Advice from My Retirement Transition Story

MY STORY:

I started working for the State of Utah right out of college at age 22 (budgeting and accounting my whole career).  Therefore, I was under the noncontributory pension system and was eligible for retirement with 30 years of service at age 52.  I started saving in retirement investment accounts (401(k), 457(b), and Roth IRA) at age 22. I saved as much as I could, occasionally adjusting for ups and downs during my life.

 I decided about 10 years prior to my retirement eligibility that I wanted to be completely debt free and have my cost of living low enough that my pension cover could it.  Therefore, I created a plan and paid off my car and mortgage prior to retirement. This was important to me so that I could have flexibility and options when I became retirement eligible.   

About 3 years out from retirement eligibility, I decided I wanted to have a second career in a slightly different field.  I researched and worked on the certification.  I became an Accredited Financial Counselor.  This accreditation process included course work, a big exam, and 1,000 experience hours; this process took me about 2.5 years. After retiring at 30 years 2 months, I did pivot careers and was a Department of Defense contractor serving the Utah Army National Guard as a Personal Financial Counselor for 7 months.

 I then decided I wanted to make sure I would have good health to enjoy my retirement, so I decided to take time off to put myself first, which I had not done in over 35 years.  I grew a garden, started going to water aerobics and swimming laps, volunteered walking shelter dogs, and volunteered for a non-profit teaching and coaching low-income women on financial literacy.  I got healthy again and lost 60 pounds.  I did this for about 7 months.

 Then I found myself missing some of the social and mental structure I had in my life when I was working. My husband was going to work a couple more years, and my youngest daughter was finishing high school.  So, I decided to go back to work again.  Initially, I wanted to try something different so I tried working at a hospital for a couple months, but that was not for me; no problem, I could afford to quit. 

 Since, I had one year out of the Utah Retirement System at this point, I decided to go back to work for the State of Utah (waiting one year allowed me to continue to receive my monthly pension and receive a paycheck).  I initially went back to what I knew and what I was good at, state government accounting, but at a lower position without the level of responsibility and stress that I had before.   

But then the stars aligned and I got my dream job, working as a Retirement Planning Advisor for the Utah Retirement Systems.  I had to study for and pass the Series 65 exam (Investment Advising and Law), which was difficult.  I get to present on the various state pension systems, retirement savings investment plans, and financial wellness.  I also meet with members one-on-one to discuss these topics and help them plan for retirement.

 I was really surprised by how hard it was to navigate retirement.  For years, I could not wait to retire and relax and do whatever I wanted, whenever I wanted, but it did not turn out that way for me; at least not yet. I was glad I had done the planning, so I had the flexibility.

 Advice I would give anyone that is working towards retirement:

 INCOME:

1)     You should save in a 401(k) and Roth IRA in addition to your pension (if you are still lucky enough to get a pension) and Social Security.

2)     Since there is an income limit on being eligible to contribute to a Roth IRA, I would be sure to do it while you can (or contribute to a Roth 401(k) or Roth 457(b) if available to you).  I would also recommend trying to maximize a Roth IRA every year you can because the contribution limit is low, the growth is tax free, withdrawals are tax free, and there is no Required Minimum Distributions.

3)     I recommend having a tax diversified plan as well. Have both pre-tax (401(k) reduces your taxes today) and post-tax (Roth reduces taxes later).

4)     Start saving early, as much as you can, and be consistent.

a.      At a minimum, save enough to get any company match; the match is free money.

b.      Compound interest is a wonder.  And as your account growths, the faster it compounds.

c.      Dollar Cost Averaging – invest at regular intervals, regardless of the market’s performance.  This spreads out the volatility.

d.      Make sure you invest for your risk level but do not be too conservative or you may not out-pace inflation.

e.      Make sure you diversify your investments to minimize risk.

5)     Monitor and understand all retirement income sources and when they will kick in.  This could be a 3-legged stool – pension, 401(k)/Roth investments, and Social Security.  Or it could be a 4-legged chair - pension, 401(k)/Roth investments, Social Security, and a part-time job.

6)     Consider a Health Savings Account (HSA) and build that up as much as you can for as long as you can.  This will become another income source in retirement.

 However, it is not just about have a certain amount saved in your retirement investment accounts; just as important is understanding and managing your expenses before and in retirement. 

 EXPENSES/COST OF LIVING:

1)     Aim to eliminate or reduce debt before retiring.  Create a plan 10-15 years out to hit the mark.

2)     Adjust your cost of living to a manageable level that your retirement income can handle.

3)     Understand changes to your expenses in retirement.  Changes in health insurance through an employer vs. marketplace vs. Medicare premiums. Changes in utilities, grocery/eating out, and transportation from changed behaviors.

 SOCIAL, MENTAL, AND PHYSICAL WELL-BEING:

Planning for and enjoying retirement is not just a numbers game with income and expenses, having a plan for your social, mental, and physical well-being is also very important.  Get involved in a social group, and maybe even a group that can serve both your social and physical needs like a hiking or golfing.  Or perhaps a quilting club or volunteering for an organization that would serve both social and mental needs.  You have worked for so long and hard to get to retirement, you want to make sure you are healthy to enjoy it just as long.

I hope sharing my story and advice helps you on your journey to a great retirement!