personal5: How we planned for our retirement (v1.0)

Retirement planning is vital to undertake in your life. I know some people live paycheck to paycheck and cannot easily save. However, if nothing else falls into place, there is of course Social Security and Medicare, but these are not enough by a long shot. The Democrats really needs to look at the bad situation of millions of people who work paycheck to paycheck and are impoverished in their old age. The rest of this article is our journey for retirement planning.

Very early we knew we solely had to take care of ourselves when we retire. We were not going to inherit anything from anybody or have any kids to help us out in our old age (which most kids will not anyway). I was a computer scientist with a masters and my wife was an elementary school teacher with a masters. We were not likely to win a lottery or make good on an IPO. I was a purely technical guy who likely will not rise in management. There are no pensions in my industry. We both worked. I was fortunate to be successfully and continuously employed throughout my career, initially in Hawaii, but later in Silicon Valley. My wife was successfully and continuously employed, initially as a substitute teacher in Hawaii, and later as a teacher in a private school in San Jose. I retired at 64 after I was laid off in my last job. My wife stopped working at 62. We don’t have any kids.

As soon as we got married in 1977, we used all my wife’s $15,000 savings (I had nothing!!) as a down payment for a condo in Honolulu for $45,000. We got in early. In 1979, we moved into Silicon Valley, and sold our condo, and bought a nice house in San Jose for $90,000 and assumed the mortgage of the previous owner. We finally sold that house in 2019 after retirement and moved to a condo on Oahu. This is our current retirement home which we had bought 4 years earlier (2015) cash down in anticipation of retirement. Since we stayed so long in our San Jose home, we paid very low property taxes (prop 13). Property taxes are not high in Hawaii.

We started plowing the maximum allowed into 401K, TSA, and traditional IRA as soon as those programs were available. We also saved all we could. My wife did all the investments for our 401K (when they became rollover IRA's), savings and IRA and grew it as much as she could. She was quite successful. The TSA just grew at 4.5% fixed. We both signed up for long term care when my first company HP first offered it.

We took only 3 loans in our lives. The first was in 1977 for our condo in Hawaii. The second was when we assumed the mortgage of the seller (about $56,000) for our San Jose home in 1979. We paid it off in 9 years. We also took a $5000 loan from my wife’s dad for the San Jose home in 1979 which we paid off in 2 years. All other transactions were cash down. We always pay off all our credit card debt in full every month. Except for the first few months of our marriage, we never paid or collected rent. We have also been very generous with many of our relatives and close friends in need – sometimes with large financial help or gifts. But now we are retired, and it can no longer happen.

Besides 401K/Rollover IRA, IRA, TSA, LTC, our house, not taking loans, not renting, and saving and investing the best we can, we did not do anything else.

After we retired, we moved to our condo in Oahu in 2019. All our income comes from joint life income annuities (bought with all our 401K, TSA, and IRA funds) and social security and is more than enough now and for quite a long time. We also have significant income generating investments which income we don't really use today and investments that tracks inflation. These are to account for inflation much later in our lives when just our current income is insufficient, or major medical related costs arise. We both have Medicare, AARP Medicare Supplemental plan F, Medicare part D drug plan, John Hancock LTC, Met-life Take-along Dental, VSP vision, USAA auto and State Farm home insurance. We don’t spend foolishly.

The blueprint we used may not work for the younger generation today. They are priced out of the housing market. College costs are astronomical. Automation and globalization are gobbling up manufacturing jobs. The planet is on a bad trajectory with regards to climate change. Pandemics are spreading now and may occur more frequently in the future. War fighting is almost unthinkable now in terms of degree of devastation. Their opportunities are much worse than what we faced. However, software, bio, green energy and AI are booming, and technology innovation is, in general, a bright spot. Salaries for professionals are much higher than what we encountered. However, some of the principles we used still apply. The young ones can also take comfort in the fact that mankind has always in the past overcome challenges.