November 24, 2017

Not Knowing What You Don't Know About Retirement



A reader sent me an email recently that contained an intriguing question and one that deserved a post. I'll let his words set the scene:

"As a follower of your blog and a reader of various websites on the topics of aging and retirement, I see the focus upon and comments by those folks who have planned and prepared for retirement for years. They may now fret over "have I saved enough" and "should I downsize/relocate" and etc but they usually are very prepared. But what about folks who just sort of find themselves retired? And there are a bunch of us. They don't know what they don't know.
So my Question: have you done a post recently from the perspective of/ or directed to someone who "finds themself retired" without necessarily having planned to be there? All of the concerns of the unknown are quite frightening. The scare mongers who are usually investment companies tell us we need millions saved or we will be in the poor house.
 The Internet is full of calculators that purport to give your Magic Number that most will not achieve especially when they find themself already retired. There can then be a tendency to enter this exciting chapter of life under the misconception that it will not turn out well. And you know that is not necessarily true."

He is quite right: becoming retired when you have planned for it, saved for it, and thought about life after work is one thing. It is quite another to suddenly finds oneself "retired" due to job loss, health or family situations, or simply burned out and needing to make a clean break. I can certainly relate. My retirement happened quite suddenly: my business went from robust to bust in about 18 months, about 5 years earlier than I had planned to walk away.

How do you know what you are supposed to know? Who do you believe? For those who have sort of stumbled into retirement what suggestions might I have? 

For purposes of this exercise, I am assuming the the situation isn't caused by simply ignoring the realities that are ahead of us all. If someone thought "it will all work out" and that was the extent of their planning, I refer you back to this post: 5 Retirement Myths You Should Ignore.

But, if you were rushed into retirement before everything came together, what should you do? What should be your approach?


1) Prepare a clear-eyed, realistic look at your financial situation now

This is a time to focus on where you are that this moment. What are your realistic streams of income? What is the condition of your investments, any pensions, future Social Security, and savings? Could you down-size your housing situation to cut expenses? Don't allow the "experts" who tell you you need X number of dollars to have a satisfying retirement influence your analysis of your situation. You have what you have. You will make it work.


2) Develop a strict budget that matches income with outgo. 

Cut what doesn't fit. Align your resources with your needs. Wants will come later. Live within that budget. You can live comfortably on a lot less than you may assume. Nobody needs 150 TV channels. No one needs the latest smart phone. Even 2 cars may be an extravagance that must be given up. When I lost a job many years ago, with two young kids and a wife to support, we didn't go to the local mall for a full year. Mac and cheese became a staple, hot dogs a treat. No temptation helps keep spending in check. 

3) Be sure to budget for health care

I have admitted this before, but when I retired I forgot to budget for health care increases. This was a serious oversight. If over 65 Medicare will be your savior. If not, you are entering a scary uncertain place, particularly at this time in our country's history. Health care costs are really unknowable, but whatever you think they may be I'd suggest adding 20% and keeping your fingers crossed. Even with Medicare, you will have plenty of expenses. Plan for them.

4) Develop of list of all the activities, hobbies, passions, and interests you have had throughout your life.

If thrown into retirement before you are ready, you will need activities to help you stay busy and focus on the opportunities that lie ahead, not the mess you may be in now. Think of whatever you like, or even used to find enjoyable at some time in your past. You have the time to feed those passions. One caution: if your hobby is rebuilding classic automobiles, that might not be your best option until your finances are steady! 


5) If you have a significant relationship put maximum effort into protecting and strengthening it.

Show me a study on retirement happiness and I will show you a section about the role strong relationships play in that journey. It could be a spouse, a significant other, or a best friend or two. But, you need those relationships to keep you on course and happy. Being with another person for 20 or 30 years in an unfulfilling, tense relationship is not a pleasant prospect. Use your new-found time to relationship-build. Trust me, it is worth more than money.



Knowing what you don't know, and then acquiring that knowledge is the first step to a productive and fulfilling retirement. You will make it work. You will not just survive, you will prosper. Retirement is all about you. Live it up.



