Thinking of retiring and scared

[Chuckanut]

and spending my savings is scary

What's scarier is when you wake up one morning and realize you are also spending your time.

My favorite cartoon from this website:

 

[HI Bill]

...it isn't easy to start to draw down the money you worked so hard to get.

You are quite correct. I started out gently, with buying my ER home while still working, then a bunch of improvements and toys. I can justify the extra spending by the extra months wr#king. But my net worth keeps outpacing my spending, so look out ER, here I come (first quarter of 2021).

 

[TNBigfoot]

I am also in your shoes as I am retiring 12/31 and the reality of now going from making the plan to making it work seems daunting. I have to remind myself that I have indeed put together a solid plan cross checked and cross/cross checked. No one knows the future so we have to press on to do our best.

Just hoping the Mike Tyson quote “Everyone has a plan until they get punched in the face!” doesn’t come to pass. If indeed it does, I adapt and persevere.

 

[Ticker]

How sure are you of your expenses? Are you including lumpy expenses such as new vehicles, home maintenance, and so on? Income taxes? Health care in retirement?

How much of your expenses are discretionary and could easily be cut, if necessary?

If you have little safety margin between projected income and essential expenses, it may be worth working longer and increasing the safety margin to reduce the fear.

Have you considered looking for a different job that might be less onerous? Even if you make less money, having some income may reduce the fear of giving up the good paying job you have now.

I spread sheeted my financials to death when retiring at 60. The only thing I precluded was the expense of grandkids. Boy, were they more expensive than I ever imagined! Don't retire with debt. Good luck!

 

[imnontrad]

I can understand this. I was told that I had enough to quit working but I still did not trust it. I was not working at the time. So I kept a budget documenting all my expenses. Then I found a job and still kept my expenses low and used the extra money to finish paying off my home. After that, y monthly expenses dropped so low that I knew I would be just fine. So when that job was moved to another state, I just left the workforce.
It has been almost 3 years and I have not even started to tap my retirement accounts yet. In addition, my health has improved since I can sleep longer and spend more time exercising and cooking from scratch.

 

[meleana]

You can benefit from hiring a fee only financial advisor that does not manage your assets hands on but can holistically guide you. We have one from the Garrett Network and we paid like $1500 each year for the past two years for a plan and access to his hand holding as we retired. Next year we will switch to his $200per hour plan as we get more comfortable with his strategy for us.

I was forced out of my job at 62 and am 64 right now. Per his advice I am on an ACA plan currently. He has us delaying SS until age 70. No pension. Advised us on our move out of state and what we could afford, etc, etc.

 

[melijov]

You can postpone your retirement if you feel better this way but sooner or later we all retire, and the fears will never disappear. To be afraid of the unknown is just natural. We all are afraid of the unknown. Your better chance is to get more educated. I would recommend some reading, for example "The Simple Path to Wealth", and many other good books. I would recommend as well to get acquainted with the "4% withdrawal rule" Good luck!!

 

[Exchme]

Nice that the OP only has stocks that will go up in his portfolio! Holding individual stocks is a bad bet because almost all stocks go down over time. It is the occasional superstar that brings up the average to a positive number. The only way to be sure to get a piece of the (positive) action is to buy a broad index. So buy a total stock market fund for the stocks and a total bond fund for the bonds. If you want to get fancy, allocate some of the stocks to a total international fund. So only 2-3 funds needed and buy very low cost funds such as at Vanguard, Schwab or Fidelity.

Rebalance annually back to your target asset allocation. That's it, no advisors needed and stay far away from the ones that take a percentage.

I made the mistake of using an advisor for a few years, just recently got rid of him. There were layers of fees - the advisory fee is the only one he discussed, but the funds charged fees and they invested in other funds that charged their own fees, so the total was 1.6% vs my average Vanguard fund fees of about 0.08% (only that high because of international). So an advisor could cost you $19k per year, obviously breaking your budget, so don't go there, they offer nothing but a great sales pitch (and it will be a great sales pitch, roping in people is what they do for a living).

 

[zippy2020]

Note to the OP: you have reserved for taxes, right? Including taxes on your SS, along with the future hit you'll take when Medicare starts. Both programs are going to need more funding to prevent benefit cuts from happening within a very few years.

