jelloshots4all
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Post by jelloshots4all on Jun 1, 2020 15:28:27 GMT -5
I was talking to a friend yesterday. He will be 63 in Sept, has been working from home, likely will for the rest of 2020.
Never married, no kids and stated he may retire at the end of the year. Then told me he has $180K in an annuity. Rents, no car payment. He figured he could live off the annuity until he receives SS.
I'm not the best YMer and kept my mouth shut mostly. He likes to travel, gamble and drink, but not excessively.
I know every person is different and their financial savings goals are as well. I was shocked when he told me this. In my mind $180K is not enough for a 63 yr old.
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qofcc
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Post by qofcc on Jun 1, 2020 15:38:44 GMT -5
Guess it depends on his current income and spending. If for example he's living off of $30k now and he thinks his SS benefit will cover most of his needs and the annuity will cover his wants I'm sure it's doable. I know retired people with no money left living off less than $20k social security. I'm trying hard not to be one of them but lots of people manage
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resolution
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Post by resolution on Jun 1, 2020 15:43:49 GMT -5
That looks like it would get him around $850 per month in income if he does an immediate annuity. If he also receives around $1500 in early social security, it would put him over 2x the federal poverty level. He could manage a basic lifestyle in a low cost area in the U.S. or a slightly better lifestyle in some place like Nicaragua or Thailand.
Not anything I would want to attempt, but I suppose it depends on how much toll his work is taking on his health.
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Post by The Walk of the Penguin Mich on Jun 1, 2020 15:48:22 GMT -5
Has he figured out what he's going to be paying for healthcare until he receives Medicare?
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Post by Deleted on Jun 1, 2020 16:02:50 GMT -5
Has he figured out what he's going to be paying for healthcare until he receives Medicare? Great minds think alike. That, to me, was the biggest unhappy surprise in an otherwise happy decision to retire- and the premiums just kept going up and the network got crappier till I qualified for Medicare. Medicare also does not cover dental, eyecare or hearing aids, with the exception of some limited coverage under some Medicare Advantage plans. (And Medicare Advantage may not be an option if he travels since it covers only in-network unless it's an emergency.) There are people on the early Retirement Board who live very simply- books from the public library, free concerts, don't care about travel or eating in restaurants- but if SS and a small annuity are your only income I'd worry about the emergencies such as major car repair or replacement, medical deductibles before he's Medicare-eligible. Also, I just checked- COBRA is NOT creditable coverage under Medicare so if he was thinking of that to tide him over he'll be facing surcharges for the rest of his life. (Edited to remove reference to home maintenance expenses since he rents.)
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Post by The Walk of the Penguin Mich on Jun 1, 2020 16:32:03 GMT -5
Has he figured out what he's going to be paying for healthcare until he receives Medicare? Great minds think alike. That, to me, was the biggest unhappy surprise in an otherwise happy decision to retire- and the premiums just kept going up and the network got crappier till I qualified for Medicare. Medicare also does not cover dental, eyecare or hearing aids, with the exception of some limited coverage under some Medicare Advantage plans. (And Medicare Advantage may not be an option if he travels since it covers only in-network unless it's an emergency.) Does he own his own home? Maintenance can produce nasty bumps in the road- new roof, new furnace, etc. There are people on the early Retirement Board who live very simply- books from the public library, free concerts, don't care about travel or eating in restaurants- but if SS and a small annuity are your only income I'd worry about the emergencies such as major car repair or replacement, medical deductibles before he's Medicare-eligible and house repairs if he owns one. Also, I just checked- COBRA is NOT creditable coverage under Medicare so if he was thinking of that to tide him over he'll be facing surcharges for the rest of his life. How is this so? If I am paying for COBRA coverage for my prescriptions and plan - which is primary to Medicare - I can expect to get slapped with a surcharge? That makes absolutely NO sense, especially as I have the same primary coverage as a spouse that IS considered credible coverage.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Jun 1, 2020 16:34:59 GMT -5
What are the terms of the 180k annuity?
When did he put that 180k in?
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Deleted
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Post by Deleted on Jun 1, 2020 16:38:48 GMT -5
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Post by The Walk of the Penguin Mich on Jun 1, 2020 16:42:27 GMT -5
This is for Part B, which I already have and am paying for (and am paying nearly 3x for courtesy of IRMA). I wonder about the rest, gonna have to do some digging.
