Hi, an update

[FinallyRetired]

Hello to everyone. This is an update to my situation maybe five years ago when I was contemplating early retirement -- at least early for me, when I was 56. This board and all of its posts and calculators helped me greatly to make the decision, but not to retire all at once. I scaled down, working part time at first, then working part time out of the home. I'm now nearing 62 and will have to decide whether to retire full time if I get my SS.

I've had success, and some surprises. The main success is that I was indeed able to execute my financial plan, but am glad that I used my judgement and kept the bulk of my retirement money in cash during the big market downturn. I'm still probably too much on the conservative side, but at least I'm still very much alive with my retirement plan. Another thing my wife and I did right is to get long term disability insurance, not that we need it, but with our parents nearing retirement home age we realize how expensive it is.

And that's one of the surprises, although we had planned for ourselves, we had not planned for our parent's needs should they need retirement home care. We're taking it a day at a time, but will probably have to do a lof of care ourselves rather than using a retirement home. Not a problem under normal conditions but we are hoping they don't need skilled nursing care.

Another surprise is that as much as I was looking forward to cutting back on work, and even though I am far from a workaholic, my work filled a lot of my time with interesting things, more than I can fill myself even with all of my hobbies. So I've stayed working part time and will probably continue to do so even though all the calculators say I don't need to.

Speaking of calculators, I don't trust that I've used any single one correctly,so have validated my answers with a number of them, and it's reassuring when the answers pretty well match. One of the latest I've downloaded is from a guy named Otar, the Otar Retirement Calculator a monte carlo one. It looks pretty good, though I'm still learning it and have questions. It's pretty cheap, at 29 and change, though not as cheap as the free ones here. Which have worked well, I just like to cross check my results.

Well that's about it, just wanted to reintroduce myself.

 

[Nords]

Welcome back, STR.

I'm glad to see the calculators are working for someone, and without causing concern about the fourth decimal place!

 

[FinallyRetired]

Thanks, Nords. Yes, those retirement calculators worked very well for me, like a fine scalpel carving a bowl of jelly. At least they allowed me to stay within the jelly bowl.

I believe you are retired primarily with just your military retired pay. That's fantastic. I also have a military pension, which really helps, but still have a part time second job. Since both military retired pay and SS are COLA adjusted that's a real help, but sometimes I wonder how that's done relative to real inflation. In retirement calculators, one of the easiest ways to break the bank is to increase inflation beyond increases in income flow. With investments, one can play with allocations to increase real return, even if at the cost of increased risk. But with govt programs, one pretty much has to live with COLA adjustments. Have you run numbers, or seen reports that compare historical COLA with actual inflation?

 

[Nords]

But with govt programs, one pretty much has to live with COLA adjustments. Have you run numbers, or seen reports that compare historical COLA with actual inflation?

Well, yeah, essentially the military pension COLA is set equal to the CPI. There's some fudging if you retired under REDUX or depending on what time of the year you drew your first check, and it's calculated from October to October instead of by calendar year, but our annual COLA should more or less match the CPI. Same as Social Security.

Whenever I get the chance I try to quiz retired veterans on how much their monthly amount is now and what year they retired. Then I go back to the pay tables and the Federal Reserve CPI tables and try to see if their current pension is keeping up with the equivalent pension (rank & years of service) of someone retiring tomorrow. Generally they're close. For example a shipmate who retired in 1989 as an O-4 with 20 years of service is getting a pension check within $20 of mine.

Now whether your personal rate of inflation matches the CPI-- do a thread search for the keywords "personal", "inflation", & "CPI" and get back to me if you have any questions.

 

[FinallyRetired]

<For example a shipmate who retired in 1989 as an O-4 with 20 years of service is getting a pension check within $20 of mine.>

I'm not sure what you are saying. I don't know when you retired, but I retired in 1987 as an O5 under the Final Pay system. When I go to this table
http://www.dod.mil/cgi-bin/finalpayhigh3.pl
I see that an O5 retiring today has an initial yearly retirement of $42,948, several thousand more than mine. This is because of COLA caps on my retired pay, while active duty received higher raises. I'm not complaining, just noting that COLA caps hurt the already retired more so than current retirees. I'm not sure what my exact retired pay is, because I'm at my remote tropical retirement location, but when I get back to the real world I will let you know

 

[Nords]

This is because of COLA caps on my retired pay, while active duty received higher raises.

Never heard of a COLA cap, but I did receive one of those higher raises (5.7%) a couple months before I retired.

I'm surprised how closely we've tracked over a 13-year gap between our retirements, but maybe it's anomalous.

 

[FinallyRetired]

Here you go, COLA Cap nightmares, hope they never come back.
http://www.afa.org/magazine/1993/06edit93.asp

 

[Nords]

Here you go, COLA Cap nightmares, hope they never come back.
http://www.afa.org/magazine/1993/06edit93.asp

Wow, glad I missed that opportunity to serve my budget country.

That sure puts TRICARE premium increases in perspective.

 

[donheff]

Here you go, COLA Cap nightmares, hope they never come back.
http://www.afa.org/magazine/1993/06edit93.asp

That is a pretty rotten thing. It sounds like it affected civilian Feds retiring under age 62 but I don't remember it at all. Did they cancel it a few years later so it only affected people for a few years? It didn't apply to me and I don't believe it was in effect for any part of this decade. The newer FERS civilian retirement system has always had partial COLAs so that is a different beast.

 

[FinallyRetired]

<Did they cancel it a few years later so it only affected people for a few years?>

Yes they canceled it after a while, thanks to organizations like MOAA and their civilian counterparts. I don't remember much about it, trying to forget it, but the idea was that the civilian and military federal employees should set the example for the rest of the country in keeping wages down (cough cough). In reality it was the gummint's way of trying to hold the budget down by cutting benefits for the group least likely to protest or go on strike.

Every year I saw my retired pay fall back under those newly retired with the same time at the same grade. As I said, no complaints against them, I was glad for them but it sucked for me. Today I'm about $5000 per year under someone with the same time and grade. At the 4% SWR and with COLA that's at least $125,000 less in equivalent savings.

I'm happy newer retirees haven't even heard of the COLA caps but, on the other hand, I hope everyone is aware of what can happen in a similar budget situation, so we can get ahead of the power curve with letters to congressmen, MOAA lobbying, etc. As you know, the national budget is not in the best of shape.