Tag Archives: Planned Retirement

Retire Abroad US Tax Guide

Relocating in Retirement, Retiring Overseas,

If you are thinking of retiring abroad, you’re not alone. In fact, just over 1 in 10 American workers are thinking of going overseas to retire, according to a 2020 survey by the Aegon Center for Longevity and Retirement. And if you do decide to move overseas, you will be joining over 430,000 retirees who are already enjoying retirement abroad.

But what makes retirement abroad an attractive idea for many? The main driver appears to be simple economics: The cost of living in the United States is rapidly increasing. Prices for housing, food, and gas are rising at the fastest rate in 10 years. For a retiree with limited savings and no fixed income, this could mean a massive lifestyle downgrade as the years go by.

Moving abroad allows people to make the most of their retirement savings by taking advantage of the lower cost of living in many countries. But before you start thinking about sipping cocktails in Mexico or Thailand, you first need to prepare for your tax obligations. American retirees are still required to file a U.S. tax return every year, even if they live abroad. Here’s a quick guide to get you started.

Retire Abroad US Tax GuideImage Source

Do I need to file taxes after retirement?

Just because you have moved to a different country does not mean that you no longer have tax obligations in the United States. The U.S. is one of the few countries to have adopted a citizenship-based tax system. This means that American citizens and permanent residents (also known as Green Card holders) are taxed on their worldwide income, even if they are based abroad. 

The same tax rules apply wherever you live. For tax year 2021, the minimum income threshold is $12,400 for single filers under the age of 65. If you are self-employed, you have to report income over $400.

You may also need to file a state tax return, depending on the tax rules of the state where you last lived. For instance, if you maintain homes or other real properties in the United States, you may still be considered a state tax resident even if you have moved abroad for retirement.

What counts as income

Employment and investments are not the only sources of income you need to report to the IRS. For retirees, income may also include pension distributions, Social Security payments, interest, and dividends.

Foreign asset reporting for expat retirees

You also need to report foreign accounts and assets to the IRS.

For instance, you are probably going to open a foreign bank account if you are planning to retire abroad. Having a foreign bank account will make your life easier, especially if you are planning on living abroad for a long time. If the total value of your foreign financial accounts (e.g. bank accounts, brokerage accounts) exceeds $10,000, you need to file a Report of Foreign Bank and Financial Accounts (FBAR).

If you own foreign financial assets such as houses and rental properties that are collectively worth over $200,000, you also need to declare them using Form 8938, or Statement of Specified Foreign Financial Assets. Your main residence is excluded from this requirement.

How to avoid double taxation?

If you decide to work or open a business abroad, you will need to pay income tax to your new host country. This could lead to a potential for double taxation since the United States taxes its citizens on their worldwide income. Here are a few ways to avoid this.

Foreign Earned Income Exclusion

One of the most popular ways to avoid double taxation is to use the Foreign Earned Income Exclusion (FEIE). The FEIE allows taxpayers to exclude income up to a certain threshold.

For tax year 2021, you can exclude up to $108,700 of earned income. That means income under that threshold is no longer subject to U.S. income tax. However, you still need to file a federal tax return even if your tax liability has been eliminated.

You must meet the physical presence test to claim this tax break. For starters, you need to physically live in a foreign country for at least 330 days in a 365-day period to claim the FEIE.

The FEIE only applies to earned income, or income derived from self-employment or a regular job. You cannot exclude pension income, capital gains, bank interest, annuities, and dividends using the FEIE.

Foreign Tax Credit

Another way to lower your tax liability is to take a foreign tax credit. You can claim an equivalent dollar value of income tax paid to a foreign government.

Income that has already been excluded under the FEIE is not eligible for a foreign tax credit. You can, however, take a tax credit on earned income that exceeds the FEIE threshold.

How to file an expat retiree tax return?

Retirement is meant to be a relaxing chapter of your life, but U.S. tax rules can make your time a lot less fun. You are expected to file a federal tax return every year, and staying on top of ever-changing IRS rules is the last thing you want to do. If you want to make the most of your retirement, your best option is to talk to tax professionals.

TFX has been preparing U.S. tax returns for Americans living abroad for over 25 years. Our team of experts can help you save time and energy and lower your tax liability. Having a tax expert process your return ensures that you have more time for the things that matter.

 

This extremely detailed and informative post comes to Leisure Freak from Veronica Rhodes at TFX.

TFX is a women-owned tax firm that offers all U.S. tax services — for both American citizens and non-citizens with U.S. tax filing requirements. From straightforward expat tax preparation to complex cases involving multiple factors — we’ve handled it all for over 25 years.

The Ultimate Definition of Early Retirement

Financial Independence, Retire Early

 

This informative article was contributed to Leisure Freak by the site Dividend Power.

There’s a lot of talk on investing and personal finance sites about what’s considered the definition of early retirement.

People get somewhat opinionated over whether someone should be considered retired if they still generate income through a side hustle or non-passive means.

Since a lot of my articles refer to financial independence and early retirement, I figured it would be good for me to further discuss the definition of early retirement.

The Ultimate Definition of Early Retirement

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Financial Independence

I consider financial independence to be a fairly straightforward concept. It’s the ability to live off passive income for a set period of time. It means you don’t need a job to maintain your lifestyle, or a side-hustle or any other means of generating labor-intensive income.

That financial independence could be based on a pile of cash that generates interest income, income from investments such as dividend growth stocks, or even social security or a pension. It could also be a combination of all of these. The extent to which your financial independence status lasts will be primarily based on the size of your savings and investments, the amount of risk you take (or don’t), and your lifestyle, which determines your spending.

Plan wisely, and you can hang on to that status almost indefinitely. Play it loose, and you could find yourself losing your financial independence and ability to stay retired early.

You can have a financially independent person with investable assets of $100K or one that requires $10 Million. It all depends on your circumstances and lifestyles.

If you’re still working a day job, or side hustling or running a business, you can still be considered financially independent. But only if the income from those activities is inconsequential to maintaining your lifestyle.

If you achieve financial independence, you can retire early. But this is only true if you do not need to work to maintain your lifestyle. However, you can be financially independent without retiring early.

Definition of Traditional Retirement

Traditional retirement is also a concept that’s understood by most. It usually means the end of one’s dependence on a conventional source of income from a W-2 or a 1099.

