The truth about being able to retire....shed some light for me (conversation, years)
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Man, there are so many quotable sentences in this post that I wish I could award more than just one reputation point!
Well thank you very very much. How kind. Since I only ever respond on an iPhone, when I am on a break, it unfortunately is full of typos, but the gist remains.
He says his wife is working so he probably has access to health insurance to get from 62 to Medicare at age 65. It's really all about the size of his Social Security check. With my projected Social Security check deferring to age 70 and access to health care through my SO, I could retire at 62 and spend a COLA-adjusted $43,500 forever with $450K in savings and a paid for house......
So the place I disagree is "Remember that money has to be the major source of your income for the next 30 or more years." The reality is most of it only needs to last 8 years when the age 70 maximum possible benefit kicks in. As long as you structure your life to live comfortably on your age 70 Social Security check, you're fine. Many people in Connecticut are going to be looking at a check at least in the mid-$30's since median income is so high.
This matches what I said earlier about income sources being more important than savings amount. I’m not a fan of purchasing annuities, but purchasing the “file at age 70” SS annuity is easily the best one to start with if you can afford it. However, while the fact remains (as has been posted by many) that it sure seems reasonable to retire debt free with normal living expenses on a $45-60k/yr SS income alone, (since that is tax free in any LCOL area, making it equal to a preretirement of $53-70k/yr ), having little or no nest egg is a heck of a gamble if your health goes south. The fact remains that the larger net income is partially reduced by combined increased health insurance costs AND out of pocket deductibles and non covered expenses for most as they age. Health insurance is normally far cheaper when younger and employed. You don’t need it as much and you don’t pay as much for it. Medicare is not a panacea. As many have mentioned, $10k/yr is pretty typical, so there goes most of the gain right there. Right now, at 60/65 as a couple we pay way less than that for everything health related; medical insurance, deductibles and OOP including dental. However, wife may need two implants and bridge and crown work this year. Expected OOP cost, a bit over $20k. Throw in a single major accident or health issue and $60k is not unreasonable. So sure, it is just fine, as long as nothing untoward ever happens. I’m not willing to take that bet. A larger emergency fund that generates added unused income to grow until it is needed (or anither $20k in annuity income purchased by it) is prudent, and more oft looked at as unneeded until the flying fecal material is redistributed by rotating fan blades. And it may never be needed because you die younger or whatever. As Matt often repeats “Money buys choices”.
And understand please, that I fully realize that $45- 60k a year is more than most people without a paid off home live on in the US. So on the surface the statement is absurd. How can anyone that never made that kind of money working ever expect to or even consider having that kind of income in retirement?? Right?
What this translates to is “at what level of comfort and risk do you believe is acceptable?” If your lifestlye allows you, with a paid off home, or low rent to live just fine on $24k, then you find yourself thinking and living at a level that is comfortable for you. My father (79) lives just such a comfortable retirement. With just his SS of $1800/mo he shares a paid off house with his GF, and they split all costs. He says he banks more than half and never touches his savings or what it earns (very conservative in CD ladders), UNLESS he has a major unexpected bill, like when he had his knee replacement and a few years later, major back surgery. Each incident was about $5k OOP. And he bought a “new” used SUV, cash, $22k. So because he also has a fairly decent amount saved that he ignores for everyday living, and even with the occasional expenditure, it still grows, he feels just fine. I don’t know the exact amount, but it is in the $300-500k range, at most.
But he lives (and had lived) a lifestyle and location that I personally would rather not. While not a jetsetter by any means, I do like to travel well, and own nice things. So my required levels, which luckily I project I can afford, coupled with the level of healthcare and home that I wish to cover, mean that my level of required income and savings are higher. He had no issue lowering his level of lifestyle. His claim was always that my mother wanted to “live fancy and drive a Cadillac”. (True by the way). So he has found a GF that has his same level of living desires and they are happy. So I am happy for them. Everyone is different, and only you can chose based on the real costs associated with retirement.
So the place I disagree is "Remember that money has to be the major source of your income for the next 30 or more years." The reality is most of it only needs to last 8 years when the age 70 maximum possible benefit kicks in. As long as you structure your life to live comfortably on your age 70 Social Security check, you're fine. Many people in Connecticut are going to be looking at a check at least in the mid-$30's since median income is so high.
Kudos for reminding folks that the average age of death in this country is about 78 (male) and 80 (female). Everyone thinks they will beat the odds, but averages still exist for a reason.
Only the most healthy or hardy (or both) are going to be in much of a shape after 80.
This is important to know - because, for late retirees, the Golden Years are often not so Golden. Even the name is probably a ruse to keep you working longer.
If one is not enjoying life in middle age, then they are certainly missing most of this existence. That's why people often say "you should like your work"....
Kudos for reminding folks that the average age of death in this country is about 78 (male) and 80 (female). Everyone thinks they will beat the odds, but averages still exist for a reason.
