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Old 08-18-2013, 06:07 AM
 
639 posts, read 768,671 times
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I am in the process of making a budget as we are 5 years out till retirement. This past week was an incredible budget buster, which got me to thinking, all the planning in the world goes out the window when someone in the family gets sick or needs you.

My elderly father ended up in ICU and coded in FL, 1000 miles away from me. I got the call at work, picked up my pocketbook, and ran to the airport. You can imagine the cost for that flight. I had to rent a car as well. I stayed with my mother, so a hotel wasn't necessary, but gas for the car, food, incidentals (I did have to buy deodorant and some "essentials"...I couldn't go around with the same underwear all week!) Thankfully, he pulled through. I am now home and will go back down when he gets out, which they are saying could be 2 weeks or so because he will also need some rehab.

It got me thinking to when my daughter got sick 5 years ago. The cost for her illness has set us back substantially. She now lives with us, just started working again (part time), wants to go back to school (she just finished her sophomore year when she got sick). So, as much as we are diligent about saving, we also have bills that some don't have anymore with their kids. But, you can't put a price tag on your child when they get sick.

I guess I also have a different perspective on that magic number needed for retirement. When your child or loved one gets sick, nothing else matters. That's why you really need that rainy day fund. If you are lucky, you don't need it. If you need it, you use it, and make the most out of what is left.

They don't call us the sandwich generation for nothing!
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Old 08-18-2013, 08:39 AM
 
1,783 posts, read 2,529,975 times
Reputation: 2791
A retirement budget has to include savings. If a retired person can't save part of his/her retirement income, I don't know how they can retire. Plus, unless your house is paid off, you're going to need as much monthly income in retirement as you had when you were working. Well, that's not quite true -- I live very well on approx 65% of what I was making when I was working, which is also about 3/5 of my retirement income. PLUS, if you retire before 65/Medicare -- where in your health insurance (that was the No. 1 mistake I made)? And what about travel (I was fortunate in that I did a lot of traveling when I was young so travel was never a consideration in my tentative retirement budget)?

Yes, unless we're rich and/or willing to work PT until we're 70 -- retirement can be difficult financially.

I'm glad for you that your father made it, for now. And thank goodness you've got an employer who understands.
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Old 08-18-2013, 09:25 AM
 
2,393 posts, read 4,860,508 times
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> You can imagine the cost for that flight.

Most airlines offer reduced fares (bereavement and family emergency). Those who are budget-challenged should know about this. Call the airline on the phone and ask.

It can help some.
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Old 08-18-2013, 10:41 AM
 
7,673 posts, read 11,281,660 times
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Quote:
Originally Posted by Fran66 View Post
A retirement budget has to include savings. If a retired person can't save part of his/her retirement income, I don't know how they can retire.
I'm going to have to disagree with this. If a person has adequate income and nest egg to retire, (and they shouldn't voluntarily retire if they don't), why would they need to save part of that income? The whole purpose of building up a nest egg during your working years (the accumulation stage of life) is so that you can spend it in retirement. One should, of course, having a spending plan for that income/nest egg so that it doesn't run out, and one continues to need to know how to invest conservatively the assets in the nest egg, but that doesn't mean that one has to add to the nest egg by saving part of their income.

Perhaps my thinking is skewed by the fact that my wife and I don't have children and we're not looking to leave a windfall to any heirs, but I don't understand the purpose of continually saving money all through your retirement years.
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Old 08-18-2013, 12:59 PM
 
29,462 posts, read 33,705,926 times
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MMOB, I understand your point and Fran's. My understanding of your situation is you have a very comfortable margin. I understand others that have a margin just not as comfortable of one. Your ability to cut back if needed is considerable and you would still be good it is not just the percentage below income you are spending but the raw amount.
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Old 08-18-2013, 01:03 PM
 
29,462 posts, read 33,705,926 times
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The following are topics not often discussed in this forum but they are so critical to retirement budgeting and dollar amounts. They are the marginal propensity to save and consume. That might be one of the best ways to assess retirement readiness.

http://en.wikipedia.org/wiki/Margina...ensity_to_save
Quote:
The marginal propensity to save (MPS) refers to the increase in saving (non-purchase of current goods and services) that results from an increase in income i.e. The marginal propensity to save might be defined as the proportion of each additional dollar of household income that is used for saving. It is also used as an alternative term for the slope of the saving line.[1] For example, if a household earns one extra dollar, and the marginal propensity to save is 0.35, then of that dollar, the household will spend 65 cents and save 35 cents. It can also go the other way, referring to the decrease in saving that results from a decrease in income.
http://en.wikipedia.org/wiki/Margina...ity_to_consume

Quote:
In economics, the marginal propensity to consume (MPC) is an empirical metric that quantifies induced consumption, the concept that the increase in personal consumer spending (consumption) occurs with an increase in disposable income (income after taxes and transfers). The proportion of the disposable income which individuals desire to spend on consumption is known as propensity to consume. MPC is the proportion of additional income that an individual desires to consume. For example, if a household earns one extra dollar of disposable income, and the marginal propensity to consume is 0.65, then of that dollar, the household will spend 65 cents and save 35 cents. Obviously, the household cannot spend more than the extra dollar.
Some of us could save 100% of every additional dollar received in retirement others would need to spend 100% to help stay afloat. Very different scenarios so it is hard at times to have common concept discussions on some topics. Once you reach the point of being able to save 100% of every additional dollar it makes it easier to spend 100% of every additional dollar. There is a time many of us reach the end of the game in getting ready for retirement and can go on cruise control. In the case of MBOB I suspect he is very much on cruise control in fact here there and everywhere around the globe.

