Six retirement lessons from Dad
My parents had the "golden" retirement that popular culture portrays: traveling, pursuing hobbies and interests, and spending time with friends and family. How did they do it? Their story provides good examples to follow -- and one not-so-good example. Spoiler alert: A successful retirement isn't rocket science, even though my father was an aeronautical engineer!
Here are six areas where Dad's specific experience can be distilled into a general lesson that remains quite relevant to us today:
My father worked a full career as a professor at the University of Southern California (USC). Back then, salaries for professors were modest, and we lived a middle-class life in the suburbs of Los Angeles. My parents lived within their means, driving their cars into the ground and not splurging on consumer items.
We didn't watch much TV, so we weren't brainwashed by commercials to spend our money on things we didn't really need. For example, we ate out at restaurants only about once or twice per year, when grandparents were visiting from out of town. My parents had no consumer or credit card debt, and they paid off the mortgage by the time my father retired.
Lesson 1: Live within your means, ignore advertising that tells you to be happy by spending your money, don't build up consumer debt and pay off your mortgage before you retire.
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USC didn't have a traditional defined-benefit pension plan. Instead, it sponsored a defined-contribution plan that required high contributions from both my father and the university. The combined contribution from both was well over 10 percent of his pay, contributed consistently for more than 30 years.
Lesson 2: Contribute as much as you can to your retirement accounts. It takes a lot of savings to accumulate enough money to retire. If you want a shot at a lengthy retirement of "not working," you'll need to contribute 10 percent to 20 percent of your pay consistently for 30 years or more, and then not touch it along the way for loans or early distributions.
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My father worked until age 65, when he retired and started collecting Social Security and his retirement benefits. At that time, 65 was Social Security's full retirement age. Adjusting for improvements in longevity, that would mean retiring at age 67 or 68 today.
Lesson 3: Delay starting Social Security at least until the full retirement age -- currently 66. Delaying until 70 would be even better. Putting off retirement until your late 60s or even early 70s is one good way to make sure you can accumulate the financial resources you need to last through the rest of your life.
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Most of my father's retirement savings at USC were converted into a lifetime annuity when he retired. He selected a joint and survivor annuity that continued monthly income to my mother after he passed away. My mother ended up being retired for 32 years -- more than one-third of her life. My mother and father never worried about running out of money because he maxed out his Social Security income and had the lifetime annuity.
Lesson 4: Use your savings as a retirement paycheck generator. Spend time to learn how to make your retirement paycheck last for the rest of your life, no matter how long you live.
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My father exercised regularly and kept his weight at healthy levels. This enabled him to enjoy the majority of his retirement years. He was very active in senior track and field events, competing in the pole vault into his late 70s. This was a great source of pride for him and our family, and it took my parents around the world for track and field events.
Lesson 5: Exercise regularly, make smart choices about nutrition, and keep your weight at reasonable levels in order to stay healthy and really enjoy your retirement years.
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My father's athletic endeavors bring me to the one not-so-good example. Eventually, he lost all the cartilage in his knees due to the constant pounding they took from his athletic training, and he was unable to walk much in his 80s. In his later years, his physical health declined once he was confined to a wheelchair, and his mental health declined after that. He ultimately developed dementia, and that was a burden to my mother who was his primary caretaker.
Lesson 6: Maintain the ability to walk and exercise as long as you can, and don't participate in activities that jeopardize that ability. Research shows that exercise is one way to delay or mitigate the onset of dementia, and walking is a very easy way to get the exercise you need.
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My father lived until age 88, spending 23 years in retirement. Today, people in their 50s and 60s who take care of their health have a good chance to make it to 90 and beyond. In this case, retiring at 70 would give you a retirement that lasts 20 years or more.
To sum up the lessons learned from Dad: Live within your means, manage your debt, save enough money throughout your career, work until your late 60s or early 70s, be thoughtful about deploying your retirement savings to generate a retirement paycheck and stay healthy through exercise and good nutrition. It's not rocket science!
