Retirement. Phil, Crone, others, help, please.

[hurricanegirl]

Heeeeelp. Is it too late to get smart?

me 60.5 "Involuntarily" retired 3 years ago. I WILL collect my SS at age 62 (17 months)

DH 69 "Retired" at full retirement age of 66.7, and still works (fairly) full time.

Quick synopsis:
Assets:
Home in MA (high COLA) $200,00
Vacation Condo in NH ( Low COLA) $100,00
No Mortgages, either property
(2) relatively new - 2006 and 2010 vehicles - no loans
(1) boat - no loan ($?)
400,000 taxable investments (mostly CD's earning 2.13 - 3.25 %)
99,000 nontaxable investment (IRA, 401K)

Debts:
0000000- no CC, No mortgage, No Heloc, etc (thank God)

I am sure I own a few other things, some small stock investment, some small gold investment, some series E bonds, etc.

I believe I have done a few things correctly and a lot of things wrong

I know you all probably wat to see my "Budget", but for the sake of simplicity can you Trust me?
Income monthly (2SS, small pension) 3400 ( i will work PT as will DH), so add a little bit
Outgo monthly( ALL INCLUSIVE) 5000

Oviously I cannot project our medial expenses, nor inflation

Two questions?
Will I make it?
What should/could I do at this point?

Thanks

[Deleted]

Even if you drew down $1600/mo from savings/retirement and never worked any PT, you'd still be set for 25 years - although everyone is going to wonder why someone with no mortgage, car loans, debt of any kind really needs $5000/mo to live.

[Deleted]

You should post your budget so we can help cut it. You should be looking for a job to get you though the next 3 years, even if it is part time. Your medical, unless you retiry health would amount to $250,000 for the two of you. You should not assume your DH will continue working and you will not. You should be moving some of that taxable account into a Roth. Inflation averages out to 3-4%, your CDs are loosing you money every month. Can you rent out the condo?

[hurricanegirl]

two properties + 2 property insurance, two house taxes, two sets of full utilities, we are in NE so winter heating costs are high, Condo fees, food, gasoline, vehile insurances, medical insurances, entertainment........................5,000 mo goes fast - please trust me this is my outgo.

and No I am not interested in renting out my vacation priperty, I try to get there at leadt once a month - more in winter as I ski (another expense included in my $5,000)

[cronewitch]

You will be fine don't worry. As you quit working even part time you will sell off you condo or move to the condo and sell the paid off house. Then when health declines you will sell the boat and go to one car for two people.

As you drive less cars will last longer so since you have newer cars now they may last another 10-15 years then you will be 70 something driving less and may want to get a final car, then give up driving when it dies, so you only need one more car ever and have two to trade in.

You could sell one home now since you have two and that would cut property taxes, insurance and other home owning cost.

Your CD's are a poor investment but you have decent rates now. They might keep the same as inflation or you could lose value every year.

I would live on your SS and work income as long as you are able to work, then sell a major asset to last a few more years so you won't need your investment principal until you are over 80.

The main problem will be when one of you dies leaving the other on a single SS check and poor investments. But then you have another home you could sell or cut back lifestyle drawing out 10K a year from investments for 20 years and still be rich compared to many retired people.

[Deleted]

Jun 20, 2011 17:11:02 GMT -5 hurricanegirl said:

two properties + 2 property insurance, two house taxes, two sets of full utilities, we are in NE so winter heating costs are high, Condo fees, food, gasoline, vehile insurances, medical insurances, entertainment........................5,000 mo goes fast - please trust me this is my outgo.

and No I am not interested in renting out my vacation priperty, I try to get there at leadt once a month - more in winter as I ski (another expense included in my $5,000)

What do you want to hear from people? You start out with this line "Heeeeelp. Is it too late to get smart?" but don't care to entertain reducing any expenses. So my answer then is, yes, it is too late to get smart.

[phil5185]

really needs $5000/mo to live.

That kind of jumps out, doesn't it? Dh has medicare, there are no debt payments of any kind. So prop tax & ins on two houses, $10k. Utilities, $3500/yr. Gas for the cars. $5000. So, about $20k out of $60,000 - that leaves $40,000 for food & fun.

I would invest some of the $400,000 to offset to inflation, $400k is a lot of cash to let sit idle, you might be around for another 30 yrs, there is bound to be some inflation in that time. What is the $99,000 invested in?