25 comments:

  1. Relevant topic, Bob.

    I participate in an online discussion group of fellow retired state employees. This very topic came up recently.

    There were a number of stories from people who were "downsized," as well as those who needed to retire in order to retain (or salvage) their health--a lot of salaried employees with 50 to 70 hour weeks, or with workplace conditions that were untenable. They all knew that they were going to take a financial "hit" by not working until their planned retirement date, but decided to walk in order to save themselves.

    Almost all did not regret their decision. They have found that by embracing a modest lifestyle, they have been able to retire, meet expenses and get reacquainted with old friends, family, hobbies and activities that are inexpensive but tremendously fulfilling. They can thrive in retirement.

    I think as long as we carefully consider the impact such a move will have on our finances, and cultivate a willingness to make the changes necessary to accommodate to our new reality, we can ignore the fear-mongering promoted by the various financial planning entities and enjoy a "satisfying retirement."

    Rick in Oregon

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    1. If there is one central message of this post it is that you will figure retirement out, even if forced into it without being fully prepared. A lifestyle change sounds more unsettling than it really is.

      Thanks, Rick, and I hope you and yours had a good Thanksgiving.

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  2. My husband and I have often called ourselves "accidental retirees." We thought we would be working forever, well into our 70s anyway, especially since we used much of our retirement savings to adopt our three daughters when we were in our 40s and early 50s, and then never could save much again due to the cost of raising those daughters. But, it was my husband having his hours cut at work (but thankfully not laid off) in 2008 and our descent into heavy debt the following year just trying to keep up that turned things around. At the beginning of 2010 we decided we could not sustain our current lifestyle, which was actually fairly modest, but we did have a mortgage, a car payment, very expensive braces for two of our daughters. We changed how we lived and ate and greatly simplified our lives. Over the next three years we were able to pay off all our debt. Somewhere along the way we learned that because we had dependent children under the age of 18 my husband would receive additional social security benefits for them when he drew his (those payments end when they turn 18). With our debt gone, between the regular and additional social security, my husband's military retirement benefit, and a small pension he had from the company added to our military health insurance benefits and a much simpler lifestyle we figured out we could afford to retire, a big surprise. This was a good thing too because although my husband's hours had returned to normal he was completely burned out at work and leaving in 2013 was the right thing to do.

    Retirement has been better than we imagined, especially since somewhere along the way we also figured out we could afford to move to Hawaii, and that decision has turned out well. As each of our daughter's SS benefits has ended our income has decreased, but we've adjusted each time and with my social security added in now our income will be more than sufficient for the two of us once our youngest daughter leaves home. Our income is not as much as it could have been if we hadn't added the girls to our family, but having our daughters in our lives has far outweighed any economic benefit we lost.

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    1. That's a great story and a perfect example of figuring things out and making them work. Humans are pretty adaptable creatures and can adjust to much more than we think we can.

      Paying off all your debts in the situation you described is something to be very proud of, and something I think readers of this blog would like to know more about, if you care to share. How your lifestyle was modified would be fascinating too.

      Drop me an e-mail if you think might be something you'd take a shot at.

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    2. Hello Laura, if you see this note, would you mind sending me your email address? I have been thinking a lot about the possibility of retiring in Hawaii...even thought about it all morning today and here I read your email! You can email me at lynn.denton@medair.org. Many thanks! Lynn

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    3. Lynn, be sure to read my interview with Laura in this post from August, 2016: Retirement and Hawaii-Bound (https://goo.gl/kiA95H) . She and her husband made the move many of us dream about after several years of study and what-if scenario planning.

      How they paid off all their debts is another part of their story I think would be interesting to many.

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  3. Like Laura, I am an accidental retiree. At fift something I had left my job and cared for my ill husband. At fifty something, with skills and a history of working for the feds on my side, I just assumed that once I got my act together, I could easily get a job. As a result I went through a lot of life insurance and such very quickly, frightenly quickly. And then of course, said job never materialized. Not much of any job materialized.