There is one extremely good reason for using an FA that too many people overlook (people in general, not accusing readers here per se). The contributors to this forum love thinking, researching, reading, and writing about investing/saving/budgeting.

Our spouses and/or heirs, very often.....don't.

I can tell you that working in an independent CFP's office in administration, we did see several cases of heirs making very costly mistakes before they came to us - meaning, we couldn't do a thing to help them, at that point.

NEVER assume that your loved ones have been keeping up with inheritance and tax changes that have happened up to the date of your death. In most cases they don't even know who to ask questions of.

 

[trumpeting_angel]

I'm of the same mind as Blue531, above. FireCalc gave me the go-ahead but I was too nervous. I cut to four days a week, and after a year three days a week. I was only making in the 40s, but it was money coming in. Then after 18 months, I cut to two days, and set a retirement date. I finished in June, and then did so much consulting work that my accountant was flustered - not what he expected. He thought I'd really retired, rather than increasing my income.



After 7 or 8 months of gardening, tending chickens, and the beginning of ski season, life was really good. Then the ski season came to a halt, the pandemic took hold, and retirement has been less fun. I know it's temporary, but without some structure from work I have been a little adrift. However, it's ski season again and things are looking up!


I read and study my finances to quell my anxiety. Knowledge is power, and it has a calming effect. Others have pointed out that there's plenty to learn. And no shortage of information - podcasts, books, websites (be sure to corroborate and verify). And the personal advisor service at Vanguard is quite inexpensive and trustworthy. All good advice! And definitely try several calculators. I like New Retirement (https://www.newretirement.com/), and many of the brokerages have calculators of varying degrees of detail.


Also: I saw this today - https://squaredawayblog.bc.edu/squared-away/how-much-will-your-retirement-taxes-be/


It was startling. I'm up there in the top 5%, depending on what the market did this day or that. Why should I worry so much?



It's good to have a reminder that we are blessed and well off, and our fear is based on living an expensive lifestyle that we feel a need to sustain. The joy of retirement is in having the time to reflect on what is meaningful, losing the pressure that has made us driven and stressed, and living more fully.

 

[imnontrad]

He has us delaying SS until age 70.

You may want to fine tune this. In many cases, the best strategy for a couple is for the higher earner to delay until age 70 and the lower earner to start SS early. This is because when one spouse dies, the surviving spouse will continue with the higher SS benefit anyway. Having both spouses delay until 70 may mean less benefit long term.

 

[PointBreeze]

I read and study my finances to quell my anxiety. Knowledge is power, and it has a calming effect. Others have pointed out that there's plenty to learn. And no shortage of information - podcasts, books, websites (be sure to corroborate and verify). And the personal advisor service at Vanguard is quite inexpensive and trustworthy. All good advice! And definitely try several calculators. I like New Retirement (https://www.newretirement.com/), and many of the brokerages have calculators of varying degrees of detail.

+1

I gave my retirement as least as much due diligence as I gave my job. I became as educated as I could be, created scores of spreadsheets, and used every retirement calculator I could find. I suggest you not retire until you have educated yourself to the point where you have much less anxiety, and you understand exactly where your spending money for each year for the next x years is coming from.

 

[trumpeting_angel]

Hey, PointBreeze - I only disagree on one part. It's still super scary to go from saving all the time, watching the dollars and the pennies, to spending it. But once you've done the homework, you realize it's a normal anxiety (Big.Change.)! and you're good to go.


I harassed my retired friends for a month or two before retiring, and a few months after, demanding to know how they can stand to take money OUT instead of just watching it grow. After a year and a half, I'm much calmer. Now I worry about my aggressive asset allocation and the gotta-end-some-time bull market. Once a worrier . . .

 

[copyright1997reloaded]

My company is closing end of 2021, several of us have chose to retire early. One co worker is 53 he used the FIRE calc but didn't believe the results, he went to his financial rep and questioned the results. His rep informed him the numbers were correct and would be able to retire. I'm 55 and plan on retiring but I also worry, I make 130k a year been saving for retirement for 33 years now the thought on not working and spending my savings is scary, I'm sure everyone who retires has the same feeling.

If they are closing, would it not be better to retire when they close? Rationale: You may be eligible for Unemployment $ (yes, even if you retire but your retirement was due to a layoff).


