Your retirement derailments?

[SumDay]

Just saw this interesting article on PlanSponsor.com:

What is derailing Boomer retirement?

The average respondent experienced four of these events, which range from events that are beyond their control, such as the effects of the recession, to family and lifestyle choices with lasting financial consequences. In the end, these events set respondents back $117,000 on average. In fact, nearly two in five of the respondents (37%) experienced five or more unanticipated events, costing them approximately $144,000.

I'm feeling pretty lucky (I guess) that I really only feel like we've had one derailment, and that was the beginning of the Great Recession, when we lost significantly more than $144K. However, it's all back, and then some.

Knocking on wood, really, really hard....

 

[timwalsh300]

This is interesting...

Nearly two-thirds (63%) of respondents say low interest rates impacted the growth of their investments. More than half (55%) say their savings were significantly lowered because of market declines...

Low interest rates have consequences going forward, but as rates were declining they should have had a positive impact on investment growth for Boomers. And for the 80-90% of Boomers who didn't lose their job during this recession or the last one (and therefore weren't forced to sell assets at rock-bottom prices) I think it's a convenient scapegoat to blame "market declines." A lot of folks seem to be terribly misinformed about what the broad market has actually done: still claiming to have "lost" half their life savings in "the crash" without realizing that it's no longer March of 2009. A 60/40 portfolio experienced 6-7% real growth over the last 20-30 years.

Tim

 

[W2R]

I guess my approach to retirement planning must have been unusual. I just ASSUMED the worst case I could imagine, and planned for that. Anything that doesn't happen is just gravy.

With a long planned retirement date in 2009, I did have the Great Recession to deal with. Then there was Hurricane Katrina in 2005, which set me back a little for a while. I didn't foresee Katrina or the housing bust, but then I assumed massive inflation beyond what we have seen and that hasn't happened to date. To me it has seemed like pretty smooth sailing.

The market is doing wonderfully right now, but I just assume this is an anomaly. I'm sort of expecting the next Great Recession and hopefully won't be too overwhelmed when it shows up.

 

[pb4uski]

I agree that blaming "the market" is a fallacy unless one panicked and sold and have been in fixed income since (which many people did even though it violated their AA assuming they have one).

Actually, if they followed their AA and bought more at the bottom of the trough they would be sitting pretty today. I didn't have the courage to sell bonds and buy stocks back then, but I did stand pat.

Look at the link for the value of $10,000 for the 10 years ended 4/30/13 for the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). The peak before the crash was $19,254 (mid 2007) and the value on 4/30/13 was $23,115. Assuming 5.5 years even if you bought in at the peak you still have a 3.4% return through 4/30/13. Not great but hardly a derailment.


https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT#tab=1

 

[nun]

I'm surprised that divorce, medical expenses and college costs aren't mentioned as retirement derailments.

 

[dtbach]

I'm surprised that divorce, medical expenses and college costs aren't mentioned as retirement derailments.

I'll agree that divorce and medical expenses may be surprises to be surmounted but college costs are not one of them. I've already told both my girls that they have their 529 plans (approx $23,000 each) and we will also give them $5K a year for 4 years. It's up to them how they use it. But my retirement will NOT be derailed by college costs.

 

[W2R]

I'm surprised that divorce, medical expenses and college costs aren't mentioned as retirement derailments.

Divorce is AWFUL from a financial perspective; BTDT, and I do not plan to marry again. I think it took us from a financially solvent couple living beyond our means on credit, to two single people in dire financial straits. At least, that was my situation and I think there is enough financial ruin in divorce to go around.

Medical expenses could be pretty terrible. Even the dental implant I got this year is going to cost me several thousand dollars, and that has felt like a punch in the gut. But it is not going to derail me. I can imagine worse medical costs.

Some retirees save for college costs beforehand, and others' kids are expected to pay for college themselves through loans, jobs, or whatever.

 

[eytonxav]

I just retired and DD decided to attend grad school at a private shortly thereafter. Not a derailment, but I did not plan for funding that. Nevertheless, I do not want to saddle my kido with a mountain of debt out of school, so am happy to fund her on top of what she earns through asssitantship or PT job. I know others certainly feel differently about what they will or will not do for their children, but if you do feel its a priority to cover your childs schooling it could be a derailment for some.

 

[nun]

Divorce is AWFUL from a financial perspective; BTDT, and I do not plan to marry again. I think it took us from a financially solvent couple living beyond our means on credit, to two single people in dire financial straits. At least, that was my situation and I think there is enough financial ruin in divorce to go around.

I agree with you about never marrying again after divorce, but mine was surprisingly easy on me financially. I did my own divorce so had no legal costs. We split everything 50/50 apart from the retirement accounts. My ex's lawyer and I tried to persuade her to take her half, but she just didn't want to know. To this day I have her half in an IRA with her as beneficiary.

 

[nun]

Another potential derailment is the cost of taking care of ageing parents.

 

[W2R]

I just retired and DD decided to attend grad school at a private shortly thereafter. Not a derailment, but I did not plan for funding that. Nevertheless, I do not want to saddle my kido with a mountain of debt out of school, so am happy to fund her on top of what she earns through asssitantship or PT job. I know others certainly feel differently about what they will or will not do for their children, but if you do feel its a priority to cover your childs schooling it could be a derailment for some.

So true - - different families do handle these things differently, and hopefully save accordingly. But if they didn't, or didn't anticipate the expense, then that could bite them later on (especially if the school is expensive).

MY daughter decided to get married 2 weeks before my long-planned retirement date. She is my only child and was 31 years old, so that kind of came out of the blue. I still felt like I should pay for her wedding, though, because she was always the type of girl to daydream about her dream wedding and it was a Big Deal to her. No derailment, but certainly an "ouch" just before retiring. I had originally saved the money for it, but by the time she hit her 30's I had pretty much given up on her marrying and needing wedding money. Oh well!

