Average age of retirement in America hits a new record high
These kind of statistics and stories should tell you it is time to become creative. Waiting for a legacy retirement is becoming wishful thinking so why not get retired right now.
Wednesday, April 30, 2014
Friday, April 18, 2014
Retirement Numbers: Save 8 x your yearly income
Saved enough to retire? That is always the question if it means you have to live fully on that savings without additional income.
Cash Flow from Earned Income Can Make Retirement Easy and Safer
The easy way to guarantee a safe retirement is to keep some income flowing from work. If you have that hobby or special skill that lets you dial down work based on your interest or need then you have an excellent tool for a sliding into retirement rather than leaping into it like most do in corporate environments. Your momentum of work vs savings can shift the need for work down to only a minimal earned income requirement that lets you cherry pick only the work that gives you the most satisfaction for the hours invested. Coaching, teaching, and creative endeavors usually fit that bill well. I have found this myself when the need to scale back work came as I took over as a caregiver for an aging parent.
Debt Free Living Always Acts as a Cushion Against Adversity
Having no debts can give you even more flexibility. If your pre-retirement income is sufficient to cover a mortgage, car payment, and other sundry debts then not having these debts can change the ratios you maintain to guarantee a well funded 25 year retirement. If the standard for that is 8x your pre-retirement income then you either have a built in buffer or the ratio can change to less. Working a budget can show you exactly where you need to be.
Manage Your Withdrawal Ratio to Extend Your Retirement
The standard withdrawal rate is 5% so taking 6% can put you at risk but scaling back can give you some breathing space and safety. If you find a way to create earned income that reduces your withdrawal rate of savings down to 4% or less you can extend your retirement savings another 5 to ten years. This becomes important if you plan an early work phase down.
Keep Earning
If you have an earned income source that fits your lifestyle then keep it going as long as you feel good about it. Not only will it keep you involved but it will add to your safety net.
Cash Flow from Earned Income Can Make Retirement Easy and Safer
The easy way to guarantee a safe retirement is to keep some income flowing from work. If you have that hobby or special skill that lets you dial down work based on your interest or need then you have an excellent tool for a sliding into retirement rather than leaping into it like most do in corporate environments. Your momentum of work vs savings can shift the need for work down to only a minimal earned income requirement that lets you cherry pick only the work that gives you the most satisfaction for the hours invested. Coaching, teaching, and creative endeavors usually fit that bill well. I have found this myself when the need to scale back work came as I took over as a caregiver for an aging parent.
Debt Free Living Always Acts as a Cushion Against Adversity
Having no debts can give you even more flexibility. If your pre-retirement income is sufficient to cover a mortgage, car payment, and other sundry debts then not having these debts can change the ratios you maintain to guarantee a well funded 25 year retirement. If the standard for that is 8x your pre-retirement income then you either have a built in buffer or the ratio can change to less. Working a budget can show you exactly where you need to be.
Manage Your Withdrawal Ratio to Extend Your Retirement
The standard withdrawal rate is 5% so taking 6% can put you at risk but scaling back can give you some breathing space and safety. If you find a way to create earned income that reduces your withdrawal rate of savings down to 4% or less you can extend your retirement savings another 5 to ten years. This becomes important if you plan an early work phase down.
Keep Earning
If you have an earned income source that fits your lifestyle then keep it going as long as you feel good about it. Not only will it keep you involved but it will add to your safety net.
Thursday, April 17, 2014
Realistic Retirement Thinking
Plan for the Day You Can't Keep it Going
Look, you can pull off the retirement lifestyle no matter what your age if you do find something that pays you to do what you love and enjoy. That still doesn't mean you shouldn't make plans for the time you want to slow down and take a different direction. To have the flexibility you need to have other sources of income and the best and most reliable source is savings.
Here are some statistics regarding what most people have in mind for retirement and it is clearly not sufficient.
Vanguard offers a retirement calculator that helps you at least get a realistic idea of how much income you can expect based on you assets and expected income streams such as social security.
Have a War Chest
Meanwhile, you need to find a way to put aside some money on a regular basis. First go ahead a create an emergency fund that will let you sit out 6 months and eventually a year for injury or disability. I've had a number of these occurrences over the decades and they were usually non work related such as an auto accident or a fall down some stairs. If you have a deep cash buffer that allows you to comfortably sit back to regroup and recover you will have to confidence to never feel that paycheck to paycheck vulnerability that a majority of workers have.
The best part of all is that you can have this confidence while living your retirement dream as a person who teaches happiness in the form of hitting tennis balls. (Substitute any other vocation that accomplishes the same for you whether it is painting murals or building computers.)
Where is the best place to hold your emergency fund? In a savings account at a nearby credit union or savings bank. I prefer credit unions since they are usually less costly and more user friendly. You will probably be eligible for one based on prior jobs, where you went to school, or past military background for someone in your family.
Look, you can pull off the retirement lifestyle no matter what your age if you do find something that pays you to do what you love and enjoy. That still doesn't mean you shouldn't make plans for the time you want to slow down and take a different direction. To have the flexibility you need to have other sources of income and the best and most reliable source is savings.
Here are some statistics regarding what most people have in mind for retirement and it is clearly not sufficient.
Vanguard offers a retirement calculator that helps you at least get a realistic idea of how much income you can expect based on you assets and expected income streams such as social security.
