Wondering if anyone has done the ‘pre-full-retirement’ stage’ of earning enough to live, but not to save?
We talked to a planner who said we could retire at 60/62 if we lived on a monthly amount (that we initially guessed we’d spend monthly). Would have a fair bit of $ at end of life --but we wouldn’t run out.
I ran numbers again & our daily living expenses are actually way higher than that initial monthly figure!
Curious if others have pursued an alternative - instead of jumping off the cliff into ‘no income, start withdrawing & living frugally’ or pushing retirement back more years - instead working just to pay daily expenses, not to further accumulate savings?
Thinking this could let investments grow and give freedom to get lower paying, less stressful (possibly part-time) jobs, move, maybe buy land, start next chapter without touching savings.
Not sure if this is a pipedream (lol), too risky, etc. - curious if others may have taken this route?
One version (although the work seems a bit optional, here–not so much a bridge to deaccumulation!)
We’re in the same boat, but probably do have enough to cover our expenses, even if they rise. We each work 2 days a week, but are stopping clinical care next summer. We’ll both be 61.
There are a lot of things to consider about whether you work or not. On a simple money brute force basis, the money you make is like having a bunch more saved spinning off returns. For example, using a 4% withdrawal rate, making $20K is like having $500K more saved.
The money you make though will impact things like healthcare subsidies, Roth conversions, etc. So, it’s a bit of a complex process.
We were very nervous about when to officially “retire,” but were kind of forced into it by several factors, including work becoming increasingly unpleasant and scheduled reductions in salary and pension of not retiring at the ideal date.
It turned out fine for us, especially since one of H’s retirement benefits is a lifetime medical insurance coverage under the family plan, partly subsidized.
We had been prepaying our mortgage so it would be totally paid before H stopped getting paychecks. We also managed to finish paying the kids’ college tuitions and expenses before H retired.
Another surprise was that H worked an extra 9 months where he received both salary AND pension, to help train replacements. It has all worked out OK and we haven’t dipped into our savings at all but have being forced to do RMDs, once H reached age 70. For us it has worked just fine. Our expenses are fairly modest, as we haven’t really wanted to do as much travel as we thought we might.
We are maybe sort of doing what you describe.
Husband and I are both officially retired, and receive pensions that would not pay all of our expenses if we keep living the same lifestyle).
However, we both choose to work very reduced hours (me 10%, him 25-30%, but both are totally flexible and controlled by when we choose to work) which has allowed us to not touch any of our retirement savings. We no longer put anything towards “retirement savings” on a regular basis.
Not exactly related to your question, but something I will add for you to consider. We did a “guesstimate” amount sort of like you did. We actually completed a spreadsheet that included everything we could think of (who knew we spent that much on wine ). BUT, before I officially retired I tracked EVERYTHING I spent for a couple of years. (Husband always tracked everything he spent, so he knew easily).
Yup, W stopped working a couple years ago after a layoff. Last year I reduced the 401k from the max to 2% just for the company match, and stopped doing 10% ESPP.
Basically we’d been saving about 20-25% of our combined gross for 25-30 years, and now it’s down to 2% of just my income alone.
Our retirement accounts are at a comfortable level for retirement today, but I’m hoping another 3-5 years of organic growth will make a significant difference plus I have RSUs to vest.
In the meantime I’m getting healthcare coverage through work, taking tons of vacation, and having fun spending the extra discretionary cash flow.
Needing to work and wanting to work are two very different things. Data and financial planning determine the former, the latter is a personal preference. Remember, retirement is an option, not a requirement. Many who love what they do never plan to retire and some can’t wait for the day. Those who plan to retire work a plan to determine what they need to save and how long they need to work. Anything beyond that is gravy.
I’ve posted on the retirement thread that, similar to @1214mom, I started tracking every penny in and every penny out monthly about 25 years ago and shared the buckets and spreadsheet that organically grew and and changed to reflect our changing lives over those child-raising and pre-retirement years. I have known for decades exactly what we spend monthly and annually and where, so there was very little guessing in retirement planning. We just had to answer the question: Do we want to live below, at, or above our current spending rate? We’ve worked with a financial planner going on 20 years now who we’ve continued to share this data and our risk tolerance with, and she has guided us to where we comfortably needed to be before we stepped off in 2017*. There have been no surprises.
My point in droning on about this again is that until you have a very firm handle on your current spending (not just tracking your bank balance) and know what you want your retirement lifestyle to look like (compared to your current lifestyle), you will be doing a lot of guessing and that guessing is what causes anxiety. If you still have a few years before you plan to retire and you don’t a very granular view of where your money goes, now is the time to start tracking. Knowledge is power, and that data will help you answer the question “how much is enough?” and determine whether additional years of work are necessary or not.
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*DH is one who left the corporate grind but continues consulting to one client because he wants to, not because he has to. That money is his alone to spend on hookers and beer and goes into a separate account that is his alone. He still considers himself retired because he has complete control over his time, effort, and enjoyment.
H and I are still working full time and still saving, but we are taking 6 weeks a year to travel. We have been remodeling our home and are paying that out of current earnings. D1 is getting married next spring and again we are funding the wedding from earnings and not touching savings. H and I are able to work from homes 4 days a week which helps. We decided in 2020 to buy ski passes every winter and do as many ski trips as possible while we are healthy and able. H gets 6 weeks vacation a year and I can take leave without pay since I only get 4. We live 2.5 miles from the beach so we spend a lot of the summer at home and enjoy things nearby. We travel abroad in spring and fall and spend winters road tripping in the western mountains.
