Success story!

Good news!  I bring you a success story from an actual pre-65 retiree.  It is possible.

A favorite retired colleague (I wanted to avoid using the word ‘old’ there…) stopped by my office the other day for lunch and we got to discuss how retirement is going for he and his wife.  They are doing very well and so I asked him how he was able to have a successful early retirement.

What about Bob?

My colleague (I will call him ‘Bob’ here) and his wife (let’s call her ‘Sarah’) have always been moderately active and do enjoy a couple of nice vacations every year. They have, however, also been fairly conservative in their spending and thoughtful in their savings.  From my perspective, their lifestyle has always been well within their income.

Bob worked for the same firm for over 20 years, but was then outsourced.  He worked at the outsourcing firm for a few years, then we got to work together at our new firm for a few years, until he ‘bailed’ early.

The outsourcing was a complicating factor, as it halted the growth of his defined benefit plan and eliminated the possibility of any company assisted pre-65 retiree medical.

Components of retirement success

Savings – Bob and Sarah always saved and, for the first years of their employment, increased their 401(k) savings with each raise, eventually maxing out the 401(k) contribution.  The 401(k) grew over the years to the point where it could support income for an early retirement.  Bob said, “Best advice I got for saving for retirement was when you get an annual increase, add one percent to your retirement savings.  Makes savings close to painless.  I don’t recall the source but it’s something I started my early years and I don’t regret it.”

Spending – Sarah and Bob always lived well within their income.  While they had a home built to their design, it is not overly large or ornate. Their cars were comfortable, middle of the road, and not replaced too often.

Luck – Some aspects of success are dictated by chance.  Bob and Sarah have been in mostly good health, with the exception of some recent back problems.  Staying healthy during their working years helped them avoid periods of income loss.  Likewise, Bob’s outsourcing did not cause a period of unemployment, even though it hurt his pension.

Planning – Bob’s initial retirement income plan was ‘save a lot of money’.  As he approached retirement, he researched using his 401(k) for income before age 59 ½.  As it happens, you can withdraw funds from a company 401(k) without the 10% penalty after age 55 if you ‘separate from service’ (retire!).  Note – if you roll the funds over to an IRA, you’re back to age 59 ½ to withdraw penalty free.  Either way you remain liable for income tax.

Bob and Sarah put together a retirement income plan that used their 401(k) early, then, in later years, the 401(k), Social Security, and the small pension.

Sarah and Bob have been using Affordable Care Act (ACA, sometimes referred to as ‘Obamacare’) for insurance and have been happy with it.  Bob did have to use the insurance last year for back surgery, but he has recovered nicely.  They did learn to manage their taxable income so that they can use the premium subsidies that are part of the ACA to keep their costs down.  I’m not sure what Sarah does for exercise, but I know that Bob walks daily and he’s still tall and relatively lean.

What does Bob say?

I asked Bob what he thought of retirement and he said they love it.  Objectively, I have worked on and off with the man for over 30 years and he looks more relaxed and happy than ever.

Bob says, “This might be off track for retirement but when I was getting ready to retire I set up a document according to Simple Dollar’s Preparing your Information for Disaster.  It has information that Sarah can go to if I get hit by a bus.  I handle finances and other things in retirement that Sarah could care less about but if she has to, she has a go-to document if I’m out of commission.”

Bob and Sarah have a success story that I wish for us all.

Different?

Everyone’s retirement will be different.  Bob’s is working out great and I am happy for he and Sarah.  You will have different circumstances and constraints that may have you retiring much differently than Bob and Sarah.  Do the best you can pre-retirement to plan and minimize surprises so that you get the best out of your retirement.

Actions you can take include:

-It’s never too late to review your savings and budget.

-Bob had a RIP (retirement income plan) and you should too.  If you have not yet read about a RIP, go here.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
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