Why lower retirement spending rates means most retirees will need to work some during their retirement years.
In this episode you’ll learn:
- What is the average savings of retirees in their first year of retirement.
- What is the average income and expenditures of retirees.
- What is the maximum sustainable withdrawal rate for retirees.
- Why most retirees shouldn’t stop working.
Olutayo Ayodeji Suicide Prevention Gofundme Campaign
Olutayo Ayodeji Facebook Profile
16th Annual Transamerica Retirement Survey
Consumer Expenditures Survey (retiree data in second column from the left)
Determining Withdrawal Rates Using Historical Data – William P. Bengen – Journal of Financial Planning – October 1994
Profile of Bill Bengen on PSA Card
Does the 4% Rule Work Around the World? – Wade Pfau
Will 90 Become the New 60 – Nautilus
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Work Can Ease The Retirement Transition
A few weeks ago after attending a wedding in Twin Falls, Idaho, we were checking into a hotel when I noticed a bicycle in the rack outside the door.
What peaked my interest was the rider had left his or her mini-air pump attached to the bike, free for anyone to steal.
“How trusting,” I thought.
The road bike was a Jamis Satellite steel frame, outfitted with a classic Brooks B17 brown leather saddle, a bike seat Brooks has been making for over 100 years, and the exact seat I wanted as a teenager but couldn’t afford. I thought it would make me ride faster.
This bike could have come right out of the 1970s or 80s.
The next morning, I was sitting in the hotel lobby when the bike’s owner came down to use the computer and prepare for his day’s journey.
Ride Across America
We got to talking. His name is Olutayo Ayodeji. He is riding across the country from Olympia, Washington to the Virginia coast as a memorial to his sixteen-year-old son Sule who took his own life a year ago.
Olutayo told me how he knew nothing about depression when the school nurse called him several years back to say his son had broken down and was in her office.
They worked with psychologists to try to find the right mix of counseling and medicine to manage the illness.
Things seemed to be improving. Sule had just gotten a job at Chipotle. He was preparing to attend the University of Maryland. He and his Dad were planning a cross-country bicycle trip for the summer Sule graduated from high school.
According to Olutayo’s GoFundMe profile, Sule said he wanted to “travel the country, going from town to town, and meet new people.”
But the day came when Sule didn’t show up for work. His sister and Dad couldn’t find him. Olutayo said the last time he saw his son was earlier that day when Sule asked to borrow his cellphone. They later found a note.
One year later, Olutayo is taking the bike trip he and his son were planning. He bought the Jamis bicycle used at a swap meet for $400. This is a low budget adventure. No fancy gear. No shuttle to follow him in case his bike breaks down.
Olutayo writes of Sule, “I will meet those people for him, and I will tell them how intelligent, artistic, and insightful Sule was. This cross-country ride was intended for my buddy and I to see and explore the country together. So, as I ride, I will carry Sule with me. I will deposit some of his ashes in the rivers I cross. The rivers will carry him to parts of the world he will not consciously explore, and he will forever be part of the ecosystem.”
Olutayo also rides for the other teens who lost their lives to suicide, for their parents, and for the parents of teenagers who currently suffer depression. As he travels, Olutayo tries to spread awareness of teen depression.
Finally, Olutayo says he rides for himself. “I’m not riding for closure because there will be none. There will always be an opening in my heart where my son should be. If nothing else, I hope that this ride will provide me with the strength to carry on. As in life, I know my journey will be long and challenging. Along the way, I will face challenges and obstacles. I know there will be times when I want to give up but I will forge ahead because my Sule and others could not. I will ride.”
Olutayo’s most recent post on Facebook was from Kremmling, Colorado, elevation 7,313. He wrote, “We are making progress today, despite the headwinds.”
Olutayo mentioned to me when he was in Idaho that he was still waiting for the tailwinds everyone said he would have if he rode from west to east. Apparently, he is still waiting.
What inspires me about Olutayo’s 3,000 mile journey is his willingness to undertake it on a used road bike with faulty rims that have plagued him for much of the trip. Cycling isn’t much fun on wobbly wheels. Most cyclists on such a long ride cruise along on rims that cost two to three times what Olutayo paid for his entire bike.
The Retirement Journey
Most of us don’t have the desire or ambition to an attempt a cross-country cycling trip. Yet, there comes a day when we launch ourselves on a journey that can seem equally as perilous. Where the unknowns are just as great and where we worry about our level of preparedness.
It’s called retirement.
Some retirees begin their journey with seven figure investment portfolio balances and lucrative pension plans. These are the retirees who cruise through retirement on the equivalent of $5,000 custom road bikes with titanium frames and carbon forks.
Most retirees get by on much less; the equivalent of Olutayo’s used Jamis steel frame bike with wheels that won’t stay true.
According to the 2016 Transamerica Center for Retirement Studies, the median retirement savings for a retiree at the time of retirement is $131,000. For couples, the median retirement savings balance at the time of retirement is $250,000.
If the average retired couple withdrew 4% of their starting $250,000 balance to live on in their first year of retirement that is $12,500. In addition, the average retired U.S. couple receives $26,544 in annual social security benefits. Combined that is just over $39,000 per year for living expenses.
According to the 2014 Consumer Expenditures Survey, the average retired household spends $42,715 per year.
That includes $15,000 per year on housing related costs, $6,800 on transportation, $6,000 on healthcare costs, $5,400 on food, $2,500 on charity, $2,300 on Entertainment and $4,700 on everything else.
Work During Retirement
How does the average retired couple bridge the gap between what they spend annually and their social security benefits and investment earnings? They work.
The average retiree household earns $7,700 annually from employment. Work on at least a part-time basis is how most retirees will be able to afford retirement.
According to the Transamerica Center for Retirement Studies, 58% of workers expect to retire after age 65 and 51% of workers plan to continue working in retirement.
Including paid part-time employment as part of your retirement can make the retirement journey more manageable and less stressful.