There are advantages and of course, there are disadvantage comes along.
I retired in my 40’s, almost a quarter century ago. My wife retired the following year although at a younger age. We had accumulated a nice nest egg. It was nowhere near what the pundits claimed we needed. It was roughly four times our total annual income. That has meant occasions of economic stress, especially in the depths of the Bush crash.
The first thing you discover is how much money you save when you aren’t working. Wardrobe and transportation are significant costs to the employed; food is another. Income taxes drop precipitously when you leave the weekly paycheck behind. You can manage when and how you extract taxable cash. And you’re no longer paying into SS and Medicare, so be sure you have your accounts paid up with sufficient credits before you retire.
I enjoy the kitchen. While working, the time spent for the job in getting ready, commuting and cool-down did not allow for much cooking. That led to entirely too much processed, fast and restaurant food. But in retirement I’m able to spend the time to create things like stocks, homemade vegetables, pastas and extracts. Food is extraordinarily inexpensive when you have the time and inclination to work with it.
Health costs will rise, very quickly. You may be tempted to self-insure. Be very certain how you will do that before you step off. You’re just one step away from any diagnosis from disaster.
Do we have Time? .
Certainly yes, It’s not true of all aging. But in retirement, if you don’t significantly vary the routine and record in a diary, the days can blend seamlessly. You measure life in growing seasons. And when you do something special, like a grand circle national park tour, you’re doing it when the workers aren’t because costs are cheaper. By the same token, work holidays become much less meaningful. A 3 day weekend is not the momentary abeyance of life stress that it once was. Friday nights aren’t necessarily party nights. And very quickly, the lifelong friendships you developed at work unravel. Especially when you move to your retirement community. Your social life is starting new.
You’re completely on your own. If you’ve generated a lifelong guaranteed annuity that’s sufficient to your needs, that’s an enormous unburdening. Money, as many have said, is an enabler, though so many treat it as an end in itself. On the other hand, those like us who extract our living from the markets will find themselves spending a great deal of time crafting and adapting their lifetime asset distribution plan. In our case it’s a detailed and very flexible plan matching income, expenses and growth over a 50-year span. It is the single most successful thing you can do in anticipation of retirement.
You will become extremely focused on your debt, and will move heaven and earth to extract yourself from that realm. Yes, there are many economic advantages to intelligent use of debt. But I’ll remind you that you are on your own: if you succumb to that debt spiral and wind up in bankruptcy the prognosis is truly bleak. Those risks magnify and must be weighed very, very carefully against any perceived benefit. The objective here is to minimize stress. That relatively minor debt we incurred in 2004 transformed into a harsh and painful reality in 2009, when the crash began to squeeze our cash flow.
How is retirement community?
It can be one of your greatest cost cutters. We moved out of that terribly expensive urban center and into a rural community where housing costs and taxes dropped considerably. Depending on how rural you get, you may have to be flexible in your demands for trade work, and be willing to do a lot of minor repair work yourself. Our low living costs allowed us to also buy an inexpensive condo in a large southwestern city where we have become snowbirds. Of course, that brings its own set of challenges and opportunities.
The saddest fact about joining a community with an abundance of retired people, while you are still in the blush of youth, is that many of your new close friends will be decades older than you. But that’s your retirement cohort. And while you’re peacefully moving into your fifties, those beautiful souls are dying. Too quickly. You must find that careful blend of young and old - and it’s more difficult to maintain that balance than you would think.
If you do this thing, you’ll soon discover how absolutely critical those programs for the elderly are especially SS and Medicare. You might cynically think you’ll never see a dime of that (and the threat today is greater than ever) but eventually you’ll get to my age. You’ll be grateful for the security. And if you’ve planned your retirement distribution correctly, it will mean extra cash that you can use to buy Thanksgiving and Christmas packages for the less fortunate. Because by then you’ll have lived through the highs and lows and will understand how terribly thin is that margin of poor and rich lives.
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