Today is a real milestone in my dorky life, a date which I thought would never get here. Effective today, May 1 2021, I’m 59 1/2 years old and “penalty free”.
I’m now eligible to withdraw funds from my IRA, no questions asked. Woo-hoo!
To be honest, I don’t need or even want to dip into my IRA just yet. I’m counting on it to supplement my social security in a few years. Plus withdrawals count as MAGI (income) and would raise the cost of my health insurance premiums thru the ACA. But if I really needed or wanted to, I can now make withdrawals without jumping thru hoops or getting slammed with a 10% early withdrawal penalty. (There’s another bonus too, more on that in a minute.)
It’s been 30+ years since I began saving for retirement, but it sure seems longer. In the late 1980s, I was working at my first IT position (computer programming) for Omega Systems. Back in the days of those flickering green screens, we had no distractions like the internet or even e-mail. Every 2 weeks, you waited for the Company Newsletter, on paper, to arrive in your IN basket on your desk.
One such newsletter in the Fall of 1989 reminded everyone of the company’s new “401K Retirement Plan”. 401Ks were still pretty new and retirement was the furthest thing from my mind, so I called my company’s Financial officer Dick Smith, for advice.
I loved Dick Smith. He was a trim gentleman with steel hair & moustache, all business but honest as they come. I asked him if I should sign up for a 401K. He said “Douglas, how old are you? 23, 24? What’s your hurry?” I said I was 28. He said “Geez, what are you waiting for?”
I signed over 5% of my pre-tax salary to that first 401K. I’d increase the percentage when I got a decent bump in salary or moved to another company. My last few years of work, I was contributing 15% of my pay to my retirement.
I don’t want to sound like I’m boasting, I know plenty have less than me, and am sure lots have more. I’ve just noticed some interesting things along the way to building my retirement nest-egg.
1. The check is in the mail. Why? After I ER’d, I decided to roll my UPMC 401K into my IRA so I could manage my investments in one place. I figured the transfer would take all of 10 seconds.
Nope. When I contacted my former employer and asked what the holdup was, they said they’d get back to me. A week later: “Douglas, we put your check in the mail today.”
What did they mean? Was the check really in the mail? We’re talking a hefty sum, and with my luck it would get lost or stolen.
A couple days later it arrived—along with a warning to deposit it in my IRA right away, or in 30 days I’d be paying half of it back in taxes and penalties. When I called my brokerage to see how to get it to them as quickly as possible, they said “Just drop it in the mail.”
2. Pennsylvania’s a nice place to visit—and retire. After you turn 59 1/2 years old in my state, you’ll pay ZERO state taxes on your 401K, 403B, Roth, IRA & Social Security.
3. Trust no one (stock, that is). In 1997, when I left Omega Systems to work for GNCorp (the company that makes all those vitamins), I signed up for their 401K and was invited to buy GNC stock at a substantial discount. I declined, preferring mutual funds over a company stock.
Shortly after I left GNC in 2000 (to work for BNY Mellon), people began shopping online in earnest—vitamins included. GNC stock plummeted to pennies on the dollar, and people like my former manager (who’s 401K consisted of GNC stock only) lost almost everything.
4. Listen to your mother—most of the time. When my retirement fund hit $50,000 I told my mom. She said “My God, Doug! What are you going to do with all that money?” I said “Well…. nothing, Mom. It’s for my retirement someday.” She said “Oh honey, by then it won’t be worth anything!”
5. And finally, it takes money to make money. What took all those years to accrue has almost doubled since I retired 6 1/2 years ago. How? The magic of compounding and a too greedy market, I reckon.
After I kick the bucket, cash in my chips, you know what I mean—15% of my remaining assets are designated to go to three places: the Salvation Army, Humane Animal Rescue & the Epilepsy Foundation.
I’m takiing the rest with me.
That is a good hunk of change! Congratulations! As they say, if you don't spend your money, someone else will. So spend it.
ReplyDeleteThanks Gigi! I'm just glad it's finally mine :)
DeleteSo glad you are now free. I took mine a 54 due to being restructured out of my job and boy did the govt take a bite out of it. You have done some wise prep work for retirement. Enjoy it big guy.
ReplyDeletePatti thanks very much and wow I didn't know that about you. I'd be interested in hearing more about that sometime.
DeleteCongratulations. When you start a retirement program, the last thing you think of is actually retiring. Then one day, you are there.
ReplyDeleteThanks Ann, and yes--so true!
DeleteYou've made some wise decisions and done well! Congratulations! We have a very modest IRA and even though we are past retirement age we're afraid to spend any. You never know what you might need when you reach those later years!
ReplyDeleteThanks Bonnie, and I appreciate your sharing that, I plan to do another blog about this. I am comfortable but still relate to this a lot. Good for you for being careful.
DeleteCongrats, Doug, on planning ahead and now reaping the benefits of a comfortable retirement. Not sure a gold casket would remain buried for long. (Ha, I know you're only joking about that.) One habit of a lifetime I find hard to break is still being a tad frugal even though I no longer have to be. Treat yourself well and often! Enjoy!
