Postcards From Retirement
For real-life advice on how to plan for retirement, listen to the stories of folks who've already made it work
(MONEY Magazine) – You've undoubtedly read plenty of sage advice from financial experts about the best way to plan for retirement. But as you know, life doesn't go by the book. Stock markets plunge, early retirement comes earlier than expected, divorce and remarriage reorient your goals, days out of the office feel unsatisfying—or like gifts. And the lessons learned from the setbacks and surprises can be just as valuable as the prescriptions of credentialed advisers. In the following pages, you won't read about income-replacement ratios or expected rates of return. Instead, you'll find five accounts of people who have successfully made the journey from career to retirement. On the way, they've learned that you don't always end up where you expect to be. But all have figured out how to live well and make their money last.
Can't afford to retire here? Settle abroad
Nazareth Serpa and Paul Mason, both 59
RETIRED In the process now
WHAT NOW? Moving to Brazil and building a B&B
"Brazil is beautiful, and the costs are much lower than in the U.S. You can get health insurance really inexpensively." —Paul
The corporate upheavals of the past decade have shaken the financial security of millions of Americans, Paul Mason among them. In the '90s, the international business lawyer easily jumped from tech company to tech company, spending seven years at Digital Equipment, then moving to 3Com. But when the tech bubble burst in March 2001, Mason lost his job. Since then, he's done legal consulting from his home in Key Biscayne, Fla. and tapped his savings. Now, at 59, he's making the transition to retirement. But with only $150,000 in his portfolio, plus a rental property, finances are tight. His solution: retire overseas.
For the past five years, Mason has been married to Nazareth Serpa, a Brazilian law professor. It's a second marriage for both. He's also fallen in love with Brazil, and he now divides his time with the goal of living there full time within five years. "The country is beautiful, the people are friendly, and the costs are much lower than in the U.S.," says Mason, who figures that he can continue to work as a lawyer and arbitrator while Serpa teaches mediation.
The other half of their retirement vision is to slow down. This past spring, the couple bought two acres of land outside PetrÓpolis, in a mountainous resort area north of Rio called Araras, for just $55,000. There they are building a 5,000-square-foot bed and breakfast. Total cost: $200,000, financed by the sale of Mason's Key Biscayne apartment for $595,000. Casa Paul e Nazareth should be open by the end of the year. "We don't expect to make a lot of money doing this, but it's a great way to meet people and share experiences," says Mason. "Also, we have a lot of friends—hopefully we can lure them to come and visit."
Even if you love your job, remember what else you love
June MacDonald, 89
FORMERLY Payroll manager
WHAT NOW? Sold her home to move in with her son
"I could have kept going until I was 80, but if you never retire you may never get a chance to enjoy time together." —June
Twenty-five years into retirement, June MacDonald, 89, knows a bit about how expectations and events intersect. She and her late husband William, a former police officer, didn't devote much time to planning—but they made sure they had enough to live on. More important, the MacDonalds figured out the right time to call it quits. With their three boys grown, June had returned to work at age 50. But when William reached the mandatory retirement age of 65, he urged June to retire too. Reluctant to quit—she enjoyed her work as well as the income—she waited five years and then left. "If you never retire," she says, "you may never get a chance to enjoy yourselves together."
And for the next 16 years, they did—traveling and spending time in their 12-room Medford, Mass. house. "We always had a great time," she recalls. But after William died in 1996 at the age of 86, June found her cash flow getting tight. As a widow, she gets only $19,000 a year in pension and Social Security income. The $100,000 she had at the start of retirement was shrinking. "It was getting harder to take care of a big house," she says.
The solution, she decided, was to cash in her equity. This past spring, the house that June and William had stretched to buy for $8,000 in 1939 sold for $475,000, and June moved in with her son Bill and his wife Helen. With money from the sale, she is financing an $80,000 addition to their Rindge, N.H. home, while planning trips to see her other two sons and their kids and grandkids. Says June: "Things have a way of working out for the best."
Plan how you'll spend your time, not just your money
Steve and Elizabeth Crawford, 56 and 54
FORMERLY Ad exec and librarian
WHAT NOW? Volunteering, writing books
"People keep asking me, 'What do you do all day?' or they say, 'You're too young to retire.' There are stock questions you have to defuse." —Steve
Steve Crawford loved his job, but he always figured that the exit sign was blinking 2004...2004...2004. "Advertising is a young man's game," he says. "My company was designed to get people out at 57, so I expected to retire early." With that in mind, Steve charted his career, eventually rising to executive vice president at ad giant Leo Burnett.