That source of income could have been a career, job, business, or even actively managing investments. It’s meant to be a transition. From spending most of your time on activities dictated by your income-producing commitments. To a period where you have the freedom to choose how your time is spent.

A precursor for retirement usually is financial independence, although it is clear many people are ill-prepared for that period of their life. Sometimes your exact retirement age is not planned due circumstances beyond your control. If we look at net worth targets by age, studies show that the median net worth of many in the 55 – 64 age bracket is only about $200K in 2019 dollars. This may not be enough depending on your lifestyle and spending.

In my opinion, you probably can’t be considered retired if you’re still actively generating income unless that income is not necessary to maintain your desired lifestyle. This means side hustles, part-time work, and similar income-producing activities are fair game in retirement provided that income is not necessary to maintain your lifestyle.

You can be retired and still generate income, as long as you’re financially independent.

What’s Considered Early Retirement

What distinguishes traditional retirement from early retirement is simply timing. I find this one relatively easy to define.

What we need is a proper and current baseline of when the majority of people retire. Thankfully the LIMRA Secure Retirement Institute has done all the hard work on what age most people retire in the US. This data will naturally continue to evolve over time as people live longer.

For now, LIMRA found that roughly 51% of Americans retire between the ages of 61 and 65, with 82% retiring after the age of 60.

Only 18% of individuals retire before the age of 60.

And only 5% of individuals retire before the age of 55.

What’s fascinating is that only 1% of individuals retire before the age of 50. That’s the type of 1%er many people want to be! On the other end of the spectrum only 7% retire after the age of 80 and only 2% at the age of 85+.

Based on this data, I would classify anyone retiring before the age of 60 as an early retiree. Those retiring before the age of 55 would be considered extremely early retirees and an outlier.

Those early retired folks are getting a considerable discount on their freedom, but they likely worked hard for it.

Like traditional retirement, you can be early retired and still generate income, as long as you’re financially independent. But again, you can be financially independent without being retired early.

Closing Thoughts on the Definition of Early Retirement

It’s no wonder there’s a bit of stigma associated with early retirees. Especially those under the age of 55. The chances that someone will ever meet or come across one of those individuals is rare.

This leads to quite a bit of ignorance around how most people have achieved such a significant accomplishment. And to a certain extent, maybe even some hostility. All you have to do is read through some of the comments on mainstream personal finance news outlets that highlight early retirees in a given article. Those comments are a window into how stigmatized this subject still is. Often people fail to realize though it is through hard work, paying off debt, saving at a high rate, and making smart decisions on investing in stocks or real estate.

Since I read and write about many people who have achieved FIRE, I’ve grown accustomed to learning about all sorts of people achieving financial independence and early retirement. As a result, the concept has become relatively normalized in my mind.

I’ve also realized that what many people are really chasing is financial independence at an early enough stage of their life to then do the things they want to in life. You can still choose to work but you can also choose not to. Early retirement will be a natural outcome once you hit that milestone of financial independence. Of course, many people want to claim their freedom as early as possible. Based on the data shared here, it seems like having the option to retire before the age of 50 would put most people in rarefied company.

Early retirement certainly comes in many flavors. Much thanks to Dividend Power for contributing this post. 

Author Bio: Dividend Power is a self-taught investor and blogger on dividend growth stocks and financial independence. Some of his writings can be found on Seeking Alpha, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial blogs. He also works as a part-time freelance equity analyst with a leading newsletter on dividend stocks. He was recently in the top 4% out of over 8,091 financial bloggers as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

 

 

5 Benefits of Downsizing Your Home After Retirement

Relocating in Retirement,

 

This informative post was contributed to Leisure Freak by freelance writer Alison Smith. 

Your beautiful, spacious house with four bedrooms and three bathrooms was once a perfect home for you and your family. However, things change. Your kids fly out of the nest and start their own lives. They do come to visit, but the length of their stay doesn’t necessitate so much otherwise empty space. Also, large homes are expensive to maintain, and cleaning them is no easy feat. Especially once you retire, the reasons to stay in that house vanish one by one. And the reasons to move out begin to take their place. It has been your home for a long time. And it’s only natural that many fond memories make you hesitant to consider that maybe it’s time for another change. But if you think about it, there are many benefits of downsizing your home after retirement.

5 Benefits of Downsizing Your Home After Retirement

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1- You can address possible accessibility issues

If you live in a multi-level house, going up and down the stairs can become difficult at one point. Even if you don’t struggle with mobility issues at the moment, you may develop them later. Therefore, downsizing your home after retirement will allow you to purchase a house that provides better accessibility. It is definitely a much better option than spending tremendous amounts of money on renovations to make your current home better suited for your needs.

Single-level houses are a great option as they have no or few stairs. Also, open floor plans should be on your priority list as they are much easier to maintain and move around. Speaking of moving around, look for homes that feature wide doorways.  

2- Easier maintenance

As we have already mentioned, a smaller home is way easier to keep clean and tidy. It will take you much less time to put everything in order, so you will be able to get the most out of your retirement and do the things you enjoy.

Just think about how much time and energy you have to spend mowing your lawn, weeding, and taking care of all the plants. Not many people enjoy having to do this, even when they are in full strength. A nice patio and a low-maintenance garden are all you need for a happy life. 

Furthermore, older homes tend to require more maintenance and repairs. This is both physically and financially draining. As you can expect, the most common issues in older homes have to do with plumbing, electrical installations, inadequate insulation, drafty windows, outdated appliances, and we won’t even mention possible structural issues and toxic materials. All of these are very costly to fix, and they tend to add up. So even if you don’t have any troubles now, downsizing to a smaller home will spare you a lot of headaches in the long run. 

3- You get the chance to lead a more active lifestyle

Lack of physical activity is prevalent in older adults and retirees. The problem is that this inactivity can lead to the development of chronic diseases, for instance, diabetes and heart disease. It can also lead to a shorter life span.

If you live in the suburbs, where you have to rely on your car to get around, leading an active lifestyle can be difficult. So, if your goal is to stay active after retirement, moving to a more walkable neighborhood is an excellent idea. You can find an area that offers better exercise opportunities, such as places to go for walks. Also, look for neighborhoods with good transportation options so you can quickly get to different parts of town. A condominium is an alternative, too, as there are buildings that offer amenities like a swimming pool or a gym.

