So, you’ve decided to retire early, which means congratulations are in order. It’s never an easy decision to make, especially at a relatively young age. But, if you think it’s the right move, it is worth celebrating. All you need to do now is figure out which of the retirement types you’re going to pick. Oh, did nobody tell you? Yep, there isn’t just one form of retirement; there is four.
Below are the different types and what you’ll need to make it work.
Simply put, this is the model employees throughout the civilized world have come to love and cherish. It’s the idea that after 30 to 40 years of hard work, a person bows out gracefully. How smoothly depends on your finances. Over the years, you should have contributed to a variety of plans for the sake of your golden years. To pull this one off, you’re going to need every penny from every retirement plan. The key is to track down all of the ones you have paid into, consolidate or organize all of your accounts, and create your withdrawal strategy. In this scenario, you’re going to need patience and an eye for the paper trail.
Scratch the “love and cherish” part of the last paragraph. The retirement plan workers truly love is early retirement. There is no better thought than quitting early and moving to an exotic country with sun, sea, sand, and cocktails, or simply just living free at a younger age. Of course, not everyone can afford this method, and that is something to bear in mind while daydreaming about it. Once you retire, there is no additional income apart from the money in your bank account. Therefore, cutting costs, debt elimination, and budgeting properly are the keys. For those challenged with plastic balances, try consolidation.creditcard to reduce your expenses. For the people who struggle with money, think about hiring a financial planner to help set a realistic early retirement plan.
This is for the people who either can’t afford full retirement or don’t want tofullymake the switch. Yes, there are those who love to work and don’t want to give it up altogether. It goes without saying, but a steady, part-time role is essential for semi-retirement. The sensible and easiest method is through a phased retirement approach at your employer. Some people will find this obvious, but it’s difficult to predict an employer’s motives. Even if you want it and it makes sense for the firm, they might not want you on the books. One thing you have to ensure if semi-retirement is a mandatory condition for you is that there is a part-time position with a stable wage before you make a decision.
Not many people will think this is an option. Fewer people will know someone on temporary retirement (aka Mini Retirement) because it isn’t a popular choice. The reason for this comes down to job stability and your particular payable skill-sets. Moneyboss.com points that the key to this option is to work for ten to fifteen years and retire for as long as the money last. However, there needs to be options on the table when you come back. Otherwise, you will have no job and no money. Alternatively, you can stay in contact with your professional connections to pull strings during your retirement, or work freelance.
So, which one is it going to be? The decision is yours.
Preparing for retirement can seem like a complicated thing to those who haven’t thought much about it or haven’t researched the subject. Individuals just have to make sure they cover all the bases before stopping work for good. Stressing about retirement won’t help. What’s done is done. It’s time to look forward and take positive action.
The twilight years of anyone’s life are supposed to offer a calmness and tranquility they never experienced during previous times. Still, that is never going to happen if people don’t deal with all the financial implications in advance. The advice below should assist with that.
Selecting a pension scheme
Depending on where someone lives in the world, their government might force a mandatory retirement system on the worker. Take Social Security for example,you can’t opt out. Yet as more people than ever depend on it, it’s vulnerable due to politics.Not only that, but depending on where you live, these public retirement systems may pay short of what is needed to live on in retirement.
That’s why experts from llenrock.com and similar sites say it’s still sensible to look for private retirement benefit packages outside of that deal by choosing the right employer. That does mean having a long-term commitment for retirement benefits and depending on one’s age when becoming “retirement concerned” may not be an option to pursue.
Another pension like option is annuities. They are an insurance product that people can buy designed to provide guaranteed retirement income. They can be complicated and come in various forms: Fixed, Variable, Immediate or Deferred, etc.
Retired people will need as much cash as possible to pay their bills and live a decent life. So, it’s sensible to read the small print and get some advice when it comes to selecting the best program. Most people will want to look for deals that:
Allow lump sum payments
Have high-interest rates
Come from reputable firms that aren’t going to disappear overnight
Alongside pensions, it makes sense for anyone preparing for retirement to open some savings accounts. For the best rates, it’s sensible to use comparison websites to reduce the time and effort people put into the process. Start putting money in those accounts at least ten years before the retirement date. That way, there should be a large sum that individuals can access in emergencies. Some of the best banks for high-interest savings accounts at the moment include:
The Bank of America
Just use Google to find a suitable comparison tool, and then take a look at the results before contacting the provider.
Start Investing for Long-Term Growth and Income
Stocks and Bonds are essential for building a retirement portfolio. Retired people without a workplace pension will need investments to provide both growth and income to support them through a long retirement. Once meeting your savings account emergency fund requirements, investing in the market should be considered. Many stocks pay dividends. Bonds pay interest income. Both pay higher than what a savings account will provide. Retirement investing should be done within one’s risk tolerance as these investments are not guaranteed as savings accounts are.
Look to utilize retirement savings accounts to invest in stocks and bonds. In the US there is the work related 401K retirement account. There is also the IRA that anyone with earned income can open. Learn the basics and choose low-cost investment methods. Consumer Reportscan be a starting point.
Nobody wants to reach retirement age with lots of debt. That is because the person will have to continue their payments, even when they no longer earn a wage. With that in mind, savvy individuals will attempt to clear the balance before they leave the workplace. That could mean sending large payments for the last few years and living on a bare bones budget. However, as unappealing as that sounds, that strategy is much better than the alternative, having to live that way for the rest of your life in retirement. Professionals like those from debtconsolidate.company claim that more people retire with debt today than ever before. That is something workers need to try hard to turn around. Some of the best techniques that people who see retiring with some debt might consider, include:
Remortgaging any properties – Re-purpose equity to payoff high interest debt.
Opting for a consolidation loan – Single loan to manage repayment.
Using careful investments to create profit to clear the debt
Downsizing – Home or other assets to clear debt.
There is no getting away from the fact that everyone will have to think about the financial implications of their retirement. So, it’s wise that people start as soon as possible if they want to live a care-free lifestyle during their last years on this planet.
Those who fail to take action will condemn themselves to threatening letters, money worries, and lots of other unwanted issues. When all’s said and done, people work their entire lives to get some quality years of relaxation time. Don’t make the mistake of letting financial problems get in the way of that!
