What better way to learn about retirement than from someone who meticulously prepared for it? On this episode of The Agent of Wealth Podcast, host Marc Bautis talks with Fritz Gilbert, an aluminum industry professional who retired with his wife at age 55. Gilbert has chronicled his retirement every week for the past five years in his blog called The Retirement Manifesto, and he’s the author of Keys to a Successful Retirement: Staying Happy, Active, and Productive in Your Retired Years.
In this episode, you will learn:
- What retirement looks like (from a first-person perspective).
- How to start planning for your retirement.
- What to expect in your retirement.
- How to account for “doomsday scenarios” while planning for retirement.
- And more!
Welcome back to the Agent of Wealth Podcast, I’m your host Marc Bautis.
Most of the information about planning for retirement comes from advisors like me, or even from academia. But today, I brought a special guest to the show: Fritz Gilbert. Fritz provides a unique perspective on retirement. For the past five years, he has wrote about his active retirement on a weekly basis via The Retirement Manifesto, an online blog Gilbert founded to share his experience on preparing for and transitioned into this new phase of life. Gilbert is also the author of the newly released book: Keys to a Successful Retirement: Staying Happy, Active, and Productive in Your Retired Years. Fritz, welcome to the show.
Thanks, Marc. It’s an honor to be on. I look forward to chatting with you.
Like I said, it’s pretty cool to have someone on the show with first-hand experience in retirement. How did you decide to create your blog and start chronicling your experience?
I actually tell this story in my book. If something intrigues you and you’ve got a curiosity about it, just take the first step and do it. I think my blog is a good example of that, as I had a curiosity about blogging five years ago.
I’ve been a do-it-yourself (DIY) investor for the last 30 years — I always liked personal finance. But I never really did any writing, other than at my corporate job: Emails and other things you have to do working in corporate America.
Then I started blogging about five years ago now, following my interest. I just fell in love with it…. I think what I enjoy so much is that it forces you to really think. You have to develop a thought, put it into a structure that’s appealing to the readers and then put together a logical story that ties it all together.
Then you get the reader feedback, the engagement with the readers, and the community: Bloggers and podcasters.
It just turned into this tremendous thing that to me that’s added a lot of fulfillment in my retirement years. I really never saw it coming — it’s kind of serendipity, to answer your question in one word.
What is Retirement Really Like?
Everyone wonders: what is next? What is retirement going to look like? In your book, you summed it up in one word: freedom.
Ys. I started the blog three years before I retired. Obviously, once you start writing about a topic every week, you really start thinking about it. The first year, I was really focused on making sure the numbers were tight. Then, probably about two years before I retired, I knew numbers were looking good so I started focusing more on what life was going to be like after retirement.
The closer I got to it, I almost got obsessed. What’s it really like? Retirement is like getting married; you can’t really appreciate what it’s going to be like until you actually experience it.
To me, a big focus on the book was for people to have that same curiosity. But nobody can explain it perfectly. Even if they could, your individual experience will is almost guaranteed be different than mine. But, I put a lot of energy into the book to try to explain the transition because to me, it’s intriguing and it’s important that you get it right. Retirement is so much more than the financials. I see it all the time: Analyzing numbers. It’s always: Will the money run out? Will you have enough money for expenses? But, probably the non-quantitative aspect of retirement: The emotions, the relationships — all that stuff is just as important as change.
Absolutely. The way I like to think about it is… the financials — absolutely, you have to have them. But you also have to look at the non-financial side, especially in your final year of work when you’re approaching the “starting line,” as I call it. Financials are necessary, but not sufficient.
There’s a funny quote or that’s something along the lines of “Most people prepare more for a two week vacation than they do for retirement.” But with anything, prep and planning will lead to more success. The other comparison I like is retiring is like baking a cake.
How did you come up with these comparisons?
I even question how I come up with the things I come up with. I like using metaphors and analogies when I write, because I think it’s a good way to think outside of the box. As I started thinking about it, I don’t bake cakes.
But, as you start thinking about the process, it’s so similar to planning for retirement.
I’m going to bake a cake = I’m going to retire.
What type of cake would you like to make? What type of life would you like to live in retirement?
The steps that you go through — putting the cake in the oven, waiting an amount of time for it to cook — that’s reminiscent of building your finances and getting them to the point where they’re ready.