Moreover, you can decide to move to a completely different state. Perhaps you have always wanted to live in a warm climate. You will be happy to know that the US has a lot of senior-friendly places. Just think about Florida. If this sounds like an interesting idea, Sunshine State is definitely worth considering. It has everything you could possibly need to lead a happy life: affordable housing, low cost of living, no income tax, stunning beaches, excellent senior communities, a great health care system, and, as the nickname suggests, lots of sunshine. All that will motivate you to get on your feet and join many other active retirees who saw the benefits of living in this state.

4- You can lower your monthly spending

Smaller homes equal lower utility bills. You waste considerable amounts of money on heating and cooling the unused space in your big old home. There is also electricity, gas, and water. So, the smaller the place, the less you will spend to make it comfortable for living. Also, bigger homes come with higher expenses on lawn care and cleaning if you have to use these services. And we have already talked about the repairs. 

Furthermore, larger spaces may require you to spend money on more furniture and other decor, just to fill up space. But if you downsize, you will get a chance to rid yourself of all the unnecessary junk and lead a simpler, clutter-free life. Moreover, if you move to a smaller home, you can earn some money by selling the stuff you no longer have space for. 

All the money you save on lower utility bills, maintenance, and repairs will let you spend more on yourself. You deserve a bit of pampering. And you can invest that money into a new hobby that will keep you active and connected with other people.

5- Downsizing your home after retirement is a chance at a new start

Downsizing to a new home is a new beginning. So, you can use this opportunity to declutter your home and let yourself have a fresh start. As with all the excess furniture, you can sell the items you no longer need. You can organize a yard sale, which is always good fun. Or your family can help you sell some things online. Another option is to donate some of your stuff to a charitable organization. 

The reason why decluttering is necessary is that you have most likely collected an endless collection of items over the decades you have lived in your house. So, if you want to have a pristine new home, this is how you begin. Although sifting through all those belongings can be hard and emotional, you will feel a massive burden lift off your shoulders once you decide what you will discard. Only then can you get your fresh start.

Enjoy your new life chapter!

As you can see, there are many benefits of downsizing your home after retirement. Most of them are concerning financial advantages that will allow you to have a better quality of life. Also, downsizing will help you choose a home in a location that will keep you active, happy, connected with your community instead of being invisible to the world. 

 

The world is certainly anxious to get back to normal and on the move. For some, retirement offers a chance to cash in on a currently high home appraisal and opportunity to move to a lower cost area. Thank you Alison for contributing this timely post that explains the benefits of downsizing your home after retirement.  

Author Bio: 

Alison Smith is a kindergarten teacher. She has always loved expressing her thoughts on various topics, and since writing is her passion, she has become a freelance content creator for different websites. She loves reading and is very proud of her book collection. 

Important Legal Steps to Take After Retirement

Non-financial Aspects of retirement, Protect Assets

This informative post was contributed to Leisure Freak by writer Veronica Baxter. A good reminder that there are necessary and important legal steps we need to include in our retirement plan. 

This article will outline the actions you should take while planning to retire or having just retired to ensure you achieve the financial and medical outcomes you desire.

Make a Will

If you have not done so already, make a will. In most states, this can be done with forms you can obtain online; however, there are likely witness or notary requirements. Be sure to comply with the testamentary requirements in your state so that your will is enforceable.

If your estate is complex in that you own a business, have multiple real estate holdings, have real estate or accounts across state lines, own property or accounts, or have invested internationally, you should consult an experienced wills and estates attorney for guidance.

Important Legal Steps to Take After RetirementImage Source

Update Your Beneficiaries

Your life insurance and bank, investment, pension, and retirement accounts require beneficiary designations. And, of course, you must designate beneficiaries in your will.

Be sure to keep your beneficiary designations up to date. For example, suppose you’ve had more children since the last time you updated your beneficiary designations. In that case, it is time to update again to include a designation to a trust in the name of those minor children. If you’ve divorced and you fail to change your life insurance beneficiary from your ex-spouse to someone else, your ex may benefit from your death. Not ideal.

Name primary and contingent beneficiaries or multiple primary beneficiaries in case a beneficiary cannot be found or has died. In this way, you avoid life insurance not paying out or the proceeds from your bank and investment accounts escheating to the state. Your loved ones should benefit from your hard work if you cannot, not the government.

Last, be sure to designate your beneficiaries by name. Problems can arise between potential beneficiaries if you do not. For example, if a man designates “all of my children” as beneficiaries, who does he mean? His children from his first marriage? His second wife’s children, who he considered his own but never formally adopted? A child he had with a girlfriend in college? You can see the problem.

Set up Durable Power of Attorney and Medical Power of Attorney

These designations appoint someone to make decisions on your behalf should you become incapable of doing so. For these people to be empowered to act for you, your incapacity may be  

temporary or permanent. The person with durable power of attorney will see to your financial affairs. Likewise, the person with medical power of attorney will make medical decisions for you and enforce your wishes regarding the type of treatment you do and do not want.

Be sure to consult the person or people you want taking on these roles – some people don’t want this kind of responsibility, and you need a willing and capable person to act on your behalf when you cannot.

You can set up a DNR order or organ donation in advance, however, the person with medical power of attorney will make sure your medical team complies with your wishes.

Update Your IRA Investment Risk Level

While not a legal step, this is important. If you have not been advised to do so already, be sure to contact the administrator of your retirement account and shift your investments to low-risk investments. This is to ensure the preservation of the corpus of your contributions as well as growth at a more stable and predictable, albeit lower, rate of interest.

Last, be sure to inform your loved ones of your intentions regarding all of this and their responsibilities, if any. Tell someone where all of your legal documents are so that if something happens to you, they can be easily accessed. You will rest easier knowing that you have taken care of all of this in advance.

Thanks to Veronica Baxter for sharing these important legal steps to take after retirement. 

It’s easy to forget about the non-financial aspects of retirement preparation. Especially things that don’t exactly fit into the more exciting aspects of retirement planning.

V Baxter Leisure Freak Contributed PostAbout the Author

Veronica Baxter is a writer at assignyourwriter, blogger, and legal assistant living and working in the great city of Philadelphia. She frequently works with and writes for Boonswang Law, national life insurance beneficiary attorneys based in Philadelphia.

