Retirement…ahhhh…sounds like such a nice word, until you don’t know where your money is at.
The stress of having an account that someone else has control over is overwhelming sometimes.
I am finding this out from my BF (boyfriend). He is a very responsible, accountable, old fashioned man (not old in years, he is only 54). He happens to be a responsible person who worked for the same company (company changed hands 3 times) for the last 31 years and lived below his means.
The company is now on the verge of filing bankruptcy, which is why he unexpectedly retired early, otherwise there would be a good chance of him losing more than half of his pension. And after 31 years of hard manual labor, he wasn’t about to let his pension slip through his hands.
When a company files bankruptcy and their employees have pension plans, there is usually a guarantee provided by the government called a guarantee pension. PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 (ERISA) to protect pension benefits in private-sector defined benefit plans – the kind that typically pay a set monthly amount at retirement. You are not guaranteed your whole pension, in some cases you are only entitled to about ⅓ of your original payout.
One day while I was at work he texted me…”I pulled the trigger, I gave my two week notice and retired”. He wasn’t ready for it, I wasn’t ready for it. But I was extremely happy for him. He had been dealing with incompetent managers (people who had degrees but never once worked in the field, couldn’t read a road map to get them out of a ceral box, and just thought “they knew better” than someone who had a degree but also had 31 years experience out in the field but didn’t want to be in management).
But then came the fear. The fear of “what happens next?” “How do I get my money”, “How do I invest my money”? He only had two weeks to roll over his pension and his 401k. For someone who has been debt-free for the last 10 years, I couldn’t understand how he didn’t know what to do with his money. I have been following Dave Ramsey, Mr. Money Mustache, The Money Wizard, Root of Good, etc for the last couple of years, and I know exactly what I would have done if it was my money. But it’s not my money and I am trying to understand how hard this is for him. Any advice I give him may be wrong and I wouldn’t know who to advise him to go see.
The problem with retiring early (prior to 59 ½) is that in order to take money from any retirement accounts without penalty you have to do a 72T withdrawal. This is just the IRS way of distributing your retirement plan with equal periodic payments without charging a penalty. But, and here’s the big but….you have to know how to withdrawal from a 72T.
Unfortunately or fortunately, the BF decided to use a finance person who is also helping fellow employees with their respective retirements, but how much does anyone know about this person? BF is now having trouble seeing his money on the financial website. The brokerage firm is now using a new company. All of this stress is unbelievable. I suggest that if you’re not going to manage your own money, do yourself a favor and learn as much about finances as you can and if you still don’t want to manage your own money, search out someone who you’ve done your homework on and interview them…interview several of them and then pick the one that suits you, understands you, and has your best interest in mind.
I have read Simple Path to Wealth by J.L. Collins and Quit Like a Millionaire by Bryce Leung and Kristy Shen. Both are great books but I still can’t tell the BF to “just put your money here, or there”. What happens if he loses it, I would feel that I was responsible.
So please, if you are anywhere near retirement know exactly what you are going to do with your money. Have the foresight to look ahead and plan.
I suggest getting a Personal Capital Account as does every other FIRE person (financial independence retire early) to keep track of budgeting, investments and bank accounts and also go with the Big 3 at Vanguard:
If you like, comment below on your views for retirement.
Here’s to reading on!