[hurricanegirl]

Thanks Crone - what took you so long to reply ha ha ha

I know I have been smart with zero debt my whole life,,,,,and I know I have been somewhat dumb with my investments, but overall I think I MIGHT BE ok. Your reasoning is somehat similar to mine and there is always that "reverse mortgage" (I have no kids and really dont want to leave anything behind when I go)

[hurricanegirl]

Thanks Phil

Here is a quick budget on the two houses annual

utilities 6600
insurances (life house,vehciles and WC for hubby business 5,400
food 5160
gasolie for vehciles (boat not included) 4100
taxes 5200
medical (prescriptions,dental, eye
and health insurance for me 11,000
gifting,charity 3380
landscape 1000
cigarettes (yeah I know 1800)
misc 2000
condo fees 3000
approx 48,000
and the additionalk 12,000 yearly is for skiing, entertainment, travel, all else.

[crockpottin]

Could you live in the vacation place year round? It sounds like you use it a lot, and if you moved there permanently you could sell the place in MA & cut costs.

[midjd]

Jun 20, 2011 17:24:34 GMT -5 @mmc said:

What do you want to hear from people? You start out with this line "Heeeeelp. Is it too late to get smart?" but don't care to entertain reducing any expenses. So my answer then is, yes, it is too late to get smart.

Yeah, kinda wondering the same thing. What do you want to hear?

[lynnerself]

I think she wants the answer to the first question
Will I make it?
more than the 2nd
What should/could I do at this point?
First she wants to know if she will make with her current plan and expenses.

[hurricanegirl]

crockpottin - yeah I would love to move to the condo in NH (Low COLA, no state tax, etc) but DH is "rooted in MA", so the condo is vacation only

and yeah my Quesion should have read
Will I make it? and IF NOT what could/should I do different with my 400,000 cash?

I really didnt buy a vacation home 5 years ago to sell or rent it now. I bought it to "enjoy" in my retirement . I will sell one of the properties when necessary and hopefully in a better market than present, or as Crone suggested when I am too old to maintain and enjoy both

OTOH, while my cash could have earned me more, it was never at risk.

[tskeeter]

What should/could I do at this point?

Study up on the various strategies for taking SS benefits to maximize your benefits. Depending on your relative incomes, you may be better off delaying your SS benefits and taking benefits on your husbands account (it looks like your DH may be drawing SS already).

The strategy DW and I have developed is delay taking benefits on my account (this increases the benefits about 8% for each year of delay, or an increase of about 64%) and take benefits on DW's account when she reaches age 62. I'll start to draw on my account when I'm 70 and when I kick the bucket, she'll draw a widow's benefit on my account. This will maximize what DW can draw over her lifetime. Some considerations in deciding on this strategy: our SS benefits are close to the same amount if we start taking benefits at 62, DW's family has a history of long lives (her grandmother lived to be nearly 103, not bad for someone born in 1898), we would be able to retire and live without DW's SS until she is 62 and we can live on her SS and a spousal benefit until I reach 70.

[phil5185]

You have about $100,000 tied up in the condo - that would earn $8000/yr in bonds/index. And it's costing ~$10,000/yr for condo fees, ins, prop tax, utilities. So, $18,000/yr in costs & lost earnings.

Could you rent a similar condo when you go skiing? We rented a condo at Keystone for a week in Jan, about $700 - really nice, kitchen, gas fireplace, overlooked the Ice Skating Lake, easy access to the Lifts/Slopes. You could do that about 6 weeks/yr for $5000 - and have $13,000 left over.

What is the $99,000 invested in? CDs, stocks, bonds?

Bond funds normally earn 5% to 6%, index funds earn 11%. So a 50/50 mix of the two averages about 8%/yr. If you draw 4% for your living costs ($16,000/yr) and leave 4%/yr for growth to offset inflation. The $400,000 should be $1,060,000 when you are age 85 - at that point you would be using $40,000/yr and leaving $40,000 for growth, you could then spend the whole $80,000 and never run out of money. And it doesn't have to be all or nothing - if you're uncomfortable with $400,000 in stocks/bonds, just invest a portion and keep some CDs.

[DVM gone riding]

so it is to late to fix this, but why on earth do you have so much in fully taxed accts and so little in tax advantaged accts??? Where you banking on a bigger pension so didn't save as much in 401k/ira accts??? Just trying to understand the reasoning.

How well you do depends entirely on how much you think you deserve. If you learn to live on SS and PT work and NOT the savings for the next 10-15 years you will be fine if you need to maintain your "lifestyle" of High COLA in your main house plus the "vacation" property and all the trappings you might be in trouble.

