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Post by minnesotapaintlady on Oct 17, 2021 20:29:23 GMT -5
I had a couple of friends who worked for PanAm (airline from back in the day). When they went bankrupt, their pension went from amazing (around $3,000 per month) down to $200 per month. One ended up selling his very nice house and having to rent a room from another neighbor. The other was fortunate enough that his wife had a nice pension and they had a bit of family money tucked away. This is why I think even if I had a pension...and I really wish I did!...I'd save. Too many horror stories about them going away or getting reduced. My mom and aunt worked at the same company (one for 47 years and one for 38) and their pension situations ended up being very different partly due to the company being sold several times while they were there. Government pensions are probably pretty solid though. As much as social security anyhow.
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CCL
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Post by CCL on Oct 18, 2021 3:12:38 GMT -5
Pensions do sometimes get cut, especially if the company files for bankruptcy. I remember when United Airlines went bankrupt the employees lost nearly all of their pensions. Folks count on the PBGC to cover them but it doesn't always work out well. www.pbgc.gov/wr/large/united/united-airlines-plan-restorationI would never completely trust a pension to be guaranteed.
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giramomma
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Post by giramomma on Oct 18, 2021 7:04:40 GMT -5
I may look into LTC ins in the next few years. Luckily, I can pick the brains of many folx whom I work with. I'm on another finances board. I can't remember all the posts about LTC exactly, but I think policies aren't what they used to be.
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TheOtherMe
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Post by TheOtherMe on Oct 18, 2021 8:00:25 GMT -5
My dad was sure his pension was gone every time a letter from Bridgestone arrived.
They did take away free health insurance and offered a ridiculously expensive plan in it's place. They started out reimbursing white collar retirees a certain amount every year. That got smaller and smaller. It didn't even cover Medicare Part B when he passed away. Mom got 1/2 the reimbursement dad got.
They paid the reimbursement after dad died and it was horrible tried to get it back to them.
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azucena
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Post by azucena on Oct 18, 2021 10:08:26 GMT -5
I may look into LTC ins in the next few years. Luckily, I can pick the brains of many folx whom I work with. I'm on another finances board. I can't remember all the posts about LTC exactly, but I think policies aren't what they used to be. Early products were way underpriced as no one in the US was tracking incidence rates before. In the last 5 yrs or so, all the major players have raised rates and shored up their policy language to make it clear what they are covering.
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seriousthistime
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Post by seriousthistime on Oct 18, 2021 10:18:41 GMT -5
I wish I knew more about other public pensions because people rant and rave about how they are bankrupting places like Illinois, for example. Most of the severe problems with public pensions arise from "spiking", when your pension is a % of your final salary, or maybe the final two years, and then the last year or two you load up on overtime, work on holidays and get double time, etc. It's more common among police and firefighters, where pay is high to begin with (yes, for good reason, I know- I wouldn't want to do those jobs). Those promises became more and more difficult to fund, especially as interest rates declined (less anticipated investment income means you have to put more cash into the plan to keep it adequately funded). There are noteworthy abuses of course, and they make the news. That purportedly shows the public that pensions are way too generous and unfair to the taxpayers. But these cases are relatively rare. Most public employees pay into the system for some years, are paid a salary according to a scale, and get a pension based on high-3 or high-5 salary x number of years of service. If you think of public pensions as a triangle the abuses you mention are at the top of the triangle. The systems are actually weighed down by the vast numbers of pensions paid out to the large numbers of retirees more toward the bottom of the triangle. And in regard to recipients who abuse the system, the enticement to boost the benefits with holiday pay, overtime, etc., and then retire with a more generous benefit also means those people are off the local or state payroll. In Illinois, some school superintendents managed to get their salary boosted in their final few years before retirement. The superintendent is one person at the top of the district. There are a few hundred people in the district in other positions (principals, teachers, admin, aides, maintenance, etc.) whose pensions do not involve any manipulation of the system. Some public pension systems also require employees to pay into Social Security. Federal pensions fall into two categories: CSRS, which did not require paying into SS but has a more generous payout, and FERS, which does require paying into SS but has a less generous payout.
