Retirement

Engineering Potpourri Hobbies
#7

I won’t bother to tell you my age, but Latexman is the same age as my son. I have a little in the bank, thanks to the careful saving of my wife, who passed away three years ago. I use a financial planner and so far, it seems to be working fairly well, though not quite so well as SuperSalad Investments Ltd.

Having a lot of money has never been my goal and I don’t have any particular urge to maintain a fancy lifestyle. I live on a golf course, used to golf, but gave it up a few years ago due to various aches and pains. I still enjoy watching the golfers go by in the summer time and cross country skiers in the winter.

My neighbours are very friendly. We had a fairly large dump of snow a week or so ago. Sean, the guy across the street saw me struggling to shovel the driveway and before I knew it, he came over and stayed with me until the snow was all gone. The young girl next door comes over to help whenever she sees me working in the yard…nice neighbours.

You really don’t need much money after retirement, particularly during this pandemic. I find that the Canada Pension Plan and Old Age Security benefits are just about enough for my needs without delving too deep into my savings.

Life is good.

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#8

Thanks BA, I hope life is as good for me and DW as it has been for you. God bless you!

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#9

If I ever feel the need for a FA, it’ll be a fiduciary who contracts by the job or by the hour. I hope I never need continuous service such that I have to pay ~ 1% of assets under management (AUM). There may come a time down the road where I may need a FA, not yet though.

#10

I hope so too, Latexman. All the best to you and DW.

#11

Interesting topic to me. I plan for mine carefully, too. I have a couple of decades yet to go, but my own DW and I are pretty much on track for a secure retirement AND education paid for my son; as much as he wants.

Since I’m in Canada, there’s no point going into certain specifics: the definitions won’t line up. I do use a financial adviser, and I actually switched about 5 years ago as my previous one was “phoning it in” more than I could tolerate and packing my investments into just one institution (eggs in one basket).

I do pay a fee for my FA’s service, but I’ll also note that she looks at my taxes, not just my investments. I prefer to do my own taxes, but last year she noticed a way boost my tax return by 2500 bucks! Debt paid in my opinion. On top of that, performance of my investments has improved by more than 1% since I switched.

#12

As reported over in the Simpli Book Club, two months ago, I started giving each of my five kids a copy of The Coffee House Investor by Bill Schultheis. So far, I’ve given it to three of them; two more to go. I guess I need to visit those two!

By the way, that book also has an excellent recipe for pumpkin pie in it.

#13

Of my hundred moving parts, I consider the best feature of my retirement plan during the early decumulation phase, my pension. A retirement is dynamic, as is just about everything. I think I have a good pension, but like most private, non-government pensions; it does not have a cost of living allowance (COLA). Once I pull the trigger, my pension remains fixed until DW and I reach the end of our planning period, which is retirement speak for . . . death, the long sleep, feeding the worms, etc.

I consider myself lucky to have a full pension. When I graduated from University and went to work in 1979, Union Carbide Corporation (UCC) had a pension. Most mega-Corps did in those days. In 1988, I settled into UCC’s latex business unit (BU), and I am still in it today, but it has changed owners twice. In 2001, Dow Chemical purchased UCC. Dow had a pension too. The rules of the acquisition were whichever pension UCC or Dow that gave the former UCC employee the highest payout that is the formula to use. Ha! For me right now and at 65, that is the Dow formula. Yep, lucky! Then in 2010, Arkema bought the North America (U.S.) part of the Dow latex business unit, because Dow was buying Rohm & Haas and the FTC required the sale of our BU, because Dow would have had a monopoly in several U.S. latex markets. Frankly, those of us in the latex mafia knew this was going to happen the day Dow announced they were buying Rohm & Haas in 2009. Again luckily, the day Arkema officially bought us, I was over 50 years old (52.625 years old) and I had over 30 years of service (30.7 years) with Dow (and UCC). This meant I qualified for a full Dow pension and for Dow retiree medical, but more on retiree medical later. Therefore, I am a Dow Chemical/UCC retiree. I am deferring my pension until I am 65 because the pension payout goes up 8% every year until then! Wow, an 8% return and very little risk. That was a no-brainer to me. After 65, the rate declines to 6% per year.

