BIGGEST adaption was going from accumulating to decumulating.  25% pre-retirement salary going in, 5% coming out for me!


        I don’t know El. We’re taking out what we need (liberally - with slop) and saving the excess for the big one, maybe LTC, which I believe may never come. There’s only so much crap to spend on after the basics. We’ve already began to get rid of stuff in anticipation of a final move. That along with portfolio consolidation to what we perceive is the best of the best and thus needs very little oversight and we’re still accumulating. There’s always some kind of return in every market even unspent yield or unspent realized capital gains.

          We found our biggest hurdle was adapting to spending even though we think we’re all set with excess income for years. Much more difficult for us then investing.


Pony, my post is in direct response to the OP:

"So forget all that. There are a bunch of smart people here with their own retirements that they didn't get wrong. So how'd you do it? What'd you buy? What would you have told yourself to start doing 5 years before you retired?"

And here's what I said:

"Well, here's how I looked at things 25 years ago."

Not today!  8-)

At any rate, my verbiage is how I approached retirement, starting about 5 years before I pulled the plug (3 years before LaLoba did the same.  My bottom line is that my retirement portfolio has ALWAYS produced more divey, interest, and distribution cash than what I needed to withdraw and spend.  I never bothered to consider one part of my portfolio to be 'growth', another 'income', a third 'safety net'.  My whole retirement portfolio has always been set up ('allocated') to produce more income than what I needed.  My 'verbiage' was simply how I came to that strategy, and why!  I thought that's what unbiased2020 was asking about!  8-)

ElLobo, de la casa de la toro caca grande
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Re: Alright retirees, how'd you do it?


@FD1001 wrote:

Let’s separate the people who have social security + a pension/lump sum from work or inheritance that can supply all/most(or more) of their expenses. They can invest in any asset allocation with fewer worries.

For the rest who depend mostly on SS + their investment, my rule of thumb is to have at least 20 times their annual expense in investments/savings, not including SS for someone who needs it for at least 30 years.  In reality, most US households are far from that. The older you are starting your retirement the lower your investments/savings can be.

I retired after 23 years at the end of 2018 with savings in the mid 20" of our yearly expense.  After just 1.5 years savings are at 34 times our yearly expense.


It makes little difference ifn you have Social Security and/or a pension.  You have to figure out how much cash you need from your portfolio.  Then, whatever amount of cash that implies, per year, having 20 times that amount in investments/savings implies you plan to withdraw at a 5% rate.  Ifn you have 25 years saved up, the rate goes down to 4%.  Ifn 33.3 years, then 3%.

ElLobo, de la casa de la toro caca grande
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Re: Alright retirees, how'd you do it?

This has been a great thread. I've enjoyed everyone's perspectives and the friendly debates on the best way.  So a few surprise answers I wasn't expecting, but appreciate:

  1. Reduce spending/debt
  2. Prepare yourself mentally; and,
  3. hold lots of stocks

Haven't seen much talk of "buckets"--which I like in theory but lean towards not doing. Instead I see a lot of folks getting themselves comfortable with a portfolio, focus a lot on SS or other sources of income, and sticking to it. 

So this thread and some other reading has transformed my thinking.  I was sitting around thinking that in few years I would need to "cash out" my portfolio and buy a whole bunch of new, unfamiliar things.

Now, I'm changing my focus to tweaking my current portfolio to make it suitable for the long run, starting now.  I already have a few dividend growth equities and funds, some preferred stock, muni bonds, etc.  I also have some shorter term growth ideas that may/may not play out. I'm more comfortable with a heavier stock allocation than I originally thought, but I'll start focusing the equity side on some "safer" dividend payers. I haven't got all the AA% down yet, like whether 50/50 40/60 or whatever.  But I can at least slowly move things in this direction and maybe grab some good deals on equities during these volatile times. Wish I knew of a decent all-in-one mutual fund solution for at least a part of this in case I get it wrong.  More to be determined.

Again, can't thank the kind folks on this thread for sharing their experiences. 

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Re: Alright retirees, how'd you do it?


@unbiased2020 wrote:

Now, I'm changing my focus to tweaking my current portfolio to make it suitable for the long run, starting now. [...] I haven't got all the AA% down yet, like whether 50/50 40/60 or whatever. [...]

Wish I knew of a decent all-in-one mutual fund solution for at least a part of this in case I get it wrong.  More to be determined. 


 

For a 40/60 AA fund you may want to check out highly regarded VWINX, and for a 60/40 AA take a look at VLAIX, a fund that is very competitive with everybody's favorite 60/40 allocation fund, PRWCX, which is closed to new investors, however.

VWINX is a more value oriented fund, whereas VLAIX is more in the growth camp. You may want to consider combining these two funds in a proportion that meets your personal comfort level.

Good luck,

Fred

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Re: Alright retirees, how'd you do it?

I think that that getting spending and debt under control ties in with asset allocation decisions. Let me explain ...

My goal pre-retirement was to get monthly "fixed costs" down to below the level of my risk-free retirement income. So, I wanted all unavoidable expenses (food, health care, transport, utilities, etc.) to be less than my pension+ social security + rental income plus any annuity income. 

That way I know I can live no matter what the market decides to do. My situation is not "fragile", to use Taleb's vocabulary.

Therefore my capital (my investments) is important only for discretionary spending (country house, trips, a work of art, meals in great restaurants, etc.). 

As a direct result, my attitude towards portfolio volatility changed. Given the low yield of bonds, I can put more money in risky assets like equity; it's easier to tolerate price and income swings, as my existential situation will not be affected. I can be patient. All that's affected is discretionary spending.