When you retire, you don’t have to live an extremely frugal life. If you plan your retirement well, you can still enjoy a comfortable lifestyle. However, there are certain things you should do so that you’re not forced to live frugally.
Ensuring you have plenty of money is one of them, but you should also think about reducing your retirement expenses. The less you have to spend on necessities, the more you can spend on the things you enjoy. As you plan your retirement, think of how you can cut your costs, so you have more disposable income.
Aim to Be Debt-free
Struggling with debt isn’t something you want to be doing when you retire. Even a healthy level of debt could be an inconvenience. If you retire early, you could be more likely to still be paying off your mortgage or other debts. Aiming to be free of all debts by the time you retire will mean you don’t have the money you owe draining your resources. When it comes to loans and credit cards, debtconsolidation.loans or something similar could be a good choice. Consolidating your debts makes them easier to manage. You can concentrate on one payment instead of several. If you want to be debt-free, you should create a plan you can follow to pay off your debts.
Downsizing is often recommended for retirement. When people retire, they often have a home big enough for their whole family, but the family has long since moved out. If your home is already empty of kids, you might consider downsizing before you retire so that you’re able to reduce your living costs. Downsizing helps you to bolster your savings too. Some people might be wary of downsizing, though. They like the home they have and will miss it if they sell it. Perhaps you might make use of the extra space you have instead. You could rent it out or use it to run a business.
Take a New Approach to Transportation
When you retire, being able to get around is still important. In fact, later on, isolation is a risk, so transportation becomes even more important. However, you can still change the ways that you get around and reduce your transportation costs while still meeting all of your transportation needs. For example, if you no longer have two people going to two different jobs, you probably don’t need two cars anymore. You might feel more comfortable downsizing your car as you did with your house, so you have something more efficient. Find the most efficient vehicles at consumerreports.org.
Stay Healthy for Lower Medical Costs
You can’t have complete control of your health as you get older. However, there are some things you can do to avoid various health problems. Staying healthy can help you to reduce medical and insurance costs so that you have more money to spend on other things. As you plan your early retirement, include a healthy lifestyle now and in the future in your plans.
Reducing your costs for retirement doesn’t have to mean extremely frugal living. You can be comfortable and still spend less than before.
I don’t think I am so different from most people. I was concentrating on saving for my retirement instead of worrying about planning for long term care. It seemed as something that may or may not be needed. I knew 100% that I would need to have a successfully executed retirement plan so that was my main focus. But after recently going through everything associated to a family member’s long term care issueI now see that I need to look at our options. It’s time to seriously begin our own planning for long term care.
Family’s Long Term Care (LTC) History
When it comes to planning for long term care one’s family history should be looked at. Part of our procrastination toward all of this is because of our family history. Everyone has lived independently into their 70s to early 90s until something happened. A fall, a stroke, heart attack, cancer, etc. They then either passed at a hospital, suddenly at home, or after only a few months in a nursing home.
Our most recent family member’s long term care issue ended up the same way. She passed shortly after being released from the rehab center to the nursing home.
Nobody in the family had any long term care plans. Seeing a family history of elderly relatives spending years in a nursing home would certainly be an important issue to keep in mind when planning for long term care.
My wife and I aren’t yet age 60. We don’t feel like we are anywhere close to needing to do this. But anything can happen and having some kind of plan is better than no plan. Much can change in the coming years and decades. Remaining flexible and willing to reassess and make changes is a big part of our long term care planning.
Planning for Long Term Care Starts With Knowing the Options
To be honest, when my CFP brought up adding some planning for long term care my eyes glaze over and my brain shuts off. Just like it does during any life insurance sales pitch. What I am sharing is the various actions to consider doing and the available options for funding long term care. That and what I think is my and my bride’s best plan based on what we know today.
Power Of Attorney (POA)
I believe this is a must-do for anyone planning for long term care. As long as my wife and I are around we have each other’s back. But what if something happens to the both of us? Having someone already listed as our POA will allow for the handling of our needs. We are going to have our daughters listed. After all, someone has to be legally able to execute our plan.
This should also cover things if my wife and I are separated by one’s death. The “still of this earth” should still be covered by the POA and there’s one less thing to think about setting up. We are going to set this up ASAP.
Living Will / DNR
Officially make our wishes known with a living will. I would not want to languish in a vegetative state (coma) in long term care nor bankrupt my wife paying for it. A DNR can be an option once of advanced years or ill-health. Set the conditions that align with your values.
The 800 Pound Gorilla: Paying For Long Term Care (LTC)
There seems to be just a few ways to pay for long term care if and when the time comes. It’s expensive so lets start with some financial numbers. According to what the 2016 Genworth study found, the national median nursing home cost for a semi-private room is $6,844 a month. Some states and/or cities are higher and others lower.
Long Term Care Insurance Policy
The last quote I got when this was pitched to me was about $1,700 a year a piece. So hand over $3,400 (2 x $1,700) a year for the rest of my and the bride’s lives until needed, or not needed. From some quick online research that amount falls in line with the average cost of $3,381-per-year (combined) for a 60-year-old couple buying LTC insurance.
This then provides us both an Initial policy benefit of $164,000 a piece in today’s dollars. That policy benefit amount is based on a daily benefit of $150 with a 3 year benefit period. Coverage value will increase annually because a 3 percent compound inflation growth option would be included.
Life Insurance with a LTC Rider
You either pay a monthly insurance premium or hand over a chunk of money that can be used to pay for your long term care or a death benefit. An example I found(nerdwallet) is where a 60-year-old female nonsmoker pays a single $100,000 premium. That pays for up to $579,888 in long-term care benefits, (around six times her premium). Long-term care benefits could pay out for up to six years, at up to $8,054 per month. If the long-term care part of the policy is never used it would pay a death benefit of $193,296 to her beneficiary.
Fixed Annuity with LTC Benefits
Annuities are complicated. Hybrid annuities that combine a deferred fixed annuity with an LTC benefit are really complicated. When trying to figure this out I found a decent example (bankrate).
A 60-year-old man purchases a $50,000 long-term care annuity that fully matures in 20 years with 5% inflation protection compounded annually with a 200% coverage maximum and a six-year benefit period.
The initial long-term-care coverage maximum is $100,000 (2 X the $50,000 premium he paid). Without inflation protection it could be three times the premium paid (3 x $50,000= $150,000).