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That's for the whole population. Life expectancy goes up with age. OP said he is 50.
"A 50-year-old man born on July 1, 1960 currently has a life expectancy of 81, according to the SSA's new life expectancy calculator, released last week. Once he makes it to age 67 his live expectancy grows to 84.4 years and if he hits 70 the average life expectancy is 85.3 years."
He says his wife is working so he probably has access to health insurance to get from 62 to Medicare at age 65. It's really all about the size of his Social Security check. With my projected Social Security check deferring to age 70 and access to health care through my SO, I could retire at 62 and spend a COLA-adjusted $43,500 forever with $450K in savings and a paid for house. I'd hit 70 with a bit of that $450k left as an emergency fund and Social Security would pay the bills. I just wouldn't want to do it in Connecticut using IRA/401(k) money since they'll eat ~$1,800 in state income tax and chew me up with property tax and automobile taxes.
The 4% rule is fine if you have a really big pile of retirement portfolio and the Social Security check is chump change. For most people with no pension and a modest retirement portfolio, the most conservative way to be financially secure as an elderly person is to defer collecting Social Security until age 70 since that's fully COLA-protected. The more modest your portfolio, the longer you have to keep working.
So the place I disagree is "Remember that money has to be the major source of your income for the next 30 or more years." The reality is most of it only needs to last 8 years when the age 70 maximum possible benefit kicks in. As long as you structure your life to live comfortably on your age 70 Social Security check, you're fine. Many people in Connecticut are going to be looking at a check at least in the mid-$30's since median income is so high.
Unfortunately we cannot really rely on Social Security any more. With Congress ignoring the warnings of future shortfalls and actually raiding the fund surpluses to fund their deficits, I would not necessarily rely on it fully.
Someone who is used to living on a salary of $80 to $100,000 a year would have a very difficult time making ends meet and enjoying their retirement years on just Social Security. Even when you consider that a retiree would no longer have to save for that retirement, pay a mortgage and have commuting/job related expenses, they would still likely need more than just what Social Security pays. Add in occasional vacations and travel, I just don't see how it can be done. Don't get me wrong, I do know a lot of people that live on a very modest income in retirement but if you own a home and want to remain in that home, you could be facing some significant expenses that a modest income would not cover. A family member faced this situation and was forced to do a reverse mortgage to help them through the last years of their life. Not a situation I would want to take a chance being in.
You are right that Connecticut is not a cheap place to live on a fixed income but the state does exempt Social Security income under $50,000 a year and many towns offer property tax relief to retired residents living on fixed incomes. The family member above paid very little in property taxes because of that program. For the OP though, it does not matter since he already said that they would likely relocate once they retire. Jay
Hey there Jay.......Good seeing you here. Lol...By hate I mean how bad the auto industry has declined over the years, It used to be a very lucrative business to be in at one time.....Doing it for so long and seeing how much it has changed makes me realize I could have done much more in a different field...There were offers in CT for sure .......Problem lies that when you become a manager, you get manager salary........Those positions dont open up often as we usually stay in it until the end.....Most positions that come up in my field are for parts counter which is a pay cut and I would not mind stepping down and reducing stress .....but.....The issue it's a really big cut........I have become overqualified in something I have done for the last 32 years. I do have a threshold that I could take a pay cut to and live but most places are $20,000 - $25,000 off. Even a managers position in CT is usually $30,000 or more less than here in NY. Before I became manager I was at $71,000.......I was fine.......I could step down for probably $65,000 and be ok but $35,000-45,000 is not feasible at this stage unless I was forced to do it. The work thing is a whole other issue that I feel completely stuck by. I would prefer to maximize my income as much as possible ...and yes...closer to home would without a doubt be ideal.
Unfortunately all industries change over the years. I remember my father complaining of changes in his job and retiring early because of them. He was just too tired to learn new things or deal with the changes, I see the same thing in my industry so you are not alone. I am not sure either how much longer I will hang in there.
I know you looked very carefully at the jobs closer to home and thought you even had one with a less rigorous commute. Personally I would have jumped at that one because I hate traffic and would do anything to make my life simpler (within reason). Of course this is a personal choice but again you might consider sticking with this job for several years and then going to a job that is closer before retiring. It would help you to save more for retirement and delay taking Social Security until it is maxed out or closer to it.
Again I would suggest you check the amount you would have at retirement since the $450,000 seems low. Max out your 401k contribution and start the $5,000 catch-up contribution as soon as you are eligible. That would seem to give you more than your advisor says. $18,500 + $5,000 = $23,500 per year times 12 years is $282,000. Add in interest on that amount and what you have saved to date (which would likely double over the next 12 years), I think it would come out more. Of course I do not know what you have saved to date so it is hard to say. Jay
Unfortunately all industries change over the years. I remember my father complaining of changes in his job and retiring early because of them. He was just too tired to learn new things or deal with the changes, I see the same thing in my industry so you are not alone. I am not sure either how much longer I will hang in there.
