A tale of five retirements

By Slow Dad - June 24, 2017

Comparing and contrasting five very different approaches to retirement funding. 15 years in a caravan? House building in Asia? And lots in-between.
Recently Fritz from RetirementManifesto organised a series of bloggers to outline how they plan to fund and organise their retirements. This provided a very useful means of allowing readers to compare and contrast approaches, hopefully learning something along the way.

The series is very American focussed, with relevant tax and healthcare and pension regulations understandably dominating the discussions. Readers from elsewhere can still benefit from learning the general approach, but the specifics don’t necessarily translate so well.

Fritz challenged me to do something similar for Europeans. However Europe is a big place, with a vast multitude of very different tax and pension regimes in place.

I do think Fritz's compare and contrast idea was a good one, so today I present five case studies that outline a diverse array of different values, funding models, and approaches to retirement.

You can't take it with you

Retiree #1 inherited and ran the family business for ~30 years, married and had a whole tribe of kids, and generally lived hand to mouth the whole time. The proceeds of good years were blown on flashy trophy purchases like new cars, in bad years they did it pretty hard.

Around age 60 Retiree #1 was pretty much stuffed. A lifetime of heavy lifting and manual work had left them with worn out knees, a stuffed back, arthritis, and carpal tunnel. The business had become structurally redundant, a combination technological improvements and globalisation meant there was no longer a place for doing things on a small local scale.

Unable to continue the business, and with no viable going concern to sell, Retiree #1 should have been facing a retirement reliant on social security handouts and living on the poverty line.

The gods of fortune rescued Retiree #1 however. Infrastructure improvements to nearby highways, combined with society’s apparent increasing tolerance for lengthy commutes, meant the land upon which the family business had operated suddenly became valuable. Retiree #1 closed the family business, sold the land for millions to property developers, and bought a McMansion at the beach.

Over the next five years they consciously and deliberately burned through their means test assessible assets. They travelled first class, and stayed in 5 star accommodation. They got fat. They got type 2 diabetes. They got knee replacements. Eventually they became eligible for a full state pension, while living in a house they owned outright.

Retirement philosophy: Social security is an entitlement, we earned it by paying taxes. People would be stupid to not take and consume everything they possibly can, after all you can’t take it with you when you die.

"after all you can’t take it with you when you die."

A gypsy soul

Retiree #2 served the 20 years required to be eligible for a full military pension, while studying in the evenings and weekends to qualify for the accounting profession that they joined upon their military retirement. Along the way they got married, and had a few kids.

When aged around 55, Retiree #2’s spouse died suddenly. Their kids had long since left home, so Retiree #2 retired again, sold the family home, bought a caravan, and set out to explore.

Early on Retiree #2 lived on a combination of their military pension, savings and capital from their home sale to live on. Over time their private pensions kicked in to, allowing them to reduce the need to live on capital. Finally a partial state pension allowed them to preserve what remaining capital they had left.

Gypsy soul - 15 years later they are still going strong.

15 years later they are still going strong. Every month or two they take a “sanity” break from the small towns and out of the way places, catching a plane or train for a holiday away from the caravan. Go see a theatre performance in a big city, drop in to babysit the grandkids during school holidays, or spend a few days island hopping in some far away tropical paradise.

Retirement philosophy: After having spent a lifetime of duty, compromise and responsibility, an unexpected tragedy provided a second chance to lead a life free from it all.

Their only regrets were that they didn’t take control of their own destiny sooner, and that their spouse wasn’t there to experience the newfound quality of life with.

"Their only regrets were that they didn’t take control of their own destiny sooner"

There will always be time for that later... until there isn't

Retiree #3 followed the cliched climb up the corporate ladder. Graduated university followed by 30 unsatisfying years of long hours spent in an office as a professional meeting attendee. Married to a spouse they didn’t much like, and a couple kids they barely knew.

The big house in the suburbs.

The large new corporate executive vehicle that gets replaced every two years.

The expensive suits.

The majority of their savings were channelled into private pensions, following the financial planning orthodoxy that says that is the most tax efficient way to park money.

5 years short of retirement age the political winds in the office changed, and Retiree #3 found themselves unexpectedly made redundant. Six months of anger, depression and railing against the unfairness of the world followed.

Early Retirement wasn’t an option, as their large pile of wealth was tantalisingly locked away in a gilded tax advantaged cage. Local pension regulations did not provide for an option to pay a penalties and access it early.

It took a further six months for them to find another job, many rungs lower down the corporate ladder. Who wants to hire an institutionalised professional middle manager aged in their early 50s?

Too old and closed minded to learn new skills.

Too set in their ways to adapt to a new working culture.

Too egotistical to work for a boss younger than themselves.

Prospective employers assumed they were the walking embodiment of the cliché.