If no withdrawals are made over 20 years at a 3.5% compound interest rate, minus annuity administrative fees, there would be $265,330 available in long-term-care insurance under the 5% inflation-protected scenario. Or a monthly maximum of $3,685 to help pay the high costs of long term care.
If long-term care is never needed or used, then the annuity can be redeemed for its accumulated value when it matures at 20 years or left to continue accumulating interest with the long-term care policy part also remaining intact. When this person dies, the heirs will inherit the greater of the accumulated annuity value (if there have been no withdrawals), or the single premium paid initially minus the amount of any long-term care paid out.
This is how most people who are not on Medicaid pay for their long term care needs. It certainly is how my family has handled it. Money comes from savings, retirement income, and investments. It comes down to looking at any and all income or asset sources to pay for long term care. The money to fund long term care will have to come from Social Security, pensions, annuities, savings accounts, 401k, IRA, Roth IRA, stocks and bonds.
Because of the high cost of nursing home care it can really slam a retirement portfolio. Especially if the stay turns into a long stay. Even if in one’s long term care plan opted to include one of the other annuity or insurance options, it may not pay enough or for long enough. So having invested assets to use for funding shortfalls will still be necessary.
Oh yes, Medicaid. The long term care funding source of last resort. Thank goodness for Medicaid too. Most people aren’t able to save a big chunk for retirement to even consider LTC options. It is the safety net for everyone. Even if you do everything right trying to fund your LTC you can still end up on Medicaid if your money runs out.
Doing nothing to plan for long term care and thinking Medicaid is a great solution should be reconsidered. For one thing Medicaid is under threat. Just look at the last ACA repeal and replace effort. Medicaid cuts where high on the list.
Not only that but there happens to be 29 States and the territory of Puerto Rico that have what’s called Filial Responsibility Laws. Meaning that the states can recovermoney from family members what is spent for nursing home care through their Medicaid. Your long term care bills could become your kids or sibling’s financial burden.
For some, relying on their family is their only option. Not having enough money and unable to qualify for Medicaid leaves no choices. This is a tough one as it interrupts loved one’s careers and life. Some may lovingly offer to go into this but I wouldn’t want to plan on being a burden on my children for our long term care if I can plan away from that. Nor having them being stuck with the bill for our nursing home care.
I’m Planning for Self-Funding of Any Future Nursing Home Care With an IRA
At least that is my plan for now based on what is known today. Anything can happen over the next decades. The best planning for long term care can be uprooted with government policy changes or long term care changes. Part of my long term care plan is to revisit it and make any necessary changes.
I am hesitant about insurance products. I really hate the thought of depending on an insurance company coming through as promised. Especially after taking a big lump sum or decades of payments from me. I’m a bit cynical after my company weaseled out of pension promises. That and how some in government talk about the Social Security benefit I paid for as an entitlement they want to cut or do away with.
Creating a Quasi HSA with an IRA is the Answer for Me
What I believe to be my best plan is to set aside an amount of $175,000 to $200,000 within my IRA for long term care. It will be part of my long term portfolio bucket 3 and invested as such until we reach ill-health or old age when it it will be moved to bucket 2 and 1.
Taxes are the reason for using an IRA to pay for any long term care.
A quick look through IRS Publication 502shows that long term care expenses are allowable for tax deduction. That deduction is limited to deducting medical expenses that are above a 10% of AGI threshold on schedule A.
When looking at any IRA balance it is never lost on me that some of that money isn’t mine. I have to pay taxes on it. This medical deduction allows me to use it for a needed expense but also making a big chunk of it tax-free by way of the tax deduction offset. In a way making my IRA a partially tax-free Heath Savings Account (HSA). A quasi HSA as I call it.
This however is not without other impacts. With the high cost of long term care the large IRA withdrawals will cause some of our Social Security to become taxable.The Social Security tax calculation is based on AGI that is before any deductions. The key is to limit IRA long term care withdrawals to only what is needed. That and using tax efficient strategies to keep taxable income as low as possible by also utilizing non-retirement and Roth IRA money.
Finding a balance between IRA withdrawals and the optimum taxable income amount will be the task at hand.
As I said, this is about planning which is based on what we know today. Everything will have to be revisited if the government changes how taxes are done through tax reform or other tax rule changes.
If our family’s long term care history is any indicator of what we can plan for then this should be enough along with other income (Social Security) and savings to cover our shorter length nursing home care. If not needed it’s all still part of our portfolio to pass on.
Of course this plan goes to hell if one of use languishes in a nursing home for years and years. But then other long term products have length limitations too. There are no guarantees for anything in life.
It was much easier getting excited about saving for and planning for early retirement. Retirement is about freedom. There is nothing free about living the last of your life in a nursing home. There is something to be said about living independently and free until dying in your sleep.
Everyone’s situation is different. Family history, available portfolio, risk tolerance, etc., can be as varied as there are people in the world. In a way other than some legal issues around POA and Living Will I am not doing much. Money is just where it is. However I am now cognizant that I must leave a LTC chunk untouched in my long term IRA portfolio bucket and develop my retirement withdrawal strategy around it.
Comments would be very welcome. I would be interested in hearing what you have in your long term care plan and why you went the way you did.
According to Bloomberg, global power has never been so clean with renewables beating the investment power of fossil fuels two to one and clean energy installations breaking world records in 2016. Rising energy costs and climate change are two of the main reasons why more and more people in the US are turning to off grid energy sources to power their homes. However, learning how to do it and deciding how best to manage it in the area where you live requires a fair amount of investigation.
Energy costs can become particularly difficult for us to manage as we get older and for retirees they can be a source of permanent stress. Before retiring it’s a good idea to set up a new financial plan to save on costs; a plan that might cover anything from changes to grocery shopping bills, to health plans, to transport decisions. Off grid energy solutions are another viable way of saving on monthly expenditures that, as senior citizens, we would do well to consider.
1. Find ways of reducing your energy needs
As well as saving on costs, the choice to power your home using off grid energy means that you have the chance to assess how much energy you use and start reducing it. Many of us waste a fair amount of energy much of the time. With a better organized household, with positive limits in place, we can actually use off grid power sources to reduce both energy costs and energy consumption in one hit.
