Broker Check

Will You Be Ready? Find Your "Number"

| February 09, 2021

Loyal readers, the inspiration for this post comes from a few different client interactions in the last month.  But keep those questions coming and real questions from the mailbag will return soon. 

Age and having ”enough” set aside (financial independence) are two common goals people achieve when they decide to fully retire. 

Others love what they do but changes in their jobs create an opportunity to walk away.  One client worked for an insurance agency that under-went some significant changes and the client was ready to be done with that phase of work.  In his mid-60s with enough set aside, the changes proved to be just the push he needed to end this phase of his working career.  He now works part-time, a few days a week, for a local hospital in the billing department.  Enough to stay sharp, earn a few bucks, and more mornings include a longer walk followed by coffee at the kitchen table. 

Another client is a long-term skilled trades-man for a large auto manufacturer in Michigan.  His current role is test and rebuild transmissions.  With the shift from internal combustion engines to electric powered motors, the need to troubleshoot transmissions and his highly specific skills are on cusp of becoming irrelevant.  While wanting to work three more years due to pure enjoyment – and also not wanting to become "every day, all day, child care" for the youngest grandchildren – he and his wife have enough between social security, a pension, and their retirement accounts to be just fine in retirement.  Having reached financial independence, this client continues to work because he ENJOYS what he does.  When word comes from above that his job is no longer needed, he can pridefully pack up his tools and walk off the factory floor head held high.  If was 20 years younger, the outlook would be different.  Retooling his skills would be paramount. 

We’ve also consulted with individuals presented with buy-outs that were unable to accept as their financial house was not in good order.  Over-leveraged with debt and without enough retirement savings, telling folks they still have to work, while not pleasant, is an important part of what we do too. 

Others hold off retirement as they are leery of how they will fill their days.  For those contemplating retirement, take a week or two of vacation in February or March and stay home.  Golf courses are open only so long in the colder climates.  There are limits with hunting and fishing.  Watching the grandkids takes a lot of energy.  Having hobbies and finding purpose in retirement are keys to success. 

Buyouts, mergers, sick parents, sick children, marriage, divorce, death of a loved-one, lay-off, down-sizing, all may be triggers.  Will you be ready?  What goes into helping you make this decision? 

Knowing “your number” means knowing both how much money you need each month and how much you want each month.  From there, plug in knowing income streams like Social Security and pensions.  After that, you will need to rely on your investments.  For 401(k)s and IRAs, as a bogey, take 5% of the overall balance as an annual amount.  Divide by 12 months and then take 80% or 75% of that number to reflect income taxes.  That’s an additional amount of income per month, again as an approximation. 

We've worked through such scenarios for hundreds of clients, helping with choices related to pensions, Social Security, Medicare, when to take money from different investment accounts, what debts to consider paying down prior to retirement, and on. 

If you need financial guidance for your purposeful life journey, schedule a call with us to talk in more depth about your unique situation.