 

A Closing In On Retirement Dilemma: Stay Put Or Chase New Opportunity

Financial Independence, Retirement Plan, Risk Tolerance,

It’s something that many future retirees may encounter when within a couple of years of freedom. The closing in on retirement dilemma of whether to stay put in the job or move on to what might be a better opportunity. Something that may even shorten the remaining retirement time frame if the earnings are better. I had this quandary when I was a year or so away from my targeted retirement goals. In my case the decision was made for me. Just in time before I might have regretted what I was about to do.

A Closing In On Retirement Dilemma: Stay Put Or Chase New Opportunity

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The Common Closing In On Retirement Dilemma – Move On or Ride It Out

We’ve all heard the saying, the grass is always greener on the other side. If there was ever a time to pay attention to that idiom, it’s when we’re closing in on retirement. The trick is to spend a little time examining the other side with a clean pair of glasses. We need to see if it’s really better. Sometimes we are looking through an emotionally smudged lense. In my case it was a close call and I ended up staying put until hitting my retirement target. 

During my final year I was tempted by a lucrative offer to jump ship and I was about to accept it. Luckily for me they decided that their business was going to downsize days before things were finalized and fortunately the cat was still bagged. Both the project and the offered position were cancelled. Days later word got out about all of their coming layoffs. How different my retirement timeline would have played out had I made the move and that company’s decision was made after it was too late for me to reverse course. 

It was a quick eye opener and I instead stuck it out where I was until my early retirement time. Months after I retired I started on some rewarding paid retirement job adventures. I can see how different those experiences would have been had I started them before I was retirement ready. 

Here’s how it went with me. Something to provide a few thoughts to go through before making a decision to either make or avoid a pre-retirement job move.

What’s exactly motivating the urge to jump ship when almost home?

How do we really feel about the job?

It’s easy to become impatient when getting close to our retirement date. Things at work that have always irritated us will only amplify. I had plenty of them over the decades in my first career. My “closing in on retirement dilemma” of whether to stick it out of skate off was primarily motivated by the constant post company merger executive’s insults. Insults that were both financially and policy driven against those of us who actually did their jobs. 

Since we are close to the finish, we should focus on the light at the end of the tunnel. We have to assess and ask ourselves whether we like the company, people, immediate management, work, environment, conditions, pay, etc. If the answer is yes for the majority, maybe sticking it out might be the logical decision. If not, nobody should have to stay in an intolerable situation if a better opportunity presents itself. 

The power of seeing prospects of more money

A sprinkle of impatience and a pinch of greed may be all it takes to believe we’re seeing retirement sooner than planned or going with a bigger sendoff. Who wouldn’t want that? There’s always the temptation to chase after more money. If the runway to retirement is long enough, then this is a powerful motivation and maybe a good move because pitfalls would be most likely-short-term in the entire time-frame scheme of things. If it’s a short retirement runway with a higher impact of error, maybe not so much. 

To temper my enthusiasm and emotions so that I could logically think my way through, I reminded myself that my current salary, although less than what was being dangled in a new opportunity, still provided a near retirement date. It helped, but I was still swayed by dollar signs.

Applicable Lessons Learned Comparing My First Career With My Retirement Jobs

Nothing is guaranteed

I admit I was shook when everything collapsed as it did while trying to solve my closing in on retirement dilemma. Timing of the new company’s coming reductions was in my favor. But it would have been devastating had it come a week or two later. I would have been left desperate to find another position and most likely adding delay to my retirement plans. 

As good as a new offer looks, there’s no guarantee that it will be fulfilled or last. Sure, the same goes for our existing positions. But at least with time on the job there is usually a severance benefit if let go. If in the final stretch to retirement that may be enough to get us there. We must always remember that all of it is a delicate dance. Business has its priorities, and we should have and guard our own priorities.

All the workplace annoyances

When we’re in a long-time career we can think annoyances are isolated to only where we’re working. Surely there isn’t the same propensity for shenanigans and insult as there is here? The reality is that this happens everywhere. 

How I got through the last stretch to retirement was to figure out how to better avoid the irritating people and policies. With no motivation or ambition for advancement in my soon to retire mentality, I just focused on doing the parts of my job that I did best. I then leveraged their game using their annoying new rules to my advantage while holding my nose to get to my primary goal: Leaving on my terms when I was ready.

After I retired I started some great retirement gigs. I saw the same irritating nonsense going on that I saw before, but what wasn’t the same was me. I didn’t need to be there, I wanted to be there. Having the power to walk away anytime and having zero financial threat for failing to please a company idiot changed everything. It’s easy to tolerate the side stuff when the employment power dynamic is flipped in your favor. 

Money isn’t everything

I was tempted in my final stretch to retirement by what looked like an exciting project with what was a different growing company along with a big raise. The near miss made me think hard about what might have happened. 

I tried to stay objective by reminding myself that money wasn’t my primary motivation in the overall scheme of things. Early retirement on my terms was. That’s what’s at risk if things go wrong. If money was all I cared about, I certainly wouldn’t be on track for an early retirement just down the road, I’d instead just stay working to pad my net worth. No thanks!

Even so, I still fell for money’s lure in my last stretch before retirement. My near miss experience did teach me how to better prioritize and prepare myself for my enjoyable retirement jobs that came later. I had won the game by reaching my financial goals and could truly only accept work that I had interest in doing. Best of all, without having to meet any financial obligations or goals, I only had to do it for as long as I wanted to. There’s truly a huge difference between needing to work, and wanting to work. Taking on a new opportunity while closing in retirement would certainly fall into needing to work.

I found my retirement gigs much more enjoyable and the money earned was just the cherry on top. I also realized that money wasn’t proportional to job enjoyment. My first gig was lower paying than my career. My second retirement gig paid more than my long career. Another paid way less than than all of them. I enjoyed them equally and way more than my long-time career. 

How hard are we really willing to work during our last leg of employment servitude?

When we have been in a position for a long time we may be working hard but it is known, understood, learned, and productive work. Our work and reputation has already been earned. A new position means we will most likely have to reprove ourselves. There’s the stress of learning new job duties. But also learning the new company culture, processes, determining people to align with and those to avoid, etc. All with the pressure to succeed because we still have retirement date goals that are within reach if we pull it off.

Some may find it appealing to just coast on their long-time job through their final stretch to retirement. That wasn’t me, although I often wished it was. There probably wouldn’t have been any closing in on retirement dilemma to work through. While in my long-time career I was ambitious, taking on new responsibilities, and attempting to increase my knowledge and skills. What I found later during my retirement gigs is it was a lot easier to do in a company and position I had been in for years. 

