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First of all, the withdrawal rate of 4% is dwarfed by the return any investor can easily generate (even after you pay a top-notch advisor)...
The withdrawal rate of 4% might be lower than your return during a 30 year retirement.
In some cases, it might not. This is why 4% is commonly advised instead of the historical long term returns, because there are many examples where a given retirement period will have much lower returns than the mean.
Quote:
Originally Posted by MyronSubotnick
Rule of thumb I was taught was to take your last-year's salary, multiply by 20 (I use 30), and that is the minimum amount you need to have saved at retirement age to maintain a basic lifestyle
Poor planning. Use your expenses, not your income.
Quote:
Originally Posted by MyronSubotnick
Interesting.... I did ACA just one year, and got audited by the IRS because I owed over $2,000 tax on ACA subsidiaries... my CPA confirmed it.
Fire your CPA, subsidies are not taxed, have never been taxed, and IRS sure didn't audit you because you didn't pay taxes on them.
the subsidies are not taxed when you under state your income and get a subsidy that is more than you actually should have , they are simply paid back ..
you pre-guess before the year , no different than social security while working and pre fra . at the end of the year you settle up if you went over what you guessed at and received more than your actual income dictates .. that is what happened .
Last edited by mathjak107; 01-21-2017 at 03:52 AM..
This is a 'loop hole' that bothers me a bit.
Younger retired people that could easily pay for their insurance but since only income is counted, they are subsidized.
I know of several couples that retired in their late 50's and have much more in savings that I could ever have amassed but have low enough income and pay less a month for the two of them than I do for Medicare plus supplements( and high deductible ones, at that) for only one of me.
There is a reason for that. Before the ACA, many younger retirees ended up using their life savings to pay for insurance and health care. Many younger retirees had to retire because they were fired or laid off or had health problems preventing them from continuing to work.
This discourages saving for retirement (Americans don't save much for retirement, as it is), and it also means that younger retirees may not get the health care they need. This causes Medicare to have increased amounts to pay for them, if they get sicker because they didn't get proper health care (for example, they were pre-diabetic, but didn't know it because they didn't go to the doctor or didn't get pre-diabetic medical treatment....and thus became diabetic requiring expensive medication for life).
It also wouldn't help the govt if the retiree uses his life savings to pay for health care, and then when he needs a nursing home later, the govt has to pay for it (Medicaid), because his IRA has been used up.
Most people haven't saved a million dollars or anywhere near that, so the case where someone has a ton of money in an IRA but gets a subsidy, is rare.
It is in the govt's interest for people to keep their retirement savings for their senior years when they WILL be sickly or have to go into a nursing home or whatever. It costs the govt less in the long run. It would also discourage saving for retirement, if retirement savings meant you couldn't get assistance with those outrageously high premiums under the ACA.
My ACA premium for a modest policy is over $800/month...based on nothing but my age. I am healthy with no history of high claims. But I don't get credit for that. I must pay for the high claims turned in by others. I have been getting a subsidy, though. Don't know if that will continue.
Ahhhh.... now it comes out... the 'entitlement' argument that taxpayers owe you something... You aren't owed ANYTHING that isn't constitutional/Bill of Rights. Everyone's (well OC's subscribers get the brunt of it, but it was a matter of choice) premiums went way up. Deal with it.
First of all, the withdrawal rate of 4% is dwarfed by the return any investor can easily generate (even after you pay a top-notch advisor)... I retired at 46, and if I only had $1M in (tax-exempt/deferred) investments, the calculations demonstrated (assuming nothing utterly decimating affected our society, which would affect us all) would last me until 86. Not a safe enough margin for me, but for this is based on your scenario statements. Rule of thumb I was taught was to take your last-year's salary, multiply by 20 (I use 30), and that is the minimum amount you need to have saved at retirement age to maintain a basic lifestyle. Do you stuff your money in a mattress?
I evaluated the OC rates (BTW, the subsidies provided are considered income, and so they are taxed), but more importantly, the true coverage that it provided. I found, in my specific scenario, it was far cheaper to buy a private policy (as I am in the high-risk pool), than to have massive co-pays and denial of services under OC. The OC plan, IMHO, is an utter failure, and having competition among insurers provides an advantage to consumers. I would rather pay $1200/mo for private insurance that covers almost all of my typical $85K/year medical bills, than have OC for $85/mo, and I have to dish out over $45K a year on non-reimbursed bills.