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nidena
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Post by nidena on Oct 18, 2021 10:33:52 GMT -5
Well, my pension is definitely not based on overtime though it is a "high three" one. The military doesn't pay overtime...to anyone. It'd be interesting to see what the numbers are for # of retirees vs # who've died. The Greatest Generation was the largest pool of veterans but very few, in comparison to the 10+ million who served, actually retired. There's approximately 2 million retirees currently, from all wars and out of nearly 20 million veterans, and they're forecasting 2.3 million by 2031. But so many fewer people are joining and the Vietnam Era vets make up half that total veteran number. I don't see the govt having to pay for a number of retirees equal to what they'll gain back in funding when the Vietnam vets die. It definitely wouldn't hurt to EXPECT them to slash my retirement, hope that they don't, and save accordingly.
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tractor
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Post by tractor on Oct 18, 2021 11:34:25 GMT -5
Reading these posts always make me feel lucky to work where I do. We get 100% vested in the pension after one year, with a percentage of salary (5%?) every year, on top of a 5% 401k match. After ten years I have $200k cash value in my pension and a similar amount in my 401k.
My wife is a school teacher, her pension is based on her three highest pay years, which is normally near the end of your career. In her instance she switch school districts about 5 years ago taking a significant pay cut. As a result, when she's eligible to collect her pension in 2-years, it will be the same amount she makes now...makes for easy budgeting.
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gs11rmb
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Post by gs11rmb on Oct 18, 2021 13:10:15 GMT -5
Most of the severe problems with public pensions arise from "spiking", when your pension is a % of your final salary, or maybe the final two years, and then the last year or two you load up on overtime, work on holidays and get double time, etc. It's more common among police and firefighters, where pay is high to begin with (yes, for good reason, I know- I wouldn't want to do those jobs). Those promises became more and more difficult to fund, especially as interest rates declined (less anticipated investment income means you have to put more cash into the plan to keep it adequately funded). There are noteworthy abuses of course, and they make the news. That purportedly shows the public that pensions are way too generous and unfair to the taxpayers. But these cases are relatively rare. Most public employees pay into the system for some years, are paid a salary according to a scale, and get a pension based on high-3 or high-5 salary x number of years of service. If you think of public pensions as a triangle the abuses you mention are at the top of the triangle. The systems are actually weighed down by the vast numbers of pensions paid out to the large numbers of retirees more toward the bottom of the triangle. And in regard to recipients who abuse the system, the enticement to boost the benefits with holiday pay, overtime, etc., and then retire with a more generous benefit also means those people are off the local or state payroll. In Illinois, some school superintendents managed to get their salary boosted in their final few years before retirement. The superintendent is one person at the top of the district. There are a few hundred people in the district in other positions (principals, teachers, admin, aides, maintenance, etc.) whose pensions do not involve any manipulation of the system. Some public pension systems also require employees to pay into Social Security. Federal pensions fall into two categories: CSRS, which did not require paying into SS but has a more generous payout, and FERS, which does require paying into SS but has a less generous payout. I think the easiest solution to this problem would be to link the pension calculation to base salary and nothing else. It would stop people 'abusing' the system and take away the purported abuse as a reason for people to rail against public pensions. Of course, there's probably a huge flaw in my reasoning otherwise this would have happened already
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Post by Deleted on Oct 18, 2021 13:43:46 GMT -5
I think the easiest solution to this problem would be to link the pension calculation to base salary and nothing else. It would stop people 'abusing' the system and take away the purported abuse as a reason for people to rail against public pensions. Of course, there's probably a huge flaw in my reasoning otherwise this would have happened already One reason may be pushback from the unions involved. Many may not be salaried anyway, since they get overtime and extra pay for working holidays. They could just base the pension on a 40-hour work week. The "unpaid sick time" benefit is also a ticking time bomb. I don't know if that's actually part of the pension system but in many public plans if someone retires after 20 years and has 100 unused sick days they get to cash them in at their current pay rate. I've never worked for an employer that let me carry sick days forward- use them or lose them. I was blessed to be extremely healthy and had a generous ST disability plan that paid for the 6 weeks I was off after having DS. I left tons of sick days on the table, especially since back then it wasn't acceptable to use them when your kid got sick (and DS bless him, was also pretty healthy).
