In my view, the major retirement consideration is sufficient income to maintain a similar lifestyle you enjoyed when working. If you recently retired or plan to do so within the next few years, it is probably too late to assess considerations to improve your retirement position because your retirement income is already cast in stone. On the other hand, if you have a number of years before retirement and wondering how you should prepare for it, keep reading because I offer some valid recommendations for you to ponder based on my own experience since retiring in 2012 at the age of 71.
My Retirement Story
After I graduated with a degree in Mechanical Engineering in 1966, I served as an Officer in the Army and then joined one of the big 4 defense companies. The company offered a pension plan. I remember receiving my first pension plan status report shortly after joining the company stating my retirement date in 2005. As a young engineer, retirement was the furthest thing from my mind and I promptly threw the report in the trash. Fast forward to 2005. I was very thankful for my pension which was 100% company paid not requiring any contributions from me. If the amount of retirement income was based on my discipline to make regular contributions to my plan, I probably would have a retirement income substantially less than the company paid plan.
Company sponsored 401K plans, began in the early 1980’s. My company had one and matched my contributions up to 3% initially and later up to 6%. As a result, I had a pretty good size 401K plan waiting for me at retirement.
I decided to wait until 2012 to retire (7 years beyond my planned 2005 date) to pay off the mortgage, cars, credit card debt and put some extra money into our savings. I could do this because I liked my job and had a decent salary. I could not see retiring too early and becoming a Walmart greeter for some extra cash.
Bottom line is, I retired with no debt and income comprising: my pension; social security; and my 401K Required Minimum Distribution (required by law at 70 ½ years of age) which allows my wife and I to maintain a similar life style as when I was working. This meant I can do things in retirement that are fulfilling and satisfying for no compensation which opens up many doors of opportunity otherwise not there if I had to require some income from my endeavors.
I am not wealthy by any means but fortunate to have chosen a career with many job opportunities and be born into a generation that had good paying jobs in companies providing excellent benefits. My profession allowed me to work for several different companies as I climbed up the food chain. But I did make a conscious decision when I was in my late 40’s to stick (and at times difficult to stay the course) with a company to ensure I would have a pension, a decision which I accomplished and proved to be key in my retirement.
RECOMMENDATIONS
The following recommendations are based on my retirement story and experience:
Recommendation No. 1– Plan and commit to your retirement plan early!
Do not wait until sometime later in life to start saving for retirement. If you do, you will most likely fail miserably in reaching your goal. Forget living in the ‘NOW’ for retirement. Do not be a dreamer thinking you will win the lottery or the world will come to an end so why save now. These approaches have an extremely low if not an impossible chance of succeeding.
Recommendation No. 2– Define and implement a plan to offset the absence of a pension
Generation Y, X and future generations will not have company provided pension plans as previous generations had. The exception to this is the State and Federal governments that still provide pensions. This means you will have to make up the estimated $1M or more (assuming a reasonable plan and a 20 year minimum life after retirement) steady and reliable contribution to your other retirement income. The shortfall can be made up with: additional contributions to a 401k or Roth IRA plan; investing in rental real estate for rental income; work for the State or Federal government; or some other means to make up the difference. You can also work in retirement or live a life style less than that you are accustomed to while working.
Recommendation No. 3– Find and stick with a company with good salary, benefits, and career growth opportunities
Generations X, Y and prior generations stayed with company’s long term to ensure they received a pension and health benefits. That has all changed today because pensions no longer exist and health benefits are portable. This means there is nothing compelling you to stay with a company. My son is a case in point. He is an electrical engineer with a specialty in signal integrity which is a highly sought after skill. As a result he has worked for 2 companies over the last 3 years both of which offered excellent salaries and benefits. The company he presently works for provides 100% company paid health benefits and $10K contribution to his 401K. He is looking ahead at retirement and choosing companies that offer the best deal. You could not do this prior to the early or mid 1990’s.
Recommendation No. 4– Select a career that provides good job opportunities in the 21st century
The future will focus on integrating science, engineering, and math with life sciences. Alec Ross (author of “The Industries of the Future”) believes robotics, codification of money, markets, weapons and more, big data management and application, and genomic technology applied to cancer cure and other areas will be the industries of the 2020 and beyond. Robotics will be substitution for laborers in elderly care, factories, fast food restaurants, and other areas. In this new environment coding will pretty much ensure good jobs for a long time. Robot manufacturing, software coding, maintenance, repair, design etc should also be a good job source for years to come. The energy field with a focus of renewable sources will also be an exciting field to think about. Of course there will still be a need for welders, machinists, heavy equipment operators, plumbers, electricians and trades. New high school graduates and college graduates just starting out, and out of work folks in search of retraining should study these new trends and develop skills accordingly. Be smart in choosing your education and field to work in to ensure a good job in the future.
Recommendation No. 5- Pay your debt off before retiring
Strive to pay all of your debt before retiring. As I found out, entering retirement without debt was a big advantage. It is true that your monthly income needs in retirement are less then when working but you need to have sufficient savings and 401K to fund big ticket items such as: a new car; repair or maintance of your car; health care costs including prescriptions; a vacation or cruise; and other such things.
SUMMARY
As a young person you do not think about retirement but it is coming like a freight train so prepare to jump on it when the time comes or you could suffer a serious train wreck. Take charge of your retirement plan early and stay committed to it. Choose a career that aligns with the 21st century industries of the future. Search out and apply for excellent companies that provide career growth, good pay, and excellent benefits. One of my rules of thumb is “after graduation from college you have 5 years to move around and change the type of work you do because after that you will probably have to take a significant pay cut to switch careers”. Keep this in mind. Do not be afraid to work beyond your retirement date to be better positioned when you retire.
Bio:
John earned a BS in Mechanical Engineering and MS in Engineering Management from Northeastern University. He has a total of 44 years’ experience, 30 years with DOD Companies. He is a member of PMI (project Management Institute). John has managed numerous firm fixed price and cost plus large high technical development programs worth in excessive of $100M. He has extensive subcontract management experience domestically and foreign. John has held a number of positions over his career including: Director of Programs; Director of Operations; Program Manager; Project Engineer; Engineering Manager; and Design Engineer.His technical design areas of experience include: radar; mobile tactical communication systems; cryogenics; electronic packaging; material handling; antennas; x-ray technology; underwater vehicles; welding; structural analysis; and thermal analysis. He has experience in the following areas: design; manufacturing; test; integration; selloff; subcontract management; contracts; risk and opportunity management; and quality control. John is a certified six sigma specialist, certified level 2 EVM (earned value management) specialist; certified CAM (cost control manager).