Have a War Chest
Meanwhile, you need to find a way to put aside some money on a regular basis. First go ahead a create an emergency fund that will let you sit out 6 months and eventually a year for injury or disability. I've had a number of these occurrences over the decades and they were usually non work related such as an auto accident or a fall down some stairs. If you have a deep cash buffer that allows you to comfortably sit back to regroup and recover you will have to confidence to never feel that paycheck to paycheck vulnerability that a majority of workers have.
The best part of all is that you can have this confidence while living your retirement dream as a person who teaches happiness in the form of hitting tennis balls. (Substitute any other vocation that accomplishes the same for you whether it is painting murals or building computers.)
Where is the best place to hold your emergency fund? In a savings account at a nearby credit union or savings bank. I prefer credit unions since they are usually less costly and more user friendly. You will probably be eligible for one based on prior jobs, where you went to school, or past military background for someone in your family.
Wednesday, April 16, 2014
Planning for Not Working.
Here is a great article about not running out of money in retirement. For our purposes we will consider this the endgame aspect of retirement where after you hit your 60's you may want to slow down from your already long lived recreational lifestyle of teaching tennis or doing whatever it is you like to do best. There comes a time when you have to face the possibility that you can't generate enough income through your avocation to keep the bills paid. This means long term planning for not running out of money.
The central aspects of this are being conservative and keeping track of expenses.
One of course is social security though it may someday only amount to a utility bill payment for you if you are in your 20's or 30's.
A private pension in the form of an annuity is one approach that merits a strong look. I am using that as one form of cash flow in a total of at least six I have planned to receive. An annuity that lasts your lifetime is a relatively solid way to guarantee income throughout your life.
Laddered annuities for specific periods of say 10 years can also move you further along the timeline until you reach a point where only basic necessities are what you might worry about. This gives you a higher payback for your money since it is not for your lifetime but a fixed period of time.
A target retirement fund ETF in an IRA that represents the date you must begin to take withdrawals will allow you to at least have another stream of income come online as the laddered annuities drop off and you have gained the additional time for growth from the balanced investments that are within the target fund.
Stock ownership in a taxable fund that is your long term fallback that if you sell them you will only pay capital gains and you may never actually sell them.
Royalties and rental income if you have intellectual properties or real estate that generates income.
Work that you do to keep busy and enjoy life such as teaching tennis. I have known many teachers that worked into their 80's since their skills are still evident to beginners and if they have been involved for a long time they have a reputation that will carry them forward.
Finally, here is an article to help you determine if you are ready to retire. Notice they mention one of the six reasons is that you like your job. If you like it, it's not a job, and if you love it there is no work involved so you are retired.
The central aspects of this are being conservative and keeping track of expenses.
One of course is social security though it may someday only amount to a utility bill payment for you if you are in your 20's or 30's.
A private pension in the form of an annuity is one approach that merits a strong look. I am using that as one form of cash flow in a total of at least six I have planned to receive. An annuity that lasts your lifetime is a relatively solid way to guarantee income throughout your life.
Laddered annuities for specific periods of say 10 years can also move you further along the timeline until you reach a point where only basic necessities are what you might worry about. This gives you a higher payback for your money since it is not for your lifetime but a fixed period of time.
A target retirement fund ETF in an IRA that represents the date you must begin to take withdrawals will allow you to at least have another stream of income come online as the laddered annuities drop off and you have gained the additional time for growth from the balanced investments that are within the target fund.
Stock ownership in a taxable fund that is your long term fallback that if you sell them you will only pay capital gains and you may never actually sell them.
Royalties and rental income if you have intellectual properties or real estate that generates income.
Work that you do to keep busy and enjoy life such as teaching tennis. I have known many teachers that worked into their 80's since their skills are still evident to beginners and if they have been involved for a long time they have a reputation that will carry them forward.
Finally, here is an article to help you determine if you are ready to retire. Notice they mention one of the six reasons is that you like your job. If you like it, it's not a job, and if you love it there is no work involved so you are retired.
Monday, April 14, 2014
How I Quit Work
The day I found I could be paid to hit tennis balls and teach others to play a game that I love was the day I quit work and found I had a retirement income. It is hard to call it work when the days I am not out teaching find me looking forward to more time on the court. Isn't this what all those self-help and success books tell you. "Do what you love." Well, I found it early and thankfully I have been able to do it for the past 40 years with a few stints at work in between. When I say stints I mean other work that now in hindsight was a way to reinforce how perfectly good I had it when on the court versus anything else. I found my retirement racket and it literally was in my hands.
Skating Through Life
In the military we had a term called skating. In that usage it meant getting over or getting past something without suffering. If you were a master skater you would find a way to avoid the drudgery of most assignments or a way to avoid the assignments altogether. You just had to have an eye for avoiding pain. If you were successful many would marvel at you as someone who knew instinctively how to save yourself from the daily insults that most were born to suffer in the military. Since those days I have lived my life as best as I could in pursuit of the goal of being a skilled skater. The following story in the next post will give you some details on how I achieved an early retirement through perfecting the art of skating.
The art of life is the art of avoiding pain; and he is the best pilot, who steers clearest of the rocks and shoals with which it is beset. - Thomas Jefferson
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