[hurricanegirl]

tskeeter-thanks. I have one PT job now, and looking for at least one more,,,if I can find 2nd PT employ I MIGHT be able to put off my own SS and increase it from 1480ish at age 62 to 2000 at full retirement age

Phil - I will try to answer your questions

$99,000 in IRA and 401K

19,000 IRA in CD which matures shortly and I can probably get 2.6% on a five year and would cash in early if financially I could pay penalty and improve the rate

80,000 with principal financial group (former employer sponsored, and I left it there.. Approx 70% fixed income, approx 17% Large Cap US, approx 12% Small/mid cap US. 1% International equity just for giggles so I can watch it mostly decline lately. I Really dont understand too much about all of these, other than the risk/return allocation.

Earnings show at 11.73% for year 2010, and 2.83 Year to date

I lost quite a bit somewhere around year 2000 and again 2008, so in 2009 I moved the 70% to fixed income and seem to pretty much hold my own and or get a fair % of growth. (11% 2010)

as far as NH condo costs go, 3000 condo fee, 1600 taxes, 300 insurance and 1400 utility, so about 6300 yearly. I did lease for years before I purchased and the purchase did seem to be cost effective versus the lease (which was approx 5200)

I am open to any and all suggestions as to where to invest some of my "Cash", but at this point in my life I also need to protext the majority of it as much as possible, at least in my opinion. AND as I believe I said earlier, I really dont know a lot about how I would go about this

Lastly, quite a few responses seemed upset that I was not willing to try to let you help me "reduce" my $5,000 monthly expenses. While I do have Cable tv and a cell phone, these are "spartan" packages. I have successfully appealed to tax assessors to lower property taxes, I negotiate with phone, internet, etc for discounts whenever my last discount expires, and I really do believe my expenses are as much under control as they can be right now. Could I cut more? Absolutely! And I would in a heartbeat if it becomes a do or die situation

I really am mostly looking for suggestions as to what to do with some "CasH"

thanks to all who read/ stay patient with me/and reply

[Deleted]

"Principal is terrible (in my experience) Get it out of here and roll it over into another company. They were our 401K administrators for 3 years and everyone lost money those 3 years... we moved to Wells Fargo, and even with their higher fees our funds performed much better and we all started to make money."

This situation can also be explained by the years invested. Very few people made money in 2008 & 2009. A far more important question is how the money was invested.

Since the O.P. is in her early 60s she probably still has another 30+ years left so I would be looking for long term growth to offset the inflation that will inevitably occur over that period of time. So I would be moving those tax deferred accounts over to Vanguard and split the money into 70% stock (either the trusty S&P 500 or the Total Stock fund) and 30% Total Bond.

But really you should be doing your homework first so you understand the recommendations given. I recommend
"A Random Walk Down Wall Street" and the "Four Pillars of Investing".

Also spend some time at www.Morningstar.com so you can compare costs and ratings of different mutual funds.

[phil5185]

$99,000 in IRA and 401K
80,000 with principal financial group (former employer sponsored, and I left it there.. Approx 70% fixed income, approx 17% Large Cap US, approx 12% Small/mid cap US. 1% International equity just for giggles so I can watch it mostly decline lately.

OK, the $499,000 breaks down to $24,000 in stocks and $475,000 in cash/income.

I am open to any and all suggestions as to where to invest some of my "Cash", but at this point in my life I also need to protext the majority of it as much as possible, at least in my opinion.

With your current allocation, inflation is a risk. When you are in cash, earning <2%, and inflation is at >2%, your $475,000 erodes every year. I would probably move >$200,000 of the $475k from cash into investments. You could be around for another 30 yrs (hopefully), the cost of goods will be at least double by then, maybe triple. In 2040, you may need $90,000 to buy a new Ford Pinto, $500 for a cart of groceries - you would burn thru $400,000 pretty fast at those prices.

[midjd]

Which one of you smokes, or do you both smoke? Not to be morbid or hate on smokers (my dear mum and DH both are) but I don't know if I'd necessarily count on living another 30 years if you're going through $150 worth of cigarettes each month. On the other hand, you're probably going to have higher healthcare costs than a nonsmoker, so you may use up the money in a shorter amount of time. You may be the outlier everyone talks about, the person who smokes like a chimney and lives to be 90, but I wouldn't count on it.

Other than that, I'm on board with Phil's advice.