My husband and I retired the very same day. He had nearly 37 years with our company; I had 24. We thought a lot about retirement before we actually did it, and in preparation for the big day, we paid off credit cards, car payments, mortgages, and other bills. But while we did a good job as a couple, there were still money matters that I had to deal with myself.
First was my attitude about money. To me, money has always meant freedom and opportunity. When I was working, I put money aside for my 401K, allocated some more money to buy company stock, and then I just spent the rest! So while I considered myself to be lucky to be receiving a monthly pension, I knew that my retirement income would be only about 25% of my working salary. I had been spoiled during my career: although I'm not an extravagant person, I could pretty much buy whatever I wanted when I wanted it. I had the freedom to spend money, and money gave me the opportunity to have things, do things, give things. In retirement, I knew I would be facing a big challenge to live on much less than I was accustomed to spending, so I tried to prepare myself to face this huge challenge.
To anticipate what I would need to live within my retirement means, I did two exercises that ultimately proved to be very helpful:
- I looked through my checkbook and credit card receipts for the previous year and categorized all the expenses.
- For two weeks I religiously wrote down everything I spent, including those mysterious ATM withdrawals. (It was very enlightening to see how a $100 ATM withdrawal disappeared on coffee, gas, lunch, and trips to Target.)
After completing those exercises, I sat down and figured out how much I would need to squeak by on 75% less than I had been spending. It didn't compute. Then I went back and figured out what I could eliminate. It was a sobering experience, but never during this exercise (or in the years that I've been retired) did I second-guess my decision to retire. Instead, I thought about my first job that paid $5700 a year. I was happy then, I reasoned, and felt like I had more money than I ever needed. I assumed that I could figure it out again.
In the first year, however, boy was I wrong. Another retirement failure. Looking back, I think I was in financial denial. No longer working, I had way more time than money. When I was home all day, finally having the time to sit and read a book, I realized there were no chairs in our house comfortable enough to sit for more than 20 minutes. So I went out and bought a beautiful, red suede reading chair. And since I had time to sit on the patio, I realized that the cushions on the outside furniture were threadbare. So I went out and bought some pretty new green cushions. Then, because I missed being around people, I realized that I had time to go see friends and family. So I decided to visit my sister in Chicago... and my mom and dad in Florida... and a friend in Portland. When I retired, I received a little cash buyout for my unused vacation. Within six months I had blown through my little nest egg and was completely broke! This was not good. Too much time. Not enough money.
When I finally encountered the financial reality of my living on my retirement income, I became a little cranky. (Who are we kidding -- I became A LOT cranky.) I wasn't accustomed to having to decide whether to get my hair cut or meet a friend for lunch. I didn't like having to go to the library to find the book for my book club, and not having the cash to buy a new purse on a whim. I hated it when my dog got sick and I had to spend all my mad money for the month on tests, shots and medicine for him. I bought one of those books on how to find bargains and not spend much money, but it alternately made me mad and depressed me. I didn't think this was a fun game at all. I felt like a real failure.
Fortunately, just at the peak of this post-retirement financial angst, I got a huge reprieve. The non-profit organization where I volunteered needed someone to fill a temporary program manager spot. When the Executive Director asked me to help out, my first reaction was "oh no -- I don't want to go back to work!" After discussing it with her, however, I realized that I could work three days a week, earn enough money to make it worth my while, provide a little structure to my time, get some interaction with people -- and still only have to do it for three to four months. The opportunity was perfect. I took it. It saved my sanity and helped me over the huge financial -- and emotional-- hump that I encountered in the first year of retirement. Looking back, I realize that a temporary job was never in my plan for retirement. But it was just what I needed at the time. A word to the wise: although you might not be able to imagine it now, when the time comes, don't rule out a temporary, part time job to help with the transition to retirement, both financially and emotionally.
Fortunately, the second year of retirement was better for me financially. I adjusted to having more time on my hands. I realized that I didn't really "need" many of the things that I had been buying -- and after cleaning out several closets -- I discovered that I didn't even want them. I never thought of myself as an avid shopper, but I had a real "ah ha" moment when I realized that shopping had become a habit for me, something that I did to fill my time, and perhaps to fill up some of the emptiness inside myself that resulted from no longer working.
Also in the second year of retirement, I developed an idea for a consulting project which I've been able to bring to fruition. More on that in a later post, but it has helped me earn a little spending money and accomplish something that gives me much personal satisfaction.
So now I've been retired for more than three years. Of course it's not my intention to provide financial advice for retirement -- I'm certainly not qualified to do that! But I've learned several things -- I'm not so much of a failure any more! -- and I'm happy to share this information and perspective with others who are making plans for retirement:
First, be honest with yourself about money. Analyze your expenses and understand how and where you spend. Estimate your expenses after retirement and then go back and estimate them again. I'd say multiply by at least 1.3 for the first year. Downsizing is a big, painful adjustment. Having a little extra cash might help you make the transition. And don't do what I did: don't spend your nest egg within the first six months of retirement! Save a little -- for freedom and opportunity when they come up!
Second, if you have a husband, partner, or significant other, have some honest talks about money. My husband and I have different views of money: remember, I see it as freedom and opportunity and look for ways to spend it. My husband, while a generous person, doesn't look for opportunities to enhance the economy. I'll talk about this more in a future post, but being able to talk about money issues as you navigate this huge life transition is very important.
Next, you might find the following categories helpful for your planning purposes. After three years, I can break down my spending into these different areas:
- Household expenses (my contribution to our joint expenses) ... 30%
- Travel ... 20%
- Health-related expenses ... 12%
- Personal care and clothing ... 7%
- Charitable contributions ... 7%
- Entertainment ... 6.5%
- Gifts and family ... 6.5%
- Car ... 6%
- Pet ... 6%
Finally, below are some of my favorite websites and books about money, financial planning and retirement. Of course there are many others, but I found these particularly helpful and interesting:
- U.S. Department of Labor Women’s Bureau’s Wi$e Up Women - is sponsored by the Department of Labor Women's Bureau. It offers an online curriculum for learning about budgeting , investing and other money matters. My favorite feature of this program is the free teleconferences providing financial advice on a wide range of topics.
- MsMoney.com features lots of valuable free information, including a money quiz, online seminars on financial health and financial security, e-books, and tools and articles on careers and life.
- Social Security Online for Women provides information for women regarding social security, and includes a Retirement Planner which calculates retirement benefits using different scenarios.
- Ballpark Estimate is a site sponsored by American Savings Education Council and provides a worksheet that helps you figure out how much you need to save to fund your retirement.
- The Savage Number: How Much Money Do You Need to Retire, by Terry Savage.
- Money Shy to Money Sure: A Woman's Road Map to Financial Well-Being, by Olivia Mellan and Sherry Christie.