Life After Full-time Work Blog

Learn about preparing for life after full-time work through posts from Don's upcoming book.

#21: Dan Discusses How Far He’s Got With His Retirement Planning

I thought it might be interesting to check in with a family currently saving for retirement and also getting their next generation thinking early along those lines. You might be surprised by the source for the lesson that the father teaches.


As with Post #8, I’m writing this in interview format. Think of this as a bit of entertainment before the more serious event of the day, which is a guided tour of a part of the Finance landscape in the land of life after full-time work. I’m the Tour Guide conducting the interview, if you didn’t already guess it.

You’ll see that Dan’s family is substantially better off than the average family. So I’m not suggesting that this is what everyone should be doing – it simply isn’t feasible. For a more general evaluation of how far you’ve come, see Post #22. For this post, I’m just using Dan to bring to life one possible mindset.

Tour Guide: Welcome, Dan. I hope I’ve put you at ease after the brief attack of nerves you had when I suggested this.

Dan: Yes, thanks. You’ve reassured me that you didn’t pick me to make an example of me! So maybe that means I’m not in an unusual situation, after all.

TG: Actually, for this stage you are, in the best way. You mentioned that your son has a job and is living at home, and that your daughter will soon graduate from university. I want my readers to find out your situation in connection with your son, in particular. Can you remind us what financial arrangements are in place?

Dan: I don’t know that I’d glorify the situation with a fancy phrase like “financial arrangements,” but I think you mean that he’s not paying us rent and instead is contributing half of what his rent would normally be into his company’s retirement plan.

TG: That’s right. How did that come about? Did you make it a condition?

Dan: Oh no, nothing as formal as that. It all just seemed to be natural.

TG: Natural? You mean everyone does it?

Dan: Oh no, just that it fits into the whole context of our lives.

TG: Can you give us the background that makes it so natural?

Dan: Oh sure. We’ve always been careful with our money. And I work with a lot of young people, and many of them don’t seem to have a clue about managing their finances. Our family has been used to discussing that sort of thing over dinner when the kids were younger, and from [our son’s] behavior he seems to have grown up with good financial sense.

TG: For example?

Dan: Well, like living at home. We love it that he feels comfortable enough to want to do that. We had a brief discussion about ground rules, since he brings friends and girl-friends home, but then that’s natural and not new. We like having him and the other young folk around! So it suits us perfectly. What would we do with his room, if he left? We wouldn’t rent it out. It would just be waste space, and we wouldn’t be better off financially. So he wins and we win too. And half of his financial gain benefits him via more spending money today, and the other half benefits him in the future. He gets it. Did you ever see Sesame Street, the one with Elmo’s three jars? “For me, for you, for later.” He gets the “for later” bit. It’s natural, to him.

TG: Excellent! Anything else?

Dan: Sure. By now he and [our daughter] are pretty literate, financially. So there are so many little things they do automatically. For example, he doesn’t buy a fancy coffee every morning. He packs his own lunch every day. (OK, his mother makes it for him.) He doesn’t smoke (which makes him healthier too) and only occasionally has a beer, never a binge. His work colleagues say they can’t afford to buy a car, they earn so little. But really it’s that they spend so much. We brought up our kids to do chores around the house and paid them for it. And half of that money went into our Sesame Street Bank, as we called it – meaning that they gave me the money, and I gave them a receipt for it, and every month I’d give them their bank statement. And I’d then, in front of them, calculate some interest and add it to their total. And that introduced them to the idea of compounding. So they had an incentive to keep the money in the bank! Of course I had to give them much more interest than a bank would, to make it really visible to them, but it was worth it for the education they got!

TG: What an example!

Dan: One more thing, and we didn’t even realize we were teaching them this lesson. It’s about borrowing. If they wanted to cash in their savings and add something so that they could buy something they wanted that they couldn’t yet afford, we said that was OK, but they’d have to pay the bank interest at the same rate that they were receiving. Oh no, they wouldn’t do that! And the attitude seems to have taken, that you should be debt-free. You live on less than you make, so you save. If you have a credit card, it’s OK to use it for the convenience of it being a charge card; but if at the end of the month you can’t afford to pay it all off, and have to pay interest, then you can’t afford whatever you’ve bought, so don’t get in that position. It’s a disease that can get out of hand.