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jelloshots4all
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Post by jelloshots4all on Jun 1, 2020 17:26:17 GMT -5
What are the terms of the 180k annuity? When did he put that 180k in? I didn't ask too many questions. He said he was going to take out $50k his 1st year. I gave him the name of my CFP. I just was kind of shocked
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movingforward
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Post by movingforward on Jun 1, 2020 17:49:46 GMT -5
My aunt and her husband retired at 63 and 64 with around $250K (that was 6 years ago). I thought that was way too little, but they seem to be doing well. They do; however, have a paid off home which makes a difference. They live in a low cost of living area. Their entertainment is pretty cheap. They eat out on Saturday night, her husband likes to fish, she goes on some church bus trips, she and her husband may go to the beach once a year, etc.
My dad retired with $600K at the age of 61 (12 years ago). After mom passed, he bought a condo and paid cash (leaving him around $450K). He has a small pension of around $250 a month and lives on that and his social security. I'm a little amazed at that since he spends around $10K per year on travel. He now has to take out the required amount from his IRA but ends up putting it back into savings. It is amazing how little some actually end up needing. I'm still afraid of him having to into assisted living some day and not having enough but he does have long term care insurance too.
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Deleted
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Post by Deleted on Jun 1, 2020 19:20:19 GMT -5
What are the terms of the 180k annuity? When did he put that 180k in? I didn't ask too many questions. He said he was going to take out $50k his 1st year. I gave him the name of my CFP. I just was kind of shocked I haven't done a lot of research on annuities- not the least interested in buying one- but what kind of annuity lets you take nearly 1/3 out in one year? I hope he's not planning on doing that every year. The insurance company has to make some money (and pay the agent who sold it!) and I suspect that smaller limits will apply in future years.
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tractor
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Post by tractor on Jun 2, 2020 7:10:08 GMT -5
It really does depend on the individual. My neighbor has never been married, has no kids and no mortgage. I don’t know how much money he has, although when I joke with him about buying stuff, he typically says he has more money than he will ever spend.
However, he never goes out, only shopping once a month for some food. The rest of the time he stays inside and lives a hermit lifestyle. At one time he told me he spends @$400/month and most of that was for cigarettes (he quit smoking last month). He’s 67 and just as happy as can be. So I guess my point is, if your lifestyle is always below your income level, everything will be fine. It’s those on the other side of the equation that should be worried.
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Wisconsin Beth
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Post by Wisconsin Beth on Jun 2, 2020 7:30:26 GMT -5
My aunt and her husband retired at 63 and 64 with around $250K (that was 6 years ago). I thought that was way too little, but they seem to be doing well. They do; however, have a paid off home which makes a difference. They live in a low cost of living area. Their entertainment is pretty cheap. They eat out on Saturday night, her husband likes to fish, she goes on some church bus trips, she and her husband may go to the beach once a year, etc. My dad retired with $600K at the age of 61 (12 years ago). After mom passed, he bought a condo and paid cash (leaving him around $450K). He has a small pension of around $250 a month and lives on that and his social security. I'm a little amazed at that since he spends around $10K per year on travel. He now has to take out the required amount from his IRA but ends up putting it back into savings. It is amazing how little some actually end up needing. I'm still afraid of him having to into assisted living some day and not having enough but he does have long term care insurance too. Yeah, my Dad retired 20 years ago, Mom retired 12 years ago. They're basically living off their SS checks. I'm not sure what their IRA/457 accounts are doing right now but I believe Mom is stacking CDs with the mandatory payouts. The house is paid off. The car is paid off. Their biggest "fun" is the lot rent for the trailer in Door Co. Which is about $2K a summer, plus food and gas to get there. They'll pick up the check sometimes on meals out for the family which isn't exactly cheap.