Dow Chemical is doing very well financially, and they fund the pension well. The pension fund is over 90% funded the last time I checked. In addition, the Pension Benefit Guaranty Corporation (PBGC) guarantees the pension. Again, I feel lucky.

So, my plan right now is to take the 100% Joint & Survivor annuity at age 65. My DW will probably out live me. Both her parents are still with us; mine passed 3 and 4 years ago. She’ll lose her SS when I pass, but she’ll get mine because it’s bigger, and she’ll take a big tax hit because she may have to file as a single, if she doesn’t remarry. Lots of moving parts!

Any one else get lucky and snag a full or partial pension?

#14

SECURE Act 2.0 coming maybe.

https://finance.yahoo.com/news/washi…150553724.html

Highlights (from article):

  • Automatic enrollment in retirement plans at work.

  • Raise RMD age to 75.

  • Improvements to Retirement Saver’s credit.

  • National database for employees to find left behind retirement plans from switching jobs.

Overall I like it a lot.

#15

Against much resistance/inertia the Australian government made it easy to find my lost super. I tried to do it manually before the recent changes and I was supposed to rock up to a police station to get my identity confirmed etc etc, that is they made it as hard as possible. With the new system I ticked two boxes online and it was done.

#16

Crikey, Greg! What does that mean in North American English? :rofl: What’s your “super”?

#17

Is this it?
AustralianSuper is the largest Australian superannuation and pension fund, with approximately one in every ten Australian workers as members

#18

Super=superannuation. By law all Australian employers have to pay 9.5% of my pay into a super fund. They used to get the choice of fund (nothing to see here) but we can now select our own. It’s quite a good system, but has the rather enormous flaw that 9.5% isn’t really enough to get people completely off the state pension, so a lot of people buy big capital items when they retire and then take the full state pension.

#19

Thanks. Started in 1919, made compulsory in 1986, modernised in 1991. Wow, sounds better than our 401k.

As of 30 June 2018, Australians have AU$2.7 trillion in superannuation assets, making Australia the 4th largest holder of pension fund assets in the world. As of 30 June 2019, the balance is AU$2.9 trillion.

A permanent, portable pension. Nice!

#20

Have SS + VA Disability + small investments + ability to do small jobs. Should be ok for now, but things will change with time - planning for that.

#21

Is there a Mrs. MSQUARED48 and does she have some retirement income streams?

I have an internal debate going on whether I want to do some small, part-time jobs too after I retire. Part of me screams, HELL NO, and part of me says, maybe it’ll keep me young and sharp. I’ll probably never know until after I retire. When/how did you decide?

#22

She has SS too. I decided to work too because I can, and I can afford to pick and choose based on my availability, ability, and liability. Plus, as you alluded to, the work :triangular_ruler: helps forestall the dementia… :manual_wheelchair: along with playing the piano :musical_keyboard: and sailing. :sailboat:

#23

To retire, in about 2 years, one of the first things I have to do is, “request a Transition Kit by contacting the Retiree Service Center at least 60, but not more than 90 days, in advance of your anticipated retirement date.” Therefore, I will have less than 60-90 days to make irrevocable decisions from seven (7) options that affects my wife and me until the end of time, our time anyway. Scary. @GregLocock, I see why you suggested engaging a financial planner.

One common pension strategy that life insurance companies push is “pension maximization”. In this strategy, the pensioner selects the highest payout single life annuity and uses some or all of the extra money to buy one, or a few, term life insurance policies. The payout of the life insurance policy(s) are then used to buy an annuity for the spouse to provide an income stream equal to the 100% Joint & Survivor annuity in the pension plan. If the spouse dies first, the pensioner just stops paying for the life insurance policy. It is a little complicated too, because annuity income is taxed, and life insurance payouts are not. It is also not without risk, as the following article says:

Here are my numbers at 65 years old:

Single Life Annuity $7,812/month
100% Joint & Survivor $6,796/month
Extra (before tax) $1,016/month

That is not a small amount of money, an extra 15%.

One part of me says, why go to all that trouble, when I can just check the 100% J&S box on my pension documents. Will the wife be able to execute all that when I kick the bucket? Do we want to be dependent on the life insurance and annuity companies, or, does that diversify the risk compared to trusting my megaCorp? And, can I save some significant money if I go to all this trouble?