I know you looked very carefully at the jobs closer to home and thought you even had one with a less rigorous commute. Personally I would have jumped at that one because I hate traffic and would do anything to make my life simpler (within reason). Of course this is a personal choice but again you might consider sticking with this job for several years and then going to a job that is closer before retiring. It would help you to save more for retirement and delay taking Social Security until it is maxed out or closer to it.
Again I would suggest you check the amount you would have at retirement since the $450,000 seems low. Max out your 401k contribution and start the $5,000 catch-up contribution as soon as you are eligible. That would seem to give you more than your advisor says. $18,500 + $5,000 = $23,500 per year times 12 years is $282,000. Add in interest on that amount and what you have saved to date (which would likely double over the next 12 years), I think it would come out more. Of course I do not know what you have saved to date so it is hard to say. Jay
I was just telling my wife the other day that maybe I will bite the bullet and stay at my job and maximize the income.......Unless I am forced to leave......fired......out of biz......anything can happen. No doubt I could have taken a few of those jobs offered at a lot less money but it was not always a financial decision......I work for one of the top auto groups in the Northeast.......some of the jobs offered were smaller mom and pop dealers.....not as progressive as mine.....or what we call solid......Lots of those small dealers get bought out by larger groups eventually.....So besides the money, there was also the security......I have 15 years at my current place and am well respected and do my job 100%. But as mentioned if a dealership met my cut off point and it was closer to home then I would probably jump on that. Below my cut off point and it is not really worth it. The one I did have (and you and I know who it is) looked good until I realized that the pay plan, while fine because it was a manager position, was set up in a way I was not ok with. Also they wanted me to work more hours than my current job......I would have wound up not really gaining a better work/life balance so I passed.
I am also meeting again with my financial planner in the next 2 weeks to asses things again. The 450,000 was an estimate from 2 years ago and that was only for my part of the savings. My wife has her own IRA. Maybe it will be more. We'll see.
I am contributing 18% right now to my 401K. It has taken a hit over the last few weeks like all of us have.
Regarding our house, it will be paid off most likely in 9 years as long we are still working......We are not cheap people and spend on things when we need them.....that's the key word ....need......We are just smart with our saving. Look, I am also a musician.....I have been playing guitar for 35 years. I have 5 guitars.......amps.......all that stuff. It's not a cheap hobby.......but I only buy something musical when I need to.....If I want to buy a new guitar, I sell one. I don't spend money just to spend and we plan on carrying that mentality into retirement. As long as the main debt (home,cars,credit cards) is paid off I think we will be fine. My wife and I carry no credit card debt.......If we charge, we pay it off. I have friends who are spendaholics.......I have friends at my age with huge college debt for their kids. I have a friend who is 47 and just had his 5th kid a year ago......These are the people who probably can never retire....lol. My sister who has a great job in the medical field spends more money than she makes and borrows against her 401K....Everyone is different.
I firmly believe that we will be ok. Reading all the replies I am thinking that the best course is to retire at 65 because of Medicaid.....I was not thinking about that which is why I posted on here.
But I really don't want to what i am doing at 60......let alone 65........this is where I am struggling. But anything can happen as we all know........Business could get worse and I could lose my job......I could die before retirement comes.......It's so much to think about.
When I was in my early 60s, I did numerous financial and retirement reviews and estimates. To be able to maintain my lifestyle without moving to a low cost area, I figured I would need to work until about age 70. That motivated us to change our thinking.
We downsized, sold the house and then I retired. We moved into a small RV and planned to travel, visit the National Parks and then look for another area of the country to resettle. Bottomline is RV travel was dirt cheap compared with my previous lifestyle. We lost expenses related to property tax (previously over $10K), utilities, home maintenance and upkeep. Our clothing expenses dropped to nearly nothing and lots of miscellaneous expenses just vanished. We did have to pay for fuel for the RV but that cost no more than when I commuted to work every day. Our utilities dropped to near $0. We did pay for camping fees but they averaged less than $10/day. After a couple of years of RV travel we had saved so much money we could resettle back into our high COL area.
Another option is to undergo a few years of severe austerity while building savings. That is hard to do and a lot less fun than RV travel.
Kudos for reminding folks that the average age of death in this country is about 78 (male) and 80 (female). Everyone thinks they will beat the odds, but averages still exist for a reason.
Only the most healthy or hardy (or both) are going to be in much of a shape after 80.
This is important to know - because, for late retirees, the Golden Years are often not so Golden. Even the name is probably a ruse to keep you working longer.
If one is not enjoying life in middle age, then they are certainly missing most of this existence. That's why people often say "you should like your work"....
The average age from death is meaningless in Retirement planning. Th average life expectancy for a couple who make it to 65 is the upper 80's with just less than a coin toss chance one will see 90.
Once you weed out infant death , the sick and weak by 65 those left live a lot longer than the average from birth.
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