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Old 02-11-2016, 03:53 AM
 
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Healthcare yes ,it will sky rocket. Owning a home is a mixed bag

It is all about location and where you want to be. We no longer need to support and maintain an entire house. Taxes and up keep on a house would be more then we pay in rent on an apartment in a high rise.

Plus the money we would have tied up in that house would not be generating any income which more then offsets rent increases.

You are fixated on this homeownership thing but it is not always a factor in many cases .

In fact a renter who goes from a 3 bedroom apartment when the kids live with them to a 1 bedroom apartment would likely see better cash flow then a home owner supporting the same entire house.
Location and where you live are what is the deciding factor. Most folks buy way more home then they would ever think of renting so it rarely is an apple to apple comparison.

Homes in our area start at 800k but we would never rent one. Instead we rent an apartment in a luxury building for a fraction of what that home would take to support. In fact just the money that would be tied up in the house if it was paid off even at todays low rates can generate more then our rent cost us.

Last edited by mathjak107; 02-11-2016 at 04:06 AM..
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Old 02-11-2016, 04:37 AM
 
Location: R.I.
986 posts, read 609,359 times
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Quote:
Originally Posted by Perryinva View Post
OK, I tried finding something similar with the search function, but couldn't. If it's out there, please point me to a better way to find it!




What I'm asking, which is the direct result of a "Saving and Planning for Retirement" lunch session at work (so by definition, no one retired, some close, some not) we had recently, is how many retirees actually accounted for an effective increase in net income due to not paying in to SS, Medicare, reduction in Federal and State (if taxed, which we are here) income tax, and other paystub standard deductions that went away when you retired.


This conversation came up, when the inevitable "85% of pre-retirement income rule of thumb" bullet was brought up, which, thanks to the recent Poll and discussions here, I was quite easily able to discuss intelligently and dispel the notion as that being a useful number. Instead I directed the conversation to talk about actual costs of living, non discretionary costs, and discretionary costs, inflation, health care costs, etc. What surprised me most, was how many in the group still argued pro FOR that rule of thumb, based on some rather poor reasons. Virtually no one discussed the equivalent gains from taxable amount and required deductions on a "pre-retirement basis", ie: apples and apples. They discussed the taxable income after retirement as if it was the same as pre-retirement.


Just a random example: If you make $100k pre retirement, gross, when discussing retirement you have to assume that $85K replacement is also gross. For this group, where we have rather nice pre-65 retirement benefits for medical, normal retirement is 60, and your health care costs will be roughly the same even when eligible for Medicare, thanks to a company supplement.


Most people in the group state they will collect SS at 62, unless they work past that age. No one, not one, planned on going past FRA.


So to keep the discussion apples and apples, we discussed costs and savings at 62 and beyond.


When I look at my December paystub, adding all the deductions, savings, taxes, SS, etc, accounts for 41% of my pay. It's been that amount plus or minus a small amount for years. And I'm not a monster saver, either, about 15% of my pay.


Naturally, in retirement, we all know you are more likely to pay less taxes, no SS, stop mandatory saving, etc, but the discussion was that the savings from THAT amount was roughly the 15% missing from 85% rule.


So, without belaboring actual amounts, I'm just curious, did many retirees actually look at what their real net income would be after retirement, accounting for all the above disappearing costs that then became a "phantom income" or may be a better term is "phantom raise" INSTEAD OF just looking at what their retirement income would be from sources? And how did that amount compare to reality. Naturally, if you relocate to totally different tax structure state, etc, then it becomes perhaps hopelessly more complex. My take on it would be that many simply knew it would be less, and hoped that it would be much more than anticipated, so better news than expected.


Maybe I'm all wet, and totally off base on this, or unclear. But based on the wild wide spread of the recent "What percentage Poll", I think not. The best thing about that poll was the large percentages of people where retirement income was under say 60% or pre. That's very positive and encouraging information.
Here are my numbers most hot off my 2015 W-2. I was a little off in the other poll but taking another look I am at about 66%. These figures are based on if I stay in the same state and same home.

Working Income - $102,000
Federal Income Tax Withheld - $15,173
State Income Tax Withheld - $4,868
Social Security Tax Withheld - $6,195
Medicare Tax Withheld - $1,449
TSP - $18,000
Other Savings - $10,000
________________________________
Net - $46,315
Household Expenses Including Property Tax - $36,000
(+) - $10,315

Retirement Income - $67,377 - (FERS-TSP-SS)
(I used Turbo Tax Calculator to estimated taxes and inflated all other expenses)
Federal & State Income Tax Withheld - $10,500
Health Insurance FEHB BC/BS - $3,360
Medicare B - $1560
Life Insurance - $600
Dental - $960
Vision - $240
Household Expenses Including Property Tax - $40,000
(+) - 10,157

This plan works for me at age 65 because being a Federal employee (like you I think) I make 20 years at age 64.5 which changes the pension multiplier to 1.1 for FERS, and I will be at the top of my grade x 3 years at age 65. I am also able to claim my SS Survivor's benefit first at age 65 which is less than mine, but when I claim my own at age 70 with the added income from the higher benefit I will no longer need TSP to fund my retirement. Hopefully what I will be required to withdraw from 70+ from my TSP I can help my grand daughters with their college expenses. BTW, all my TSP is now the G Fund and that is where it is staying until I retire because I need to sleep at night.

