Book Review: Retirement Reinvention

Retirement Reinvention

About the Book:

For twenty years, Robin Ryan has been helping clients get the most out of their careers and their lives. Now, in Retirement Reinvention, she shatters the myths of retirement.  The old model of retirement is changing. The majority of retirees today are seeking fun and meaningful ways to spend their time. 

Full of practical advice, this thought-provoking guide offers readers a path for reinventing their own retirements, including step-by-step instructions for:

   • Leaving an old career behind 

   • Pinpointing interests and skills 

   • Exploring different places to live 

   • Defining new, satisfying opportunities 

   • Finding meaningful ways to give back to your community 

   • Striking the right balance between work and leisure 

From starting a dream business to shifting to the nonprofit sector to volunteering, Robin Ryan will help you create a plan and pivot toward a future as vital as it is truly rewarding.

My Comments:

When I say "retire", what comes to your mind?  The beach?  Your bed?  Fun?  Boredom?  In Retirement Reinvention Robin Ryan pushes the idea of retirement being not the time after you quit your job but the time during which you participate in activities (possibly including jobs) that are fun and meaningful to you.  Instead of your 66th birthday being the end of your working life, Ryan suggests you see it as a new beginning.  

Robin Ryan uses stories of real people and how they have been able to make a difference in a way that is meaningful to them.  Some have started small businesses, others have taken up time-consuming hobbies while yet others have chosen to learn something new.  The key to a successful retirement is choice--you may not make a fortune blogging as a hobby but if writing is fun, you can try to build an audience (and since you don't need one, you don't have to do SEO research, create pinworthy graphics or maintain a mailing list).  

One thing I do regularly is peruse the posts on Rockstar Finance and last night when I was starting this post, this one caught my eye:  Our "High School Rule" for early retirement.  The ideas are much the same as expressed by Robin Ryan.

If you are trying to figure out how you are going to spend the rest of your healthy left Robin Ryan has a lot of good ideas of things to do and suggestions about how to get started.

I'd like to thank the publisher for providing a review copy via NetGalley.  Grade:  B+

My Stock Portfolio: AT&T

I've said before that I firmly believe that the best investment strategy for most people, me included, is to invest in a diversified portfolio of index mutual funds.  You should pick an asset allocation ratio (what percent of your money is in stocks vs bonds, and foreign vs domestic) set it, and generally leave it alone.  Invest regularly and do not try to time the market.  If you do this I can almost guarantee you:

• You are not going to double your money in a year or two
• You are not going to lose money, in the long run
• You will have up years and down years, but if you don't sell during the down years, you will eventually recover (and then some)
• 
  

That being said, I personally find the stock market to be fascinating and I like playing around with it.  We allocate a very small percent of our assets to purchasing individual stocks using low-fee or no-fee brokers.  Robinhood allows you to purchase individual shares of most companies in realtime for no commissions.  Robinhood also allows you to set stop loss, limit buys and limit sell orders.  If you use my Robinhood link, you will get one free share of stock, and so will I.  What have you got to lose?

This article will begin a periodic series on the individual stocks in which I have invested.  These articles are not a recommendation that you purchase the stock, but rather an indication of why I purchased it, how it has performed, and what I plan to do with it.  

Name of Company and Description of Business

According to AT&T's website 

At AT&T, we’re bringing it all together. We deliver advanced mobile services, next-generation TV, high-speed internet and smart solutions for people and businesses. That’s why we’re investing to be a global leader in the Technology, Media and Telecommunications industry.

In the United States, we offer TV and wireless nationwide, plus a large high-speed internet footprint. We offer a wide choice of internet speeds to meet customers’ needs. With our 100% fiber network, customers in 67 markets can download a 90-minute HD movie in less than 36 seconds, a 30-minute TV episode in 3 seconds and 25 songs in 1 second¹. We plan to expand these speeds to at least 75 metros in total. We also offer pay TV in 11 Latin American countries.

We offer solutions that help businesses in every industry serve their customers better. We deliver advanced services to millions of businesses on 6 continents. That includes nearly all of the Fortune 1000 as well as neighborhood businesses across the United States.

Our high-speed mobile internet network covers more than 400 million people and businesses across the U.S. and Mexico. We also wirelessly connect cars, machines, shipping containers and more. It's all part of our leadership in what’s called the Internet of Things.