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TheOtherMe
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Post by TheOtherMe on Oct 18, 2021 14:05:55 GMT -5
While my pension was calculated on my high 3, I believe the calculation was based on the GS scale without regard to locality pay.
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Post by Deleted on Oct 18, 2021 14:17:01 GMT -5
I think the easiest solution to this problem would be to link the pension calculation to base salary and nothing else. It would stop people 'abusing' the system and take away the purported abuse as a reason for people to rail against public pensions. Of course, there's probably a huge flaw in my reasoning otherwise this would have happened already One reason may be pushback from the unions involved. Many may not be salaried anyway, since they get overtime and extra pay for working holidays. They could just base the pension on a 40-hour work week. The "unpaid sick time" benefit is also a ticking time bomb. I don't know if that's actually part of the pension system but in many public plans if someone retires after 20 years and has 100 unused sick days they get to cash them in at their current pay rate. I've never worked for an employer that let me carry sick days forward- use them or lose them. I was blessed to be extremely healthy and had a generous ST disability plan that paid for the 6 weeks I was off after having DS. I left tons of sick days on the table, especially since back then it wasn't acceptable to use them when your kid got sick (and DS bless him, was also pretty healthy). There is no limit to the amount of sick leave we can accrue. 104 hours/year. You don’t get paid for it when you retire. We have some people with a couple thousand hours of sick leave. As they get closer to their retirement date, they usually start burning up their sick leave. I think one of the men that works with me has been doing that for most of this year. It seems like he’s not at work just as much as he is, and I’ve heard that he’s planning to retire soon. A lot of people try to retire with the max amount of vacation time we can accrue. It was 440 hours, and increased to over 500 hours during the pandemic, I’m not sure of the exact number now. They do that because it’s the first check they get after retiring and 440 hours is around $14k. At least, that’s what I’ve been told about why they do it. And apparently it takes a month or 2 to start receiving the pension. It would be difficult for me to get to 440 hours of vacation time. Every year I say I’m going to start working on that, but so far it’s been a FAIL. I get 5 weeks/year and I use it all lol.
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susana1954
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Post by susana1954 on Oct 18, 2021 19:09:49 GMT -5
Our sick leave accrued with no limits, but we didn't get paid for it at the end. Instead, it is converted to additional retirement credit. I had about 6 months worth (around 90 days) even though I had to use a lot toward the end because of DH. I think state employees got paid for theirs, but that may only be for vacation days. Teachers don't have vacation days. I am very grateful for my pension, but I also saved for retirement in both RSA-1 and in a Roth. I feel like my pension is relatively safe because it is a state pension, but some city pensions are under the retirement system as well. At least one city has quit paying their share into the state retirement system and so their retirees lost their pensions if I remember correctly. link
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Post by The Walk of the Penguin Mich on Oct 19, 2021 11:00:14 GMT -5
Our sick leave accrued with no limits, but we didn't get paid for it at the end. Instead, it is converted to additional retirement credit. I had about 6 months worth (around 90 days) even though I had to use a lot toward the end because of DH. I think state employees got paid for theirs, but that may only be for vacation days. Teachers don't have vacation days. I am very grateful for my pension, but I also saved for retirement in both RSA-1 and in a Roth. I feel like my pension is relatively safe because it is a state pension, but some city pensions are under the retirement system as well. At least one city has quit paying their share into the state retirement system and so their retirees lost their pensions if I remember correctly. linkOurs worked the same way. You could accrue unlimited sick time and if it was unused those hours would decrease the time to retirement. I worked there 11 years when I went out sick and had accrued 5 months of sick time. I think I figured that I could have retired in another 8 years (I’d have been 59) as I would have fulfilled their ‘rule of 70’ which years of service plus age had to be 70. At that point, it was access to the employee health insurance for me that I would be working for as I would pay as an employee until I reached 65, then they’d cover Medigap for the same price. Oh, well…..