But as we all know we can't predict what life will deliver us good and bad so all my retirement plans are definitely subject to change.
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Old 02-11-2016, 04:47 AM
 
Location: North Beach, MD on the Chesapeake
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Not so much less taxes but fewer expenses, mainly gas (the drop in gas prices has helped that).


My former employer contractually carries my health insurance at the same rate as when working, so that is a benefit.


Since my income has dropped, and due to the type of income, that allows us a couple more deductions for college costs that my working income had phased out.


Although it will work out in the end, my MD state income tax is deducted at the state rate of nearly 8% with federal taxes at 20%. That will drop when I do the tax returns.
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Old 02-11-2016, 04:51 AM
 
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I plan to live on about 20% of my current income in retirement. The "rule" that says you'll need about 85% of your current income isn't accurate. Your current income is irrelevant. Many people don't spend the amount that they're currently earning. Also some people will actually make more money in retirement than they are currently earning in a job because of SS plus pensions. Also if their wife isn't currently working they will perhaps get an income boost when she starts collecting SS too. It's a varied thing. I think 85% is far fetched myself.
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Old 02-11-2016, 04:57 AM
 
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You can think it is far fetched but if you look at even just the city data poll in the other thread there are more needing 100% or more than 60% or less.
Retirement is not just about payng bills. It is about having the time to fill wishes and dream lists with the only thing stopping you is your health and the money.
We have 18k a year in after tax dollars just being consumed by medicare , supplemental coverage and our long term care insurance.
If we had double our working income we would find a way to enjoy it every year.

We all had different needs ,wants and expextions from our different incomes during our working years . Most of us didn't have the time to do the things we wanted or dreamed about.

Well retirement is full of time and with many of us time does cost money

Last edited by mathjak107; 02-11-2016 at 05:11 AM..
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Old 02-11-2016, 08:18 AM
 
Location: OKLAHOMA
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Quote:
Originally Posted by mathjak107 View Post
The flip side of that tax savings is medical insuarance is all after tax dollars. With medicare and medigap running 10k or more for a couple that is a big monkey wrench in the tax savings.
We just started with medicare (this month) and because of lump sums or investiments that make money we're paying A LOT MORE for medicare like getting close to double. Thinking we were going to pay what everyone else seems to pay was wrong. I'd say medical with Blue Cross Fed is our suppliement and then add medicare we're 600 plus a month now. Medical is are largest bill per month.
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Old 02-11-2016, 08:33 AM
 
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Yep, we just increased 300% from 104.50 to 389.50 because of a property sale in 2014 when we were neither retired nor using medicare yet. We are appealing it .
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Old 02-11-2016, 08:57 AM
 
Location: OKLAHOMA
1,784 posts, read 3,623,479 times
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Quote:
Originally Posted by mathjak107 View Post
Yep, we just increased 300% from 104.50 to 389.50 because of a property sale in 2014 when we were neither retired nor using medicare yet. We are appealing it .
Horrible. My husband will flip because we're trying to sell a cattle ranch. He'll die if they think that is all INCOME. Who in our government came up with this. Was it because they took all that money out of medicare to start the"Affordable Care Act"?
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Old 02-11-2016, 09:07 AM
 
Location: Idaho
1,457 posts, read 1,159,750 times
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Quote:
Originally Posted by mathjak107 View Post
You can think it is far fetched but if you look at even just the city data poll in the other thread there are more needing 100% or more than 60% or less.
Retirement is not just about payng bills. It is about having the time to fill wishes and dream lists with the only thing stopping you is your health and the money.
I don't disagree with you that retirement means having the time to fill wishes and dream lists with only health and money being the limits. However, wishes and wants are not synonymous to needs.

The cd poll you cited is for " percent of current income are you trying to achieve". This could means either wants or needs or both. I guess it is more likely to be 'wants' for folks who checked > 100% box (like you) and 'needs' for folks who checked <50% (like me).

The poll shows roughly 15% who chose > 100% and 15% who chose less than 50%. The 'middle' 70% is likely to reflect both 'wants' and 'needs'.
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Old 02-11-2016, 09:26 AM
 
Location: Backwoods of Maine
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To heck with "wishes and dream lists". We live in our own time and space now, and had the good sense to move to a state with lower COL. That has saved us a bundle. Property taxes before the move were $4K+ and now they are just shy of $800.

We both by-passed Medicare as a waste of money and time. I don't know why so many age 65ers think that because they are eligible, they "must" sign up. It isn't mandatory. You may be able to get a better deal elsewhere, and we have.

Children have "wishes and dream lists". Retirees have good times while dealing with reality.
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