    The end result of course, was that I used up life insurance and a small 401K living on for the basics until I got to the age of the pension and SS. While I would love that time back, I did still have dependent kids at home and many other expense-and I had to breakt he "do nothing for a year rule" because of course, the foreign service wanted me half around the world and so on and so forth. I managed to land on my feet by living on that pension and social security, and because I am one of those people who spends what is there without a spouse with more control, I am probably better off with the decent monthly stipend than deciding how much to spend each month from savings. The end result of course is that I landed on my feet and that $36000 a year is more than many folks take out annually.

    In spite of all the financial issues though, all these years later I realized that although I thought I was prepared for retirement, it was actually that "hobbies, travel, what will you do" part that I may have handled the worse (and may have led to many other issues). Ihad not made a plan, I had a difficulty making new friends, and I spent the first four years at least sitting around eating bonbons (figuratively), not doing much of anything, being non productive and as a result getting no exercise, spending money, and so on and so forth.

    I've come to realize that the longer I am retired, the more I have adjusted to it, and the better I probably do it-arthritic joints excepted. I wish I knew now, during those first few years,

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    1. No matter whether one begins retirement with a solid plan, or kind of stumbles through for a while, it really is a case of on-the-job training.

      I know your story and have followed your blog for several years. You have been very open about the initial period when you burned through the insurance money and that forced you into lifestyle changes. Of course, the good news is you figured it out and live a very creative life, with travel and a major move a few years ago.

      When I was fired after just moving to Tucson with a young family and not a lot in the way of savings, or after having my business shrink to the point of closing in 2001, I had some serious panic attacks. Like you, I wish I knew then what I know now....it will work itself out.

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  4. Your blog Bob, is a shinning light to all those seeking information and direction regarding retirement. There is truly a place for you in heaven.
    One of my strongest pet peeves about retirement are those others who claim perfect retirements when it is all too obvious to a knowing eye that their pronouncements are false or at best, very misleading. As time progresses, however, it becomes exceeding difficult for these 'false retirees' to keep up the charade and their reality sets in.
    Thank you again, Bob, for your honesty and dedication. I appreciate it wholeheartedly.

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    1. Thank you for your comment and support. I have never tried to hide my failures or stumbles in the past 16 years of retirement. Besides being untrue, it would be boring if everything was rosy all the time!

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  5. All good advice. I'd guess most people -- like you, like me -- who "find themselves retired" are in their 50s and still have plenty of energy and personal resources to make some more money and not have to rely just on SS and retirement savings. It doesn't have to be another fulltime job. We can consult part time; we can turn hobbies into money-making ventures; we can start a business, pursue a long-deferred dream. It's a new and different economy, not just for the millennials, but for us as well. And adding a little "extra" to your retirement income can be enormously helpful.

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    1. The guide work I did for a few years was a great way to interact with other people and generate some extra cash. When it started to get in the way of what I wanted my retirement to be, I walked away.

      I have flirted with some other money-making ideas, but frankly, the freedom of retirement to too enticing to put in the time or effort.

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    2. Tom, regarding your very positive statement: "We can consult part time; we can turn hobbies into money-making ventures; we can start a business, pursue a long-deferred dream. It's a new and different economy..."

      It certainly is a new and different economy and a friend of mine who was let go in his mid-50s thought the same, like Barbara above he thought that after a little time off he'd easily be able to pick up a job or get a gig consulting (previously he was a corporate IT manager).

      Two years down the road, with many interviews but nary a job offer or consulting gig, he's working part-time at Costco restocking the meat "tubs" (displays) because he needs the money. It's honorable work but not what he was imagining when he was let go by his employer of 25 years. Those ideas you put forward work for some but in my experience for far fewer than you might think, personally I wouldn't count on it.

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  6. I would add make sure estate planning documents, and insurance policies are up to date. When one loses a job, their insurance coverage usually ends with the job. You want to make sure you're covered for any disability, life health and death.

