Consumer Reports: A happy retirement...

[Coach]

The newest issue, February 2010, has an interesting, short article titled A happy retirement: 6 steps that work. Unfortunately I cannot find the article online. They had a couple of interesting results from a survey of retired subscribers. "Retired subscribers' satisfaction with their retirement reached a plateau when their net worth was between $500,000 and $1 million. Having much more didn't make much of a difference. But notably, even among those who reported having less than $250,000 in net worth, more than half were highly satisfied with their retirement. In addition, 38 percent of retirees said they depended on a defined-benefit pension for a significant portion of their income."

And "Taking on even a moderate amount of risk pays off. Median net worth for retirees who said they took a middle-of-the-road approach was $836,000 vs. $671,000 for conservative investors. Notably, the difference in net worth between self-described moderate and aggressive investors was relatively small: a $57,000 advantage for the more aggressive."

Their six steps: Live modestly, maximize your savings, reduce debt, don't invest too conservatively, study your options ("...also devise a Plan B in case you're forced to retire early or can't sell your home..."), and take the intangibles seriously ("...before your retire, develop hobbies and line up volunteer work, trips or part-time jobs....").

A good article, I thought.

Coach

 

[Bikerdude]

Their six steps: Live modestly, maximize your savings, reduce debt, don't invest too conservatively, study your options ("...also devise a Plan B in case you're forced to retire early or can't sell your home..."), and take the intangibles seriously ("...before your retire, develop hobbies and line up volunteer work, trips or part-time jobs....").

Most of the people on this board will be shocked, shocked! I tell you, that this approach would work.

 

[MasterBlaster]

The takeaway, from this report is that happiness and massive amounts of money are not one and the same.

We have heard this before from other studies. Yet many continue to grind away in the false belief that if they can just get to that next rung... only then will they be happy.

Yet another confirmation of the "your money or your life" philosophy.

 

[samclem]

Coach, thanks for the heads-up.

One note: This part smacks of cause/effect confusion:

And "Taking on even a moderate amount of risk pays off. Median net worth for retirees who said they took a middle-of-the-road approach was $836,000 vs. $671,000 for conservative investors.

First, using a self-defined label of "conservative" vs "middle of the road" is problematic. I know lots of folks with portfolios they consider "middle of the road" that I would label "conservative." More significantly, do "conservative" investors have less money because their returns are lower, or are retirees with less money likely to invest more conservatively? I'd guess there's at least as much of the later as the former.

I like CU, but their financial work (esp their "ratings" of mutual funds) is a couple notches below their product reviews. And their public policy (i.e. political) "reporting" is really galling. But they do a good job with vacuum cleaners, toasters, and cars.

 

[Delawaredave5]

In addition, 38 percent of retirees said they depended on a defined-benefit pension for a significant portion of their income."

Believe the survey population had a higher percentage of DB pensions and that "current generation" and was probably older -- that's why the portfolio amounts seem low.

I'd guess current generation of "50-something" folks looking at ER or RR (regular retirement) have nowhere near the DB resources - and therefore probably need larger portfolios.

 

[ERD50]

And was "net worth" adjusted for pensions? Pretty meaningless w/o that. If you have a COLA'd pension that meets your retirement expenses, you don't need much 'net worth' at all.

-ERD50

 

[Martha]

I love this, a thread where I absolutely agree with SamClem and ERD50.

Their six steps that Coach outlined is good advice, but basic. We give it here all the time.

 

[W2R]

Their six steps: Live modestly, maximize your savings, reduce debt, don't invest too conservatively, study your options ("...also devise a Plan B in case you're forced to retire early or can't sell your home..."), and take the intangibles seriously ("...before your retire, develop hobbies and line up volunteer work, trips or part-time jobs....").

Uh-oh!! Guess I'd better develop hobbies and line up volunteer work, trips, or part time jobs. Otherwise, I might be mistaken - - retirement might not be as wonderful as I think it has been!

But seriously, a part time j* for me? Puleeze. I am not just dying to get a job. Also, I am not just dying to go on a trip. If I ever find the time, I have a couple of ideas for new hobbies. So far I'm too busy doing the important stuff (like sleeping in, relaxing, and spending time with Frank).

 

[ziggy29]

And was "net worth" adjusted for pensions? Pretty meaningless w/o that. If you have a COLA'd pension that meets your retirement expenses, you don't need much 'net worth' at all.

Agreed. Ultimately what matters most is the amount of income you can derive with relative safety.

If you assume that $1M can lead to "safe" $30,000 annual withdrawals (3.33% withdrawal rate), for example, someone with a $2M portfolio and no pension would have roughly the same level of financial means as someone with *zero* retirement savings and $60,000 in Social Security and COLA'd pensions.

 

[HFWR]

I love this, a thread where I absolutely agree with SamClem and ERD50.

Is your new avatar a pic of hell freezing over?

 

[Xman]

When I was a hard charging young'n, I used to love the quote: "Money may not buy you happiness, but it'd take an expert to tell the difference."

Now, a bit older, a bit wiser, I agree with the article.

 

[ERD50]

I love this, a thread where I absolutely agree with SamClem and ERD50.

Is your new avatar a pic of hell freezing over?

heh-heh-heh - good one


We could always start up a discussion of redistribution of wealth, or a dozen other topics when you are ready for a 'spring thaw'

-ERD50

 

[youbet]

Their six steps that Coach outlined is good advice, but basic. We give it here all the time.

Basic, but nice to hear it coming from Consumers Union as they have developed a penchant for evaluating and writing about luxury cars, high end electronics, wine and those sort of things in recent years.

 

[Danmar]

Money may not guarantee happiness but some degree of financial security sure helps. Good thread and posts. I was thinking that in today's interest rate environment a DB pension plan NPV is about 20X annual payout at age 62 for healthy male with younger wife (1/2 COLA & 66% survivor benefit)?