Smart control systems are used in off grid energy homes to reduce energy waste. You can use them to schedule when lights should come on and go off, thus improving your energy efficiency ratings without adding to your daily responsibilities. By strategically placing where your lights are positioned you can also save energy. You may find that by placing lamps in corners, the light reflects off of two walls and it reduces the need to have so many bulbs in the same room.
Good quality insulation is designed to make your house cooler in the summer and warmer in the winter, which can help reduce the need for heating and air-conditioning. You should also pay careful attention to your fridge. As the appliance that uses the greatest amount of energy in our homes, we want to make sure that we’re not unknowingly wasting energy that could ultimately be saved by making a few small changes.
2. Make sure your energy plan will cover your needs
Before you switch to off grid energy at home, take the time to assess how much energy you’ve been using over the past couple of years. This will help you to gauge how much energy you’re actually going to need. You should also probably overestimate slightly to avoid the undesirable consequences of running out of energy before the end of each month.
You could also choose to make your shift to off grid energy a transitional move. Keep the energy provider electrical meter available to use in an emergency, but aim to power your home entirely from off grid energy sources, for example. This is something you can try for a year or two until you are confident that you have your energy needs completely covered.
3. Choose the right kind of energy source
Off grid electrical energy can be powered using a number of natural sources. The three main ones are wind, hydro and solar.
Solar energy is, without a doubt, the most common of renewable energies available to us today. It can power anything from a single appliance to an entire city just by harnessing the sun’s energy through the use of solar panels. Normally installed on a building’s roof, solar panels provide the power that homes need with very little maintenance involved, which makes them an attractive choice for homeowners wanting to get off the grid.
The difficulty is that solar panels can be expensive to install. So even though the long-term benefits are clear, the initial investment might make it difficult for everyone to access.
If you have a turbine or windmill linked up to your home, you have the resources necessary to capture the power of the wind and convert it into energy. Wind power is a natural energy that can also be stored and used at a later date, making it an excellent choice for homeowners who need more power during particular times of the year.
However, unlike solar panels, turbine maintenance is more time-consuming because they are constructed with many moving parts. What’s more, they only really work effectively in windy climates, which is why it’s important that you take your location into consideration before deciding whether or not to invest in wind power.
Hydroelectricity is the term used for energy generated through water. It taps into the natural cycles of rain, rivers, streams and seas. A common way of harnessing the power in water is through the use of a water turbine, which means that up-keep of all machinery can again be an issue for some people. On a positive note, if you live close to a water source, you can be sure that you will always benefit from a constant energy supply as, unlike wind, water doesn’t come and go.
So, is it time you left the grid?
This Article is a Contribution to Leisure Freak from freelance writer Jackie Edwards.
Now working as a full-time freelance writer, Jackie Edwards is also a busy mum of two small children. In any free time she has (which isn’t much) she likes to volunteer and do charity work and take the family greyhound Bertie for long walks.
Just because your company doesn’t support phased retirements doesn’t mean you have to delay your retirement. Staying in their full-time rat race grind may be the only solution they offer. But it isn’t the only solution for anyone wishing to ease into retirement using a phased retirement approach.
A recent study done by the Transamerica Center for Retirement Studies(TCRS) found that 77% of employers actually believe many of their employees plan to continue working after they retire. 47% of these employers also say many of their employees envision they’re using a phased retirement transition approach for their retirement.
Yet only 31% of the employers that Transamerica surveyed said they would let their employees shift from full-time to part-time employment. Not surprisingly, only 27% of employers said they would allow phased retirementseeking employees to move into less stressful or demanding positions.
Caution is Needed for Employer Allowed Phased Retirement
Retiring employees do need to be careful entering into a formal or informal phased retirement work arrangement with their employer.
Careful attention has to made into the impacts that a reduced schedule or a lower stress/lower paying position will have on any defined retirement benefits there may be. The defined benefit rules and the formulas they use are tough to get around. The last thing you want is for your phased retirement time dragging your retirement benefit amount down.
Other active employee benefits like medical insurance and paid-time-off/Vacation will also need to be carefully examined. Entering into a phased retirement arrangement will most likely impact them.
Signs to Look for Before Staying With Your Company in a Phased Retirement Agreement
Being able to have a phased retirement with one’s current employer is certainly the most comfortable way to go. We already understand the business, the work processes, and the culture. But based on my first career I believe caution is justified.
I think my corporate world experience isn’t unique and is a shared experience. Entering into a phased retirement agreement with one’s employer may not be the no-brainer decision you might think.
Think about the following:
Does your company have a habit of expecting employee loyalty but never reciprocates?
In other words, do they treat long-time loyal and dedicated employees as just a disposable number? Your phased retirement gig may be just short-term to ring out all they can before letting you leave on their terms, not necessarily yours. They will and do value younger employees who they think they can retain longer-term.
Do employees who have transferred to a new position or have been promoted get sucked back into their previous roles every time feces hits the fan?
Do you think your phased retirement agreement will stand if your company has a habit of doing that? Are you OK with a prolonged or indefinite return to your pre-retirement job obligations?
Has there been times when your company has backtracked away from promises made?
Think bonuses, raises, 401k match, pensions, health insurance, promotions, etc. When they do, did they include executives in the pain or did they state they decided not to include them in order to attract and retain the best for the company? Do you think they will honor your phased retirement agreement for as long as you want, need, or agreed to? If your company throws employees under the bus but never its executives then maybe you should think twice about extending your relationship with them.
Just take a moment and really think about your experience with the company.
If your career there has been nothing but a stellar experience then I think you are in the minority. If it’s that good I would also question why even consider a phased retirement. Just enjoy it until you can feel like fully retiring. If you have concerns now about the company then why enter into a phased retirement agreement and continue with any negative feelings in your life?
For my first early retirement I wasn’t thinking “phased retirement”.
I was fully in a “retire early and often” mindset. I have successfully done that with some rewarding and interesting post-retirement work. In hindsight some of the things I did while preparing for that included asking myself the above questions about my long-time employer.
Let’s just say that I have never worked for them again in post-retirement. I admit that there is some truth in the saying “better the devil you know (than the devil you don’t)”. However I found entering into a new relationship to be in my favor when working in retirement.