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CCL
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Post by CCL on Jun 2, 2020 8:11:37 GMT -5
My aunt and her husband retired at 63 and 64 with around $250K (that was 6 years ago). I thought that was way too little, but they seem to be doing well. They do; however, have a paid off home which makes a difference. They live in a low cost of living area. Their entertainment is pretty cheap. They eat out on Saturday night, her husband likes to fish, she goes on some church bus trips, she and her husband may go to the beach once a year, etc. My dad retired with $600K at the age of 61 (12 years ago). After mom passed, he bought a condo and paid cash ( leaving him around $450K). He has a small pension of around $250 a month and lives on that and his social security. I'm a little amazed at that since he spends around $10K per year on travel. He now has to take out the required amount from his IRA but ends up putting it back into savings. It is amazing how little some actually end up needing. I'm still afraid of him having to into assisted living some day and not having enough but he does have long term care insurance too. $450k is still a lot of money. If he spends an extra $10k per year on travel it will last him 45 years, not including any gains.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Jun 2, 2020 8:54:30 GMT -5
What are the terms of the 180k annuity? When did he put that 180k in? I didn't ask too many questions. He said he was going to take out $50k his 1st year. I gave him the name of my CFP. I just was kind of shocked Yeah - I'm think he doesn't have an annuity and maybe has 180k in retirement funds, and going to use that as a bridge until soc sec. if he's 63 he can take ss, but not get medicare. Maybe he doesn't realize that?
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TheHaitian
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Post by TheHaitian on Jun 2, 2020 9:55:40 GMT -5
I think the YM crowd is part of the elite and does not realize it.
I know plenty of Haitians (and non Haitians) that only have social security income as their retirement income and they are doing ok.
They are not off jet setting and touring the world but they are not begging in the streets either. They are 65-70 so have slowed down, mostly at home or church events or family gathering (so limited travel) and their funds seems to be working for them.
The ones that have moved to Haiti are doing even better.
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Cookies Galore
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Post by Cookies Galore on Jun 2, 2020 11:15:55 GMT -5
My mom took early retirement at 63 and had no savings. At least this guy has $180,000; let's remember that this is a lot of money to a good chunk of society.
This is one of those smile and nod scenarios.
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movingforward
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Post by movingforward on Jun 2, 2020 13:05:45 GMT -5
I think the YM crowd is part of the elite and does not realize it. I know plenty of Haitians (and non Haitians) that only have social security income as their retirement income and they are doing ok. They are not off jet setting and touring the world but they are not begging in the streets either. They are 65-70 so have slowed down, mostly at home or church events or family gathering (so limited travel) and their funds seems to be working for them. The ones that have moved to Haiti are doing even better. YM has me feeling like a failure most of the time when it comes to my retirement savings but then I look around at those I know in real life and I seem to be ahead of the game.
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Post by Deleted on Jun 2, 2020 13:21:55 GMT -5
I didn't ask too many questions. He said he was going to take out $50k his 1st year. I gave him the name of my CFP. I just was kind of shocked I haven't done a lot of research on annuities- not the least interested in buying one- but what kind of annuity lets you take nearly 1/3 out in one year? I hope he's not planning on doing that every year. The insurance company has to make some money (and pay the agent who sold it!) and I suspect that smaller limits will apply in future years. It may not have annuitized yet. I can't really explain really well, but some variable annuities are just investment instruments with some attached insurance until you annuitize them. Then you begin taking out a stream of income. I had one of these through Prudential when I first got divorced thanks to the bank's broker, whom I thought was a financial advisor. When he moved to Merrill Lynch and took me with him, he began withdrawing some of the money each year in order to have something to invest for me (LOL). I think it was 16k a year with no surrender penalty. Ok, I was stupid. I didn't know you don't need to have a tax advantaged investment vehicle (the annuity) inside of a tax-advantaged vehicle (an IRA). It's not worth the higher fees. However, I will say that the annuity did as well as Merrill Lynch's managed mutual fund. So it wasn't the absolutely worst thing I could have done. Have I said today how much I love Vanguard?