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    1. Good point. Most of us have no need for a fancy trust type arrangement, but life insurance to pay off any debts, a will, health directive, and power of attorney papers make life so much easier for those left behind.

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  7. "All things are difficult before they are easy. Difficulties are meant to arouse, not discourage." Many life transitions are difficult and especially those that occurred out of our control. There is a period of adjustment. I will always maintain that finances, relationships, personal/spiritual growth, physical and mental health needs to be managed in retirement as in all stages of life. Most of us didn't get to "retirement" age without learning life skills and coping mechanisms. Like Rick in Oregon said - almost all did not regret their decision and they can thrive in retirement. There are so many things that are priceless, like the gift of time and opportunity. There are so many things to enjoy and participate in that are free.

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    1. I am reminded of the news reports after singer and actor David Cassidy died a few days ago. His last words were, "so much wasted time." What a powerful reminder about the one thing we do not possess in unlimited quantities.

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  8. Great advice Bob. I have two friends who have entered retirement "suddenly" and are freaking out about it. I will share this post with them.

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    1. Thanks! I hope this helps them see that the path forward holds tremendous promise.

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  9. I too retired because of down sizing in the construction world, eight years ago. with a small pension and now SS, plus a part time hardware job, that I have since left. we are better off in retirement than when we worked full time. close to our five grown children and dozen grandchildren. at 65 living the life. (by the way love the blog)

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    1. I didn't realize what a difference living within a few minutes of our grandkids would have in our life. Instead of being 45 minutes away, we are less than 5. We get together every single Sunday at church, and then have family dinner followed by games or a movie. We attend virtually all their school activities and performances. It has made everything that much sweeter to be such an active part of their lives.

      Thank you for your readership.

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  10. Hi Bob! I very much agree with Mona that it really makes sense to maintain and manage our "finances, relationships, personal/spiritual growth, physical and mental health" throughout our entire lives. When we do, then any abrupt change that is expected (or unexpected) is taken more in stride. Of course, I agree that people are actually far more resilient and adaptable than we give ourselves credit for. While I am not yet retired myself, I feel like I am preparing myself every day in little ways and have no doubt that when the time comes it will be just another step in my evolution. ~Kathy

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    1. Retirement can be a shock to the system, prepared or not. But, you are so right: managing our preparation, reaction, and growth throughout life means we can handle most anything with much less stress and anxiety.

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  11. Excellent set of questions. Thank you for addressing another side of retirement that is rarely spoken about.
    I have a number of friends who moved for that great promotion-laid off within three to five years. Here are two more questions for the corporate mover and shaker:
    1) When you are downsized, decide where you want to live and move there. You have the money and the momentum to find a new corporate position or just start again. Companies rarely move (older) people anymore and they do not hire out of state. Making that move when you are feeling broke and defeated is very difficult. Might as well downsize and get to where you want to be and have a possibility of landing something new.
    2) IF you land another "good job" after you have been laid off, live on your retirement budget and save like there is no tomorrow. Seems to me that those who are laid off are targets for lay off the next time as well. Yes, you can consult, but that is turning out to be more of a rare bird once you hit your late 50's in my circle.
    We were lucky to land in a set of jobs for seven years after "retirement". We only lived off of our retirement income and saved everything else. It was a tough transition, but made our lives SO much easier when we left the job market at 64 and 57. Our nest egg is intact.
    My dining room table has been a place of couple therapy more then once. Finding a reason to stay together when things go sideways can be difficult. My mantra has been, "Would you be better off alone?" After being real about finances and family, the answer almost always "no". Hang on, it does get better. (My husband no longer is on any blood pressure or asthma medicines. My vision has gotten much better. AND we eat better at home then we ever did at the Olive Garden....)

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    1. You mention a very important step for anyone who finds him or herself in this position: immediately go to a "retirement" or simplified budget that cuts out frills and extras until you can stabilize your life and figure out exactly where you stand, both financially and emotionally.

      Most folks are quite surprised at how little they really need, versus what they want. I learned that first hand after being fired right after a move, with two daughters under 3.

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