That doesn't mean I can get careless. I care a lot about "discretionary" things like travel, restaurants, and escaping to the country. But, I'm relaxed. No fear!

That's my 2 cents.

N.

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Re: Alright retirees, how'd you do it?

Norbert wrote:

"My goal pre-retirement was to get monthly "fixed costs" down to below the level of my risk-free retirement income."

Ditto--no pension, no debt,  but substantial annuity income + Social Security + excellent health coverage. Unlike Norbert, however, portfolio volatility still gets my attention (personality comes into play!).

In response (at our age) to covid-19 (no politics intended), my wife and I are astounded by how much we have "saved" by backing off on travel, restaurants, and other discretionary expenses.  We look forward to reopening the spigot.

Bob

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Re: Alright retirees, how'd you do it?

ElLobo: "It makes little difference ifn you have Social Security and/or a pension.  You have to figure out how much cash you need from your portfolio.  Then, whatever amount of cash that implies, per year, having 20 times that amount in investments/savings implies you plan to withdraw at a 5% rate.  Ifn you have 25 years saved up, the rate goes down to 4%.  Ifn 33.3 years, then 3%."

If you have a Pension plus Social Security, you have a much larger income flow to cover your core expenses.  To just say that having a pension is insignificant, is not realistic for many many retirees, who have not accumulated a significant investment amount of principal.  If all you have is Social Security, plus a small amount of investment principal, it is difficult to replicate that larger additional income represented by your Pension amount.  Not everyone on this forum is a retired engineer, retired teacher, retired miliitary, etc. who are not walking in the shoes of laborers or small business owners who may now be unemployed with no income flow other than Social Security. 

Everyone's retirement situation is different and it is difficult to generalize about retirement life without a nice large pension payment each month to pay for your basic expenses.

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Re: Alright retirees, how'd you do it?


@GLI2019 wrote:

Norbert wrote:

"My goal pre-retirement was to get monthly "fixed costs" down to below the level of my risk-free retirement income."

Ditto--no pension, no debt,  but substantial annuity income + Social Security + excellent health coverage. Unlike Norbert, however, portfolio volatility still gets my attention (personality comes into play!).

In response (at our age) to covid-19 (no politics intended), my wife and I are astounded by how much we have "saved" by backing off on travel, restaurants, and other discretionary expenses.  We look forward to reopening the spigot.

Bob


Oh, I'm not immune to worrying. However, knowing that it won't be necessary to spend down my capital due to a prolonged market hiccup has been helpful. 

Part of the game is knowing the value of money; spending only on things we truly enjoy, not on frivolous stuff.

N.

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Re: Alright retirees, how'd you do it?

Bob, you are right. For us, too, the lock-down has led to reductions in outlays for restaurants and entertainment. We do much less driving. We've put off moving to our condo (not entirely a sunk cost, since we still must pay property taxes and condo fees).  Also, it has saved us several thousand dollars because we canceled our rental in Maine -- and all the annual costs associated with the month away from home. But **bleep** it, it was worth it!! We love going to Maine. We're getting cabin fever.

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Re: Alright retirees, how'd you do it?

Why do people keep saying bond yields are down?  Yes, USG note/bond yields are down but looking at global opportunity set for bonds, yield is plentiful.  One can easily find bond OEFs with good yield.  And then there are bond CEFs.  Investors are not forced into stocks for yield unless they want to be.

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Re: Alright retirees, how'd you do it?


@dtconroe wrote:

ElLobo: "It makes little difference ifn you have Social Security and/or a pension.  You have to figure out how much cash you need from your portfolio.  Then, whatever amount of cash that implies, per year, having 20 times that amount in investments/savings implies you plan to withdraw at a 5% rate.  Ifn you have 25 years saved up, the rate goes down to 4%.  Ifn 33.3 years, then 3%."

If you have a Pension plus Social Security, you have a much larger income flow to cover your core expenses.  To just say that having a pension is insignificant, is not realistic for many many retirees, who have not accumulated a significant investment amount of principal.  If all you have is Social Security, plus a small amount of investment principal, it is difficult to replicate that larger additional income represented by your Pension amount.  Not everyone on this forum is a retired engineer, retired teacher, retired miliitary, etc. who are not walking in the shoes of laborers or small business owners who may now be unemployed with no income flow other than Social Security. 

Everyone's retirement situation is different and it is difficult to generalize about retirement life without a nice large pension payment each month to pay for your basic expenses.


I'm not sure why you disagree with me, dt.  Obviously, your projected living expenses going forward are a certain amount.  There are 3 typical sources of cash to cover 'em, portfolio, pension, and Social Security.  The more you have of 2 and 3, the less you need of 1!

Here is how I first answered the OP:

"Well, here's how I looked at things 25 years ago. I had, by that time, a good handle on my monthly, quarterly, and yearly expenses. I was a salaried engineer for 36 years. So the first thing I did was to figure out what my expenses would be the day after I quit work. First thing was that I would no longer contribute to my retirement and savings accounts. After considering several things, like no more commuting costs, no more daily lunches, and such, I figured my normal everyday living expenses would be roughly 75-80% of that on the day before I retired.

I then looked at how much I was going to get from my pension and Social Security, so the difference, between my income and my expenses, came out to be some number. I then simply calculated the percent of that number to the total value of my nestegg. For me, the resultant was just under 5%."

ElLobo, de la casa de la toro caca grande
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