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TheHaitian
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Post by TheHaitian on Jun 2, 2020 14:25:22 GMT -5
I think the YM crowd is part of the elite and does not realize it. I know plenty of Haitians (and non Haitians) that only have social security income as their retirement income and they are doing ok. They are not off jet setting and touring the world but they are not begging in the streets either. They are 65-70 so have slowed down, mostly at home or church events or family gathering (so limited travel) and their funds seems to be working for them. The ones that have moved to Haiti are doing even better. YM has me feeling like a failure most of the time when it comes to my retirement savings but then I look around at those I know in real life and I seem to be ahead of the game. I can understand needing money if you retire like early early (55) and you have all those big plans for life and what your second act is going to be. But even with my own step dad that retired at 62 and look 52; after retiring you knock off a few big things off your to do list then you settle into a routine. And with my mom being the youngest of 16 (she is 56), I am seeing it with all my uncles and aunts that are retired. 2 of my uncles retired twice and went back to work twice because they got bored being at home, both still working their jobs in mid 70’s and loving it, one retired to Haiti part time and come here during the summer for a few months, and the others like I said goes from home to church, to a gathering where they will see other old folks like them (senior centers mostly), family gatherings and back home. But they also retired with no debt, some own their current home and a few are still renting (but own a home in Haiti). I calculated for my biological he would need 1k/month to have a descent retirement in Haiti. Nothing lavish but he would need for nothing and that is with a full time maid and one that comes twice a week to wash/iron clothes etc. And my biological father does not want to retire in the city, he wants to go to the country where he was born (he owns a house there, plus my grandmother house and his fathers house that is in the city of that town)... and that make him living the good life on that one. His older brother just retired and did that and he is loving it. His social security covers everything and then some and he is saving. Just got himself (at 73) a little girlfriend and they are madly in love; talking about her selling her house and moving in with him or them buying another house together. We are all happy for him (including his daughters that are 5-7 years older then me) since he has been alone since their mother died about 20 years ago. Am I running to stop maxing my 401k? No because I am way to YM in that sense... but I am definitely not dreading retirement either because looking ahead and seeing all the options and possibilities, my wife and I could stop saving today for retirement and we would both be way ahead of the curve by 65; we each have enough in our individual retirement account that at 8% over the next 30 years and not a dime added we would get over 1M each.
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giramomma
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Post by giramomma on Jun 2, 2020 15:43:48 GMT -5
I was sort of thinking that that if the guy is getting 2K a month for SS, that's actually very doable. Rooms in my area can be had for 400-500/month in rent. Add in another $100 for utilities. A bus pass for seniors runs $50 or so a month for unlimited rides. I would assume he could eat, move around, and have shelter for 1K a month. Ting can be had for $20/month. Clothing also can be a fairly low expense. Guy could have $500 left over to gamble/drink a month. He'd just need to tap into the extra money for travel.
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Post by Deleted on Jun 2, 2020 19:20:49 GMT -5
I think the YM crowd is part of the elite and does not realize it. I know plenty of Haitians (and non Haitians) that only have social security income as their retirement income and they are doing ok. They are not off jet setting and touring the world but they are not begging in the streets either. They are 65-70 so have slowed down, mostly at home or church events or family gathering (so limited travel) and their funds seems to be working for them. The ones that have moved to Haiti are doing even better. True. I know quite a few living off SS as well...although most aren't renting. That would make me a little nervous. I've always been running my numbers as needing 40K/year, but really that's major overkill. I currently with my job, both child supports and tax credits take home about 4K/month average. But if you subtract off some things that I won't have in retirement... $4,000 -1,300 (mortgage) - 500 (kid food, activities/childcare) - 583 (Roth contribution) - 200 (college savings) = $1417/month! I won't get much in SS. Right now it says $1729/month if I wait until age 67, but it would probably be right around $1400 at 65. I'm fully intending on cutting retirement savings WAAAY back either the start of 2022 or 2023...going to try to make it to 2023. I sure won't need millions if SS covers the majority of my needs. The savings would just be for big ticket stuff. Buying vehicles with cash, trips, house repairs etc and as insurance in case SS gets cut.
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resolution
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Post by resolution on Jun 2, 2020 21:39:12 GMT -5
I think he would do fine for the first 5-10 years. The problem comes when he is older and expenses have doubled with inflation but his social security check is the same due to increased medicare premiums.
