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Old 10-14-2007, 12:51 PM   #21
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If most of your retirement income is from a pension (hopefully inflation adjusted) then that is pretty much like still having a salary. If your pension income is much higher than your living expenses, you have indeed got it made. Not only do you have a salary, but if after your retirement living expenses drop you just got a big raise!!! Letting some of the excess build up for goodies or special needs down the road is a prudent thing to do.

Living mostly off a nest egg of investments versus having a substantial pension (which more than covers your needs) are radically different situations in retirement.

Audrey
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Old 10-14-2007, 01:12 PM   #22
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I also am still saving. My partially COLAd pension is just under $30K (gross) and so far this year I have not spent more than $4K (I moved it from checking to MMA).
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Old 10-14-2007, 02:24 PM   #23
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I view my gainful activity right now to be portfolio manager, and so I consider the portfolio returns to be "earnings" and I have been able to keep the earnings well above our spending every year since retirement. At this rate we can live forever. But I am realistic about the need to build a buffer in these good years to help weather the poorer years.

And also to budget for exceptional capital acquisitions like new cars and a home in the sunbelt (if current trends continue).
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Old 10-14-2007, 02:59 PM   #24
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Huh? I'm not really understanding the comments above.

You spend years saving and investing so that you can live off your nest egg. Yes, there is some cultural shock involved in then drawing off that nest egg. It has to last. The culture shock is really even more about no longer having a salary. That really does take some getting used to.

Once you are no longer drawing a salary, you can't "save" in the traditional sense. That option is truly out the window. You gave it up by retiring.

Once retired, the only thing you can do is draw conservatively from your nest egg, invest wisely for the long term which includes investing to counteract inflation, and build up a large enough nest egg before retiring so that it does indeed cover the living expenses you expect to meet the lifestyle you wish to enjoy in retirement.

Audrey
Agreed (with your confusion..)

I retired in May; my DW will retire next June. I have no current "income" and my wife will have none in another 7+ months (SS will not be drawn for another six years for either of us). Our expenses will be fully covered from our tax deferred investments (currently consisting of a 60/40 mix. The 40% bond/cash contains MM $$ to cover 3+ years of gross spending, and will be refilled from the equity side during "good" years). I don't consider that "savings" - rather than just "refilling the cookie jar "

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Old 10-14-2007, 04:17 PM   #25
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DW asked me how much do the average people who are retired manage to save each year, over and above their expenses. Other then the obvious inflation factor of ~3%, I really didn't have a clue. I expect many of the FIREd folks here to have a higher savings rate then average, but then I don't know, and thought I'd ask before lying through my teeth giving her the benefit of my wisdom. What's yours and your estimate of the average?
I have no idea of the "average" for all RE's.

As to myself and wife, I have an $80k cola'd pension that more than covers our living expenses. Anything else goes to savings/investments.

I also just started on SS at 62 and my wife and two of my kids ages 14 and 17 will be getting some SS. The SS for me and wife will go to savings/investments.

In addition, my wife has a pension (from same organization I worked for) still building (she hasn't worked for 24 years, but is vested and her pension fund is accumulating). She can either take that as a full pension anytime, or take 1/2 as a lump and a half pension, or take a full lump. We are thinking the half pension/half lump option, to roll $125k into an IRA perhaps in three or more years as we don't need the money now. But it will give her her own $13k pension plus 1/2 of my $80k when I croak. She will also be elegibile for SS as retiree in 12 to 16 years.

Besides all this, we have close to $1 million in tax deferred retirement accounts (some traditional and some Roth). It will be untouched until we hit the 70-1/2 marker (and the Roths likely never). Right now we are growing it in investments. Besides all that, we have $1/2 million in muni funds throwing off federal tax exempt income. And to beat the band, our home has been mortage free for over ten years.

So, we are probably saving/investing more now than when I was working. We are planning on building a new home. That should solve any problem we have from getting all that muni tax-exempt income from that pot. We'll pay cash for the new home, so will have no new mortage either.

One kid is through college, and we already funded UTMAs over the years for the other two kids college funds. Plus they will get a boost from their SS benefits for awhile---that's why I started SS at age 62. That made the SS at 62 or 66 question a no-brainer for me.

So, even after allowing for an occassional splurge like a cruise, a new (to us) used car, a new home (after 17 years in our mortgage-free current home), we are saving.

My next financial area to look into is longterm care insurance, to decide if the premiums will be worth it or not for us.

We will be able to leave a nice legacy to our three kids, fund some charitable interests, all while living how we want.

And to imagine, I never earned a salary higher than $60,000 a year my entire career when I was working (and even that only is my last year). Somewhere I've got the book "The Wealthy Barber". I'm going to have to finally read that and see if I already followed it's advice.

Back to your original subject---saving IN retirement. I think it is a wise thing to do. Living month-to-month, check-to-pension check, puts one in the same precarious position in retirement one would be in if still working.
Just one emergency away from disaster. Emergencys, unexpected needs, broken-down cars, health crises, leaking roofs, parents to care for, etc, etc all happen in retirement too. They don't magically stop after work ends.

Spending 100% of current income leaves one no way to build the emergency reserves, and it may even cause one to deplete existing reserves. One can live joyfully, contentedly, and richly without needing to spend 100% of retirement income.
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Old 10-14-2007, 07:44 PM   #26
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Sounds like your in good shape RR. How did you ever get an 80K pension if you never earned over 60K in one year?
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Old 10-14-2007, 07:55 PM   #27
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Sounds like your in good shape RR. How did you ever get an 80K pension if you never earned over 60K in one year?
Fortunate to be in a pension plan that allowed equity investment, and it also had an option that based pension on account balance, as well as an option that based pension on years of service.

From day 1, I allocated max allowed to equities and stayed the course over 23 years until I switched it all to fixed income type just a few years before I retired. In other words, I rode the stock boom of the eighties and nineties, and got out January 2000, before the tech bust of 2000-2002.
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Old 10-14-2007, 07:59 PM   #28
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Sounds like you have good timing.
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Old 10-14-2007, 08:14 PM   #29
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Sounds like you have good timing.
Not really. I stayed in max-allowed equities from starting the job till just 2 years before I retired. Approaching retirement was the main impetus to switching my pension allocation to 100% fixed income. Having seen four good years in the market just prior to then was just an additional reason to make me push the button. Now it "looks" like real good timing.

I suppose my best timing was in choosing to be born when I was, so that I was in a career pension accumulation stage that just so happened to coincide with the boom of the 80's and 90's.

At any rate, I am not complaining. You can be sure of that!
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Old 10-16-2007, 08:44 AM   #30
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Once you are no longer drawing a salary, you can't "save" in the traditional sense. That option is truly out the window. You gave it up by retiring.

Once retired, the only thing you can do is draw conservatively from your nest egg, invest wisely for the long term which includes investing to counteract inflation, and build up a large enough nest egg before retiring so that it does indeed cover the living expenses you expect to meet the lifestyle you wish to enjoy in retirement.

Audrey
What she said.

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