A Reader’s Retirement Plan Success Story
June 3, 2010 by MJP
Filed under Retirement Planning
Long-time supportive reader (and baby boomer) Ron emailed me this week to say that he had recently retired, at age 57. Because of his success, I asked him to share his story with us so that we could learn from it. He graciously agreed so please read on and discover that careful retirement planning does pay off.
From Ron:
Our story is relatively straightforward. My wife is 55 and I am 57. Last week was my final week of employment. In 23 working days, my wonderful wife of almost 37 years will be joining me in retirement.
Like so many baby boomers, we both have a mailbox full of degrees. My initial background was in accounting/finance for 10 years before gravitating to education. Marsha has always been in education and will be finishing her career as Assistant Superintendent of Instruction and Curriculum for a school district.
We adhere to the philosophy of always saving something toward retirement. It started when we were in our 20′s by opening IRA’s. We followed the IRA’s by opening 403b deferred comp. vehicles. We always have contributed (forced saving).
As of the past couple of years, we have also utilized the opportunity of opening 457c savings plans. After getting hammered in 2001 with the demise of the equity markets, we shifted everything to fixed income. [Ed. Note: Your conservative switch helped you dodge a big bullet in 2008.] We’ve always made money since. We have taken full advantage of tax free rollovers to take advantage of higher interest rates. The one thing that we believe folks should be fully aware of is the effects of federal income tax on taxable investments. Thus, milk deferred comp. to the max.
Three facets of entering retirement that were mandatory are:
1. Manage expenses
2. Utilize a budget (both before and after retirement) make budgeting a mindset
3. Enter retirement debt free or with relatively no debt (it’s all about cash flow)
One also should become a student of reputable information sharing. My two must haves are: Go to Retirement (your blog/numero uno) [Ed. Note: Thanks for the plug Ron!] and Kiplingers Retirement Report. Folks have to be aware of who is out there and not fall victim to entrepreneurial exploitation.
Take advantage of organizational discounts. i.e. AARP and AAA.
As you have pointed out, people should have long term care coverage with an inflation rider. We both have a policy. It is imperative that you have health care coverage. I could write a book on that.
Sometime, it would be a pleasure to reflect on that topic. We are in the process of leaving our group and purchasing HSA compatible Blue Cross Blue Shield policies. We’ll be saving almost 50% and have another saving vehicle through the HSA. [Ed. Note: We would like to hear more about the coverage and costs of these policies.]
With all of the above being said, we are starting our retirement with multiple income streams. Our net income after taxes will actually be about 25% to 30% more than when we worked. [Ed. Note: Truly an awesome outcome. Pensions are so helpful for this.] If folks will read your blog and follow your sage advice, they will well be on their way to a healthy retirement. There is sooooo much more, that I could add regarding the experience of getting here and would enjoy doing so in the future, if it will help folks out.
Thanks,
Ron and Marsha
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Thank you Ron and Marsha for sharing your story. Personally, I would love to read more, particularly as you adapt to retired life while still in your 50′s. So please contribute whenever you have the time. Meanwhile, congratulations on what you have achieved.
I invite any other readers to share their stories as well. Use the contact page to let me know you have something to contribute.
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This all sounds very nice. But I’d like some numbers please: exactly how much is that 25 to 30% more you are getting each month to live on? How much money have you saved & put away towards retirement? What are your monthly bills? What do you own? What is your lifestyle?
Without this info, sorry, but your story is nothing more than empty words. You could be living in a cardboard box for all we’d know.
First – thank you for the great blog. I just learned of it from your post on yahoo.
What I take away from Ron’s story is that best possible retirement planning most folks can do for themselves is to get a government job while you are still in your 20s or early 30s.
My brother the Los Angeles County Sheriff’s Deputy will “retire” at age 50 with a greater annual pension income than his salary was throughout most his career using well known technique of a promotion for his last year on the job, plus lots of OT, and unused sick pay cashed out that last year. I don’t think he’s ever saved a nickel, but he knew all along he would not have to. That is tremendous piece of mind. His retirement planning consists of the usual brown nosing of the higher command in order to get that final year on the job promotion (a position that will be vacated by a newly retired officer who was in the job for a year or so), plus saving up all possible sick days throughout the last ten years.
While my wife the teacher does not nearly as good a pension deal as my brother the cop, she’s had lots of time off throughout the years, a great job to have for a mom. She is now 51, and since we can easily live off my income, we fully fund her 457 and 403(b) plans ($45K pre-tax for 2010 at her age). Plus, she will get a pension for the rest of her life starting as early as age 55, although for her to “max out” her benefit, she has to wait until age 60 (so sad, too bad for her).
