My Advice to New Retirees

Although I took early retirement 12 years ago, many of my contemporaries have just started retiring in the past year.

Here's my advice, three financial and one social,  to them based on my experience:

• Take advantage of tax benefits in retirement.   After I retired, I became eligible for several tax deductions and tax credits which were phased out due to income thresholds while I was working.    I became a part time tax preparer and learned about my own tax situation while on the job. I didn't make much money, but I sure learned how to save a lot on my own taxes.   For most people, it is probably worth consulting with a good tax preparer/accountant if they currently don't use one.
• Have 3-5 years of investment income needs in cash. For those without pensions or SS payments, the number is equal to 3-5 years of expected living expenses.   For those with pensions or SS payments, the nominal number is lower since pension and SS covers part of living expenses.   I retired in 2007 at the peak of the stock market.  I was fully invested.  Then came the 08/09 crash.  Whoops, it was a challenge to get by for the next few years until the market somewhat recovered.
• Pay off all debt.   Having no debt eliminates a debt payment from living expenses. In 2008, I made the mistake of keeping funds in the stock market market instead of cashing out and paying off our mortgage.  When the market crashed, I had less money to pay of the mortgage.   The irony is I asked to refinance since I had always been timely in my payments.  The bank, which I won't name, refused since I didn't have regular income. So I told them to send me the payoff amount and let me close out the mortgage.
• Learn to say "no."  It's amazing the number of people that want retirees to do their volunteer projects, since retirees have "lots of time, from not working" in their eyes.   Fortunately, I didn't have to say "no" very much since I gave the impression I wasn't going to say "yes" if they asked.   I did recant my "no" from one request, but it was for a paying job, and they met my salary request.

My final observation, but not advice, is that retirees soon wonder how they had time to work, given how busy they are with activities and interests in retirement.

For more on Reaping the Reward, check back Fridays for a new segment.

Despite the title of the post, this is not financial, investment or retirement advice. Please consult a professional advisor.

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