I could work without a legacy of career obligation baggage to be dragged back into. I could create a retirement lifestyle where I would only seek opportunities aligned with my interests and passions. That includes only working under my terms for as long as I wanted to.
Not having to worry about upsetting or angering a long-time employer who may still have control over some of my retirement benefits, thus having control over me. That to me is a big deal.
Why Creating Your Own Phased Retirement May Be the Better Way
First off, understand what kind of phased retirement you really want. Even if your company does offer a phased retirement option it may not be aligned with what you envision.
Are you looking to go part-time?
Change job duties to something with less stress and less responsibilities?
Wanting to only work certain parts of the year or specific seasons?
Also try to figure out how long you want the arrangement to last. I think the fact anyone is willing to bring up phased retirement with their employer means they aren’t afraid to signal their retirement intentions. Hopefully this is done only after knowing one could actually retire because employers may sideswipe someone who have prematurely signaled their retirement intentions.
Rather than thinking only “phased retirement”, open up your options by thinking of retirement as the absence of needing to work. You can think of it as a phased retirement or as I had planned to do and have successfully done. That is retiring early and often.
If your plan is to go directly into your desired phased retirement position then begin finding, interviewing, and accepting a position before announcing your retirement. This will at least allow for you to explore your options over only attempting to stay at your existing company.
Here are some reasons supporting why you should create your own phased retirement:
Make a clean break from your employer. No worries of negatively impacting any retirement benefits through a reduced salary (less stress-pay/fewer hours) phased retirement agreement.
Free to choose opportunities aligned with your interests and passions. Not what your employer thinks is their best way to use you. It’s easier to limit your duties to agreed upon responsibilities and negotiate rather than be dictated when our role needs to be changed.
No previous legacy obligation of work to be dragged back into in any time of crisis, real or otherwise. That certainly could circumvent your phased retirement wants and needs.
New working environments offer new experiences. In people, work, education, and culture. It may not be as comfortable starting out but it makes up for that by being more exciting. We all stay in our ruts too long.
It’s easier to move on or as I call it “retire early again” when there are no long-term ties. Knowing that I can simply leave once a retirement job isn’t checking off all my boxes anymore makes working in retirement fun and not a dreaded burden.
Last Words on Creating Your Own Phased Retirement
The company I worked for over 3 decades did not offer any phased retirement options. It was “their way or the highway”. I waited some months after retiring early before I began looking for my first dream retirement job. It all worked out wonderfully. That doesn’t mean that it didn’t take some effort on my part.
I have several pages on this Leisure Freak site that might be of help:
Before I close out this post I would be remiss if I didn’t mention the fly in the ointment. It’s called health insurance. If you retire without a retirement medical benefit then health insurance must be considered. A phased retirement agreement at your employer that allows for employee group medical insurance does carry some weight.
When looking at creating your own phased retirement, include health insurance in your decision process. Look at staying with the same employer, looking for new opportunities that provide health care benefits, or buying health insurance in the single payer market.
Clever ways to keep costs down when starting up your own company.
So, you’re considering launching your own company? Having your own business venture will give you somewhere to focus your time and energy and the prospect of seeing a healthy return on your investment is rather exciting too. Shows like Dragon’s Den and The Apprentice may lead us to believe that a considerable sum of money is required for a successful startup, but that’s not necessarily true. Here are seven top tips for launching a business while on a budget.
1. Utilize your skills
This may seem like an obvious one, but starting a business in a sector where you have interest and expertise is always going to set you in good stead. Also, consider that your business could be service-based rather than product-based as this will keep your overhead costs to an absolute minimum. If you’re a dab hand in the garden, for example, why not offer your gardening and landscaping skills locally? Or perhaps your career was in finance, so you are able to pitch yourself as a bookkeeper.
2. Seek out investment
You can definitely start a company on your own with only a small amount of capital behind you, however if you have a more ambitious business plan or are very short on startup funds, there are many ways of gaining a little helping hand. Crowdfunding sites like Kickstarter and Crowdfunder are great tools – they are platforms for you to pitch your idea on in order to receive funding from friends, family and other unknown investors, which will eventually help you to launch your business. You could also look into the possibility of government schemes and local funding being able to assist you.
3. Make mutual business deals
A major way to save on costs is by organising trade-offs with other businesses – this move will require you to be quite pro-active and maybe even a little bit brazen, but it’s true when they say ‘if you don’t ask, you don’t get’. Let’s imagine you’re setting up your own B&B and you contact the local paper to invite them to come and review your facilities. If they say yes, they will be getting a lovely complimentary stay and you will be getting some free advertising – win, win. Or perhaps if you know somebody who’s good at website design, you can get them to design your site for you in exchange for use of your services.
4. Advertise for free
As a startup, you might not have the funds for traditional forms of advertising, but that doesn’t mean that you can’t advertise. Exploit the powers of free promotion through social media. Social media users make up 37% of the entire world population and total 2.8 billion people worldwide, so that’s the place to get your brand noticed. Set up pages on any social media sites that are relevant to your target market and offer discounts and giveaways to gain new followers straight away. Also, it’s important not to forget the power of word of mouth – tell your friends and family about your new business venture and get them to spread to the word!
5. Acquire a sponsor
Start by making a list of brands that you affiliate with and think up ways that you could promote their brand. This could be in the form of banners on your website or marketing signs at events. You can even suggest promoting their products – for example, if you own a tutoring service, you could team up with a local bookstore. If you send your students there for books, they may be able to offer initial sponsorship to help your business get off the ground.
6. Minimize waste
From packaging to printing, you need to be savvy with your resources because the small things can quickly add up. A good way to save money (and help the environment) is by going paperless. Many companies and consumers are used to e-correspondence now, so why not eliminate as much printed material as you can? Also, it’s worth considering dropshipping – this is where a retailer doesn’t have a shop or warehouse and the products go directly from the supplier to the buyer. By using this method of shipping, you won’t have to rent out a warehouse or pay for packaging, meaning you will save a substantial amount.
7. Budget branding
The great news is, creating coherent business branding can be done with minimal cost. There are so many websites out there for reasonably priced business cards – you’ll be sure to find great deals on Vistaprint, and the same goes for logos on Logo Shuffle and Logo Shines. Remember to create a consistent brand image, which means using the same logos and brand colours across all of your commercial channels and social networks. The next step is getting it out there into the world for potential consumers to see – this can mean placing it on your work clothing and even your vehicles so that your logo becomes locally recognised.