We have a neighbor who retired at close to full pay (he says) from working the JR College system. I’m not sure if he was in administration or teaching, but either way he was done in his early 50s.
Why work in the private sector? Let the private sector work for you!
Like David, I found your website from a Yahoo! article (probably the same one on protecting against inflation). I like your site.
I agree with David about government jobs and pensions. Early Boomers that worked for the federal government will do well — CSRS pays up to 80% of their salary after 40 years. Later Boomers will have pensions more like private industry — FERS (changed over in 1983) pays about half of the benefits that CSRS does, and has an inflation adjustment that is lower than full inflation. However, the FERS employees are also required to pay in to Social Security, so they will have that — more or less like a person on a private pension. Federal workers are also not allowed to “double dip” — drawing a full pension plus continuing to work in a Federal job. Any prior pension is offset against their new salary.
However, a lot of the state and local governments still have high pension pay-outs — accruing as much as 4% or 5% of final salary for each year of service. And they have retirement ages as low as 50 or lower. Where the federal government caps it at percentage of income, quite a few state and local employees can exceed their actual salaries by continuing to accrue 4% or 5% per year beyond the official retirement age of 50 or so. Double dipping is also allowed, so in states like New York and California there are people drawing retirements that exceed their original full-time salary, plus working at the same or another government job for a full salary.
The other big advantage of government jobs is that they tend to be a lot more stable than private industry is now. It is possible to build a good vested interest of several decades in retirement benefits with one employer. Even prior to a lot of companies cutting their pensions, many employees did not build much vested interest in any one company’s retirement plan because the average worker changed jobs every three to five years.
David,
Where the heck do you think your pay comes from in the public sector? It comes from the PRIVATE sector and all the taxes they pay. Like homeowners and their property taxes, sales taxes, the tickets cops issue, payroll taxes private companies must pay and so on and so on. If there wasn’t a private sector, you guys would be out of a job.
And now that most of the 50 states are in deep financial decline (because the private sector is going broke), guess who’s on the top of the list to get furloughed, laid off, pay raises cut, benefits slashed, OT eliminated, health and pensions either curtailed, cut back or cut off completely?
The police, fire department, teachers and many others connected to public sector employment (medical & hospital workers, nurses etc. etc.)
Good move, bro. You learned how to ‘work the system’. Soon, at age 50+ you’re gonna learn a new system. It’s called: work. Ha ha. Good luck!
AverageJoe (I saw your gym in the “Dodge Ball” movie),
Please read my comment again. I refer to my brother the cop and my wife the teacher. Not me.
What did you think I meant when I wrote “why work in the private sector? Let the private sector work for you!” Too subtle, I guess ….
I am self-employed. Same profession as the host of this blog (by coincidence). I know damn well who pays for it. Yes, the public sector is wildly out of control, and the private sector let it happen. Public union money elects government officials who “negotiate” contracts with public sector unions. What a charade.
Anyway, it may well be that the baby boomer public employees have pigged out too long and hard at the trough, and that their children and grandchildren will no longer have the retire-on-a-spiked-full-salary pension-in-your-50s retirement planning option available to them as new government employees. Not to worry, though, there’s always the stress disability route.
I realize this is old now, but the brother mentioned in story above has earned every bit of his pension with the highly dangerous job that he had. I don’t want to be a policewoman that is for sure!! Now he can relax and not be so stressed out.
Gina:
Yes my brother did put his life on the line, so to speak, on various patrol assignments when in his 20s and early 30s, although he has been behind a desk and/or working the county jail or at their downtown HQ for the seemingly unlimited OT since becoming a sergeant in his early-mid 30s.
I do not begrudge my brother, or any other of my above-mentioned family members their tax-payer paid pensions. At least they have no excuse to try and borrow money from me!
In fact, my brother’s son (my 21 year old nephew) just dropped out of college (UC Riverside) with only a year to go because he was able to get into the police academy and a starting salary over $50K. That’s way better than he could do with college degree these days.
My point was simply that the best retirement planning advice you can give to a person is to get a government job. A nicely spiked pension starting in your mid 50s beats scrimping and saving any day.
I am a new recipient of a public sector pension here in California, pieced together from my career as a part-time college instructor and various gigs in public sector clerical work. Having been out of work for over 2 years, I figured it was finally time to draw on it at age 55.
Something that no one seems to realize about our retirement system (PERS) is that part of our paycheck is required to be put into that pension system, sometimes as much as 10%, and that creates a cash balance that grows each year. Sometimes employers make that contribution for employees, sometimes not. It depends on the collective bargaining agreement, the agency, etc.
When I decided to take my pension, I had that cash balance, which I could have taken as a lump sum payout or as an annuity, with various options. I chose to annuitize.