Retirees share their best financial tips
“I retired! Thanks to Kiplinger's help!”
That's from an email from Jim Rowland of Vernon Hills, Ill. Rowland, an actuary, retired recently just shy of age 58. He followed a “pretty vanilla” strategy, investing in low-cost index funds and maximizing his 401(k) and health savings accounts. “I've been dollar-cost averaging since 1998,” he adds.
That's a good summary of our retirement advice, and it's gratifying to hear that it worked for Rowland, and for so many others, judging by the responses I receive to this column. Most interesting to me, however, is that readers often offer their own spin on our financial advice and recount experiences that will help future retirees.
Even though many of you have had a traditional pension or other employer plan to help pave the way, you are virtually unanimous in concluding that it was your savings that made the difference. Typical is Jay Joyce, who writes, “My retirement plan provided a solid base, but it was our additional savings in IRAs and 401(k) and 403(b) plans that allowed us to focus on our retirement goals.”
Although the emphasis is often on tax-favored retirement accounts, don't minimize the value of taxable investments. “I had no idea how important taxable funds would become,” says Rob Jennings, who retired this year at age 62.
Jennings intends to wait until age 70 to collect Social Security and is planning to make partial conversions to Roth IRAs to minimize future taxes and required minimum distributions. “I don't think there is enough emphasis on tax diversification,” says Jennings. “If someone had said to aim for equal amounts in taxable, tax-deferred and Roth accounts, that would have been very helpful.”
Kiplinger's generally advises waiting until age 70 to claim Social Security to maximize benefits. But the timing is a personal decision based on individual circumstances. Frank Caputo plans to collect Social Security when he retires at 62.
Having lost his wife to cancer at age 31, he writes: “I am not waiting. I will jump when I can.”
On the other hand, “the major mistake we made was in not waiting to start Social Security,” write Charles and Eileen Haugh, ages 78 and 80. “With our regular exercise regime and the wonderful health care at the Mayo Clinic in Rochester, Minn., where we live, we've outlived our expectations.”
Key to a successful retirement is matching income with expenses. When Dwight Robarts and his wife retire, he figures their income will drop to about 55 percent of what they earn now. He's not worried.
“We've been living on our retirement budget for the past three years, which has been an extremely useful exercise.” But you don't have to deprive yourself. “We live way below our means, as we have throughout our entire marriage,” write L. Charles Westervelt and Cynthia Gdula, “and we reward ourselves with wonderful vacations.”