The Thinker

Raising our retirement sails

Oh, how I wish I could stop thinking about tomorrow. Ignorance may be foolhardy, but while you are in it, life is truly blissful. However, since my retirement seminar about a month ago, I have been feeling a bit spooked. All along, I had this image of my ideal retirement. I would “retire” at 55 on my government pension. There would be no financial worries. However, I would work or consult a little for my own amusement and set my own hours. Maybe I would take up teaching full time at a community college or maybe not. I would leave plenty of gaps during the year for vacations and extended cruises. Then, perhaps around age 60, I would truly retire. The rest of my life would be on the house and stress free. I would indulge my many hobbies and whims. My life’s cup would runneth over. I would climb many mountains and ride my bike on many a trail. I would avoid all medical problems, stay in optimal health, and always look like Hugh Downs. I would die gently in my sleep sometime my extremely late 90s or, perhaps in the arms of an illicit and voluptuous lover half my age. Hey, it worked for Nelson Rockefeller. What a way to go!

The vision is fading. Now, after two days of learning the ins and outs of retirement, I feel like someone has thrown a bucket of cold water on me. The Eight Ball is now saying “Outlook hazy, try again”. So unfortunately, I now find myself painfully and uncomfortably financially awake. I now realize that if my wife and I want a good retirement we need both a stroke of luck and must get our financial house in order post haste.

How silly of me. I thought my government pension, our modest 401-Ks, and our small IRA would see us robustly through retirement. I had faith that my retirement income would cover expenses. Alas, it ain’t necessarily so. The sad reality out there is that not many of us can afford to spend our retirement hitting the golf course every day. As a government worker I am more fortunate than most. Yet it would not take too much for my financial house of cards to collapse either. There is nothing certain in life, not even a government job or a government pension.

In fact, retirement is turning into a scary experience for many Americans. The good news is that we are living longer. Instead of dropping dead of a heart attack in our sixties, many of us will reach our eighties or beyond. That is pretty much the extent of the good news.

The bad news is that because we are living longer we need to save even more money to carry us through those extra years. Medical expenses and home prices are likely to continue to exceed inflation during our retirements. Many of us have to work longer because social security insists we must wait longer before it will pay out benefits.

Yet there is no guarantee that we will remain gainfully employed until a proper retirement age. It seems that we budding senior citizens are expensive employees. We too have jobs that could be amenable to outsourcing. If our employer is watching the bottom line, and whose employer isn’t, someone half our age and willing to work for half our salary can likely replace us. Consequently, long before we turn 67 and a half there is a decent chance that we will be shoved out the door. If it is done gracefully, we will retire on a reduced pension. However, pensions are largely obsolete. So for most of us, a graceful forced retirement means perhaps a few tens of thousands of dollars to not come to work anymore. So there we are, maybe age 50 or 55, forced to buy our own health insurance at exorbitant rates (if we can get it at all), our mortgage payments still due every month, and working perhaps 2 or 3 mediocre jobs for less than half what we made before. We can see a second career as a Wal-Mart greeter in our future. Naturally, we will be too young for Medicare or Social Security benefits. In addition, we dare not touch our 401-Ks for our living expenses, since we will have to pay stiff penalties. Meanwhile, Junior is miffed because we are having a hard time turning up even spare change under the cushions to send him to a community college.

I hope that most of you reading this will not suffer this fate. Unfortunately, there is ample evidence that millions of Americans have already gone through one of these peculiar levels of hell. Nevertheless, even if we are fortunate and retire with a decent pension and bulging 401-K, there are other potential financial landmines just below the surface. Perhaps we have aging parents with special needs. Perhaps our spouse will develop a chronic condition that will require years in a nursing home. If you thought owning a house and raising children was complicated, welcome to modern retirement living. It is a new landscape, where many doctors will refuse to see you because of they will not accept the government’s niggardly Medicare reimbursement rates. Cash only please.

Darn that Jerry. Jerry is the financial planner at the retirement seminar I attended who sobered me up. Yeah, I think I knew about all these landmines in my future, but I was much more comfortable not thinking about them. I have more immediate health problems inside my family to navigate and a daughter who will be attending college soon. Now I also have to think five, ten, twenty, and potentially forty years ahead to make sure I have all my bases covered.

I have decided I cannot do this alone. Yes, I am good at tracking my net worth in Quicken. I balance my accounts to the penny every month. I even put away money for my daughter’s college education, although we have saved only about half what it will cost. The sad reality is that managing a successful retirement is beyond all but a tiny percent of us. It is too complex. There are too many variables. The rules keep changing. Therefore, my wife and I are hiring a financial planner.

Even this is risky. Most financial planners are more interested in their bottom line than yours. Moreover, their bottom line will look a lot better if they sell you the stocks and funds for the banks or brokerage firms they represent. So where do you go? You may want to do what I am doing and hire a fee only financial planner. Yet even that is no guarantee that you will get your money’s worth. It is easy to squander your money at $150 an hour too.

We decided to hire Jerry, the financial planner who woke me up. I know he has many clients, and I was surprised to find he was taking on new ones. He seems to spend about half his time engaged in financial evangelism by going out and talking to people like me. Yes, he is affiliated with the National Association of Personal Financial Advisors, a fee-only group of financial planners with reasonably rigorous standards and ethics. Still, NAPFA affiliation is no guarantee of quality advice. However, having met Jerry in class I feel confident that although his fees are not cheap, I will get my money’s worth.

Getting there from here will be another chore. Aside from the initial planning fee, (I am glad we are getting a substantial tax refund this year so we can afford to do this) and the yearly retainer there is much work that we have to do first. The bundle of papers from Jerry arrived in the mail the other day. This is as intimidating as filing a complex tax return. There are about thirty pages of forms to go through asking for excruciating details about our financial life and goals. Many of the questions are hard to answer. How long do you expect to live? Well, forever naturally, but they want a number. I answered 90 for my wife and me, although I would be surprised if either of us live that long. Where do we want to retire? I haven’t a clue. When do we want to retire? We do not know precisely. Sometime between 55 and 60 maybe, if we can afford it?

Perhaps it does not matter much, but putting our thoughts down on paper does have merit. For in doing so every year we have an opportunity to reassess our goals. Then, with Jerry’s sound help, we will steer closer toward meeting those goals every year. As he put in his newsletter, “We cannot direct the wind, but we can adjust the sails.”

This is good advice. We need to start by putting up our sails.

(Stay tuned for more chapters in the months and years ahead.)


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