Some couples would be anxious if confronted with the challenges faced by Cmdr. Don Gingles, USN-Ret., and his wife, Marilyn. After living in Virginia for 23 years and raising a family, they left a home, an established social network, and careers they enjoyed and retired to Florida, where they are renting a house while waiting for their dream home to be built.

Although the first few years of retirement can be an unsettling period full of financial surprises, that’s not the case for the Gingleses, who retired in January 2004. “We look at this as a restart. It’s exciting,” says Don. “When I went through flight training here, I said I’d never come back to Florida, but here we are, and we are enjoying it. The lifestyle is good. This morning, I’m off to play golf and Marilyn is off to the pool for a swim exercise class.”

Leisure time surprises

When moving to a new location and changing lifestyles, retirees often are surprised by increased travel or entertainment costs or by the initial expenses involved in setting up a retirement home. The Gingleses are building in a neighborhood with retired and working families, and Marilyn notes that leisure activities from golf to book groups are close by and reasonably priced.

Paul Riskus, a CFP with USAA Financial Planning Services in San Antonio, says many of the retiring military folks he works with are choosing to call retirement communities home, in part to enjoy a ready-made social network and control leisure costs.

“These people have their families spread out over the world and are looking first and foremost for a community where everyone looks out for each other,” says Riskus. “In addition to being comfortable living with members of the same generation who have the same values and morals, my clients appreciate that these communities provide plenty of group activities and day trips to take advantage of. In fact, many are choosing to move into these communities earlier so they can put down roots and establish their social network before [they reach] the point that they need the medical care many of these communities offer.”

Riskus impresses on his clients that while the retirement communities’ glossy brochures are designed to sell the big picture — security, maintenance-free living, and an active social life—the financial details are important. For example, social events may be planned, but what do they cost? Also, what is the potential rent or activity fee increase each year, and who decides?

Financial preparation

The Gingles’ retirement satisfaction could stem from the fact that they began preparing financially for retirement long before deciding where to live. The Gingleses applied the “start early and increase what you can afford over time” philosophy to saving for retirement. “A lot of people put off saving for retirement or assume they will live off their military retired pay,” says Marilyn, who retired from her job as a surgical nurse last year. “The military pension is nice to have, but you can’t live on your retired pay if you want the same lifestyle you had before. When we were first married, we put away what we could afford on a monthly basis, and that got us into the habit of saving. You never miss that $50 or $100 if you direct it automatically into a savings or investment account.”

Michael Finer, a financial advisor with Major League Investments in Salem, Mass., sees Americans’ tendency to procrastinate on saving for retirement exaggerated in the military population. “The military may be lulled into a false sense of security, thinking they have their military pension and TRICARE insurance to fall back on,” says Finer, who also serves as a major in the Army National Guard.

Finer also warns against blindly using the traditional yardstick of 75 percent to 80 percent of pre-retirement income to develop a retirement budget. When planning, there is no substitute, he says, for crunching the numbers and considering your unique set of circumstances.

In fact, a recent study from the TIAA-CREF Institute found that though more than half of those planning to retire expected their spending to decline, only 30 percent of those in retirement experienced a drop in spending. What’s more, 20 percent reported an increase, and even those whose spending declined noted that it declined significantly less than they thought it would.

Perhaps the TIAA-CREF study’s most important finding, however, was that retirees like the Gingleses, who planned for retirement before they retired, were less surprised by their retirement expenses. In fact, half of the respondents reported their retirement expenses were lower than they had anticipated.
Master Sgt. Steven Wightman, now assigned to the Army Retired Reserve Component and a CFP at the Lexington, Mass.-based Wightman Financial Network LLC, tells his military clients that their pension and TRICARE insurance is a great start but cautions them to remember that their retired pay is not figured on their current allowances for housing, sustenance, etcetera, but only on base pay— and that their insurance does not cover the long term care costs that easily could put a secure retirement in peril.

“To avoid surprises, I suggest that for a few months before they retire, my military clients practice living on what they project their retirement income will be,” says Wightman.

Real estate

The Gingleses used another tool in their retirement savings plan: real estate. They now attribute their ability to cast a wide net in the search for a retirement home to their early entry into the real estate market.

“We bought a home early in my career in San Diego, and we’ve leveraged that initial investment. Each of the 18 times we moved, we made money on the house we were selling,” says Don.

In fact, buying a home is the first piece of advice Finer offers his military clients. “Buying a home enables you to build equity throughout your career. You don’t want to end up at the end of a 20- or 30-year military career without a home,” he says. “If you buy near a military base, you can always rent to another military person if you are transferred. Alternatively, you can buy a home where you like to vacation.”

Marilyn figures that, between the profits on their home sales and the rental income generated while her family was stationed elsewhere, she and her husband have lived rent-free for their entire marriage, 46 years.

“The important thing is getting into the real estate market,” she advises. “You don’t have to buy your dream house right away. Rather, find a home in a nice neighborhood, invest two or three years fixing it up, and turn around and sell it at a profit and move on.”

From finances to purpose

As you lay the groundwork for a financially secure retirement, Wightman says to remember that most retirements, even those with the soundest of financial foundations, will include periods of uncertainty.
After all, more intimidating than adjusting to a new retirement budget is answering the question: What do I want to do with the rest of my life?

“This is a big question, especially for people who have always put service to others, their country, and their family, first,” says Wightman. “Who you are and what you want out of life can get lost along the way during your career. I like to get my clients thinking about this question before they actually retire. I tell them their assets are like gas in their car, the question is where do they want to go?”