In each of the steps, there’s almost a perfect correlation with the steps that you need to take as you prepare for retirement.
Most people are going to start retirement planning with the financial side of things, and that’s fine. But I don’t think you can do the financials right unless you spend time thinking about what you want your end product to be; what type of cake do you want? To me, that is the bedrock foundation that you have to answer.
Tips for Financially Planning Your Retirement
When you completed that step, did you then create an estimate of what you thought your expenses would be in retirement?
Yes. We’ve never been budgeters. I’ve always saved aggressively. My wife and I are very aligned in the way we think about this stuff. We’ve always lived below our means and paid ourselves first. Once we automated our savings, we just kind of spent the rest. We would do nice vacations, I had frequent flyer miles, etc., etc. We knew we were saving 20/25% of our pay so we could afford to spend the rest, but we never really tracked our spending.
How to Estimate Retirement Expenses
So when we started getting serious about saving for retirement, we:
- Tracked every penny we spent for a year (by category) on a spreadsheet.
- Then, in a new column on the same spreadsheet, we estimated how each expense would change in retirement.
Since I wouldn’t be driving to work anymore, the car expenses would decrease. Also work related was clothing costs — there was less of a need for new work clothes, dry cleaning, etc. We went through this process, category by category. We added some travel and entertainment-type expenses, and we tried our best a projecting health insurance costs.
We took the current actual, made a retirement-projected. I did some inflation adjustments on each of the categories, looked how spending could change, and I actually laid out a projection through age 95 to make sure that we were thinking holistically and long-term rather than just looking at a snapshot in time.
Projecting Health Insurance Costs in Retirement
You mentioned health insurance; I see that’s an area that people are unsure of. They don’t know what the increased cost of health insurance is going to be. In your blog, you mentioned that you didn’t go from your company’s employer plan to Medicare because you didn’t retire at 65, correct?
No, I retired at age 55, so I have 10 years of private medical before I’m eligible for Medicare. Basically, I read all the average statistics and hedged. We allotted for $2,500 a month in health insurance costs, but we’re actually paying $2,000. We did that across the board — used the highest reasonable estimates in each category as a hedge. This way, if we did miss a couple of elements, we wouldn’t get caught by a surprise.
I would rather be surprised to the positive than surprised to the negative.
Exactly. We factored in pretty expensive healthcare. But once the numbers showed we could do it, there’s less to fear. And, as it turns out, we’ve been able to afford it. I don’t think fear and anxiety should be the reason you don’t retire. You just have to plan for the worst-case scenarios.
Creating a Side-Hustle Back-Up Plan: To Do or Not To Do?
Did you ever put any kind of plan in place for going back to work if you couldn’t afford the expenses?
No. My plan was that once I retired, I never wanted to be dependent on side-hustle income. Obviously, I’ve make some money through blogging, writing a book, etc., but none of that was built into our plan. We always assumed that once the paycheck stops, it stops forever. If we were not in the situation where that was possible, why retire? My wife and I would have kept working — I had a good corporate job with great benefits. I could’ve worked another year or two if I needed to. I never wanted to be in a situation where we had a high probability of having to go back to work if we missed.
I would rather assume the worst and then if some of the things fell together better than we planned, so be it. That was the way that my wife and I approached it.
Was your wife working at the time as well?
No. Once we had our daughter, she was a stay-at-home mom. Actually, one of the things we did right is that early on in my career, before we had our daughter — who’s 25 now — when my wife was still working, we planned for it. We knew that we wanted to start a family, and we were both aligned that my wife would become a stay-at-home mom. So, while my wife was still working, we saved 100% of her pay. Not only that but we never got dependent on the income — we never bought cars or homes based on her income. This way, once the child came along, she would be able to quit and our budget wouldn’t be affected.
How to Deal with Change
That leads me to another topic, one that many people don’t necessarily consider. Before retiring, you anticipate leaving the workplace and the change that comes with it. But don’t underestimate the amount of change that’s associated with being stay-at-home spouses. Retirement is equally big for both of you, regardless of where you’re coming from.
That brings up a good topic. You moved right around the same time you retired, correct?
