We have a lot of clients who work for municipalities. These folks often have the ability to “retire” at massively different ages than other folks. And that’s great for them. But it’s forced us to use different “language” when talking with clients.
A client (we will call Joe) is “retiring” this year at age 66.
A client working for a municipality (we will call Pete) is “retiring” this year at age 47.
Both will retire. In fact, both will retire soon.
But two completely different approaches will be needed regarding retirement.
At 47, Pete may have another job lined up. That may come with a second pension, or a 401k, or just another stream of income that didn’t exist before. But it will (likely) be years before he needs to start drawing down his retirement account.
At 66, it’s a pretty safe bet that Joe (unless he is that type-A kind of a guy), will not be working. And Joe may not start drawing down on his retirement account at work right away, but he might. He will starting withdrawing funds from his plan soon.
Here’s the thing with Joe: even a 66 year old like Joe will need to be sure he won’t outlive his money. And if Joe has good health and a little luck, he could hang around long enough to bug his great grandchildren — 30 years.
But hold on… a 47 year old (like Pete) also needs to be sure he won’t outlive HIS money either. And if Pete has good health and a little luck, he could ALSO hang around long enough to bug his great grandchildren — for a long time. Possibly 45 — or even 50 — years.
Pete’s money will need to last an extremely long time.
Therefore Pete’s money needs to grow for a long time.
Does it makes sense for someone like Joe, age 66 to have the exact same approach as Pete, age 47? Probably not.
Which is why we need to know if you plan on drawing down your assets in the very near future.
Around the office, we have learned NOT to ask “when will you retire” but rather, “when do you plan to begin drawing down.” There is a vast difference.