My cousin Dan from Minnesota, who retired from the U.S. Postal Service in February at age 53, offers his thoughts on how he’s affording retirement:
The first reaction I get when I talk to people about retirement is, “I can’t live on X percentage of my salary.” I took a different approach when I considered my early retirement.
First, I created a spreadsheet. On the left side I listed my current salary and all of the deductions from my paycheck. Then I calculated the percentage of each deduction from my gross pay. Even though some of these deductions, like the credit union, are technically my money and not some evil government program, It still affected my take-home pay. It turned out that I was living on 41% of my gross pay.
Then on the right side of the page I did the same thing based on my retirement estimate, including the deduction for survivors’ benefits. Many of the columns were now zeros. For example, since you don’t pay into retirement when you retire, that column was zero. Federal employees don’t pay into Social Security but we pay a Medicare tax, so this column was also zero in retirement. My percentage of take-home pay was now up to 62%, but still several hundred dollars less per month than my working salary, so I made some changes.
First, I realized I was over-insured. With two kids safely out of college and the third a senior, it was time to reduce my life insurance (sorry, kids), especially since the rates start to go up fast when you hit 50. Then I realized that my health insurance costs had gone up dramatically. By switching health plans I was able to reduce my health costs and not even change doctors!
Now the difference between my working and retirement salaries was pretty close, so I considered my lifestyle changes in retirement. First of all I would not be spending four bucks each morning having coffee and a bagel with my friend Art. (Art and I still meet once a week but I make him buy.) My lunches at the employee cafeteria used to cost upwards of $7 each day. Eleven dollars per day for breakfast and lunch, times 20 days per month equals a $220 savings.
My mentor Arnie taught me the importance of a neatly pressed shirt, so I would take my dress shirts each week to the cleaners. Another $40 monthly savings.
Since I lived so close to work, there would be no gas savings for me but I bet most of you will reduce your gasoline consumption as well as the wear and tear on your vehicles. And don’t forget to tell your insurance agent that you have retired as you may be entitled to a reduction on your car insurance.
I’m sure there are other reductions that I can’t even account for like black socks, dress shirts, jelly beans, pitching in for birthday cakes and retirements, aspirin, but the bottom line for me is that it seems to be working.
I realize I may be a unique case having 37 years of service at the age of 53 (yes, I started working for the U.S. Postal Service after school at the age of 16) but 80 days into this retirement thing and I don’t feel any financial pressure. I walk almost every day, I’ve lost weight (including the weight of my Blackberry), I bet my blood pressure is down, and my grass is finally dandelion free.