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Tiny
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Post by Tiny on Oct 19, 2021 13:10:04 GMT -5
I would think about your expenses - from a couple of different angles: 1.) Your typical monthly/yearly expenses that you have now (what you pay for with your net pay - what hits your checking account). This should include any sinking funds (for twice a year expenses - when your house is paid off you will have property taxes and insurance that happen once or twice a year - and might not be able to cash flow easily). 2.) The income tax you will need to pay on your retirement income. And the cost of healthcare. I had trouble estimating these... (the income tax thing made my head hurt - but I got thru it and came up with a guestimate.) I just took the highest healthcare cost I've heard other people complain about and used that... 3.) the dreaded Lumpy Expenses: you will need another car or 2 over the rest of your life time. You will need to replace appliances (maybe 2 times over 20 or 30 years). You will need to repaint the interior of your home - or replace flooring/carpeting. You may need to replace window treatments (do shades or blinds last more than 20 years?). Your house will need some big expense thing - be it plumbing or rotting wood on a porch or a tree that needs to get cut down or maybe concrete work (front concrete stairs and porch or a patio or a driveway) How do you plan for occasional 5K or 10K or 20K expenses? that will happen 10 or 20 or 30 years in the future? Some other unique to you big expense that you KNOW or are planning to have happen in the future - (a 6 month world tour for your 60th b-day, an RV so you can travel America for 2 or 3 years - while still maintain a home so when the trill wears off the "adventurer life" you have a place to come home to... whatever...) #3 is the tough thing I'm dealing with right now. I'm 57.5 yo and thinking about what I will be spending money on after I FIre (in 12 to 24 months) is a challenge. Especially when I get to how my life will look when I'm between 60 and 65... these seem like they will be very active years and I want to have $$ to enjoy them. ADDED: I'm expecting to live on less "net income" in Retirement than when I was working (the Pandemic helped me confirm that this is not a "cazy" thing - going to work turned out to be just as big an "expense" as I thought (and my calculations showed) it was. I have a "car payment" built into my monthly expenses - even though I haven't had a car payment in 5 years - The money goes to savings/investing. When I need a new car - I've got a pool of money for a down payment AND I've got a "loan payment amount" line item built into my monthly expenses if I have to take a loan (I won't have to scramble or cut back when I need a new car. A new car won't mess too much with my finances going forward once I buy it). I've pretty much "cash flowed" or borrowed money for big house repairs - because I could "redirect" some flow of money that was going to other "savings" to the expense - and I could usually pay for the expense in less than 12 months. I restricted myself to one or two such expenses at a time - so I didn't over extend my self. I am currently saving up money for a "new roof" with a "fixed" monthly amount that's going to savings (I'm not investing this money because the roof is gonna happen in 12 to 24 months. and I don't want to have pay for the roof with a loan). When I calculate my retirement expenses - I'm leaving in the "car payment" and I'm leaving in the "new roof" amount - but I've rounded it up and am calling it "Lumpy House Expense". When I'm a figuring out how much money I need to have invested/saved for retirement - I'm using a total of #1 + #2 +#3 to get my Yearly Expense number. I need to have 8 * Yearly Expense Number in savings/investments to get me thru to 65 when my pension starts. I'm thinking I could supplement my income by working if I've underestimated my expenses (and I'd have 8 years to improve my "retirement plan" that goes from 65 til I'm dead - if the 8 * Yearly Expenses Number was way off. ) Once my pension starts at 65, How much I will need from my savings/investments will be Yearly Expense Number minus my pension income. Once I take SS how much I will need from savings/investments will be Yearly Expense Number - my pension income - SS. I think you need to start with having a very good handle on your typical yearly expenses, how much you will need to pay for taxes and health care and then some way to account for the lumpy expenses you can identify that will happen during the next 10, 20, 30, maybe 40 years of your life. Once you have some idea of the expenses - you can subtract out your income from pension/disability/SS and if you still need money to make ends meet - that's the amount you have to saved/invested and available to use.
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Tiny
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Post by Tiny on Oct 19, 2021 13:28:50 GMT -5
My view of Lumpy Expenses in general - you can usually see them coming and you usually can prepare for them.