Yes. When I was working, we lived in Atlanta. About seven to eight years before I retired, we purchased a vacation home up in the mountains. For a while, we were renting it out — making some passive income. It was paying for itself. But we always knew that our retirement plan was to sell the house in Atlanta and move to the cabin full-time.
But it actually happened a bit sooner than we expected, because at the time, my wife was caring for her mom whom had Alzheimer’s. The nursing home facilities by the cabin were a lot better than they were in the city, so we moved her mother into a nice nursing home in the mountains and my wife moved to the cabin full-time.
I got a small apartment in Atlanta, where I’d live Monday-Thursday — I drove down from the cabin to the city every Monday morning, and back to the cabin Thursday night. I worked from home on Friday. We did that for two years until we made the full transition.
I hear people say, “test drive your retirement.” And that’s basically what it seems you did. It’s a big change and to make it quickly can be challenging.
Yeah, and I think when it comes to moving, the hardest part is your friendships and relationships — even leaving your dentist, doctors, etc. Doing it the way we did it gave us the opportunity to be engaged in the community up here, over time.
How Does Your Daily Day Change?
What changed in terms of your daily day during retirement?
Everything. It’s incredible. For the first three to four months I was so happy to not be working. It’s not that I didn’t like my job, but I was so excited about getting that ultimate freedom — not having to set an alarm clock, etc. In that time, I really just disconnected and enjoyed the serendipity of an open day, no scheduling, things like that.
What I found at about the four-month mark — and a lot of people do find this — is that there is value to having structure in your day. When you’re working, your entire day is structured: You’ve go to the office, have meetings, deliverables, monthly reports, etc. In retirement, all of that is gone — there is quite literally no structure at all.
You kind of have to play around with how much structure works for you. I found that a little bit of both structure and freedom works well for me. For example, every morning I go to the gym and take a class, then come home and walk the dogs in the woods. At around 10- 11:00 AM, the day becomes less structured — we do whatever we want to do. Having balance works well for us.
Planning for Travel in Retirement
Have you done a lot of traveling in retirement?
Yes, we planned on traveling quite a bit. Our daughter lives in Seattle with our granddaughter, her husband is in the military. Last summer, we took a three-month, 10,000 mile trip to see them. We drove cross-country and took our time.
The first year I retired, we took a train trip. My wife always wanted to go cross-country on a train, so we did it. It was 7,000 miles, and we went from Georgia to Washington D.C., out through Chicago to Seattle. We got off the train in Seattle, stayed there for a while, and then came down the California coast and back across the southern route. We did a big loop on the train; that was great.
Last year, we did a three-month R.V. trip and spent the summer in the Pacific Northwest. This year, due to the COVID-19 pandemic, things are going to change. We’re taking off in August; we’re going to go up to Michigan. We were planning on flying out to Seattle and spending a couple weeks; but that got cancelled.
So, we scheduled our trip to Seattle, we’re going to fly out there this Fall. Since we’re not going to be doing the big R.V. trip, we’re planning just a shorter one-month trip up to northern Michigan — the upper peninsula — to visit some family and get away from the Georgia heat.
Again, that’s kind of goes back to what I was saying about structure. Have part of your life where you’re free to travel and do things, but still have a home base where you have a sense of community. It’s worked out well for us mixing those two together.
After going through the three years of planning, and now being in it, was there anything that you didn’t expect?
I think as much as I was looking forward to the liberation and the freedom, I don’t think I grasped how significant it really is. To have complete control over every minute of your day is so liberating. Being able to do only the things that you choose to do is a huge change in life. With that, comes a warning that you’re also responsible to fill your day with things that provide meaning, get you motivated and give you fulfillment. Nobody is going to do it for you.
In your book you equate it to freedom that no one has had since childhood. I can relate to that. I remember hanging out on my friend’s front steps when we were about 10-years-old. My friend’s grandfather came up to us and said, “Guys, don’t forget this time. This is going to be the best time of your lives. You don’t have cares and responsibilities.” We were like, “Yeah, whatever.” Looking back at it, he was right. Now, I’m the one saying that to my kids and they’re not listening. The cycle comes around.
I use that analogy in my book. I talk about how retirement is the summer vacation that never ends. If you were like me, you’re all excited about summer vacation; everyone is running through the playground and they’re all excited. But a month later, you’re bored. You can’t afford for that to happen in retirement, because you’re not going back to school in a few months. You have to have some design around what you want your life to be.
