Making a Big Change: a Case Study [How I Retired]

Almost all of us face a decision at some point about whether to make a big change in our lives:

• Deciding whether to go to college
• To change jobs
• To get married
• To get a divorce
• To retire
• and so on …

Sometimes we don’t even know what we want to do, but we know we don’t want to keep doing what we are doing.

While I can’t provide advice that covers every situation, I can at least give you a case study that you may be able to learn from. The case study involves my retirement, which is very timely: my official retirement date was exactly one year ago today. I’ll discuss my situation, my thought process, and my actions. Hopefully this can benefit you in some of your decision-making activities.

Background

A former associate used to say that he could not retire until reached 82: although a couple of years older than me, he has young children, and was only half-joking.

I would quip back that I would die before I retired. About 10 years ago, Vickie and I had spent over $100,000 gaining custody of our oldest granddaughter. And, we got stuck for a long while with a couple of properties that were losing money.

So, when I started thinking seriously about retirement about 3 years ago, I really did not think it was an option. I certainly wasn’t proud of my 401k, and I knew there would be huge actuarial penalties associated with retiring at anything less than 62, and I was only a little over 55.

But, I felt like I had to change something … ever since Vickie passed away, work just didn’t seem the same to me. I did love the people I worked with, and still do, dearly. And, at times I really, really enjoyed the work. But, I still knew “down deep inside” that it was time for a change.

Use Project Management Every Step of the Way

So, I knew that rolling options around inside of my head was not going to get me anywhere: I knew that actions were required. So, applying good Getting Things Done techniques, I set up a project entitled “Examine Retirement Potential.” Then, I began developing and implementing Next Actions for it and for every related project that followed it. (From the time of this project to my retirement, I probably had a dozen related projects.)

When I say “use project management,” I do not mean that you have to go out and buy a copy of Microsoft Project. I used nothing more than the simple GTD techniques that David Allen describes in his book, and which I describe in some detail in this discussion on managing tasks and in this discussion on managing projects.

My first “Next Action” was to gather appropriate financial data. Among other things, this entailed using my company’s pension calculator to see what monthly pension I would receive if I retired at 56.

Then, after gathering data, the next step was to make sense of it and to try answer the question: “Is this enough for me?” Frankly, I was disappointed that it looked like I needed to wait a while. But, at least it looked like something I could do if I could reduce debt (for example).

So, I began paying about $1,000 extra per month on my mortgage, thinking I would just go ahead and pay it off. I kept at this for about 6 months or so, maybe a little longer, and then all of a sudden I realized that I really should get a consultant to look at my situation and advise me on what to do. In hindsight, I should have done this right at the start, but foresight is more difficult than hindsight.

Get Some INDEPENDENT Advice

I think that for any major change, one should try to benefit from the thought process of people who can give you an unbiased opinion. When someone is giving you advice, it pays to ask yourself “what’s their motivation … what’s in this for them?”

The consultant I hired gave me some interesting advice: (1) stop paying extra on the mortgage, (2) put the extra money into the 401k and into savings, and (3) get an interest-only loan. Going this route, he showed me that I could retire at 57 or possibly 57 and a half.

He projected that there would still be plenty of money left when I die, and that I would not need to do a 72T option (which allows you to take money out of your 401k, penalty-free, before you turn 59 and a half). Of course, he wanted me to switch my 401k over to an IRA with his company. This was where I realized this guy doesn’t give a rat’s ass about me … just my money and how his company can keep as much of it as possible. Why would I want to have lots of money left when I die? Makes no sense … I’d like to use it while I am alive, thank you.

But, his calculations were useful nonetheless. And it did sensitize to me something about deciding on retirement: you really have to figure out when you are going to die. Of course, none of us know, do we? But, you don’t want to live longer than your money does, so it pays to look way into the future with the forecasting.

One final point on independent advice: I read several books about retirement. The VP of HR got three books for me to read, sort of as a test case for a library for our company, which has several people my age. One of those books had some really timeless advice:

If you retire too early, that is a mistake you can recover from. If you retire too late, there is no recovery.

That really hit home with me. Also, two of three books stressed that it is easier to live on a reduced income than most people think. Many people put off retirement because they want to have at least as much monthly income in retirement as when they were working. That sort of thinking can work out, but it can also lead to people working right up until they croak.

Test Everything You Can

One thing the consultant did say that was great advice was for me to test-run what it would be like to live on my projected retirement income/expense profile. This was great advice, and it gave me the confidence to make the final decision. Frankly, it was a bit of a scary thought to me. I would be living on a pension that was one-fourth my normal income (retiring early is expensive), supplemented by some income from savings as needed. I worried that I could not do it … I really liked buying toys and this would pretty much end that.

So, I tested it for about 6 months. I made it okay. That gave me the confidence that I could really do it. Hence, around the beginning of 2006, I told my boss I would retire in the June or September or December timeframe. He needed some time to replace me and there would have to be some overlap to ensure everything went smooth. And, I felt I needed time to save more money.

Would I Do Anything Different?

Yup. I would save more. Within six months of retiring I got hit with about $15,000 in unexpected expenses. I had planned for some “unexpected” expense, but not that much. So, saving more would have given me more of a cushion.

And, I would have gotten independent advice a lot sooner: it should have been done in parallel with the data-gathering activity.

Wrapping Up

There is probably a ton of useful information that I have forgotten to add. But, hopefully these broad strokes give you a sense of how you might go about deciding on whether to make a big change.

Almost all of us fear change, and we look for excuse after excuse to put it off. Very often this works against us. So, if you are thinking about making a big change, you owe it to yourself to go ahead and start turning your thoughts into projects. Evaluate the feasibility, get some independent advice, and test what you can.