Now you’re all set with the advice you need to start a business the frugal way, it’s time to take the plunge and become the entrepreneur you’ve always dreamt of being. Who knows, you may just be able to fund an early retirement.
This is a contributed post to Leisure Freak by the awesome author Kayleigh Alexandra.
Passionate about writing for the startup and entrepreneurial audience, I love to share my insight into the world of ecommerce and digital marketing. I hope to inspire others to start their own journeys and share their stories. Find me at MicroStartups.
It’s hard enough to save for retirement let alone pay off the mortgage too. Most of us end up retiring with a mortgage. I sure did, our parents did, and frankly almost everyone I knew did. At the time of my first early retirement we had been in our home 14 years. The mortgage was paid down 40% from when we bought the home. Here is the strategy I used and considered to help us manage our housing costs in retirement.
Four Strategies To Consider When Retiring With a Mortgage
#1- Refinance to Lower Your Monthly Payments
Obviously if someone is considering retiring with a mortgage the numbers have got to line up. Simply running our budget numbers including the monthly mortgage payment through a retirement calculator like FIRECalc can provide some assurance. I retired early and certainly made sure that I could afford to retire with my mortgage payment.
My strategy was to reduce my monthly mortgage payment to allow for more cushion in my retirement budget. I prefer 30 year mortgage loans with a lower monthly obligation and then making extra payments when I can.
We bought our home in 1995 with an 8% interest rate and a $1185 monthly payment. We did refinance a couple of times to take advantage of lower rates over the years. Each refinance was for the existing mortgage balance and pushing it out again for 30 years with the lower interest rate. This always resulted in a reduced monthly payment.
I used this same strategy the month before I retired to lower the payment again. With our last mortgage refinance our interest rate was 3.75% with a monthly payment of $744. This made retiring with a mortgage much easier on my retirement budget.
By refinancing your mortgage before retiring the refinancing process is smoother. The bank was able to easily perform my employment verification and verify my income. I did not mention my intention to soon retire, nor did they ask.
#2- Downsize to Reduce Housing Costs
Our plan was that we stay in our existing 2 story empty nest for several years and then later sell and downsize. Retiring with a mortgage doesn’t mean it has to be with us the rest of our lives. The plan was to later buy something with our equity for a mortgage free or almost mortgage free final home. A smaller home should also provide lower utility costs, taxes, insurance, etc., to give even more retirement budget cushion.
For some with a large mortgage payment, completing this move would be highly considered before retiring. In our case we still enjoyed where we lived and could manage the mortgage payment in retirement. That is why this is part of our delayed strategic moves and I am glad we waited.
We have recognized that our views on housing have changed. I believe they will change even more as time goes by with our aging. When I retired the only thing we considered was buying a smaller ranch home. Now we are opening up to RV, Condo, and even just renting. It is important to have a long term view and plan. But recognize that things may change over time. I keep our options open.
#3- Move to a Less Costly State, City, or Town
This strategic step is also part of our delayed retiring with a mortgage housing strategy. We will consider relocating somewhere less expensive if and when the time comes to sell our existing home. The town we live in is beautiful and with lots to do. Because of that it is sought after and has become a higher cost area.
Not knowing the future, we keep this as a strategic consideration. A lot will depend on the cost of living and our budget at the time. We keep an open mind to moving to a State that has no or lower income tax, a different town, or even a different retiree welcoming country.
#4- Pay Off the Mortgage with Retirement Job Income
I had always planned on retiring early and often. Meaning I would always remain open to opportunities that I had passion for or was interested in learning and doing in my retirement. My retiring with a mortgage allowed for my retirement funding to cover it in my budget. That means that any income I earn is extra. With this strategy I am able to divert all my retirement job income to the mortgage.
I did put this strategy into action after landing a sweet retirement gig. I paid off the mortgage within 18 months. Even if a retirement job didn’t pay enough to clear the mortgage, all money paid towards the mortgage would be like an investment. Where it enhances the benefits provided in our delayed retirement housing strategy moves of downsizing and/or relocation later on.
Now that I am in my 2nd early retirement it is nice to be mortgage free. However my retiring with a mortgage delayed strategies of downsizing and relocation are still fully in play.
The strategic goal is having a plan that manages our retirement housing by offering us financial flexibility. It’s all about looking for ways to stretch our retirement dollars in the best way possible in a place we WANT to call home.
Is Your Motivation Challenged When It Comes To Saving for Retirement?
I think everyone deep down hopes to one day have a happy retirement. But it seems that people have a problem saving for it. After all, it is a consumer driven society with lots to spend money on. To get started saving and stay motivated it’s time to rethink how we look at our retirement. Think of it as our life’s biggest purchase and just like any other purchase it will be limited by our available cash.
The bummer when buying your retirement is that unlike other big lifetime purchases like our education, home, car, etc., a decent and happy retirement can’t be financed. We simply cannot wait to the last-minute and plop down a 10% to 20% down payment and borrow the rest to get what we need or want. It takes assets.
The other happy retirement equation that needs answered is knowing the retirement basics, features and options we REALLY want to have. Our retirement features and options has costs associated to them just like any other large purchase we make. We have to complete some product (retirement lifestyle) research and save as much as we can to buy the retirement we want. If we don’t it’s simply settling for the retirement we end up with.
A Decent and Happy Retirement is Years in the Making – So is a Bad One
OK I get it. Life happens, wages are stagnant, there are student loans, too many cool things to buy and do, etc. There are just too many reasons to ignore saving for retirement and put it off for later. Retirement is too far into the future to think about now. WRONG!
When it comes to saving for retirement, procrastination is our worst enemy. Saving something, even if it starts out as a small amount will be better than not saving anything. Especially when done earlier instead of later when time is on our side. It is a personal win-win with no downside. On the other hand not saving anything guarantees a worse retirement outcome.
Saving For Retirement is Putting Aside Money For YOUR Life’s Biggest Purchase.
You Do Want to Buy Something Nicer?
Nobody intentionally goes out to buy a bad education, house, car, or you name it. Who in their right mind would roll up to the grocery store cashier with only $25 to their name and $200 of needed groceries in the shopping cart. But when our money is short we do end up settling for what we can afford.