Once I entered into new retirement opportunities within similar technical fields, I experienced just how challenging and stressful it is to feel that I was performing sufficiently. That feeling of inadequacy would have been excruciating if done worrying about survival to make my retirement date goal. In my post-retirement experience that specific new job pressure wasn’t an issue. I just needed to satisfy my own feelings of adequacy. It takes a while to retrain our brain to overcome all of the stress that can come with a new job. I will say that all got easier to menatlly get through with each new paid retirement opportunity I took on.

Risk is always there

In some cases it doesn’t matter how well we perform or how solid our plan is. There’s always the risk of outside forces overturning everything we have worked towards. Just as in my close call when business and economic conditions abruptly changed. It can happen whether we stay put or chase a new opportunity.

That near miss and my retirement work experience showed me that the biggest hedge against expendability by these outside forces is reaching our personal finance goals. Something to focus on when experiencing a closing in on retirement dilemma of whether a late career move is the way to go. If the odds look great to make a move or the risk reward is worth it then do it. If not or not sure, then stick it out until the odds are more in your favor or when you can freely chase opportunities post FIRE.

It will always be a tough dilemma

I know that I underestimated how competitive and ruthless the working world can be. After dealing with and managing levels of it in my long-time career, I failed to think it could be even tougher starting somewhere new. I wasn’t a starry eyed fool. It’s more about being lulled into complacency after decades at the same company and then receiving a good opportunity pitch. 

Everyone will have to decide for themselves whether to stay put or chase a new opportunity in the final stretch to retirement. Sometimes the stars will align and an opportunity is too good to pass up. For others the prudent move might be avoiding any rocking of the boat that got them there. Regardless of how impatient and annoyed we are during the last stretch along the lines of the saying, better the devil you know. 

How To Get the Most Out of Your Retirement

Early Retirement Lifestyle,

 

This informative post was contributed to Leisure Freak by freelance writer Sierra Powell. 

One of the most exciting and momentous times in someone’s life will come when they are finally prepared to stop working and enjoy retirement. While you will likely have to work very hard for a long time to get to this point, it is important that you continue to be diligent and find ways to ensure that you maximize this time of your life. There are several tips that you can follow that will help you to get the most out of your retirement.

How To Get the Most Out of Your Retirement

Image Source: Pexels.com

Be Financially Prepared

One of the most important factors that can influence how well you are able to enjoy your retirement is whether you are financially prepared. All people need to make sure that they have the financial resources available to last while also having the finances to enjoy their life. This can be done through a combination of savings, social security, pensions, and other sources of income. When speaking with a financial expert pensions and other sources of income will be used to assess your ability to live the lifestyle you want in retirement. It is important that you continue to assess this in the years leading up to your retirement target date.

Have Healthy Hobbies

When you are newly retired, you may find that you suddenly have a lot more spare time to spend. While you used to spend 40 or more hours per week working and commuting, you will now have time to do what you love. It is important that you fill this time with things that you love to do but are also healthy and productive. Some great options can include playing golf or tennis, gardening, or even hiking. All of these will allow you to get outside and enjoy some fresh air.

Stay On Top of Health

A major factor that will influence your overall quality of life in retirement is how healthy you are. Your personal health is something that you need to take care of your entire life. This will include exercising regularly, eating well, and seeing a doctor from time to time. Those that are able to follow a healthy lifestyle will feel better, have more energy, and will be able to enjoy their life more.

Consider Working a Little

As you are new to the world of retirement, you may be excited to avoid working altogether. However, in the first few years, you may find that you miss the structure and relationships that are developed in a professional setting. Those that choose to do so can consider working a little bit on the side during retirement. Depending on your situation, this can include working part-time or taking on hours as a consultant. This could also help you make a little extra money on the side.

Try New Things and Meet New People

While some people think of retirement as a time to start slowing down and relaxing, it is also a time when you are generally free of responsibility and will have a lot more time. Due to this, it is a good time for you to try new things and meet new people. It would be a good idea to get involved in your local community and find ways to volunteer your time and skills. This can help you meet other people in your area that are retired as well, which will help you make more friends and enjoy your time.

See the World

An ultimate dream that a lot of people will have when they retire is to travel as much as they can. For those that have the time and financial resources, this is a great way to get the most out of your retirement. You should spend time carefully thinking about what you would like to see the most and start planning trips. There are often great travel groups that you can join that will allow you to meet other people and travel in a larger and safer group.

As you are approaching retirement, it will be time to start thinking about what you want to do the most with your time. By following these tips, you will be able to get the most out of your retirement once the time comes.

Thank you Sierra for contributing this article to Leisure Freak. Your tips offer ideas and seeds for thought beyond just the total savings number. 
freelance writer Sierra PowellAuthor Bio: Sierra Powell graduated from the University of Oklahoma with a major in Mass Communications and a minor in Writing. When she’s not writing, she loves to cook, sew, and go hiking with her dogs.

FIRE Choke? How I Accounted For The Risks Of Early Retirement

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FIRE is hard to accomplish, not impossible. For many the dream of financial independence and retiring early is extremely alluring. Enough to motivate us to accomplish the necessary personal finance goals and overcome the hurdles of a system that wasn’t intended to allow escape from. It is something to be proud of and celebrated. Then just as it’s right in front of us we can find ourselves unable to pull the trigger, we FIRE choke. Fear of taking that last step is common. 

I wasn’t blind to the many risks of early retirement and covered it in my plan. Yet I still experienced anxiety from the enormity of my retirement move. It’s all too easy to focus on the celebrated sunny day images of early retirement and overlook or underestimate the probability of storms. That is until it’s all on the line at crunch time.

FIRE Choke? How I Accounted For The Risks Of Early Retirement

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Avoid FIRE Choke: Dealing With The Risks Of Early Retirement 

The risks of early retirement are real. They must be recognized and accounted for in any early retirement plan. Even if we’re fortunate enough to never actually experience them, without understanding how we would counter them can cause expending too much energy and time worrying about “what if”. 

I had delayed my early retirement by a year because the recession came right as I hit my goals. It ruthlessly moved my target further away from me and set me back. But later when all signs pointed to being good to go, my recent memory of the recession’s last minute target devastation caused me a little battle with FIRE choke. It would have been much more paralyzing had I not accounted for all the risks we’re warned about. 