Speaking historically, AT&T is "the phone company" that got its start when Alexander Graham Bell invented the telephone.  It has gone through several rounds of break-ups and consolidations but today offers a variety of telecommunications products.

Date Purchased

I purchased two shares on November 21, 2016.

Purchase Price

My purchase price was $37.67.

Current Price

The current price, as of 12:49 CST, on 1/29/18 is $37.49.

Stop-Loss Price

I do not have a stop-loss set for this stock.  I don't think AT&T is going anywhere so I'm not afraid of losing a lot of money on this.  While the price may go up and down, the business itself is profitable and it is paying a good dividend.

Dividends Received

I received $.49 per share on May 1, August 1, November 1 and will receive a $0.50 dividend on February 1.

Gain or Loss Since Purchase:

My dividends plus the current cost of the stock total $38.47; I purchased the share for $37.67, giving me a current gain of $0.80 or 2.1%  over 14 months. By comparison, the S&P has risen about 35% since then.

What Others Think

Dividend Value Builder:  "T is a great addition to any large diversified portfolio. However, it should be viewed differently than in the past. I’m afraid the long term risk of a dividend cut is higher than most investors perceive."

The Money Madam at Seeking Alpha:  "AT&T is a good pick for 2018"

Stone Fox Capital at Seeking Alpha:  " Ultimately, the highly competitive domestic wireless market and cable television markets limit any material upside for the stock. Investors in AT&T will get to enjoy the large 5% dividend yield, but not much else."

Discount Fountain at Seeking Alpha:  "[M] view is that AT&T will continue to be a strong long-term investment going forward. The stock pays a very attractive yield, its core business remains strong, and the implications surrounding the ongoing Time Warner deal appear to be causing irrational avoidance of this stock, leading to quite a good buying opportunity."

Brian Bollinger (10/26/16): "However, my preference is to watch major transformations from the sideline for a while. AT&T has a lot of new businesses to digest and optimize between DirecTV and Time Warner. The media industry could certainly evolve the way AT&T is expecting (and in part trying to force with its deals), but there are plenty of other risks involved as well. Certainly no one can forget AOL’s disastrous merger with Time Warner.

For now, I prefer to stick with other high dividend stocks in our Conservative Retirees dividend stock portfolio. "

Jason Feiber (11/12/17):  "AT&T Inc. (T) is a high-quality business with a tremendous record for paying shareholders a huge and growing dividend. Their ability to continue doing that could very well improve moving forward, yet the stock’s recent price action apparently discounts much of this. But short-term volatility is often a long-term opportunity, and this stock has the potential for 14% upside on top of a market-crushing yield of almost 6%. If you like your dividends big, and you want them to get bigger every year, this dividend growth stock should be on your radar."

Why Did I Purchase?

I purchased AT&T stock because I was looking for a company that paid good dividends and that would be around for the long haul.

What Are My Plans?

I plan to maintain my position into the indefinite future, though if the price drops below $37.00 in the next few months, I may buy another share.

Additional Comments:

A couple of days after I wrote most of this article, AT&T released their fourth quarter earnings per share.  While the expected earnings per share were $0.65 per share, the actual earnings per share were $0.78, and as a result, share price rose $1.19 in after hours trading.  

When Should I Take Social Security?

One common piece of advice given to those planning for retirement is to delay taking your Social Security benefit, as each year you delay increases the benefit.  So, is that good advice?

The first part of answering that question is to determine whether or not you NEED to take those benefits at the earliest possible moment.  In other words, if you have been laid off or have become disabled and have no other means of support, then no, you should not delay taking your benefits.  Rather you need to learn to live within the means provided by the benefits you have.

Early Retirement

Social Security retirement benefits can be claimed as early as age 62; however, the amount you receive is less than if you retired at your normal retirement age (for me, 67) and, if you continue working and earn over $16,920.00 your benefits will be reduced by $1 for each $2 over that amount.  In short, unless you are talking a low-wage job or very part-time work, it is probably not worth it to take your Social Security before your full retirement age unless you really are retired. 

But what if you are retired (or want to be)?  You are entitled to take your Social Security benefit at 62 but the benefit amount is reduced.  For example, my husband's benefit would be about $3800 per year less if he took his benefit at 62 as opposed to 66.  Assuming we did not need the money to make ends meet, and assuming he was earning less than $16,920 per year, he would collect over $58,000 between 62 and 66. 