I don’t know, but the following quote from the article sounds good to me:

Mark Maurer, president of Low Load Insurance Services in Tampa, Fla., develops ‘pension max’ strategies for clients of fee-only certified financial planners. He says that just 20% of the clients he reviews do better with pension max than with the joint-pension option.

80% in favor of just checking the J&S box!

Knowing me though, I will probably look into it, and excite a few life insurance and annuity sales people in the process. Any advice before I dive into the shark infested waters?

#24

Sorry any help I can offer is for Oz. We get a year after officially retiring (which confusingly doesn’t mean stopping work), in which to sort our financial affairs out. Since this will span 2 tax years that gives some leeway in optimising tax over that period. Basically your super/accumulation fund gives you a lump sum that is protected from most income tax, and this can then be invested in funds of funds, or you can have a self managed scheme which can hold shares and other investments etc directly. Or you can buy an annuity. Only the first of those appeals to me.

#25

I am seriously considering retiring next year at the age of 56. My wife will be 64 next year. She retired 6 years ago. I will have 32 years of service with my current employer next year.

I am fortunate to have a full pension from my company. They discontinued it about 10 years ago, but I was grandfathered in. I have been saving the maximum into my 401(k) for 30 years. My wife formerly worked for the same company and has already rolled her pension (lump sum) into an investment account and has a 401(k) that is about 1/3 of mine. Unless I take the full-life annuity for my pension, the payout is tied to the interest rate on January 1. Since the interest rate is at an historic low, the payout options are at historic highs. I may not be able to risk working another year and having the interest rates rise.

I plan to take my pension as a 10-year certain. I will get a monthly payment for 10 years and then it ends. That will take me from 56 to 66. At 67, I can get my full Social Security. We already own our retirement home with no mortgage. When we retire, we will sell our current home and that money goes straight into the bank. We own a cabin in the woods which we will sell at retirement and that goes in the bank. Based on my crude, but very conservative spreadsheet, I can maintain my current standard of living, keep up with inflation and will run out of money the day I turn 105. I don’t expect to live that long. I am assuming that Social Security will still exist in 10 years. But, if it doesn’t, I will still have plenty of money to live out my life in comfort.

Taking my pension starting at 56 comes at a high price. We are penalized 6% per year for every year under 65. But, even loosing half of my pension, the 10-year certain payout will match my current income. I can live on just the pension for the first 10 years, using the money from the house and cabin to supplement. After that, my 401(k), my wife’s 401(k), her pension and SS will carry us through to the end. I have budgeted US$3000 per month for health insurance which I expect to go up 3 percent each year. I take no credit for Medicare in case it disappears by the time I qualify.

I have no financial planner. I probably should consider getting one. I have done pretty well on my own up to now. But the stakes get higher once I have no income coming in from work. If it starts to look like I am falling behind, I will consider doing consulting work part time in retirement. Working as a field engineer on big compressor or turbine overhauls once or twice per year might be fun.

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#26

@Latexman - I don’t have formal training as a financial planner, but have been an investor since age 24. This includes self-education on stocks, mutual funds, exchange traded funds, an fixed income investments, and annuities. I’ve provided advice, recommendations, and guidance to family members and friends over the past 30 years, or so.

Investing through insurance companies has advantages, but the investor should have qualified, independent evaluation of the product offered. Insurance company fees are high and tend to be front-end loaded. This is why insurance agents promote these products (a high percentage of fees goes to the agent).

Pension max may not be a good idea for you:
Maximizing Pensions With Life Insurance

  1. You are too close to retirement.
  2. Your spouse has no interest in financial matters.

If you decide to hire a professional financial planner, I suggest looking at those who practice for “fee-only”:
Fee-Only Financial Planning

One of the basic rules of financial planning is to look at ALL of your and your wife’s financial resources… don’t make a decision on what pension option to exercise in a “vacuum”.

If you are considering staying with your employer’s pension system, make an independent financial review of the company:
Dow Inc. - Value Line Assessment

Value Line is a subscription investment advisory service - They make info on the Dow Jones 30 stocks (including Dow, Inc.) available to the public for advertising purposes. Info on other companies is copyrighted. I have been subscribing to and following their advice for 43 years. Current price of a subscription is $600 / year… I take investing seriously, but am NOT advertising their product - there are other services just as good.

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