How to Prepare for “Doomsday Scenarios”
Going back to some of the preparation work, how much preparation did you put into “doomsday scenarios”, like a market crash, Social Security cut, etc.? Did you account for those possibilities in your planning?
Great question. I think everybody has to run some negative-type scenarios. We did. I talked about the cashflow projection that I did through age 95, including expected inflation rates. But the big unknowns were:
- Investment returns.
- Spending patterns.
- Longevity (lifespan).
Everyone is worried about running out of money. Basically, we played around with scenarios where we used 75% of social security — that’s what we always used as a hedger. We put in various variables; The markets don’t work as well as you think, inflation runs higher than you think, and saw how it looked. The concern is that if you put everything to the negative, you might end up working five years longer than you really have to. But, the likelihood of that is low. At the same time, you have to be cognizant that it could happen.
After looking at every major risk, we asked ourselves ‘what’s our best option to mitigate that risk?’
As an example, a bear market is going to happen — we just don’t know when. So to mitigate the sequence of return risk — which happens when the market takes a major downturn early in your retirement — we put in place the bucket strategy, where we keep three years of cash and another five years in bonds and investments. Maybe you don’t get more returns on the bonds and investments, but they’re more stable. Then, we reserve the equities for bucket three, which is seven to eight years out.
We could go seven or eight years without selling an equity of stock and be okay. We did that as a mitigation of sequence of return risk.
Once you’re reasonably confident that you have addressed your risks, don’t let that fear keep you from retiring. Get on with it. My wife and I’s goal of early retirement was to get out as early as we can, so we can get as many good, healthy years as possible. Once we knew we had enough money saved, our life was no longer about financials — it was about getting out and living life. We made the decision to pull the trigger and it’s worked out well.
Did you do any hedging or planning on the after-tax versus pre-tax aspects of some of your retirement accounts?
We sure did. Like most Baby Boomers, when I was coming up through the workplace, you didn’t have Roth accounts; all you had was the before tax 401(k)s. Obviously, I was saving everything pre-tax, because that’s what everyone said was right. The reality is that now the IRS is coming after their money. If you look at the required minimum distributions, and if you wait until age 72 to start pulling from it, you can get hammered on taxes.
We’ve put together a very solid plan. We’re doing Roth conversions every year. We basically look at our marginal tax bracket situation. Let’s say there’s $40,000 left between the income that I’m getting from my pension, maybe my blog, some other side income-type things. If there’s $40,000 left between that and the marginal tax bracket, we’ll go ahead and take a $40,000 withdrawal from the 401(k) pre-tax, move it into the Roth, pay the taxes on it.
Especially now with the current tax structure for married filed jointly, the 2017/2018 reductions are significant. We’re taking advantage of those to move as much as that before tax money as we can.
I wrote a blog post recently on our retirement drawdown strategy. There, I went through all of this logic and how we’re addressing various elements.
That’s great, thanks for sharing. What’s next for The Retirement Manifesto, are you continuing to write for the foreseeable future?
Yeah, I will be writing every week. I really like the challenge of weekly blog posts. I enjoy coming up with articles that are entertaining. My readership base has grown quite a bit. I received the award of “Retirement Blog of the Year” from the Academy Awards of Blogging. Like you said in the introduction of this episode, there aren’t a lot of people talking about retirement from the first person perspective. Being a Baby Boomer, and being in the early phase of retirement, I feel like The Retirement Manifesto is a good place to start educating yourself.
One of the things you have to look out for when you go into retirement is there is a lack of reward. People are so used to a reward structure at work — whether it’s a bonus, salary increase or pat on the back from your boss. That goes away in retirement. So, finding things that give you that sense of achievement is really important, and my blog is something that gives me that.
That’s awesome. So, that just about wraps up our show for today. Fritz, how best can someone find out more information about your blog and your book?
I appreciate it Marc. I’m at TheRetirementManifesto.com. You can find my book on there. I’m also on Facebook, Twitter and everywhere else. But the blog domain is the easiest place to find me.
Great. Thank you very much for being on the show today. And thank you everyone for tuning in to today’s episode. Until next time!