Taking Stock: Finances


January 3, 2016 by Jean


As the old year turned into the new, I ended my first full year of retirement and began the second. And since the new year is traditionally a time for reviewing our lives and making resolutions, it seemed a good time to take stock of how I am doing. This is the first of three “taking stock” posts, which will look at how I am doing in in terms of retirement finances, retirement time, and retirement well-being.

I will begin with finances because New Year’s Day is when I traditionally take stock of how I am doing financially by balancing my household accounts and setting up my budget for the new year. 2015 was a year of big changes for me financially. Although I finished my teaching responsibilities in May, 2014, I was officially on an “end-of-career sabbatical” and still being paid by Gettysburg College through the end of that year. Indeed, since I was paid the equivalent of six months salary between September and December 2014, my bi-weekly paychecks were larger than normal. To go from these big paychecks to living without any regular income, as I did in 2015, was a a source of some anxiety – especially because I had used some of the savings originally intended to finance my first three years of retirement to pay for my house addition.

I approached the financial uncertainty of 2015 as I always have, with a budget. After reviewing my savings and likely expenses, I decided that I could afford $2600 per month to live on. $100 of this came from a small amount of Social Security that I am receiving on my ex-husband’s account (I don’t plan to begin collecting Social Security on my own account until I turn 70 in 2018); the remaining $2500 was to come from savings. About mid-year, I reviewed my budget and made some changes in how money was distributed among categories, but not in the overall budget amount (see How Much Does It Cost to Live in Retirement).

As the old year ended, I took out my budget spreadsheet to see how I had done. The news was good; I had spent a little under $2100 per month, or $500 less than budgeted. Of the balance remaining in my various budget accounts, a little more than $3000 is being carried over into 2016; the rest is savings that I can use to delay drawing on my retirement funds.

I typically carry over the balance on line items that I expect to vary greatly from one year to the next. Examples are house repairs and travel. If I don’t spend much money on my house in a particular year, I consider those as savings that can be used for house maintenance and repairs in the coming year. In 2016, for example, I will need to replace my hot water heater and have a flight of outdoor stairs rebuilt. I will also use money from this account for remodeling my old study into a new sewing room/guest room. Travel is another line item that I treat as savings; rather than taking a big vacation every year, I tend to let my travel savings accumulate for several years to finance a big trip.

I am also carrying over a balance on line items that were underspent in the year just ending but that I expect to spend an unusually large amount on in the coming year. In 2015, I spent very little on clothing. Because I lost weight this year, however, many of my old clothes, especially my winter woolens, no longer fit well.  In 2016, I expect to finish setting up my new sewing space and then spend money on high-quality fabrics to make myself new clothes that fit. I am also carrying over the unspent balance in my “garden” line item because I expect relatively high costs this year associated with creating two large sections of my new front garden.

Although I underspent my budget overall last year, I have decided to keep my monthly budget amount at $2600 for the coming year. I have enough money to support this standard of living, and this will allow me to relax a little about some of my expenditures.

As part of my annual New Years Day accounting, I always check on how much I have in the bank (in checking account, savings accounts, and certificates of deposit). Because I spent less than anticipated in 2015, these savings will carry me through the first month and a half of 2016. When I looked at the bank CDs that I have maturing in 2016 and that were designated for living expenses in that year, I discovered that they will carry me through until March, 2017, with another several months of living expenses from a CD that will mature early in 2017. This means that I won’t need to start drawing down my retirement funds until the middle of 2017 – more good news because my portfolio didn’t grow as much as expected this year. I did take some distributions this year because I was tipped off by a friend that I might want to reduce the tax bite of minimum distributions when I turn 71 in 2019 by taking some income from my tax-deferred retirement funds in these years when I have very little taxable income. I did so by rolling some funds over into a Roth IRA and paying the taxes now.

Most of what is written about retirement is about retirement finances because that is the greatest source of anxiety for most people as they anticipate and move into retirement. All in all, I have come to the end of my first year without a paycheck feeling good about and in control of my financial situation.

10 thoughts on “Taking Stock: Finances

  1. A great goal met Jean. We still struggle with the insurance cost and how it takes a huge bite out of our budget although shopping around new plans have reduced the cost a bit. And we have to keep our spending down or that increases the cost of the insurance….long story but it has to do with tax breaks. It is easy to see why retirement income and spending can be a huge source of anxiety.

    • Jean says:

      Donna, I haven’t really had to deal with the insurance costs yet. I am covered by Medicare Part B, the cost of which is deducted from my monthly Social Security payment, and I have an inexpensive Medicare supplement from my former employer for the first three years of retirement. In 2018, I’ll have to start carrying the expense of paying for a good Medicare supplement on my own.

  2. Jean R. says:

    I wish I had a better handle on investing. I was fine until the government made me take yearly disbursements to pay the taxes on the money. I don’t know what to do with the disbursements to reinvest! I finally talked to one of the investors at the bank and rolled some into something he advised but it’s the first of the year and I have to do something again! I guess I could have worse problems but it is a source of worry. I have no problem living off social security and the pension check I get from my husband but I wish I cared more about learning about investing. And of course, most retired people seem to worry that our social security and pension money and healthcare coverage will disappear at the whim of the guys in D.C. With GM’s bankruptcy a few years ago that was a real possibility. That was a tough year of worry while they were working out the deals for the retirees.

    • Jean says:

      Jean, Does your Senior Hall run any educational programs on investing? I just know some basics, enough to make me reasonably comfortable making decisions. (Also, TIAA-CREF, where my retirement portfolio is held, provides free advice from certified financial planners, which is a great service.) By the time I have to start taking minimum distributions, I’ll probably need at least some of it to live on.

      • Jean R. says:

        No, they don’t but I that would make a good suggestion. The director is always looking for new ideas. They have a free lawyer service every month. Ten minutes for a quick question and it’s come in handy a few times to double check what my own lawyer tells me.

        I have not needed my distributions and when they appear in my checking account it annoys because I liked it where it was and it creates a problem this time every year.. LOL I know, that’s a stupid thing to complain about when so many women in our age bracket struggle with not enough money.

  3. Diana Studer says:

    is the lost weight good, a planned change?
    I have a stash of fabric but haven’t sewn in forever.

    • Jean says:

      Diana, The weight loss is a good, planned change. Now that I am getting enough sleep and am no longer stressed out at work, I was able to take off the 20+ extra pounds that I’ve been carrying around for 20+ years.
      The last time I sewed an article of clothing for myself was in 1984, so I will need to relearn. But I’ve become increasingly dissatisfied with the quality of the clothing available for sale.

  4. […] my second year of retirement begins, I am taking stock of how things are going. My last post (Taking Stock: Finances) focused on how I am doing financially; this one focuses on how I am using my time. While finances […]

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I am Jean Potuchek, a professional sociologist who has just stepped into the next phase of my life, retirement, after more than thirty years of college teaching. This blog is about my experience of that new phase of life.

Please join me as I step into my future.

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