Shortly before reaching pension eligibility age they again found themselves on the receiving end of a redundancy.

This time they kicked back, coasted into what promised to be a long and luxuriously well-funded retirement of globe-trotting, doing good deeds, and attempting to repair their almost non-existent relationships with their kids.

Not long afterwards a terminal cancer diagnosis put paid to most of those best laid plans. Private pensions funding not globe-trotting travel but chemo treatments. The long anticipated visits to the grandkids were replaced with visits to the oncologist.

Retirement philosophy: After spending a lifetime deferring enjoyment today for the promise of delayed gratification tomorrow, it transpires that tomorrow may never come.

The uncertainty over how long a life a person will live requires a conscious weighing up of the optimal mix of living for today versus planning for tomorrow.

With the benefit of hindsight they now believe they got that balance very wrong.

"a terminal cancer diagnosis put paid to most of those best laid plans."

From a career spent blowing things up, to a retirement spent building

Retiree #4 spent 25 years in the military, retiring aged 44 physically and (mostly) mentally intact. They had remained single. They never had kids. They spent much of that period posted in various (mostly) undesirable places around the world performing (mostly) unpleasant tasks, all the while under the constant risk of being blown up.

They had saved almost everything they had ever earned, the military meeting most of the needs of a soldier willing to live a simple life without family commitments. Their largest outgoing had been financially supporting a collection of nieces and nephews who had lacked the foresight to choose carefully when selecting their parents.

A year into retirement Retiree #4 decided to become a semi-professional student, studying a wide variety of interest driven university and vocational subjects. Two or three times a year they take extended trips to south-east Asia, volunteering for good causes such as Habitat for Humanity.

Two or three times a year they take extended trips to south-east Asia, volunteering for good causes such as Habitat for Humanity.

Retirement philosophy: Hard work is for masochists, working smart keeps you alive. Live simply, while investing wisely.

Retire young, before you have pushed your luck too far, while you are fit enough and mobile enough to enjoy the life you have remaining.

Don’t wait until the concept of an adventure holiday consists of attempting to survive a trip on a pensioner tour bus full of elderly overweight helmet-haired widows.

"Retire young... while you are fit enough and mobile enough to enjoy the life you have remaining."

Living by your own rules means you don't need to wait until retirement

Retiree #5 graduated from university then (after a brief stint in the workforce) founded a business that allowed them to travel the world while working on projects that piqued their interest.

They focussed on acquiring and maintaining a constantly evolving skillset that was both in demand and commanded a premium for their time. Along the way the converted that premium into a diverse collection of investments, each generating passive income streams.

Before the age of 40 Retiree #5 was in a position to dial back their work commitments, spending 3-6 months per year working on interesting projects for a select group of appreciative yet undemanding clients, while spending the rest of the year hanging out with their young family.

Retirement philosophy: Retirement is for old people, the tax and social security systems says so. Financial freedom is measured in time, not money.

Focus on commanding a premium on your time while working, but limit that time to only that which is required to keep your brain stimulated and your skills saleable.

Establish indirect income streams, and use those income streams to start replacing your direct income earned via employment.

In this way you can gradually buy your way towards retirement starting today, without worrying about unnecessary externally imposed restrictions associated with pensions.

"gradually buy your way towards retirement starting today"

So what?

All 5 of the retirees presented here took very different routes to retirement, using very different funding methods. However all share several things in common.

They all successfully managed to achieve retirement (at least as far as they wanted to be retired). From that perspective they are winning at life, as many folks don't make it even that far.

They all retired earlier than the ever increasing state pension eligibility age limit.

Retirement did not play out how any of them expected while they were working towards it, in fact it the only person for whom their retirement passably resembled what they had imagined is the semi-retired Retiree #5.

All of the older retirees lament the relentless consequences of age: the slowing down both mentally and physically, the increasing frailty, the feeling overwhelmed by the pace of change, and the need to pee several times a night.

How do your retirement plans compare with those presented here?

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  1. Well geez. Some of those were depressing but quite accurate! I hate to hear stories of people retiring and dying shortly after. What terrible timing death has!! I will be a mix of most (minus the military part) by bouncing from jobs until I was 23 (when some people learn of FIRE!) then beginning my career that will have me for 5 more years (21 total). After which I will ne FI and have the choice to continue on a part time basis just for fun, move on to something new, or both! I have no intentions of not working but I have every intention to be more fulfilled by the work I do. 5 more years... :)

  2. Sounds like a grand plan Miss Mazuma.

    I suspect dying is inconvenient timing for most people, but I agree with your sentiment.

    Financial Independence certainly provides the luxury of choice, to work a little, or a lot, or not to work at all... basically to do as much or as little as a person wants. That is a great problem to have!