We have all had to settle a time or two for something either less than wanted, less than needed, or on the crappy side of things. Try doing that every day for the rest of your life.
There should be Social Security to help us with our retirement purchase. But it was never meant to be our retirement’s only source of funding. It would be very challenging to have a nice happy retirement purchased by Social Security alone. So ask yourself. Do you want to buy a crappy retirement? Are you OK with settling for a low quality of life over what might be decades?
Retirement is YOUR life that inevitably awaits you. Ignore or delay planning and saving for retirement all you want. It only hurts and limits you when it becomes your time to buy it. We can put retirement off for only so long.
We must rethink of it as our life’s biggest purchase and prioritize it as such. At some point everyone alive will have to buy a retirement. Either on their terms or not.
The Goal Should Be a Happy Retirement
Buying A Retirement You Will Want
Setting Your Retirement Base
Don’t let the numbers get in your way. We all hear the financial industry claims that we need to have enough to provide 80% (give or take) of our final income for retirement. Taking that number to get a retirement savings estimate would intimidate and demotivate any positive action for most folks. The big objective is to start saving something. You don’t have to set a savings goal to start. But eventually it is necessary to understand where you are and how you are doing.
Here’s what I did.
When buying something big there is always the base price. Then the cost rises when features or options are added. The same goes with our retirement.
The happy retirement base price is having our basic lifestyle costs covered. That being food, shelter, utilities, insurance, taxes, etc. The way I look at it is that not being able to cover these basics lifestyle needs is certainly a bad and unhappy retirement.
That base price can vary depending on where we live and other basic retirement lifestyle choices. Just like a big automotive purchase. Choosing a base Ford or Chevy will have a base cost or price before adding any features or options to it. We have to make sound retirement choices.
Setting Base Happy Retirement Goals
Figure out what your monthly budget will be to cover your basic needs. Use your current monthly basic costs. Then look at it for areas you will probably see reductions or increases and make adjustments. For example:
Staying put or moving somewhere cheaper.
Health Insurance. This is hard to figure given today’s political climate but assume it will be higher until Medicare kicks in.
Taxes. Probably lower than paying while working.
Transportation costs. No more commute may reduce the amount you will pay for fuel, maintenance, and insurance. More vacation road trips may cause this amount to break even or add to it.
What we are retiring to. Must-have activities of passion and interests that have costs associated to them. For example, hobbies and travel.
Set a realistic base model retirement estimate. Then do the math. Hopefully it is much less than the 80% of current salary. This will help set your base retirement purchase price and be used to set your base happy retirement savings goals.
Keep in mind that at some point social security will also be there to help pay those happy retirement basics. Get your Social Security estimate and plug that into your equation to reduce savings needs. Also subtract out any expected pension coming your way. ( I had to mention it even though unlikely today)
Based on the 4% retirement withdrawal model you can simply take the yearly amount you estimate your savings will have to cover and multiply it by 25 to reach a retirement savings goal to shoot for. Remember that even if you don’t make your goal you are far better off than if you did nothing. Beat it and you have options. The future price of our happy retirement that we save for may vary as time goes on just like anything else. Make necessary adjustments.
Happy Retirement Features and Options
I love features and options but some are worth a lot more than others to me. I separated these out from my retirement savings calculations because I really don’t have to have costly add ons. Especially those that don’t really add anything to my happiness value. I would enjoy having some but I don’t need them to meet my basic happy retirement requirements. They are my wish list items that I used to set my highly optioned happy retirement savings goals. For example:
Travel. World travel wasn’t part of my base retirement but would be a nice-to-have if finances allowed.
Hobbies. For instance I have an active automotive hobby and would love to increase my participation which would mean more travel costs than my base happy retirement allows for.
Sports. I always wanted to learn how to play golf but it does have costs to play.
Everyone’s valued options and features list is different. Just do a self assessment of things you enjoy doing now and wish to do in retirement. Figure out what the cost is. Then add it to your base retirement to calculate your highly optioned happy retirement estimate.
Consider Living Your Retirement Lifestyle Now
We decided to live our retirement lifestyle years before we retired early. We didn’t waste money on anything that didn’t meet our happiness values. This allowed us to reduce our monthly costs, pay off all debt, left more money to save, and gave us time to create a sustainable and enjoyable lifestyle.
In my case, our base retirement purchase number was more like 30% of our last salary. A lower base retirement lifestyle cost means needing less assets to pay for it.
When it Comes Time To Purchase Your Retirement
When the time comes to buy your retirement you will definitely get what you can pay for. Some get to choose when retirement is. For others it comes when they least expect it, ready or not. Hopefully there is enough assets to buy a happy retirement that covers all the required basics.
Having a successful retirement savings outcome increases the possibility of buying a retirement with valued features and options. As long as the base retirement is covered then being able to add from the wish list becomes an option. Limited only by what you can afford. Just like any other big purchase.
If a little short then anything saved will allow you to possibly fill the gap through cutting lifestyle costs or landing a part-time gig. That beats being far short with no money and few alternatives.
It’s a consumerist world and culture that we live in. Buy this, buy that. This article is all about ending the procrastination and seriously getting started with saving for your life’s biggest purchase – YOUR retirement.
Motivate yourself by looking at retirement as something you want to buy for yourself, not just settle for.
Figure out how much you can dedicate to retirement saving.
Increase your retirement savings rate over time as conditions allow.
Never stop saving for the biggest purchase of your life. Saving anything is better than nothing. When the consumerist world calls your name and tempts you to stray from your retirement savings, remember that nobody else is going to buy you a happy retirement. Having a happy retirement is all on us to figure out and pay for ourselves.
I’m just back from a short four-day Colorado mountain vacation. It was nice to just let go, relax, and count my blessings. The best part was all the laughs. It has me happily reflecting on the past 7 years of my early retirement and taking note of some early retirement observations.
As good as things are now, I can remember before retiring all the fears and questions that I had. Studying and planning can only do so much. At some point we have to jump in and either sink or swim. With anything we do there can be surprises.
Here Are a Few of My Early Retirement Observations
I will start with money because that is what most people are concerned about when retiring early. Will it last? Will it be enough? I think that captures most basic initial concerns. All those warnings that the first 10 years are critical for long-term success are enough to cause anyone pause.