TLDR;
23 years ago - I had installed a "check valve" on my sewer line to prevent storm water backing up into my basement. This type of flooding is common in my area - in the past home owners used stand pipes in basement floor drains and toilets to combat the problem (or to make the flood less bad). The check valve stopped the flooding completely. It cost me 5K back then - an astonishing amount (worth.every.penny). About 18 years ago when I was at the local "plumbing supply house" getting some replacement parts for a repair and replace plumbing job (that went so bizarrely wrong and then so perfectly right - my handyman brother and I compare all things that don't go quite right to the clusterf&ck that this project was) - a woman who looked to be in her late 50's was trying to get info on how to fix the sewer flooding problem with her home - she was tired of the clean up AND the flooding was getting worse (more often and higher volumes of water coming in). I suggested checking with her suburban government (they sometimes gave grant money to help with the expense) for help with getting a "check valve" installed - and that the cost of the check valve might be in the 5K range. The woman turned pale and gasped "where will I get 5K?". She said she was working - but 5K?!? so expensive who has that sort of money?? I vowed that I NEVER wanted to be in this woman's shoes when I was an older home owner.
I have sinking funds and think about and plan for the future as best I can.
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countrygirl2
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Post by countrygirl2 on Oct 19, 2021 19:45:03 GMT -5
I am very happy for those with pensions, will be a huge help in your retirement, won't have to save as much.
Hubs and I were not fortunate enough to have such so we saved like fiends. But his SS is good, mine not so much as I had to quit way early. That's why we keep the rentals but one day in the not so far distance future we will be selling them.
With pensions I think it will give you a lot of leeway, still I would try and retire with no debt. Good luck to all of you.
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CCL
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Post by CCL on Oct 19, 2021 21:43:02 GMT -5
I don't worry much about having some debt. I'd rather make payments on something than take money out of retirement funds or savings. I don't see any reason at all to pay everything off. We are much better off due to leaving the $$$ in mutual funds.
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Post by minnesotapaintlady on Oct 19, 2021 22:17:20 GMT -5
I don't worry much about having some debt. I'd rather make payments on something than take money out of retirement funds or savings. I don't see any reason at all to pay everything off. We are much better off due to leaving the $$$ in mutual funds. There is though if you're trying to keep your income low for ACA subsidies. That can be a lot of money if you retire long before 65.
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CCL
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Post by CCL on Oct 19, 2021 22:38:27 GMT -5
I can see you point MPL. What kind of income do you need to qualify for the subsidies? Our actual income really isn't high, except for what I am converting to Roth IRAs. Since investments are about half in retirement accounts and half in my brokerage account, for the most part, I can control what it will be for the year.
We have a car payment and I refinanced the house with a 30 year loan, but our day-to-day spending is very conservative.
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CCL
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Post by CCL on Oct 19, 2021 22:50:22 GMT -5
I just looked it up. According to what I found via Google, we would be in one of the lower cost brackets, excluding our Roth conversions. So if we needed to fall back on the ACA option, I would have to reduce my conversions. It would just take me longer to convert every thing.
For us, the car and house payments wouldn't make a difference.
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Post by minnesotapaintlady on Oct 19, 2021 23:17:40 GMT -5
What kind of income do you need to qualify for the subsidies? I haven't played around with it a lot, since it's still a number of years out. I just know at 40K income it gives me a $777/month subsidy towards family coverage (probably still will be covering Carrot in retirement). With that subsidy, the plans range from $0.91/month for a super high deductible HMO to $744/month for a PPO plan. 5K/year would have to go to the mortgage. If I plug in 35K it doesn't give a subsidy amount. It says we qualify for healthcare assistance and I have to fill in an application which I don't bother doing. However, this is still something I go back and forth on constantly. Lately, I'm leaning towards stopping the 10K/year prepayment I've been doing and instead maxing the I bonds. 30K in I bonds would pay my mortgage from 59 to Medicare eligibility and not really move the needle on AGI.