ETA: To OP, if you pay 1% advisory fee, then a 4% SWR is now 3%...because you've lost 1% to the advisor.

 

[imnontrad]

If they are closing, would it not be better to retire when they close? Rationale: You may be eligible for Unemployment $ (yes, even if you retire but your retirement was due to a layoff).


Yes, eligible for unemployment ONLY if you can prove that you are looking for another paid position. Each state has their own rules what constitutes a job search (usually X applications each week).

I was off for almost one year trying to decide whether to retire and almost went nuts. I was not ready to quit working. I found another job and then after about a year, that job was being moved to another state. By that time, I was ready to walk away and have not missed any of it a bit.

 

[Maidensong]

I think having multiple streams of income helped us feel secure enough for the DH to retire at 60 in 2015. (He tried to retire in May 2014, but Google didn't want to turn him loose so he agreed to telecommute from our retirement home in another state until the end of that year.) For a while we lived on rental income and savings. Then in 2019, I filed for SS to supplement our rental income. This year, the DH hit FRA so he's now taking SS, my SS has been upped by switching to spousal benefits, and we're both on Medicare now. The rental income is now gravy because SS provides all but about $1000 of our monthly needs. (We have matters arranged so funds come into a joint MM savings with monthly transfers to our CASA checking accounts, which pay 2% up to 15K. We use these as our "paychecks.") We haven't touched the IRAs and won't until the DH turns 72 in 2026. We sold some Google stock to fund our travel until Covid hit, but there's still plenty in there.

Amazingly enough, our net worth climbs each year.

Money is replaceable. Time is not. As my wise uncle once told me, "It's time to start using the good china."

 

[trumpeting_angel]

Yes, eligible for unemployment ONLY if you can prove that you are looking for another paid position. Each state has their own rules what constitutes a job search (usually X applications each week).

This hasn't been the case in many states during the federal unemployment supplement. In Vermont, people on UI who could certify that they were unemployed did not have to indicate that they were hunting for work for about seven months.

 

[rrs26ja]

I can't answer your question about FireCalc, but I will say this. Once you retire, your focus needs to be on preservation of capital and not so much on growth. The market has been going up due to stimulus and tech stocks due to Covid. This cannot continue, the market is due for a correction. If you have 1.2M and there is a 30% correction you are down to 840k. On your question of is .7% to 1.0% worth it, I say yes with the right company. I went with a company called e3 Wealth using their e3 select retirement program.

 

[PointBreeze]

Hey, PointBreeze - I only disagree on one part. It's still super scary to go from saving all the time, watching the dollars and the pennies, to spending it. But once you've done the homework, you realize it's a normal anxiety (Big.Change.)! and you're good to go.


I harassed my retired friends for a month or two before retiring, and a few months after, demanding to know how they can stand to take money OUT instead of just watching it grow. After a year and a half, I'm much calmer. Now I worry about my aggressive asset allocation and the gotta-end-some-time bull market. Once a worrier . . .

Good point, Trumpeting Angel. I was reluctant to withdraw money the first year or two. After that, it was actually empowering. But yes, making the switch from decades of monthly deposits to withdrawing is jarring.

 

[PoorOldCountryBoy]

Hi,

I want to retire - yesterday. I am 61. I have 1.2m in 401k, savings etc. About 65/35 stocks/bonds. FireCalc shows I can withdraw 70k/year with 100% success. This is more than I need for expenses. I am really afraid of giving up 125K/yr salary. I am afraid savings will fall as fast as they rose.

My questions are: how trustworthy is the calculation provided by FireCalc? Is a financial advisor at .75 - 1 % worth it? How has your experience been giving up steady income for probable income? Any advice on withdrawal strategies? For example, should I sell stock I am overweight on and keep household income below 80k to avoid capital gains? They have been high performers and are expected to continue to be so. Or sell bonds and rebalance stock funds to bond funds?

I know... lots of questions. My mind has been spinning for months. Appreciate any thoughts.

OP, Retired at 50 and am very thankful you want to work another year to pay into SS for the rest of us


On a more serious note, the only way I could get my emotions managed to do this is to realize you are switching your investments from capital gains to income generation. A bucket approach helps:


1. Have 2-5 years of expenses in TBills/Cash/CDs (zero risk investments). Then you know you are safe for 2-5 years. Conversely if you screw up the investments you have 2-5 years to find a job.