ReplyDeleteFlorence you always make me smile! And yes I was just saying, it's hard for me to spend. I lived on such a budget for so many years, I can't just give it up. I think I'm a minimalist!
ReplyDeleteI knew it had too many words for you!
ReplyDeleteThis is great to hear, youngster! I am way past that age, but worked until I was 61 anyway. You made excellent and wise decisions when you were young and along the way, which is why you're comfortable now! I started investing in retirement accounts in my 20s also and they have served me well. Washington taxes everything but we have no state income tax at least.
ReplyDeleteThanks Margaret but I'd hardly call me a youngster, we're pretty close in age! Anyway, compared to your beautiful home I'm a bit further down the ladder but like you I'm pretty sure I won't have to worry about money at least... It's a good feeling I wish more of us could share 🙂
DeleteI was never educated about money or the need to save, my parents lived payday to payday knowing they would get an age pension at 60. These days the age pension doesn't kick in until 65 and even then it depends on which end of the year a person was born in. Anyway, I learned about putting money into superannuation (same as your 401K) when I learned the government was going to make businesses here put in a small percentage for each person employed by them and later learned (too late) that people could add to that voluntarily themselves. I retired with a lot less than you have in your account and use it now drawing the minimum allowed amount each fortnight to top up my age pension. It's handy and by having that account still actively invested it is still growing and actually has more in it now than when I retired. I have it allocated as equal 25% shares to each of my children when I kick the bucket.
ReplyDeleteHmm that's pretty interesting River, Australia sounds similar enough to the US. Well, to be honest I didn't learn much from my parents either, we grew up pretty poor, also paycheck to paycheck. But i went thru a bout of homelessness in my 20s, made a vow I'd never let such a thing happen again. Anyway, good to hear you're doing well enough in retirement. :)
DeleteI vowed I would never be in debt, and I'm not. It's limiting, never using a credit card, but freeing too, no bills constantly coming in.
DeleteGood for you River! I have a credit card but I pay it in FULL every month.
DeleteBy the time I was in my early fifties, I got a significant raise at work, and decided to open an annuity. My employer also added 10 percent. By the time I retired in my mid-sixties, it was enough to give us a decent additional monthly income. It's made all the difference! :-)
ReplyDeleteHm, thanks for sharing this DJan. I've been giving some thought to buying an annuity when I get a bit older, and get tired or stressed watching over these various stock-funds. It just seems there's so much 'fine print' out there when it comes to annuities... I'm glad you & SG have what makes you comfortable--and solvent :^)
DeleteCongrats on a well-lived financial life. I started withdrawing from my IRA as soon as I moved to Pennsylvania -- and you know the reason why.
ReplyDeleteVery smart, Traveling Man! Thanks Tom, and really, good for you :)
DeleteCongrats on the milestone and also the wisdom of your younger self! So few people do the latter anymore and thus when they get to 59 1/2, there won't be much to celebrate.
ReplyDeleteI was fortunate in that I started saving in a 401k immediately during my first job and for the last 20 years or so, maxed it out. I have always found it easier to have it automatically deducted and just learned to live on what's left versus get my entire paycheck and say I'm going to invest it.
For now my wife works and doesn't plan on retiring so 59 1/2 doesn't hold much sway yet. If she does decide to retire early someday, I preparing by investing some outside of a 401k and can use a Roth Ladder to get me to 59 1/2.
Ed thank you, and thanks for sharing your story here. Well I certainly didn't max my contributions to my 401K, but I did a 'mirror portfolio', same funds, after tax dollars. I always expected it to be smaller than my retirement funds, but I got more aggressive with it's funds so it grew a bit larger. Anyway. it's great that you're doing what's best for you and your wife can say the same for her. You guys have a good partnership :)
ReplyDeleteCongrats to you on reaching this significant to you timeline. Sounds like you made some wise financial decisions when you were young and later, too. Life can be so unpredictable, we never know what our future financial needs may be so have to plan as best we can for the unknowable. The degree of comfort we experience in our older years is highly influenced by the financial security we feel so that can impact our mental health, too. Sounds like your challenge now is to continue exercising the good judgment you’ve been using to preserve your funds, yet safely grow them in the years ahead. Sometimes easier said than done in this crazy world. You’re a young man yet, so enjoy yourself in these years ahead of you.
ReplyDeleteThank you Joared, you're very kind. Well, I grew up somewhat poor, than in my early twenties wound up homeless, a friend let me live in their attic for a year--an experience I NEVER wanted to go thru again. I got a real second chance to go back & finish school, and I wanted to really make it count. :)
DeleteYay! Good for you, Doug! That must feel so good. We have also always tried to live under our means as much as possible and still do. We are starting to spend a bit more, but it’s hard to get out of the habit at our age. You know Art is constantly looking for coins when we go walking.
ReplyDeleteKay, thank you and haha--I don't know if you'll see this, but you made me laugh here about Art! There's nothing wrong with being frugal--or smart!
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