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Post by Deleted on Jun 2, 2020 22:18:10 GMT -5
I think the YM crowd is part of the elite and does not realize it. I know plenty of Haitians (and non Haitians) that only have social security income as their retirement income and they are doing ok. They are not off jet setting and touring the world but they are not begging in the streets either. They are 65-70 so have slowed down, mostly at home or church events or family gathering (so limited travel) and their funds seems to be working for them. The ones that have moved to Haiti are doing even better. True. I know quite a few living off SS as well...although most aren't renting. That would make me a little nervous. I've always been running my numbers as needing 40K/year, but really that's major overkill. I currently with my job, both child supports and tax credits take home about 4K/month average. But if you subtract off some things that I won't have in retirement... $4,000 -1,300 (mortgage) - 500 (kid food, activities/childcare) - 583 (Roth contribution) - 200 (college savings) = $1417/month! I won't get much in SS. Right now it says $1729/month if I wait until age 67, but it would probably be right around $1400 at 65. I'm fully intending on cutting retirement savings WAAAY back either the start of 2022 or 2023...going to try to make it to 2023. I sure won't need millions if SS covers the majority of my needs. The savings would just be for big ticket stuff. Buying vehicles with cash, trips, house repairs etc and as insurance in case SS gets cut. Reduced expenses make all the difference. No SS tax, no Medicare tax, no pension contribution, no (meager) contribution to 403b or whatever, no Roth contribution, and no state income tax on pension or SS . . . It really starts to mount up. That is why I have more money in retirement than working even without touching retirement funds. I am working on no house payment. Six more years!
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tskeeter
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Post by tskeeter on Jun 2, 2020 22:32:23 GMT -5
YM has me feeling like a failure most of the time when it comes to my retirement savings but then I look around at those I know in real life and I seem to be ahead of the game. I can understand needing money if you retire like early early (55) and you have all those big plans for life and what your second act is going to be. But even with my own step dad that retired at 62 and look 52; after retiring you knock off a few big things off your to do list then you settle into a routine. And with my mom being the youngest of 16 (she is 56), I am seeing it with all my uncles and aunts that are retired. 2 of my uncles retired twice and went back to work twice because they got bored being at home, both still working their jobs in mid 70’s and loving it, one retired to Haiti part time and come here during the summer for a few months, and the others like I said goes from home to church, to a gathering where they will see other old folks like them (senior centers mostly), family gatherings and back home. But they also retired with no debt, some own their current home and a few are still renting (but own a home in Haiti). I calculated for my biological he would need 1k/month to have a descent retirement in Haiti. Nothing lavish but he would need for nothing and that is with a full time maid and one that comes twice a week to wash/iron clothes etc. And my biological father does not want to retire in the city, he wants to go to the country where he was born (he owns a house there, plus my grandmother house and his fathers house that is in the city of that town)... and that make him living the good life on that one. His older brother just retired and did that and he is loving it. His social security covers everything and then some and he is saving. Just got himself (at 73) a little girlfriend and they are madly in love; talking about her selling her house and moving in with him or them buying another house together. We are all happy for him (including his daughters that are 5-7 years older then me) since he has been alone since their mother died about 20 years ago. Am I running to stop maxing my 401k? No because I am way to YM in that sense... but I am definitely not dreading retirement either because looking ahead and seeing all the options and possibilities, my wife and I could stop saving today for retirement and we would both be way ahead of the curve by 65; we each have enough in our individual retirement account that at 8% over the next 30 years and not a dime added we would get over 1M each. TheHatian, A nest egg of $1M each isn’t as much as it sounds like. If you consider the impact of 30 years of inflation, when you retire, your $1M would have the buying power of about $400K today. Then figure the impact of inflation during retirement and your buying power shrinks even more. Maybe by a weighted average of another 25%. So, between 2050 and 2080, your 2050 $1M nest egg will provide the buying power that about $300K does today. Could you live for the next 30 years on your SS, any pension you have, and a $300K nest egg? Hopefully the math works for you.