Last edited by TuborgP; 08-18-2013 at 01:15 PM..
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Old 08-18-2013, 01:58 PM
 
9,961 posts, read 11,815,123 times
Reputation: 13278
Quote:
Originally Posted by saralvr View Post
I am in the process of making a budget as we are 5 years out till retirement. This past week was an incredible budget buster, which got me to thinking, all the planning in the world goes out the window when someone in the family gets sick or needs you.

My elderly father ended up in ICU and coded in FL, 1000 miles away from me. I got the call at work, picked up my pocketbook, and ran to the airport. You can imagine the cost for that flight. I had to rent a car as well. I stayed with my mother, so a hotel wasn't necessary, but gas for the car, food, incidentals (I did have to buy deodorant and some "essentials"...I couldn't go around with the same underwear all week!) Thankfully, he pulled through. I am now home and will go back down when he gets out, which they are saying could be 2 weeks or so because he will also need some rehab.

It got me thinking to when my daughter got sick 5 years ago. The cost for her illness has set us back substantially. She now lives with us, just started working again (part time), wants to go back to school (she just finished her sophomore year when she got sick). So, as much as we are diligent about saving, we also have bills that some don't have anymore with their kids. But, you can't put a price tag on your child when they get sick.

I guess I also have a different perspective on that magic number needed for retirement. When your child or loved one gets sick, nothing else matters. That's why you really need that rainy day fund. If you are lucky, you don't need it. If you need it, you use it, and make the most out of what is left.

They don't call us the sandwich generation for nothing!
With retirement coming up as early as a year from now and maybe as far away as five years (age 70) I've worked a lot on our budget.

I am signing up for medicare in the next week and I've pretty much settled on Aetna's Individual Medicare Supplement Insurance Plan or Plan "F". It's not cheap by comparison, $142/mo as far as I can figure, but the good thing is after the premium payment everything else appears covered.

It's the prescription plan and so far I have settled on the Humana Walmart-Preferred Rx Plan.

It's the drugs that could be the budget buster in my family.

Just discovered this yesterday and retirement for me is looking closer to 68 than 66.

My wife and I both require prescription drugs but one of us has two (not one but two) Tier 5 drugs and you got to look out for this little one. Using the plan our combined annual out of pocket prescription costs is estimated to be $609.22+$3,374.74=$3,984.96 and that was a shocker!

Before I seriously started looking I had no idea it would be this high. I double checked spending most of the night crunching numbers and as far as I can tell that is what it will be. That's $332.08/mo in addition to all our premiums so in the for what it's worth department it looks as if medical will cost us a combined total of $316.27+546.73=$863.00/month!

Most of that prescription costs will hit us in January, February and a bit in March with the rest of the year pretty much "free". In January we will have a combined out of our pocket cost of $1,984.66, February will be $1,348.65 with March and April at $435.33 with the rest of the year at no out of pocket costs.

I my future January's and February's are gonna suck! No extra spending money those months.

And here until recently I was rather naively thinking our combined medical with premiums might run us $400 to $500 tops. I was hoping for $400.

To hear some people talk you would think being on medicare it's all free. Cost is greatly reduced but it certainly is not free if you are running tier 4 or 5 drugs.

But what can you do? It is what it is so if you were where I was sorta planning on a retirement you might want to give your medical costs a very serious look over.

Our private insurance costs nearly double the project total medicare cost of $863.00 but at least with medicare and our supplement we won't have the several thousand in annual deductibles to come up with. Last year we both had to spend some time in a hospital and the combined deductibles hit my wallet really hard.

For other emergencies I want to have $1,000/month extra set aside to handle other than medical emergencies.
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Old 08-18-2013, 05:10 PM
 
Location: N of citrus, S of decent corn
34,550 posts, read 42,724,437 times
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Our retirement budget only uses credit cards for emergencies. Other wise, if we don't have the cash we don't do it.
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Old 08-18-2013, 06:23 PM
 
9,961 posts, read 11,815,123 times
Reputation: 13278
Quote:
Originally Posted by gentlearts View Post
Our retirement budget only uses credit cards for emergencies. Other wise, if we don't have the cash we don't do it.
In working out our budget we came to the conclusion use of a credit card would be the kiss of death.

No cash and we don't do it either. You live on what you receive every month and no more, ever.
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Old 08-18-2013, 06:44 PM
 
Location: Prescott Valley,az summer/east valley Az winter
2,034 posts, read 3,530,393 times
Reputation: 7855
I've seen some retirement estimates as high as $300,000. per person out of pocket medical costs in retirement. A lot of people do not believe that could possibly be because they are healthy while planning their (way early) retirement . We go to a geriactric medical practice (no one less than 60) . When wife remarked about her prescriptions ( thought she had a lot) 5 different~ her Dr. remarked it wasn't that many, a lot of people had 2 pages of scrips. Hers was only 1/2 page.

And I only take 2.

Plan for it~ better than really being in pain in your later years.
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