Wealth + Health Diaries Real Life Stories from Real Life People – Ken

Janice James tkc.profilePicture Written by: Janice James | Transamerica
May 22, 2019

5 Min readClock Icon

Curious how your spending and money management stack up? In this series, we talk to real folks just like you, who’ve shared their tales of spending, saving, and searching for loose change.

Today, we hear from Ken, a 51-year-old rancher who lives in Montana. He and his wife divorced 15 years ago, and he moved to Montana to live out his dream of being a rancher. As an only child, he also needs to make caregiving decisions for his 80-year-old mother.

KEN’S PROFILE
Occupation:
Rancher
Industry: Agriculture
Age: 51
Location: Montana
Salary/income: $65,000  



MONTHLY SAVINGS AND INVESTMENTS
Roth IRA:
$300
Savings: $400 
Employer-sponsored retirement plan: $0


MONTHLY EXPENSES 
Housing costs:
 $1,240 
Groceries and home supplies: $600 
Dining out: $250 
Loans: $0 
Health, dental, and vision insurance: $300 
Auto, homeowner, and umbrella liability insurance: $300 
Life insurance premium: $200 
Utilities: $80 
Internet/digital: $80 
Lawn service: $0 
Cell phone: $70 
Gym membership: $0 
Clothing, misc.: $100 
Credit card debt payments: $0 


OUR CHAT WITH KEN
How difficult is it for you to put money away for retirement? Have you had to give up anything?

When I moved to Montana, I went from working for someone to working for myself. At my old job at a large energy company, I was able to save quite a bit in my employer-sponsored plan by making regular pretax contributions. Early on, I promised myself that I would always contribute at least 8% of my pretax income to my retirement plan, and I kept that promise over more than 20 years of working at the company. My contributions increased as I got promotions and raises, and I did the auto increase option for a few years, eventually settling at a contribution rate of around 11% for the last five or six years I was on the plan. The company matched up to 3%, which the way I looked at it was like getting free money. When I left my job, I had vested retirement savings of more than $400,000.

Now that I’m a self-employed rancher, it’s up to me to consistently put money away for retirement. I’ve done better some years than others. Income is a little more variable now, so I’m not able to consistently put away 8% every year. My priority is my Roth IRA. Some years I’ve been able to max it out, which now means $7,000 a year since I’m over 50 [previously $5,500 a year under old contribution limits]. So maxing out my Roth IRA each year is my current retirement savings goal, but this year it looks like I’ll probably fall a couple grand short.


How do you feel about your retirement savings at this point?
I think I’m doing pretty well right now and saving a good amount, especially since I rolled over my employer-sponsored plan into some different account options offered through the plan. That way I could continue to contribute to my retirement while keeping everything consolidated in a couple of funds, and I wouldn’t need to open different accounts or manage multiple plans. I’d been making contributions to a regular 401(k) plan and to our company’s Roth 401(k) option, so I was able to shift those funds over to new accounts in a traditional IRA and a Roth IRA that offered more investment options at a lower maintenance cost.

What are your retirement goals? What age do you want to retire? What do you want to do in retirement?
Well, I guess moving to a warmer climate will eventually be in my plan. Maybe Arizona so I can ride trails with my horses. I want to stay on my ranch until my body can’t take it any longer, so I hope that’s at least until my mid-70s.


What does “health” mean to you?

It’s all about being happy to me. When I moved to Montana, I did something I’d always wanted to do, and I don’t regret it. I hope to continue to be healthy enough to do the things that make me happy — riding horses, teaching others to ride, hanging out with my friends.


Are there indulgences that you always need to include in your budget? Housecleaner? Grocery shopper?
I just have to have enough for my weekly poker game! But I’m a pretty simple guy. No need for fancy things. My 80-year-old mom lives in assisted living in Arizona, so I do need to make a few trips a year there to help with her affairs. It’s not a regular monthly expense, but I probably spend two or three grand a year in plane tickets and travel costs. Fortunately, she has savings and a long term care insurance plan that covers most of the cost of her assisted living facility. So I only need to come up with a few hundred dollars a year out of pocket for some extra items and the occasional legal and accounting fees on her behalf.

Do you see the value in working with a retirement plan advisor?
I’ve worked a financial planner associated with my old employer’s plan. When I rolled over my investments into the new accounts, she helped me sort out those transitions. She also helped me figure out what I needed to do to sustain the life I wanted to live while saving enough to take care of myself in the future.

A key part of the change in my financial affairs was consolidating my assets to set up my future retirement and purchase the ranch. First, we took my retirement plan savings and rolled them over into a target-date index fund. The fund has a mix of domestic and international stocks, as well as bonds, and it automatically shifts the investments to be more conservative as I get closer to retirement. I like that I don’t have to worry about readjusting things all the time. I set my target retirement at age 71, which gives me a 20-year timeframe to let compounding interest do its thing. My advisor tells me that if the fund earns 5% annually, I’ll have more than $1 million saved for retirement by my early 70s. That’s going to be the lion’s share of my nest egg. And the Roth IRA contributions I’m making now go into a separate stock index fund as a way to boost that nest egg and diversify a little bit.

To purchase the ranch, we consolidated multiple savings accounts, some company stock, and the proceeds from the sale of my house. I had a rainy day fund of about $50,000, plus $85,000 I’d been saving up for about 12 years specifically for buying a ranch. When my advisor and I figured the time was right to make the move to Montana, I sold my house, which netted me roughly $240,000 after all the expenses and commissions. Putting all that together, I was able to cover most of the purchase price of the ranch, and then carry a smaller mortgage that I could afford.

In addition to saving for retirement, what are some of the big picture items you want to invest in?
When it’s time, I will buy a smaller piece of property in Arizona.

What intimidates you when planning for retirement?
Since it’s just me, I’m not too intimidated about retirement. I just hope to be healthy enough to keep doing things I want to do to be happy.

THE WRAP UP

As a single man, Ken is living out his dreams on a ranch in Montana. After his divorce, he rolled over his employer-sponsored retirement plan into an IRA and moved to his current home in Big Sky Country. He plans to continue to work with the retirement planning pros available through his old employer’s plan, and to live in Montana as long as possible before ultimately retiring to Arizona.


Neither Transamerica nor its agents or representatives may provide tax, investment, or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.

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