Market Risk

Investing over the long-term usually favors the investor. Retiring early means relying on our portfolio over a much longer period of time. But using a retirement calculator that accounts for multiple historical return cycles isn’t a guarantee that we won’t enter a risky run at the wrong time or for a devastating prolonged period of time. It was something I had to mentally deal with.

My counter to relieve some of the market risks of early retirement was with diversification and rebalancing allocations as necessary. I had the stock to bond ratios to support my investment risk tolerance. Along with enough cash to get through any bumpy markets. After my recession experience I wanted a recession hardened portfolio. Now 11 years into my early retirement I have to say it has worked flawlessly. The portfolio also proved less worrisome when I saw during the pandemic market drop that my portfolio allocations did their job. 

My tip- To reduce the market risk worries of early retirement pick a portfolio allocation, diversification, and cash holding strategy within your risk tolerance that relies on data. Don’t bounce around based on emotions. Especially those driven by fear or greed. I’ve heard too many stories of folks jumping in and out of their strategy and causing damage to both their portfolio and retirement.

Health Insurance- Medical Costs

Medical cost is something that causes many to FIRE Choke. Retiring early before Medicare eligibility can make retirement healthcare pricey. I had earned a retirement health insurance benefit. My short-term healthcare was covered. But my company had been merged with those that had an adversarial attitude toward earlier earned benefit promises. Although benefit cuts made before I retired were worrisome enough, I had to counter concerns about how much worse it could get over time. I retired 14 years before I would be Medicare age. When I retired the ACA was being worked on, nowhere near passing into law. 

With my early retirement at the end of 2009 I had a monthly health insurance premium for my wife and I of $475 with $25 copays. Now in 2021 I pay $1472 with a midrange deductible before an 80/20 payout begins. If it becomes too unaffordable my “plan B” is to structure my income to use the ACA.

My tip- What I did to calm the risks of early retirement medical cost concerns was to double my medical budget of insurance premiums plus out of pocket costs when running my numbers through the retirement calculator. In hindsight my doubleling was not enough to cover my full pre-medicare 14 year period. I recommend using a projected budget that uses double current healthcare costs for the 1rst 7 years of early retirement. Then trippel it for any remaining years before Medicare. See how your retirement calculation works out for the years before Medicare and after.

Remember, it’s just long-term projections in a calculator

I had to plug in a higher withdrawal amount into the FIRECalc calculator than I was planning on using. What I was looking for was my retirement funding success rate. I ended up initially with a higher portfolio withdrawal rate than the recommended 4% but post Medicare it will be lower. 

No More Paychecks Syndrome

The one joy of employment is getting a paycheck. Then doing our thing of managing the budget plus putting some aside to pay ourselves. Knowing that paychecks end when we walk off the job can mess with our head. I planned to get around this by having my IRA account holder directly deposit a monthly check into my bank account. 

My tip- Create your own paycheck scheme. I went from bi-weekly work paychecks to once a month distributions for my bucket strategized IRA. I had the retirement distribution deposited into a savings account and I then make bi-monthly paycheck transfers from that. 

Thoughts Of Needing More Money

One of the risks of early retirement is not having enough money. Even when the numbers check out it’s easy to succumb to thinking to maybe playing it safe and accumulate even more. This is a common FIRE Choke. Putting retirement off for another year or longer of portfolio padding. Both the fear of running out of money or being greedy and thinking more is always better than anything else can cause us to choke and derail retirement plans at the last moment. 

My tip – Retiring on our terms means picking the day we toss the job for the adventure of retirement freedom and owning our own time. When the thoughts of needing more creeped into my mind, I reminded myself that time is finite and not guaranteed. My father in-law shared through his own experience that retiring early is like leaving the casino when ahead. I used that metaphor to quiet the more money seduction.

Be Mentally Ready

Most importantly is planning to be mentally ready to retire and walk away from the only life you have known. It might not be the life you enjoy, but it’s the devil you know. Even if all the other bases are covered, not being mentally ready means none of it will matter. FIRE Choke is then inevitable. Even if we were to power past that, there would be no mental peace about the decision to retire early if our head isn’t right. There are plenty of nonfinancial aspects that we need to account for to avoid mentally regretting our early retirement decision.

My tip- Plan to deal with separating your identity from what you did for a job, expanding your social life, defining an ever changing purpose, and transitioning from saver to spender of your portfolio. Much of this requires being aware of it before retirement. But most will have to be fine tuned on the fly after entering retirement. So finally, give yourself time to work through it. 

 

There are many reasons why we may question our decision to retire early once the goals have been met and our plan looks solid. Dealing with issues that range from fear to greed are common. We just need to be aware of them and address them logically. If we can’t account for them in a reasonable way and there’s still mental reluctance then maybe it really isn’t our time to take the leap. There’s no shame in that. Afterall, we’re the ones that have to live with ourselves and the outcome of our decisions. 

How To Find the Perfect Home After Retirement Without Breaking the Bank

Relocating in Retirement,

 

This informative post was contributed to Leisure Freak by freelance writer Sierra Powell. 

Your life is probably pretty exciting right now if you’re thinking about buying a home. It’s a wonderful thing to buy a home, but you have to stay mindful of your budget, especially after you retire. You can still find an amazing home without breaking the bank. These are some things you can do to achieve that:

How To Find the Perfect Home After Retirement Without Breaking the Bank

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Look for Homes That Have Been Sitting

One of the best ways to get a break on the price of the perfect home is to look for ones that have been sitting. These are homes that have not sold for some reason or another. They may not be bad homes at all. Maybe the prices were too high, and no one else was willing to pay what the owners wanted. Maybe something about the homes didn’t appeal to others but may still appeal to you. Either way, the sellers will be eager to make a deal on it. Make an offer if you find one of these that you like. Don’t forget to use your negotiation skills. You always have the power to negotiate to pay the price you want for a home.

Consider Searching for Foreclosure Homes

You may want to sign up with an organization that can help you to find foreclosure homes. You have a great chance of getting a house at a reasonable price if it’s in the middle of foreclosure. In some cases, you can get a 30 percent discount on such a home. Make sure that you understand the redemption period and where the home is in the process of foreclosure before you put your heart into the sale. You need to know that the home will be yours when it’s all said and done.

Talk Directly to Your Real Estate Agent

You could talk directly to your real estate agent to ensure that you get an affordable home. Let the real estate agent know your budgeting boundaries and tell him or her that you will not budge. That way, the agent will only look for homes that match the price you want to pay or cost less.