When dh started saying he wanted to retire, I insisted we go to a FA to see whether it was doable. She said yes, but that he would need to work a part-time job that brings in $XX/month until we go on Medicare, which then was six years for us. So, a year later, he quit his full-time teaching job and has ended up working two different PT jobs – one pays more than twice as much as the other so he wants that one for the money and structure, and the other is for a company he always has admired and just wanted to work there PT. Money stinks but has tons of perks, and they are really flexible with scheduling, given enough notice. Between these two jobs, he is bringing in more than the FA suggested, but he really wants to keep doing both.
As is the case for the people in the story, the work is in a way seasonal as the better-paying job is in a school so he has summers off and all the holidays, including weeks off at Christmas, which gives us plenty of time to travel. I also agree with the idea of it’s the psychology of not HAVING to work full time that is making the difference. The school-based job is at his former campus, but when he clocks out he checks out in a way that wasn’t possible when he was FT. Not returning parent calls, no lesson plans, no grading, avoid office politics, no unpaid extra-duty work.
In addition to the PT jobs, the only income we have is Dh’s pension. By the time we draw both of our pensions and both of our SS, we will be making more a month than we ever have during our working lives. The FA said we would never have to touch my 401k. I’m not sure I believe her, but hearing her say that is why I can sleep at night. Unlike @ChoatieMom, we stink at tracking our spending … we just make sure to not spend more than we take in. It’s worked for us!
Yes, I find many of my friends are similar and for many it is fine.
But then income goes down unexpectedly, (death or disability) or savings get wiped out for emergency repairs…then they start spending more than what comes in.
Oh, sure. I guess what I’m saying is that I don’t know to the nickel whether in September 2022 we spent $500/month on XX or $530.45 on XX, but I know that we didn’t dip into savings regardless of the amount. We know how and have always lived within our means – house paid off, no car notes and we don’t carry a balance on the credit cards month to month. I absolutely admire those of you who carefully track spending, however.
We tracked our spending very well, and easily were able to give this to our financial planner who has been great over the years.
DH retired at age 69. He will collect SS at 70…a one year gap. This sounds crazy, but we saved enough that we could use savings to fill in that income gap for the year. Our FP said that becoming spenders instead of savers would be the hardest thing about full retirement for us both…and he was right. But that’s why we had that savings. And the year is almost over. In addition to our living expenses, we floated the cost of solar panel installation, and a new boiler in our house. Both large expenses out of the same savings. Plus a couple of vacation trips. But to be honest, I’ll be very happy when that SS money starts appearing in our checking account!
So…I guess we are drawing down…but it was very planned.
For couples who need to cover their own medical insurance pre-65/Medicare, there is a lot of incentive to work longer even if there is not a lot of savings to the nest egg during that time. Also of course it gives more years for 401K/investments to grow before being tapped.
I’m retire and live off the SS. I haven’t had to touch the 401k money yet.
My sister is thinking of retiring but when she asked her husband if he thought they could do it he said it would be tight but that they could. Her response was “Well I don’t want to live reasonably!” (she has plenty of money, and will have a high SS payment and a pension and I’m sure there will be no ‘reasonable’ about it).
One thing we did do before retirement is get the mortgage paid off. By then we were in the last years, mostly paying principal (as opposed to the early years that are mostly interest). But it just felt right for us.
Our monthly spending is still fairly high in these “go go” years including plenty of travel and eating out. But since our pensions are not what we had once hoped for, it does give us peace of mind to not have that mortgage payment. (We do of course still have property tax and insurance and maintenance expenses.)
There is good rationale to do the opposite of this, if you have the resources to do so, because SS is so much higher at 70. It builds in a higher payment to mitigate longevity risk.
We’ll do this too. It’s an insurance against sequence of return risk, by allowing you to sell less shares in a down market if you have the higher expenses of mortgage payments.
DH is looking to retire this year at 58. We live in MA and friends on the insurance exchange are very happy. As price is determined by income (not savings), with him not working and my pay being pretty low the same coverage we have now will be pretty reasonable. We would not be able to retire, no matter how much we had saved, if we were not able to keep great insurance due to having to see very specific doctors.
Like @ChoatieMom , my husband has tracked every penny since we were married in 2002 (and probably before that) so we know it is doable. According to our FA we can live off of interest and not touch the “motherload” (as my husband calls it) until he is 99 and I am 95.
While this makes me incredibly nervous, I support that my husband wants to stop working. He has a number of health conditions and doesn’t want to “work until he dies”. He figures he wants to have some time to enjoy life and it’s always iffy as to what his future health will be. As it is, I worry about traveling and it will only get more challenging as time goes on.
He argues with his boss all the time about “the accumulation of wealth”. His boss will never be able to spend all of his money, even if he tries pretty hard, yet continues to work (and complain about it daily). My husband, at this point, thinks that his boss sees the accumulation of wealth as a game to be won while my husband has always viewed working and saving as a means to an end. By tracking our spending and working with a FA for the last 20 years he feels confident that this is the optimal time to cash in the chips while he can still enjoy what he has worked toward.
I’m having a hard time picturing what our retirement will look like as I plan on working at least another 5 years. After taking 14 years off to raise our kids, I love being back in the workforce. I stay because I like what I do and definitely not for the (low) pay. I also don’t do well without structure in my life. DH and I have few shared hobbies and no big bucket list items to accomplish so I’m a little concerned we’ll end up in separate rooms staring at a TV or something.
The thing we are currently mulling over is what to do concerning the possibility of having to move to a skilled care facility as we age and how that will impact our kids’ finances. Will be meeting with our FA soon to discuss long-term care insurance plans vs. trusts.
). BUT, before I officially retired I tracked EVERYTHING I spent for a couple of years. (Husband always tracked everything he spent, so he knew easily).