 

[pb4uski]

....MY daughter decided to get married 2 weeks before my long-planned retirement date. She is my only child and was 31 years old, so that kind of came out of the blue. I still felt like I should pay for her wedding, though, because she was always the type of girl to daydream about her dream wedding and it was a Big Deal to her. No derailment, but certainly an "ouch" just before retiring. I had originally saved the money for it, but by the time she hit her 30's I had pretty much given up on her marrying and needing wedding money. Oh well!

Similar here for DD wedding as well as DS's college. I have it built into my plan even though I think it probably won't happen. If it does happen I will be happy and poorer but still fine. Incrementally, it will come out of their inheritance.

 

[nun]

Similar here for DD wedding as well as DS's college. I have it built into my plan even though I think it probably won't happen. If it does happen I will be happy and poorer but still fine. Incrementally, it will come out of their inheritance.

I imagine people on this board have college costs well figured into their plans, but for many people the costs come as a surprise and if their children get into an expensive college they will often over incur unanticipated debt. This will obviously reduce their ability to save for retirement.

 

[W2R]

Similar here for DD wedding as well as DS's college. I have it built into my plan even though I think it probably won't happen. If it does happen I will be happy and poorer but still fine. Incrementally, it will come out of their inheritance.

Right, and despite the "ouch" it was well worth it to me, just to see how stunningly beautiful (to me) and happy she was on that day. Those are the memories of a lifetime.

 

[heeyy_joe]

I think the health problems (chronic illness or serious illness) traps the other spouse into holding their job for the medical benefits.

 

[dtbach]

Right, and despite the "ouch" it was well worth it to me, just to see how stunningly beautiful (to me) and happy she was on that day. Those are the memories of a lifetime.

Yep, that is an "ouch" that is well worth it. I'm so glad that you were able to "make her day". I have 2 that I will have to marry off and I look forward to spending some of the money that I've been accumulating!!!

 

[scrabbler1]

Actually, if they followed their AA and bought more at the bottom of the trough they would be sitting pretty today. I didn't have the courage to sell bonds and buy stocks back then, but I did stand pat.

I actually did some of this in late 2008 and early 2009 and as a result my financial picture and ER budget, already in good shape at the time, became even better. I was able to sell my company stock just before it took a tumble and use its proceeds to buy into a bond fund at bargain basement prices (buying about 25% more shares than I had originally anticipated). Having all of those extra shares has gotten me more monthly dividends every month for the last 4+ years. Furthermore, with those same monthly dividends per share having taken a dip in those 4+ years, especially the last 2, having all of those extra shares has canceled out the lower DPS to provide me about the same level of monthly dividend income.

And of course my stock fund holdings both in my taxable accounts and rollover IRA have skyrocketed over that time.

 

[RunningBum]

Sometimes it's not a matter of panic selling, but rather having your employee stock options expire under water or at a fraction of what they once were. That's what derailed my ER plans in 2000/2001, for about another 10 years. Sold some but not enough.

 

[BLS53]

What I see in my social circle is the assuming of de facto guardianship of grandchildren. The explanation being that the joy of the grand kids surpasses the pleasures of retirement. So they keep working to raise this second family. Meanwhile, the mothers continue to lead their carefree Lohanesque lifestyles.

It defies logic to me, but to each their own.

 

[Walt34]

I guess I'll never understand some people. One SIL, the recently retired nurse and one I thought had some good sense, just cleaned out her 401(k) for a couple of trips. She's not yet 59 so will take the tax hit too.

She does have a pension so will probably never be eating Alpo but she's apparently not yet adjusted to the reality of going from a $250k household income to ~$75k. Her hubby also had to recently retire after his 2nd heart attack. His doc told him "You're retired. Now." And they still have a mortgage and two car payments.

And then they'll be upset when they figure out that we, with half that pre-retirement income, have a higher NW than they do.

 

[dunkelblau]

My derailment came when my buyout application was denied. I figured OMY is no big deal so I signed up for the retention bonus they offered. Now I see our company stock shooting up and for the first time in my 20+ years working in silicon valley, I have unvested options that are in the money. So unless the stock market corrects, I may be stuck working here.

Actually it's not the money, like a good diet and daily exercise, gotta do it for health reasons, right?
BBC News - Retirement 'harmful to health', study says

 

[Shanky]

Stuff Happens outside of your control and planning. The Bankruptcy of an Industry. Stock & Options going from 7 digits to nothing, Pension went to PBGC with a significant haircut (over 50%), Supplemental Executive retirement, (For the income above ERISA limits) was not protected in bankruptcy & went to 0. Relocated for new Job at nadir of housing crash and ate a 6 digit loss. Fortunately contributed the IRS max to 401K for more than 2 decades, and have substantial after tax Savings. Keep a good attitude and stay flexible and don't sweat issues you cannot control. We will still retire young, but not at the "high life" we had become accustomed to. For that, I would have to work until 60 or 62, which is not worth it from our point of view.

 

[Katsmeow]

We had two derailments that were real estate related and resulted in about a $150k loss. The only positive was that when DH retired 3 years ago I decided to work part-time for awhile - basically until we sold our then current house and bought and remodeled our retirement house. So the earnings I've made over the last 3 years have more than offset the loss and we are now in a great house (which isn't either one of the two houses that we owned when DH retired...) It has been a wild ride but worked out OK. I did end up working part-time longer than I had originally planned but that was the flexibility that continuing to work part-time gave me. I am planning on soon fully retiring.