Retirement: Work X+1, Draw 5%/Year

Roger Nusbaum submits: I'm outta here!

That is the title of the annual BusinessWeek retirement guide from the current issue. The focus was retiring early.

There were a couple of interesting ideas along with some retirement planning 'building blocks,' including the need for equity exposure well into retirement, and to plan on drawing only "4%-6%" out of your nest egg every year.

I would say don't exceed 5%. Lately I have become more aware that very few people are willing to plan for 5%, and that very few people are willing to concede that their plan may have to change as a result of what they want to spend.

I am not a financial planner but I have made a couple of good planning decisions for myself. While I always get comments disagreeing... don't plan on drawing X dollars. Plan on whatever you got, taking just 5%.

If you're living on $80,000 and you have $1 million the day you retire, taking $80,000 has a high probability of leading to failure. If you need $80,000 and you have $1 million you also have a problem in the making. You either need to keep working, or spend less money.

Work doesn't need to be the 9-5 you hate; it can be something you want to do. I have written in the past about my 75-year-old neighbor who does backhoe work for $60/hour; he can get as much work as wants with his big Tonka Toy. Here in Prescott there are a couple of companies that provide shuttle service to the Phoenix airport (two hours away), and every time I have ever taken it has been a 'retired' person doing the driving.

One 'tip' along these lines in most magazine articles is to consult, part time, in your field. I am doubtful this is easily available for people, but if it pertains to you I would start lining up ducks long before you actually retire.

One idea I don't think I have read anywhere is that you make your plan to retire at age X, squirrel away with that in mind, plan whatever it is you need to make X happen -- and then stay 12 more months. I have read "work longer," but that always seems vague. This is a specific idea: to plan retirement at age X and work until X+1. It doesn't come up much, but the number of people that should have worked for 12-24 months more could be quite high. For many people they make their highest income right before retirement, and maybe they spend a little less in that last year or two as well.

I'll conclude by saying that I am not trying to be overly harsh about perceived income needs. We all have our various financial blindspots. Realizing that you too have blindspots is important, and that if you do not yet know what your blindspots are, you should take some time to figure them out.

Comments

[Bruce Merri...:]

Hi Roger,

There is a war for talent emerging, and as more and more Boomers over 55 retire, the need for people with experience, sound judgment and expertise will multiply. A non-profit organization (The Center for Productive Longgevity)...CPL...ha... been formed to address this serious issue. The CEO is Bill Zinke ([e-mail]) in case you might want more information.

Bruce

2007 Jul 04 09:46 AM

[Roger Nusbaum:]

thank you, I'm only 41 and not considering retreiment but i bet it would be very useful for a lot of folks. thank you

2007 Jul 05 11:09 PM