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plugginaway22
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Post by plugginaway22 on Oct 20, 2021 5:59:21 GMT -5
Meeting with a CPA in November to figure out this exact thing. In 2022 we will go from income of 220k to zero. But we need to have about $40-50k AGI to qualify for a good ACA plan, and not Medicaid. Think we will be doing nothing but converting TIRA to Roths. We have no debt so our living expenses will be out of savings for about 3 years, until SS (we have no pensions).
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Post by Deleted on Oct 20, 2021 7:47:52 GMT -5
<snip> I suggested checking with her suburban government (they sometimes gave grant money to help with the expense) for help with getting a "check valve" installed - and that the cost of the check valve might be in the 5K range. The woman turned pale and gasped "where will I get 5K?". She said she was working - but 5K?!? so expensive who has that sort of money?? I vowed that I NEVER wanted to be in this woman's shoes when I was an older home owner. I have sinking funds and think about and plan for the future as best I can. Yes, that's sad. Sometimes when driving around I see homes that are clearly run-down and wonder if it's some poor old person who can't afford to move because the monthly costs of staying in the house are cheaper. The worst we saw was on an historic neighborhood with houses worth $900K-$1 million. This was listed at $230K. Moss on the roof, multiple roof tiles missing, windows boarded up. Our realtor said the listing price was pretty much the value of the land.
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nidena
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Post by nidena on Oct 20, 2021 13:49:32 GMT -5
I forgot that I also have a Roth 401k with my Job--it gets 2% every pay period. I think the current balance is around $1500--contributions began at the beginning of this year, three months after I started there.
I can see me depositing 1/12 of the max into my Roth IRA every month for as long as possible.
I can also see me snowballing the rain gutter payment into the HRV payment and having the car paid off by the end of 2023. I was looking into trading in my 2018 HRV for a 2015 Pilot but not with the way Used prices are nowadays. I'm not looking to increase my amount owed, especially if the vehicle is 3-5 year OLDER than mine.
I do look into ways to reduce my monthly expenses and the biggest opportunity is in the "Gifts" dept but, even then, it's more about giving fewer than finding less expensive. I tend to buy my women friends a small wardrobe of items (see tagline below for "of what") and those are NOT found at Walmart or Target and almost every retailer that does carry them has consistent pricing of $60+/item. To be fair, though, I never take the same person shopping within 18 months of a prior trip. lol.
I think I'm going to rename my 3-6 Months savings into Lumpy Expense savings. It's a more appropriate name.
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countrygirl2
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Post by countrygirl2 on Oct 20, 2021 19:10:59 GMT -5
I hope the credit from the solar panels covers our federal taxes this year as I only prepaid one quarter, I think they will, if not will have to pull out of my stash. I am going ahead and do the state though. I would like to get a bit more cash back in the "slush fund".
Trying to get hubs to sell the old truck he uses maybe once or twice a year and costs us $1000 for insurance and tags. He talked about selling it and just buying a heavy pull behind trailer, I wish he would.
We pay for tags on 3 trailers and a truck, the truck is off the LLC as are 2 trailers, but still its money out. The motorhome tags and ins are minimal as its old, $500 a year I believe. Need to get it out and drive it around for a bit.
I sure wouldn't have debt as insurance is a scary expensive cost and going higher. Some could need that money to keep it and sure wouldn't go without it. That is the one thing I do worry about. Hubs wants to gift money to son each year and I tell him, better think about it. We did this year and that's ok, I calculated things out and its ok, will see about next year though.
Also here we just added a county option tax, they need it so not complaining. It doesn't effect other retired folks but does us because of our LLC.
But if you are traveling or have lots of extra stuff around like us, it costs. But we aren't scrimping on anything either. I just spent $400 on both cats for shots and everything but that is only once a year.
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CCL
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Post by CCL on Oct 20, 2021 21:39:27 GMT -5
I agree, when you have lots of extra stuff, it does cost money. I just paid for vehicle plates. We have more vehicles than we need. Each one is not expensive by itself, but when you combine them, it seems like a lot of money.
I just spent $650 on our little dog. When we go on vacation it's $450 for the kennel. Pets can be expensive, but worth it, of course. Just another thing to keep in mind when planning for expenses.
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