According to this calculator if he deposited his monthly benefit in an account that earned 2% per year, by the time he reached his normal retirement age of 66, he would have about $69,000.  If he no longer got interest on that money (trying to make the math easy) but withdrew $3,800 per year thereafter (the amount by which his check was reduced due to taking it early) it would take about 18 years (or until he was 84) for that account to be down to nothing.  If he died before that, he clearly came out ahead taking the benefits early. 

Families with Minor Children or Disabled Adult Children

One thing many people do not realize is that Social Security provides benefits to minor children and to disabled adult children of retirees.  When my husband is 62, he will have a daughter who is 14 and a disabled son.  

There are online calculators, generally available for a fee,  that will help you estimate what happens  under various scenarios and if your family is anything but two wage earners who plan to take their own benefits at full retirement age, I recommend trying one of them (nope, no links at this time--no affiliate agreement either). 

The calculator I used showed that if my husband "retired" at 62 but kept his full time middle-income job, he would reduce his yearly benefit by about $3800 per year, as noted above;  however, he personally would not collect anything, because of the earnings deduction--taking away $1 for every $2 income over $16,920.

For us, the advantage to him "retiring" at 62, but continuing to work,  would be that  once he starts taking his benefits, my son and daughter would be entitled to benefits and I would be eligible for spousal benefits to care for kids (but those too are subject to the earning deduction).  In short, in the years between my husband's early "retirement" and his full retirement date, we would collect over $79,000 from Social Security for the kids.  Now, my son is currently receiving Social Security Disability benefits based on his own work record so if he took these benefits, he'd lose his own, so the total gain to our family is closer to $40,000. Using the same calculator as above, adding 2% interest per year, means we'd have about $42,500 by the time he retired, or about eleven years worth of the difference between what he would get at 66 vs 62. 

One thing I noted was that the benefit of the disabled child is the same, whether you retire early, on time, or late.  His benefit is a percent of your normal retirement benefit.  While you could assure a higher benefit for a disabled child by working longer during your high-income years (if that is what your 60's are), if continuing to work will not affect your normal retirement benefit, it is not necessary to delay taking Social Security to maximize the income of your disabled child

Regular Retirement

Once you reach your regular retirement age (66 for my husband, 67 for me), there is no reduction in benefits if you continue to work.  Again, the first question is whether you need those benefits in order to eat regularly.  If not, if delaying them is an option, then it is a math question.

 Let's say I am trying to decide whether I should take my benefits at 67 or at 70.  Social Security estimates my benefits at 67 to be $1855 per month and my benefits at 70 to be $2329 per month.  So, what's the math?

If I earn 3% per year on my benefits for three years, at the end of three years, when I turn 70, I'll have $69,787.23.  However, I'll be getting $474 less per month than I would had I wanted until 70.  

To make the math easy, I'll assume no return on the $69,787.23 after I reach age 70, and divide it by $474 to find out how many months until I break even.  The answer is that it will take me 12.26 years to break even, or until I am 82.  Tack on a little interest and the break-even point extends out even further.  

When Should I Take Social Security?

It's too bad none of us have a crystal ball; if we did the answer to this question would be simple math problem--which method will give me the most money over my lifetime?  The system is designed to pay the average person with an average lifespan the same amount of money whether they take Social Security early or late.  While a diagnosis may tell you that you are likely to be one who dies early, those who die late often surprise themselves.  

Unless there are dependents involved, there seems to be little reason to take Social Security before your normal retirement age, if you are still working a full time job.  Your benefits are reduced because you took them early but you collect only a portion of the benefits to which you are entitled because your paycheck reduces your benefits.  

My husband and I are going to go and talk to Social Security and get their official answers about what will happen if my husband takes Social Security next year. If the information we have now is correct, and our "break-even" point is when my husband is 73, we will probably not claim anything at that time--hopefully at 73 he still has quite a few  years left.

On the other hand, with 82 as the break-even point between taken benefits on time vs late, I am inclined to take them on time .  Yes, there is a decent chance of outliving the break-even point, but death at or before 82 isn't rare.  

Also, I've read that it is normal to spend "a lot" on entertainment, travel and home improvements early in retirement, and then, in your late seventies and early eighties, to spend relatively little as your energy levels decline and you spend more time at home.  Then in your late eighties and beyond, health care costs increase.  In other words, taking the money early allows you to spend it while you can still get around.  

Determining when to take Social Security is a personal decision that should be made after considering your options, your lifestyle and your expected lifespan.