When I first retired EOY2009 the market was down. Then it slowly climbed up to record highs. In late 2015 it took another dump. Now it is even higher. That’s just in the last 7+ years. Maybe it’s the next 3 years that makeup the critical first 10 that will make or break my retirement funding chances. I doubt it but if it tanks I will deal with it.
My Early Retirement Observations – I am beyond sweating about money now. It isn’t that I have a massive portfolio, it’s just enough. But the experience of living off of my portfolio and seeing the value of diversification has me a believer. Sure, it can still hit the fan. But that is why I keep a bucket of cashto live off of when another financial downturn occurs. I still argue with my CFP about how much should be in there but that is another conversation. We do balance each other out.
We use a kind of hybrid4% withdrawal rate. When the market dove recently we just effortlessly reduced some spending. Down-market conditions can bring bargains. We took advantage of some Hawaiian travel discounts offered then (we had budgeted and saved for years for a return trip to HI). That said, having a realistic budget and sticking to a financial plan has been the ticket for my early retirement success. So far, so good.
Working In Retirement
I had always intended to retire early and often. Not everyone intends to retire and then go back to doing something they always wanted to do for pay. But many folks do and it was kind of my main thing for many years. Before retirement number one I was constantly warned about the challenges of being age 50+ and landing an opportunity. I now look back at my encore career and other retirement gigs and have to smile.
My Early Retirement Observations – When it came to working in retirement there were some challenges but nothing insurmountable. Working in retirement was better and more rewarding than expected. I was picky and stuck to my guns which flipped the whole working dynamic. Working in these conditions can be fun. The big surprise is that as rewarding as it was I have no desire to jump into another paying gig. I think it’s because I have checked off all the boxes of things I wanted to learn, try, and do.
I have had many chances to get back in the game and have simply said no thanks. I have no idea what will happen next in this aspect. I believe the key is to just stay open to opportunities so I will be able to recognize them. When something comes along that’s aligned with my interests and passions then I’ll just give it review and consideration. I will know it when I see it. I’ll just keep doing my thing and If none come my way then no worries. So far, so good.
When you don’t have constant proximity to people then relationships come and go depending on the effort made to stay close. It’s easy when you are all shackled together in the rat race. I look back at the past 7 years and am amazed at how my social circle has grown and shrunk. Some faces and names fall off while others are added.
My Early Retirement Observations – I have found that it’s easier to put effort into keeping good relationships where both parties are willing to stay connected. Especially when there are still common interests and our place in life are closer together. I used to worry about it but now I get it. I am the one who jumped the rat race ship that was our main common tie. I have no doubt that we will reconnect as time goes on. Many of my old friends and rat race comrade’s lives will become closer in sync . As far as my social circle and the people in my life are concerned- So far, so good.
Appearance – Clothes, Shoes, and my Curly Hair
I always saw articles where you can adjust your clothes budget down once you retire. Amen to that. In my case it is way down. I look in my closet and actually have T-Shirts, a couple Polo Shirts, Aloha Shirts and a few of Flannel Shirts for winter hanging there. As for footwear, I haven’t bought anything but athletic shoes and flip-flops since retiring. My work/dress shoes get so little use that they will out last me. I also seem to go a long time between haircuts. I think it is part my non-conformance attitude about society and life. I just go in for a cut when it bothers me. That can take 6 months.
My Early Retirement Observations – We held onto clothes we don’t wear anymore or need for way too long. I just took 100 pounds of our good clothes to Good Will. I think once we retired that we weren’t sure what we would need. I laugh at all the time we wasted looking at them in the closet and just not paying attention. I did wear some when in my encore career so it hasn’t been 7 years of clothes hoarding but still way too long. Better late than never, the closet has a lot of room now. So far, so good.
Retirement Hobbies, Interests, and Passions
I am amazed how some things have cooled while new things have appeared out of nowhere. Mostly what was once a big hot deal in my life is now only warm. I have to believe that it is only natural. As new things come into play, aging, and getting better at this retirement thing I see my priorities shifting. My interest now focuses even more on family and health, both physical and mental.
My Early Retirement Observations – Some of my budgeted spending for things has dropped substantially as my interests and passions have cooled. I didn’t expect that, or at least not to this extent. I still do most of the things I had planned to do in retirement but after the first sprint years I now have a marathon pace. Just part of the early retirement experience and I’m continually getting better at it. So far, so good.
Health insurance – The Talk of the Town
Everyone is talking about health insurance. Will they or won’t they. When I retired I did it with a retirement medical insurance benefit. It cost $470 in 2009 when I first retired. Now I pay $970 for a much higher co-pay plan. The company I retired from was bought a few years back and the new company hasn’t said yet whether they will still allow us retirees to continue buying into their group employee plan. Health insurance has been my biggest budgetary item in retirement.
My Early Retirement Observations – Just like everything else there are no absolutes and I have to roll with the waves. I always thought the ACA was an awesome early retirement alternative. If I lost my first career retirement health benefit it would be a financially painless move to the ACA. However we don’t know what is in the cards right now because of F’n politics.
But if there is one thing I have learned from my 7 year early retirement experience is that I would rather do anything than be forced back into employment servitude. I feel comfortable knowing that I will do just as I have been doing. Figure it out and stay living my life on my terms while using the personal finance smarts that got me here. So far, so good.
One of the things that made me laugh while on my short vacation was a T-Shirt sold in all the gift shops.
You’re Just High
(Mountain Town Name, Colorado, Elevation XX,XXX)
I guess that “Calm Down” could apply to anyone who is thinking about retiring soon and is worrying. Or anyone who has retired and still getting some experience living the early retirement life. Especially with all the health insurance issues being up in the air. Don’t get me started on some’s Social Security and Medicare gutting ideas.
Those issues aren’t the last that will show up in our retirement. We deal with things when they become more clear.
My biggest early retirement observation is that being high on the financial achievement of early retirement means never wanting to come down. But hey, we got here and the same smarts used to get here will be used to stay here. Just stay calm, stick to our plan, and work things out.
That is exactly what I remind myself about. I’ve got 7 years of early retirement to look back on and I’ve learned plenty from them. So far, so good.