2. Use very low risk investments to fill out the remainder of a 10 year time period. 100% Investment grade bonds, or 20% stocks/80% investment grade bonds. Think safe.



3. You can go more aggressive (not crazy) with the rest. 80/20 or 70/30 or whatever you feel comfortable with.


4. Social Security is a powerful annuity - start your withdrawals as appropriate for your situation.

5. Try to set aside a reserve for unexpected disasters, at least 10% preferably 20% of the total. This can be in a generic equity income fund or whatever you have for your long term mix.


6. Check your medical and liability insurance needs. Umbrella liability policies are cheap. Of course home and auto need to be there too. The most likely loss scenario is the old retiree hitting someone and getting sued. I could happen to anyone.


7. It's a good idea to have a concrete plan in place in case you are suddenly laid up for 15 years with a stroke/debilitating illness. Who will take care of your affairs? If you have a spouse or kids they tend to be the default. It's much easier to have that conversation starting with "I hopefully won't need this for decades but here's what is needed if something bad happens". If you end up in pain, setting these things up later will be very difficult for you.



Then make a detailed report of the last 3 years of everything you have spent, categorized. Do you see any trends? The numbers will be what you end up spending going forward, forget the saving money in retirement fiction unless you are making major life changes like moving to a smaller house etc.


If you do the above with integrity then you'll *know* you can go for 10 years on what you have, and have a pretty good idea you can carry on afterward. The point is for you to internalize this belief by "proving" it to yourself. That will help you ignore market ups and downs and carry on.


If you are one that thinks it's too much work to do this or have no idea what you spent in the last 3 years, then spending the money for a responsible financial helper is probably money well spent. [In that case, someone who wears fancy business clothes will prove it to you. ?? ]



About half of us are not capable to do the tasks described above. It's OK, no judgement here-- just know who you are and take appropriate action. Some of the happiest retirees out there are the people who are financially clueless but have a pension and social security, and just fill up their wallets every week and spend it down. Bottom line, what will make you happiest?

 

[DrRoy]

I'm also 61, but been RE for almost 4 years. I thought Midpack and others commented as I would have. Would add though that the FA would be taking 13-17% of your income so I would never do that.

 

[LoveOGG]

I would take one more year and track ALL your expenses (every penny). I know a lot of people who think they know how much they spend until they actually track it.
You also have to figure out what to do regarding health insurance until age 65 (that could be a big cost).

 

[cyber888]

Sure, you can retire at 61 .. I assume you are getting SS at 62 . If you and your spouse are getting $36000 SS, and you are withdrawing $34000 a year from your 1.2 million nest egg .. that works well.

 

[RetireeRobert]

You don't explicitly say so, but I assume you are single. You also don't say whether your current assets are under the guidance of an adviser. I would say after retirement, if you have not used an investment advisor to get to your $1.2 million, don't start paying one afterwards.

As one other poster mentioned, work until you are 62, just another year, when you can draw SS. SS can nail down your basic survival expenses.

Good luck!

 

[RetireeRobert]

I retired early at age 54 when our three kids were ages 7, 11, and 17. I was not yet eligible for my pension or SS, but I had paid off our house mortgage years earlier, and had saved and invested enough through deferred compensation plan with employer and in taxable investment accounts to live, travel, and put all three kids through college--one to Master's degree level, and one to Doctorate level. Now at age 75, I still only tap my IRA accounts for RMD's and use those amounts for charity and reinvestment in taxable accounts. As my wife passed last year, I am so glad I made the choice to retire at age 54. I spent early retirement shuttling three kids to school and back. Family and I travelled on train trips across country, did a cruise, similar fun stuff. When I retired, it took me about 20 minutes to adjust---I never looked back or regretted my decision once. Because of my own savings and investments I was also able to let my employer pension grow before I applied for it. I now draw $102,000 a year pension, a tad over $20,000 SS, and am forced to take somewhere around $80,000 RMDs from the IRAs. I took advantage of the Covid stock market dip in March April to reposition my IRA portfolio into dividend paying stocks which will pump in $85000 a year into them---virtually guaranteeing ever growing IRA balance despite the RMDs.