Think About Buying a Fixer-Upper

Another idea to get the perfect home without breaking the bank is to look for fixer-upper homes. Fixer-upper homes are properties that need a little bit of work on them. Maybe the home needs new carpeting, or it has a few electrical issues. Perhaps it needs to be painted or the walls need some work. You can take advantage of an opportunity like that if you’re handy with tools and you want to save money. You could even find a fairly-priced handy person to help you to fix up your project home.

Don’t ever pass up a fixer-upper because it might be perfect for you. If your fixer-upper seems like it might need some bigger ticket items replaced down the road like a roof, appliances, garage doors, etc it might be worth picking up a home warranty plan to help you with replacing these items.

Look for Some Short Sales

You can also consider grabbing a short sale. Sometimes, sellers just want to get out of a house deal and move on with their lives. You can purchase such a house if their bank agrees to let them make a short sale. You’ll save money because you’ll be able to buy the home for less than it’s worth.

Explore Some Other Areas

Another way you can find a cheaper house is to look at some of the less expensive areas near you. There might be a nearby town within 10 miles where the cost of living is less than it is where you live. That’s quite common in places that are known tourist attractions. Take a drive one day and do some research to find the most affordable houses. This is possible even in Southern California. You can obtain a home with a slightly lower value and still stay within the VA loan limits in San Bernardino.

Again, don’t forget to negotiate when you find the home you want. You don’t have to pay the price that’s on the listing. Home prices are usually up for negotiations. Take a chance and make an offer on something you like. Maybe you won’t have to break the bank after all.

Find Your Dream Home Now

You now know a few secrets that will help you get a new home without breaking yourself. Try them all and then choose the home that best meets your needs. You’ll be glad you did.

Thank you Sierra for contributing this tip filled article to Leisure Freak. One of the best aspects of retirement is having the freedom to live anywhere without the tethering of employment. Retirement should include living where we are happiest. 

freelance writer Sierra Powell Author Bio: Sierra Powell graduated from the University of Oklahoma with a major in Mass Communications and a minor in Writing. When she’s not writing, she loves to cook, sew, and go hiking with her dogs.

How I Knew I Had Enough To Retire Early

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Many people want to retire early to live a life free from the rat race. It takes having a certain mentality and the financial means to pull it off. Even with meeting those requirements on paper, it can be difficult to really know when we have enough to retire early and make it work over the long-term. 

I was mentally ready and willing to ditch the career at age 40. But it wasn’t hard to figure out then that I didn’t have the means to do it. At that time in 1998 I only had around $100,000 in my 401K ($160K converted into today’s dollars), some debt, and no idea how to fund our lives without my demanding career. So began an early retirement plan and the 10 year journey to get there. Then came questioning my readiness until the moment I knew I did have just enough to retire early. Enough in more ways than one. 

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Once I Knew I Had Just Enough To Retire Early It Was Easier To Jump

Knowing that you have enough to retire early is a lot tougher than knowing you don’t. It was obvious when I first started my early retirement journey to see there was no way to pull it off. But as financial goals are met and numbers vastly improve, the real math and mind warp begins. 

The Mechanics Of Knowing I Was Good To Retire When I Did

I Became A Budget Master

I wouldn’t have been able to call it time to retire without first knowing exactly what our preferred lifestyle would cost. We had years to dial it in. I knew how much I not only needed to fund our lives but how much I wanted. 

I Cleared Date Milestones

When I started my FIRE quest I knew when I would qualify for some retirement benefits at my job. My 10 year plan revolved around hitting those milestones for a pension and retirement healthcare. Even though during my 10 year plan the company was taken over through a merger and the company promised retirement benefits were heavily diminished, I still cleared the date milestones to get what was left that I’d earned. Other milestones to consider are bonuses, meeting 401K thresholds or company match payment dates, stock option vesting, or other beneficial age based milestones. 

I Tracked My Portfolio And Retirement Calculator Results

I tracked my early retirement portfolio chances through the FIRECalc retirement calculator during my 10 year plan. Talk to 100 people about what kind of a calculated success percentage they need to feel comfortable pulling the retirement trigger and you’ll get 100 different answers from 85% to 200%. Everyone has to make that decision. I was satisfied with 90% and up. 

Settling The Mental Conflict Of Taking The Retirement Leap 

Reversing Decades Of Conditioning 

We are preconditioned to always want more. Better grades, bigger degree, more pay, higher career position, newest doohickey, the list goes on. Our dreams can even become inflated. I knew I was mentally ready to retire after years of reversing that conditioning through frugal living and distancing my identity from what I did for money. It was easy to walk away and made it easier to get through my retirement transition. 

Trusting The Numbers And Accepting Calculated Risk

It’s easy to submit to doubt when breaking norms. There’s a feeling of safety in conformity and portfolio overkill. For anyone who doesn’t equate retirement to a traditional or particular age, or having a million dollar plus portfolio, actually knowing you have enough to retire goes far beyond running numbers. It requires trusting the plan, your calculated results, and believing in your own ability to adapt and be flexible as things change going forward. There is always risk for those who don’t have the benefit of an extremely fat portfolio. I was mentally ready and willing to accept that risk for the reward it offered.  

Acknowledging The Work And Lifespan Tipping Points

I was there, I knew I mentally had enough to retire early. I was at the working tipping point when the job became less attractive than the income and portfolio padding it provided. The little voice became louder that there must be something better than this. Then the lifespan tipping point of years slipping away. Years that can’t be bought back. 

I Still Had A Hiccup

I had done everything right and still had to make an adjustment until I could confidently know both financially and mentally that I could retire early. 

The recession set in just as I approached my planned early retirement date of October 2008. It sent many of my financial goals into retreat. Numbers can look good one day and bad the next with market volatility. But the recession’s subsequent and prolonged market drop was off the charts. I delayed retirement a year until I felt the market drop had bottomed out and my calculated success rate returned within an acceptable range. That and a little mental push, courtesy of new asinine executive directed policy and work changes coming. I had enough!

 

Seeing what we need to see to know we have enough to retire early is going to look different for everyone. It’s like beauty. It’s always difficult to explain but we know it when we see it. The same applies to knowing it’s the perfect time to retire on our terms when we’re truly ready both financially and mentally to take the leap. 

