Thinking about retirement, part 1
October 11, 2022
What would we do in retirement?
I’m thinking of the many pieces of an early-ish retirement puzzle as we wend our way in that general direction. This is a very long term work in progress. At a guess, we have ten more earning or accumulation years before we’ll be set. I’m definitely not focusing on an end point yet given the vagaries of the market and my own tendency to need to get to a goal, any goal, long before I’m due to arrive. Pretending we’re laughably far away helps mitigate my tendencies.
These posts are to help me ruminate because I won’t get everything all in one or even ten passes. It’s a good bet that my thinking will change over time, too.
I’m thinking about this in, of course, the form of lists.
– How do we get there?
– Where exactly is there?
– What will we do when we get there? (Probably most importantly)
How (much) do we save for retirement?
Correlated: how much will we spend?
What’s a “safe” withdrawal average rate for us? I don’t know what I’m comfortable with yet so I’m guesstimating 3.5%. I very much agree with Tanja’s thoughts that in general, the “safe” withdrawal rate suggests there is a percentage that we can always withdraw that will be fine and sustainable when in reality, it’s better not to expect level spending. That’s been borne out by my own personal experience of the past twenty years. Some of our increasing expense was down to improving our lifestyle baseline, allowing myself to spend on things that I couldn’t afford before.
Good and sufficient amounts of food, mental health care, physical health care, dental care, clothing that fits, making our home warm and dry, to name a few. This is different from true lifestyle inflation and setting higher anchor prices but I know there’s some of the inflation as well. Is having kids lifestyle inflation? It feels like it. Everything is more expensive with kids! They eat so much …!
I’m not comfortable with the fallback plan of popping back into the workplace if I took time off and it didn’t work out. My industry is conservative and small. The likelihood of an easy re-entry is miniscule. I only know one person who has lucked into a good return to the workforce in this industry since taking time off. Thus, I am loathe to make a plan that relies on going back to work as a failsafe, especially because my health won’t allow me to do what I had to do the first time around to prove myself. PiC’s preferred work and field is similar. There’s not a good reentry point for him when so many equally qualified and currently working people are vying for the same jobs.
While I want to do nothing but rest for a year, afterwards I’ll want to do something to generate income. Whether that desire bears fruit is a whole other story. None of my creative endeavors tend to generate much income.
Also, I don’t want to have to rely on that income. I want it to be bonus money, or else that’ll mean I traded a relatively secure consistent income for inconsistent income and a lot more stress.
My money questions:
- How much do we need for living expenses up to age 60 (covered by our brokerage accounts and short term money on hand)?
- How much do we need from age 60 on (covered by our 401k and IRAs)?
- How much is good healthcare and how do we find it (??!??!)
Definite expenses:
- Housing (plus taxes, insurance and maintenance)
- Transportation (plus maintenance and insurance)
- Healthcare – the biggest question mark of them all
- Travel and entertainment
- Kids – lessons, activities, sports (??)
- Food
- Utilities
- Clothing (minimal now, it’ll increase once the kids stop living in hand me downs)
I took our highest annual spending to roughly guesstimate how much we need to spend in the future without cutting back on our current lifestyle.
I want to plan for a moderate lifestyle: to have reasonable freedom of choice, the ability to buy anything we need, a few things we want, and give to others.
I’ve roughly outlined how much we need invested in two separate pots of money (the first two bullets above) and run several different calculators to validate my guesses.
Healthcare costs and education costs for the kids are still big blanks that I can’t fill in. A knowledgeable friend suggested that we budget $12k per year if we retire before Medicare and that both makes me faint and sounds realistic.
I don’t know what the kids will ultimately do for college. We just know we’ll have some money saved and plan to cashflow some expenses for them. They may still have to take some loans if they choose more expensive paths than we had budgeted.
We’re far enough away that I don’t have the information I’d need to fine tune the financial goals. I’m making minor adjustments here and there to focus intensely on investing in our brokerage and that’s good enough to worry on for a few years as far as money goes.
Am I missing anything big?
What does retirement look like for us?
I can spend my time figuring out what we plan to do with those reclaimed hours and years because I want to retire to something, not just drop work and then feel adrift if my hobbies alone aren’t fulfilling. Then again, I can’t imagine I have to worry about that TOO much for the next 15 or so years. Our kids are our biggest priority, and biggest expenses after housing, assuming they’ll have educational expenses. So their needs provide a soft landing for a transition. Then there are so many possible hobbies! I’ll dig into that later. For now, I’m enjoying the feeling of forming a structured plan even though dire warnings about the future are hard to shake.
Also, just a quick consideration of future possible expensive curve balls: I will continue working on my mental and physical health. That costs money.
Familial curveballs: I’m fairly sure PiC’s parent has enough money for their needs, they have an estate even if we don’t know the details.
I still feel like there’s another shoe that’ll drop on my side of the family but I’m doing my best not to think about my abusive parent or brother. It’s hard not to feel like there’s unfinished business there. I am glad to have laid the groundwork that I don’t have anything more to give them after they used me as a bank for so many years. They contributed significantly to destroying my health, without remorse or care for me, I don’t owe them one more cent. (Repeat repeat repeat, in therapy and out, since I obviously still feel some guilt over this. But I don’t owe them the rest of my health or life.)
My surrogate families are generally ok financially. My niblings are a vast group of kids and I plan to be modestly generous with them since there are so very many of them.
Alongside the structure and planning, though, is the realization that we have a long road ahead of us, both in getting to retirement and in spending time in retirement if we are lucky.
I want take advantage of this long path to do all the thinking and planning of what life after retirement might look like.
This got too long so I’m stopping here and picking up in a new post…
