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Both my parents lost their jobs at age 60 weeks from each other and after two years of looking for something else gave up and decided that society did not want people in their sixties in the professional workforce. So they started collecting Social Security at age 62.
Their argument for a 5% withdrawal is that they believe that inflation has been beaten and their annual increase for inflation each year will be small. So they will not run out of money. And they need to spend five percent to pay for their bills.
Some things you pay for go up more than the CPI - some less. It's a very personal individualized market basket.
FWIW - I ran the numbers. And - if the last of your parents to die dies 30 years from now - assuming a 3% rate of return post-tax - the surviving spouse will die with zero assuming a 5% withdrawal rate. I don't think I'd want to cut it that close. Robyn
I think all of this stuff is pretty much bogus. I live pretty much like a younger person in terms of spending. In a single family house. When taxes/insurance/utilities/other house related costs go up - I pay the same increases everyone else does.
When food (at home or at restaurants) costs go up - ditto.
When travel costs go up - ditto.
Same when it comes to cable TV/internet/phone costs.
Golf club expenses too.
We have had to employ outfits like our lawn guys to do things we can no longer do for ourselves. I've always had a housekeeper once a week to clean. People who do cleaning themselves might pay more if/when they can no longer do this stuff as they get older.
So where exactly are we saving money? My husband and I have had 1 car for most of our lives. And we lived close to where we worked. No savings there. Savings not buying "work clothes"? Peanuts. The occasional senior discount? Don't even mention it - less than peanuts.
When it comes to health care - without any bells and whistles - it would pretty much have been a wash pre/post Medicare (wasn't cheap before - wasn't cheap after). Except we are now paying $10k for a concierge primary care practice to get good primary care providers. An unexpected expense.
So tell me where these savings come from? Based on reports from the real world. Robyn
Take it up with those that have done extensive study's tracking retiree spending.
Take it up with those that have done extensive study's tracking retiree spending.
Your own situation is likely the exception .
Maybe they're looking at people who are moving from Boston to Kentucky post-retirement? You're staying in NYC. How much are you saving post-retirement? And where are you saving money? I have been in Florida for the last 40+ years. And did wind up saving some $$$ post-retirement. But only when I moved from south Florida (higher cost part of the state) to north Florida (lower cost part of the state). Robyn
I am still in the early years of retirement when spending is still high . It does not fall off a cliff until mid 70's . the findings are pretty consistent with what i observe with the older folks i have know regardless of where they live .
Can someone on this board please tell my parents that they should not be taking an inflation adjusted 5-6% out of their retirement accounts each year. I tell them they should only take 3% if they don't want their money to run out. They say they can't afford to live a decent living at 3%, and instead take 5-6% instead.
They are in their early sixties and are both collecting Social Security and have about a million in their account.
Take my poll.
I will not tell them what what to do. If they have a million in their account, it's none of your business. No, it's none of your business at all! In fact, how do you even know what they have in their account?
I picked other. We don't take anything, yet. We're in our sixties and don't have as much as your parents. I'd like to save what we do have for our children. We live simply and can live on just our social security with some leftover to save each month. Once we our old enough for medicare our health insurance costs will go down quite a bit, so even better.
I would say the correct answer here is. It depends.
If you want to maintain your pre-retirement life style after you retire and don't want to move to a cheaper cost of living area and downsize, then the only appreciable decrease in spending you may see would be in your saving for retirement which may cease once you retire and in your federal taxes, if you have a large tax deferred account or a pension that is tax exempt.
Also as you age, and become less mobile, you will be less likely to travel (provided you traveled pre-retirement) or partake in outdoor events as often. But what you may save there can easily be eaten up by health issues. Besides long term health issues which you may or may not have, you will most likely have the need for extensive dental work. Just got my estimate for $14,000 - Ouch. What happened here? Also increased medications as you age. The need to hire outside people for physical labor as mentioned by Robyn.
I do agree with the 3 Go time frames and concept, but I think the significance in savings between your first ten years and your second ten years focasus mostly on descretionary spending and depends largely on the type of retirement you have and your income level going into retirement. For someone like yourself living in NY on $100,000+ retirement income, and still partaking in all of the goodies the city offers, I agree it is particularly applicable to you. But for someone retiring on $30-$40,000 a year, the fall to level 2 may not be as significant.
I do however feel compelled to point out to other readers before assuming this tremendous drop in spending, it really all depends on where you are starting from in considering this study.
That's why I don't like stating that your spending does not "fall of the cliff" until you are in your mid 70's. For some people, that cliff may be just a dip in the road.
Last edited by modhatter; 12-02-2015 at 10:03 PM..
My father is 97 and still kicking. He was the only non-smoker among our parents. All of our other parents - smokers - died in their mid-80's. My father still has 2 out of 4 siblings alive. All in their mid-90's. His father and mother died at ages 96 and 103 respectively. It is far from unusual to live that long today.
Willard Scott (remember him?) used to honor every person in the US who reached 100 on TV. There are so many of them these days that Willard Scott was forced to cancel this part of his show years ago.
The biggest threat many seniors face is outliving their money. Especially if they have to go through difficult financial times and are taking excessively large amounts of principal out of their "nest eggs"/taking excessive financial risks. Quite a few people my father knew in his senior facility had to move in with their kids post-2008 after their poorly constructed portfolios imploded. Robyn
lol- apparently you are not a fan of the Today Show...........That is simply not true- he was on just today
I don't think anyone has considered the rate of return the parents might be getting on their million.
If they are getting a steady 5-6% (bonds or whatever), then they are merely withdrawing the income that the principal generates. If they have $1M now, they will have $1M 30 years from now. If they have annuities, it will last for a certain # of years, whatever the parents have bought.
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