My Early Retirement Was Never About Retirement

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Sometimes we have to adapt to difficult and changing circumstances. As people are being forced to reevaluate their retirement plans and careers, it’s easy to get hung up on the perceived safety of coloring within the lines of traditional definitions and norms. For many it may look impossible to figure out a way to financial security. Maybe a mental shift is needed and perhaps my retirement story will provide ideas. Even though what I did was characterized as early retirement, my leaving my career at the age of 51 was never about retirement. 

Everyone has a mental picture of what retirement is. I had a retirement image too and I knew that someday I would reach an age that the traditional definition of retirement would materialize. But that vision of retirement was decades away. My early retirement wasn’t that. Not even close. I wouldn’t accept that there was just one way to go. 

My Early Retirement Was Never About Retirement

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I Retired Early But It Was Never About Retirement 

I do understand why I got the heat I did about my early retirement not being considered retired. I’ve gone with a different solution to counter the dregs of youthful work life. I wanted to ditch the rat race much earlier than waiting until a traditional retirement age. So I adopted a “retire early and often” mindset. I then created and executed a plan to achieve it. Taking a different direction where I wouldn’t have to wait until old age or having a million dollars in the bank. 

My Employment Liberation Motivation

After decades of relentless and unrewarding work, living under the threat of downsizing and the resulting financial ruin it could cause me and my family, I was motivated to reach a point of employment liberation. A financial condition where I never needed to kiss Corporate-keister or if forced into long-term unemployment have to rely on stingy safety nets to survive.

By the time I decided to work towards early retirement I had already made an interstate relocation to keep my job. Then came the long days in the office, 24X7 on-call duties, business travel, and constantly increasing workloads. There were harmful economic market bubbles and the recession that cruelly added more grief by providing easy excuses to further hammer workers. Sacrifices were made for the workplace promises of something better later. But as I and many people know, you can’t count on corporate world promises. 

What My Early Retirement Plan Targeted

I knew from day one of my financial plan that I was going to retire early and often. I later found a retirement definition that better captured that same mindset: Retirement is the absence of needing to work, not the absence of working.

It all came down to deciding that I’d commit to saving enough to cover living expenses and be free to pursue opportunities of interest and passions. I would welcome paid work in my early retirement but only on my terms. I’d only accept work that meets my criteria and always free to walk away at any time without threat of financial ruin.

What I Did To Reach Employment Liberation

Instead of trying to save a million dollars or more, which at my salary would take me well into old age if ever, I decided to go a different route: 

  • Create a sustainable happy lifestyle without wasteful spending. A frugal lifestyle that may not have included months of exotic travel, expensive cars, or second homes. But it also didn’t include feeling like we were living a deprived life. It was all about simpler living. 
  • Ramp up savings to save enough to cover that lifestyle in retirement. 
  • Maximize income with eyes wide open to leverage wins in the corporate world’s game. 
It started with cutting waste from our budget. 

We adopted a smart frugal and balanced lifestyle. It does take time and practice to figure out what a sustainable and happy frugal lifestyle is. We perfected it during our journey to early retirement. It was the lifestyle we wanted to live before and in retirement. 

Next was eliminating all non-mortgage debt. 

That effort further reduced our cost of living, that reduced our required budget, which equates to less needed saved for retirement to support it. 

Redirect excess income into savings.

It was then all about ramping up our savings to hit the portfolio target sooner than later. Once expenses are cut more money is freed up to invest. There was nothing extreme in my early retirement story. Just the same basic stuff everyone else in personal finance talks about. 

Always recognize opportunities to increase income and continually gain marketable skills. 

This is an effort that we all should do in our careers. Increased income results in more money to save. Increased skills adds to increased income opportunities now and after early retirement. 

My efforts also required me to better play the corporate world’s game. 

I focused on what management valued. They happily load us down with important but non-valued work. All the things we worked hard to do but meant nothing to management during our evaluations for raises and advancement. Tasks that management seldom loaded onto their pet employees. 

That stuff ate time. Usually eating into our personal time and always taking time away from game winning opportunities. I used their own values to decrease my efforts on that segment of responsibility and put all effort into their home run values. 

I then used their own values to challenge any of their objections to my work priorities. It was clear that the issue comes down to every personal success I could leverage into better raises for me equated to management taking some credit and reward too. 

How I Viewed My Portfolio

I did run my numbers through a retirement calculator to get a feel for my success chances. As for how much I saved, I didn’t have the luxury of shooting for a sizable portfolio that would perpetually generate enough passive income of dividends and interest to totally live off of. I knew I’d also spend down assets as part of my retirement funding bucket strategy. 

I simply thought of early retirement as a condition of unemployment. Whenever I saved money I thought in terms of how many days, weeks, months, and years of being unemployed would be covered. This thinking continued even when working in my targeted retirement gigs. I looked at my earnings that same way as I set the money aside to increase my net worth. 

I just had a different early retirement vision.

It was always my plan to retire early and then freely pursue opportunities of interest that were outside of what my first career allowed. Once that itch was scratched, I would then go on to the next one when the opportunity to do so presented itself. 

I was also content to sit out doing any paid work at all. It was an early retirement plan born of the hope for freedom through employment liberation. That and being shielded from the economic cycles and the corporate world decisions that seem to always mess with the working class. 

I didn’t have the luxury of a fat salary to pad a huge portfolio. 

Although it sounds wonderful if you have the bucks, I never even considered an early retirement of nothing but pure leisure and neverending travel. To tell the truth, that wouldn’t appeal to me regardless of money. We travel as much as we want to but enjoy where we live. I didn’t have to work in my early retirement to live our lifestyle. But I planned on being open to opportunities. Knowing I would most likely take on a paid gig at times. 

Wrapping up-

What having this mindset and plan did was allow me to take on rewarding work in retirement that I wanted to learn and do. Since I stayed on a budget funded by my portfolio, I funneled all earnings back into my net worth. After 11 years of portfolio funded early retirement, with a few working adventures thrown in, I now have a fatter portfolio to go along with my ability to live a better and freer lifestyle. 

Retiring young means still having all of the energy, spirit, and discipline that brought us success in life and career. I’ve found that we’re happiest when we can direct that energy towards something we value. I simply took what I had saved, created a way to access it to fund our frugal living lifestyle, and freed myself to accept opportunities when they were available to me. My early retirement was never about retirement as it’s hardly what many would call a retirement. Not unless the same retirement mindset that I have can be accepted. There’s always more than just one way.