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Post by Deleted on Jun 3, 2020 7:12:54 GMT -5
I think he would do fine for the first 5-10 years. The problem comes when he is older and expenses have doubled with inflation but his social security check is the same due to increased medicare premiums. One other thing that happens is that you're likely to have higher medical expenses. Even with Medicare there are prescriptions co-pays. If you can't afford decent hearing aids, new eyeglasses as your eyesight deteriorates, and necessary dental work (maybe choosing extraction over root canals and other major work) you won't die but the quality of your life will be severely affected. You also need to have more things done for you- if you own a home (I know the OP's friend doesn't) maybe you just can't clean it anymore, or mow the lawn or get up on a ladder to replace the smoke detectors. Maybe you need to switch to Uber instead of driving (although you save in car expenses). TheHaitian, A nest egg of $1M each isn’t as much as it sounds like. If you consider the impact of 30 years of inflation, when you retire, your $1M would have the buying power of about $400K today. Then figure the impact of inflation during retirement and your buying power shrinks even more. Maybe by a weighted average of another 25%. So, between 2050 and 2080, your 2050 $1M nest egg will provide the buying power that about $300K does today. Could you live for the next 30 years on your SS, any pension you have, and a $300K nest egg? Hopefully the math works for you. He did note that that $1 million each was based on the assumption that they stop saving for retirement and, from previous posts, I believe they continue to save and have many years ahead of them. I agree that $1 million isn't what it looks like to many people. I was on one Board where one person said they could retire on $1 million just invest it at 8% (!) and they'd be living high off the hog on $80K/year. I don't need to point out to this group the numerous flaws in that assumption. My simple Excel spreadsheet ran to age 65 with some reasonable assumptions about inflation, future contributions and rates of return. It took the accumulated value at age 65, adjusted it for inflation (e.g., $1 million in 10 years is worth about $740,000 now at 3% inflation), and multiplied that by the 4% safe withdrawal rate. Could I live on that plus any other sources such as SS? It wasn't fancy but it motivated me to keep saving and I could see that a reasonable retirement was attainable at 65. I quit at 61 but it's still worked out. Fancier models run by my advisor every year allow me to update my spending assumptions. The guy who developed the 4% safe withdrawal rate is now saying maybe it should be 2% or 3%- I think he did that during the last recession as well. Not good if you're already retired and need 4%! I've kept mine under 3.5% and it's trending down- 2016 was extraordinarily expensive because we downsized and there were a lot of costs associated with moving and fixing up.
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jelloshots4all
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Post by jelloshots4all on Jun 3, 2020 8:10:37 GMT -5
I was sort of thinking that that if the guy is getting 2K a month for SS, that's actually very doable. Rooms in my area can be had for 400-500/month in rent. Add in another $100 for utilities. A bus pass for seniors runs $50 or so a month for unlimited rides. I would assume he could eat, move around, and have shelter for 1K a month. Ting can be had for $20/month. Clothing also can be a fairly low expense. Guy could have $500 left over to gamble/drink a month. He'd just need to tap into the extra money for travel.
He said annuity, but it may be some other investment. He planned to take some out the first several years before he applies for SS. His current apartment is $900 a month. He said he should get around $2K a month when he applies for SS. I agree with the healthcare costs. Thanks for the good discussion. I think the YMAM in me would not be comfortable with the amount he has in investments. But I do have friends that are retired and have done fine with SS and pensions.
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Post by Deleted on Jun 3, 2020 8:34:24 GMT -5
My dad's pension was something like $150 a month, but he also got his health insurance paid for himself and my mom, for life. Between that and Medicare, almost everything was paid. I can see why companies don't offer that anymore. Yeah- I wish! I'm getting pensions from 2 previous employers, $900/month each, no COLA. Nothing to sneeze at but no health insurance included. I've seen two companies terminate retiree health insurance. One of my previous employers froze their contributions at the amount they were paying at that point- so any increases in the cost were borne by the retiree. Didn't apply to me since i didn't retire from there. My brother's company just stopped it a couple of years after he retired- he got a letter in late 2017 saying that as of 1/1/2018 they were no longer providing retiree health insurance. End of story. Last I heard, he and DSIL were paying $22K for the 2 of them for ACA coverage. Fortunately they're very frugal and they've saved a lot over the years. They become eligible for Medicare next year. Unless you've got a union contract you shouldn't count on promises for retiree health insurance.
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giramomma
Distinguished Associate
Joined: Feb 3, 2011 11:25:27 GMT -5
Posts: 21,301
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Post by giramomma on Jun 3, 2020 9:05:50 GMT -5
Unless you've got a union contract you shouldn't count on promises for retiree health insurance. Or unless you have self-serving lawmakers that are also paying into the same system. They are also state workers, that pay into the same retirement and get the same healthcare. They have yet to make laws that go against their self-interest. They aren't going to start now.
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