One's income while working, last year's or some other year's, is unrelated to the money one will need for senior years.
For one thing, I (to use an example) have a lower standard of living in retirement and don't need nearly the income I had while working. Having more is always better, but that's not what I need, and what most retirees will ever have, or could possibly have.
If I made, say, $50,000 one year at age 55, that means I'd have to have $1,000,000 saved at age 55. LOL!!!!
The "20" rule you speak of is for rich people, who have lots and lots of expendable income. It's not for average middle class Americans (which is what most Americans are).
I am always surprised to find that wealthy people don't recognize that they're wealthy and unlike most Americans. I suppose that means their parents were wealthy, and their friends are wealthy? So they've not been exposed to normal, middle class America?
The average family of 4 in America makes about $53k GROSS. They are unlikely ever to have $1M in savings by age 60, much less 55. But they don't NEED $1M in retirement savings for retirement to make it.
This is why Social Security and Medicare were started. Recognizing that most average American seniors would be thrown into real poverty, if not for those programs.
Another interesting angle on this = John and Mary both make about 75k annually paying similar amounts in income taxes throughout their careers.
- Mary is a saver, she has always maxed out her 401k and put money into taxable retirement accounts and keeps her expenses down by living in a 1BR apartment and driving older cars.
- John is more of a spender, he buys a new expensive car every few years, lives in expensive houses, eats out every night, etc. and accumulates very little in savings.
At age 50 Mary retires early, living off her savings at a relatively frugal rate of 30k per year. At age 50 John gets fired from his job, moves in with his elderly parents, and scrimps along making very little money at part time min wage type jobs. They both sign up for ACA healthcare, and under proposals to means test assets for subsidies we the taxpayers are going to allow subsidies to John who pissed away all his money and paid the same in income taxes over his career as Mary, while telling Mary sorry but you saved your money too much so you don't get subsidies like John.
Sure a corner-case toy example, but then again young early retiree millionaires on ACA with subsidies are also the extreme exception, it isn't like we'd be saving a lot of money in the program and I'm fairly skeptical that the additional cost to set up a system to verify assets and would cost less than what you'd save finding these rare birds.
What about a couple of 60 year olds who bought a modest home in San Jose 30 years ago, slowly paid off their mortgage, and now due to the insanity of the real estate market are sitting on a 1.5 million dollar asset? Do we consider them wealthy for the purposes of means testing, and if we don't do they become wealthy upon selling their house when assets change format? What if they sell their home and purchase an annuity for 1.5 million, do we still means test as having that asset given the value of that annuity and it's role being exactly the same as an early retiree's savings being drawn at 4% per year?
I personally don't think that retiring early while getting government subsidies is an ethical use of such a program. It might be legal, but it is questionable in my mind.
Imagine this scenario.
At age 60 you have accumulated two million dollars and have decided to wind down your career by switching to a part time lower paying job doing something you enjoy, now making only $18k annually but still same lifestyle due to significant retirement savings and still contributing to your IRA.
When you file your taxes, TurboTax points out that since you are low income but contributed to an IRA you qualify for the Retirement Savings Contributions Credit a program designed to encourage low income Americans to save money for retirement. What a nice surprise! The government wants to give you $2,500 for having put $5,000 in your IRA.
[quote=MyronSubotnick;46891875]Perhaps free, but then there is free healthcare, and then there is good healthcare. Sort of like how much of Europe and socialized-medicine countries work. You have stated a sample size of one (SO's cousin). That demonstrates existence of free healthcare. States nothing about good healthcare. In my 20 years experience in the healthcare environment, as well as the spouse and literally almost all my relatives, pray that the cousin does not have anything medically really bad happen to him/her. Youse gets whats youse pays for....
Your argument is that it is all free... so be it... but most would never, ever trade places when it comes to medical care. The docs/hospitals we go to in the US don't take Medicare/Medicaid, because the reimbursement is so poor, and thus the quality of care is suspect.
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