But Steve's timetable was fast-tracked when Leo Burnett was targeted for a takeover in 2001. In the inevitable corporate reshuffling, Steve, then 53, was offered a retirement package that included health insurance. He took it. His wife Elizabeth also left her part-time job as a librarian, and the couple sold the rambling house on Chicago's North Shore where they'd raised two children. They moved to a smaller home, and with Steve's $1 million-plus 401(k) and lump-sum pension, they felt financially secure.
Yet despite his bent for planning, Steve hadn't given much thought to what he would do. Elizabeth had a network of friends and volunteer work, but Steve was starting from scratch. He taught an advertising course at Ball State University in Indiana but found the four-hour trek to campus too long. Other projects proved more successful. He wrote a book on his church's 100-year history and joined several boards. And both Steve and Elizabeth tutor in the public schools.
But the Crawfords haven't quite gotten used to some of the social quirks of early retirement. With most of his friends still working, Steve notes, "I am hanging around with people who are older." Time is gradually improving his social schedule. Says Steve: "Increasingly, my friends are retiring and showing up and saying hi."
They aren't kidding when they say "diversify"
Betty Hooper, fifties
FORMERLY Project manager
WHAT NOW? Working full time for her daughter—for free
"The sad thing is I'm dating a C.P.A. who told me to diversify. But I have an M.B.A. and thought I knew as much as he did." —Betty
Even an imploding stock market didn't faze Betty Hooper, a single mom who raised two children while working as a project manager at SBC (formerly Ameritech) for 25 years. Still, she does regret plowing 100% of her 401(k) into company stock. Hooper sold after the stock price dropped in 2002, but by then her $700,000 balance had shrunk to $400,000. "The sad thing is that I'm dating a C.P.A. who told me to diversify," says Hooper. "But I have an M.B.A. and thought I knew as much as he did."
No matter. Thanks to regular saving and investing, she had enough of a financial cushion to grab an early-retirement package a year ago. "I ran the numbers with my C.P.A. friend," says Hooper, who admits to being in her mid-fifties, "and it worked." Her house in the Cleveland suburbs, built in 1996 for $343,000, is worth about $600,000. With rental income from a second house she owns and $2,700 monthly withdrawals from her $400,000 pension payout, she has plenty to cover her costs while leaving her 401(k) untouched.
In the meantime, she is reveling in her post-retirement job—working at her daughter's title insurance company for free. She's so content that she has even turned down paying jobs. "I thought to myself, 'Am I crazy or what?'" she says. "But I'm doing what I like. I don't want a new Mercedes—my little red Audi Quattro is fine for now."
It isn't always paradise if you live there all the time
Rita and Joe Kernan, both 65
FORMERLY Analyst and engineer
RETIRED 1999; 2001
WHAT NOW? Living in their second home in their dream town
"We thought we'd be happy living year round in our vacation condo in Hilton Head, but the area was too touristy. So we moved to a quieter place nearby." —Rita
Long ago, Joe and Rita Kernan found their perfect retirement home. "We went to Hilton Head on a vacation in 1987 and fell in love," says Rita. "We stayed an extra night and went to a real estate agent." They left as the owners of a two-bedroom, $90,000 beachfront apartment. For the next 14 years, Joe and Rita spent only two weeks a year there (they rented the rest of the year to qualify for an investment-property tax deduction). Still, says Joe, "Our goal was to live in Hilton Head year round."
In 2001, with their two children grown, the Kernans realized that dream. After decades of saving, they had amassed a seven-figure portfolio—enough to generate an annual income of $140,000. So at age 61, Joe retired from his job as an engineer for Northrop Grumman. Rita, a civilian analyst at an Army research facility, had retired in 1999. The couple quickly sold their Eatontown, N.J. house for $350,000 (10 times what they'd paid for it in 1969), held a garage sale and called the movers.
But the Kernans soon realized that a prized vacation condo is not the same as a comfortable year-round home. The location was beautiful—"you could watch dolphins swimming up the cove," says Rita—but touristy. They stuck it out for two years so they could sell without incurring capital-gains taxes. Then last year they unloaded the condo for $402,000 and bought a $700,000 lakefront home nearby. Now they truly feel they're living the retirement dream. Says Rita: "I never expected to be so busy having fun."