My Great Retirement Dream is a series in which we highlight a pre-retiree's dream for their retirement and have a financial adviser weigh in whether or not it's obtainable. Have a vision for the kind of retirement you want? Send us an email at retirementdream@futurenet.com.
For me, retirement is at least 15 years away, but that doesn’t mean I can’t fantasize about the future. My great retirement dream? Sell my house once my two kids are off to college, downsize, and use some of the proceeds to dabble in the stock market.
I’ve written about investing and money for years and have always wanted to give it a shot, but life gets in the way.
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Marriage, children, childcare, saving for college and retirement, divorce, the list of life events and responsibilities goes on and on. But now I’m itching to give retirement planning a whirl, filling in my dreams for my second act with real-life numbers and strategies.
How I want to live in retirement
Ideally, I would like to have a home or condo near my children, wherever they ultimately land, and another place somewhere more exotic — say, in the Caribbean.
Being a journalist allows me to work long into my retirement years, even if I dial it back to part-time. Plus, if my dream comes true, I’ll be a successful investor making boatloads of money buying the hottest growth stocks. Watch out, Jim Cramer!
How I live now
When I first wrote this article in April, I was in an enviable position, at least on the real estate front. My house has appreciated substantially since I purchased it 17 years ago. At the time, it was not yet valued at over $1 million, but it was nearing that mark.
I'm happy to report that it has reached $1 million (even with mortgage rates at today's levels), although I'm still not ready to sell. I still have about five years until my youngest is off to college. I can certainly sell and rent to stay in the school district, but would that be a wise move? After all, I couldn't downsize too much. My kids are accustomed to a certain lifestyle.
Staying with my original plan, once the mortgage is paid off and taxes are covered, I should net around $500,000, if not a little more, when I sell my house. That amount assumes home prices in my area continue to grow in the years between now and my youngest child’s high school graduation.
I also have retirement savings in a 401(k), but to be honest, not as much as I should. I have been ramping that up since I first unveiled my plan a few months ago, but not to the extent I vowed to. I still plan to take advantage of catch-up contributions, but likely won't start in a year or two, as I originally claimed. My retirement savings remain in a target-date fund. I do plan on collecting Social Security.
I try to stay healthy, exercise and live an active life. My family is, by and large, healthy, so I have good genes on my side. (I have not planned for any long-term care I may need as I get older).
I still have some debt, but it’s not too out of control. I do like to shop and have taken some trips since this article, but I’m trying to rein that in.
Can I do it? What the pro said
Sounds like an obtainable dream, right?
Not so fast, Pam Krueger, founder and CEO of Wealthramp, an online service that matches investors with fee-only financial advisers, told me.
Ugh.
While my plan is possible, Krueger said it’s not the slam-dunk that I so confidently assumed. So much for being a genius.
Just because I’m sitting on a little nest egg in my home doesn't mean I'm set, Krueger said. I would still have to make some changes to position myself for the future that I envisioned. I also need to plan a lot more for all the curveballs life tends to throw our way.
Hearing that was a hard pill to swallow. I’m more the “everything will work out” type, rather than the “plan for the next five, 10, 15 years” type.
“It's a lot of fun opening your mind to the tremendous freedom retirement offers — it’s similar to the feeling you had during summer vacation, but you know it’ll end. Retirement is forever. You have to have the funds to support that freedom,” said Krueger. “The question becomes when I’m looking at the future plan, what do I need to be doing today?”
That’s not to take away from having a vision, she said. Some people have no idea what they will do when they retire or if they can or will continue to work.
“I’ve got this picture in my head of you sitting in the sunset, sipping a cocktail and still getting paid to do great work. You are not ball and chained to a job unless you want to be," said Krueger.
"You don’t have to stop doing what you are doing. Most people don't have that luxury and they have to pick a date to stop working, retire and that's it. You have a huge opportunity here to ensure you'll be supported," she said.
Yay me!
But now for the tough love and reality check.
While I have my house to fall back on and the potential to continue working, I don’t have enough saved for retirement, have no idea how I would cover any long-term illnesses when I get older and am clueless as to how much in Social Security benefits I will receive each month. Plus, I spend a lot of money that I don’t need to.
That eyes-closed, don't worry about it approach may have been fine in my 20s, 30s, and 40s, but now it’s no longer an option.
“You’re not 30 or 40, you can’t mess this up. If you want to get this right and live out this vision, you have to take it extremely seriously,” said Krueger. “You don’t have enough money, but you do have enough time, and that means you will make up for the shortfall in funds if you plan correctly.”
What I need to do to live my retirement dream
First, Krueger said I had to focus on building my safety net. Sure, it’s not as fun as thinking about how I’ll invest or where I’ll sip cocktails as the sun sets, but she said I needed to start assessing where I’m at today.
For starters, I needed to know how much my projected Social Security benefits will be each month. That’s an easy one. A visit to the Social Security website will give me that information. While I haven't done that yet, I do have it on my to-do list. I plan to get serious this fall and will find out how much Social Security benefits will be.
I have also accepted that in my situation, I will likely be working full-time until at least 67, even if I sell my home and move. That will give my Social Security benefits more time to grow and for me to save more in a tax-advantaged retirement savings plan like my 401(k). I'm ok with that. I enjoy my job and never really envisioned a life where I would stop writing completely.
As for considering the unknowns, such as the value of my house in five years, the state of inflation, the size of my retirement savings account, the impact of taxes, and whether my children will return home after college, I haven't gotten there yet. It's hard to shake my "worry about it later" approach to life, but I am working on it. (It's another thing on my to-do list!)
How I’ll allocate the proceeds from selling my home is another consideration that I need to start thinking about, but I haven't. I know I want to downsize, but by how much and where are things I still need to ponder. I also need to start thinking about how I want to spend my time and with whom.
“Taxes, inflation and long-term care are looming as huge risks to your plan,” said Krueger, who said I should consider taking out long-term care insurance. If I wait until I’m older and something happens, it could be too cost-prohibitive. “Stress-test all the scary 'what-ifs' right now so you don't find surprises when you need money the most,” added Krueger.
I have been thinking more about what if I get sick? I don’t want to be a burden on my children and loved ones. Unfortunately, I tend to block these thoughts out of my mind pretty quickly. While I told Krueger I would seriously consider a long-term care policy, I would be lying if I said I looked into it. I'm not sure if I will need it, and put that on the back burner for now.
As for my spending, Krueger said it was time to be realistic about how I live and identify ways to free up extra money, which can go to my savings. “You have to assess your spending. You can’t get to the vision if you are not willing to do this and be crystal clear who you are and how you live. You have to know what you are spending on,” she said.
Those were empowering words, and I have been trying to do that. I cut out the second Starbucks run and am trying to cook more and curb spending on takeout! As for the shopping and traveling, I'm still a work in progress. I do have two teenage daughters. We took two trips since the assessment — one to Los Angeles and one to New York City, so you can imagine the spending that entailed!
At the end of the day
At the end of the day, Krueger said it would be prudent to get the help of a financial adviser. Sure, it may cost me $2,500 or $3,500, but working with a professional could create a blueprint that puts me on the right path.
That too is something I haven't spent much time on yet. I don't think I'm at the point where I need help with a financial plan. I still have a lot of work to do to get my spending and savings in order first.
While I'm still a work in progress, I know what I have to do to achieve my great big retirement plan and plan to do it! I'll check back again in a few months, and I'm confident I'll have much better news to report.
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