TG: I’m curious. If being debt-free is important, did you help them stay that way by paying for their education?

Dan: Yes, we did. That, reduced by their scholarships. Again, it seemed to [my wife] and me that, since we could afford it, it was a small price to pay, not just for their formal education but also for an education about life.

TG: And where does that leave you today, personally?

Dan (wryly): Not as well off as we’d like to be. Here I am, at 50, and retirement is something that’s starting to have some meaning. Not in a good way. I mean, it’s good to think about not having to work, and to do so many things we’d like to do. But where has the time flown? The time to save for retirement, I mean. That’s a depressing thought.

TG: I don’t mean to pry into your finances, but you and [your wife] own your home, right?

Dan: Right. That has taken most of our cash flow. We don’t own it clear yet, but with today’s low interest rates we’re paying off the mortgage faster than we expected. But that also means that I put just enough into my retirement plan to get the full company match, but no additional voluntary contributions.

TG: Actually, you’re just arriving at the prime saving years. Paying off your mortgage is just as important to retirement finance as is direct pension saving. And soon, when the mortgage is gone, you too, like your son, can get a double benefit, one for now and one for later. The cash flow that went into your mortgage can be divided into two parts, one to increase your current spending and the rest to save, so that after retirement your added current spending becomes sustainable.

Dan: Ha, it’s ironic, Sesame Street applies to us too!

TG: Right. What you need now is to see how much income your savings are likely to generate after you retire. You know how much money you’ve accumulated; now you need to start translating that into monthly income, because you’ve been used to a monthly budget.

Dan: Yes, I’ll do that. Maybe there’s a need for “Sesame Street for Pre-Retirees.”



Two points, really. One is that paying off a mortgage is itself a form of saving for retirement. The other is that it’s possible to find ways to save money via curtailing unnecessary everyday expenditures that we incur without thinking.


I have written about retirement planning before and some of that material also relates to topics or issues that are being discussed here. Where relevant I draw on material from three sources: The Retirement Plan Solution (co-authored with Bob Collie and Matt Smith, published by John Wiley & Sons, Inc., 2009), my foreword to Someday Rich (by Timothy Noonan and Matt Smith, also published by Wiley, 2012), and my occasional column The Art of Investment in the FT Money supplement of The Financial Times, published in the UK. I am grateful to the other authors and to The Financial Times for permission to use the material here.

2 Responses to “#21: Dan Discusses How Far He’s Got With His Retirement Planning”

  1. J. J. Woolverton says:

    Don, I like this approach — it seems real and personal. Two points from my personal experience. First, with mortgages, I bought two condos at the same time. Both with a mortgage of $350,000 on them. One I lived in, the other was an investment that I rented out. The one I lived in I doubled up on the mortgage payment each month as well as paying 10% off at the end of the year — both I was able to do without any penalties as it was in my agreement. The other I left as is. After five years the mortgage on the rental property was just over $300,000 while the mortgage on my condo was just under $150,000. A major difference. By paying a little each month did not prove too much of a hardship (i.e., did not change my standard of living). As well, I could stop any time and start up again when I could afford to.

    Secondly, I did pay for my kids’ education for two reasons: 1) I wanted them to know how important I thought education was; and 2) I had a deal with them that they would take Accounting 101, Economics 101, no matter what their major was, and the Canadian Securities Course when they graduated. I was paying $800 a month for each kid throughout the school year. When they graduated, to make sure they took the CSC, I also promised that I would match up to $500 a month anything they could save from work for a period of five years — since I was already in the habit of paying out monthly expenses to them. I stated that this was the only guarantee of them doubling their money ever year. They would each set up a fund to capture income along the way. The one catch: they could not touch the funds for a period of 15 years — teaching them the power of compound interest. They are now in their late 40s and still have not touched the funds. Unfortunately, they were better at saving through the first five years than I thought they would be able too. So, dad also learned a lesson.

    • Don Ezra says:

      Your stories are wonderful, JJ, thank you! Nice to hear that disciplined finances have such good effects — you must have enjoyed learning your own lesson.

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