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Low six figure net worth excluding home equity - probably $40k-$50k in equity. Dad just turned 62 in August. Mom will be turning 62 next month, will be retiring, and taking SS immediately. Her monthly SS is only going to be ~$1,100/month. She has never made more than $40,000 until this past year - mostly in the $30k-$35k range. They have a mortgage in the $700/month range and a payment on a new CR-V. He's going to try to work until 67, but works a physical job in a manufacturing facility. Who knows how long he can keep that up.
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They're spending like much younger people at a much higher income level.
Sounds like your parents have an excellent retirement plan, and you are it.
Delaying SS for as long as possible after FRA is always the smarter approach as far as income for life, as long as you do not plan for and expect to drop dead by age 80, and spend accordingly. There are few possibly no, valid income scenarios where you can claim at 62 and “invest” what you are getting and come out ahead as far as lifetime income. That is not to say that there are no good reasons to file at 62, there are. Most people that file at 62 either HAVE to (no other source of income possible) or just WANT to (I want whats due me now, life’s too short so I want it while I can spend it, etc, etc), or it really makes no difference to them when they collect, as the amount is just not important enough to differentiate delaying for,(500/mo vs 800/mo). The last 2 are poor financial reasons that are based on emotional reactions and/or shortsightedness, and are typical of people that have always had trouble with successful execution of delayed gratification and “pay yourself first while LBYM” mindsets.
It is not a sign of less education or stupidity, but simple emotion over fact. I have a very smart engineer friend that retired, with a 30 year pension, that had to go back to work because he never took the time to get a handle on expenses and what his income would be. He assumed, since so many people don't have a nice pension, and that he was not extravagant, he would have no trouble with his pension plus SS at 62. But one mans not extravagant is anothers foolish spending. They spent small fortunes ($30kish) on vacations, and support a grown child that failed to launch.
Another educated friend, 58, casually seeking investment/retirement advice before I retired, told me she was definitely retiring at 62, because she was “done”, and that plus her SS better be enough. This (single) person has never been that hard a worker, but has a nice secure position & no health issues. Staying at her job (non physical and clean) another 2-3 years would be effortless, and pays well, >$80k. She also only recently (50s?) started saving in the 401k with company match, as she had “never got around to it, too many other things going on, you know how it is”. (I think she was put off when I said, “No, I don’t know how it is. There is no sane reason to pass up an instant 50% ROI on 8% of your income”). I suggested that she has to examine her life expenses, plus contingency and have a handle on that before she could make a decision about when to retire, & she got rather offended. She was retiring at 62, period. She had gotten an inheritance from her mother and her house was paid off with it.
When I suggested that delaying SS while living off her pension and some savings, she actually said she didn’t even know how much SS she would be getting, and “it really doesn’t matter, you get what you get, and there must be a reason most everyone she knows takes it at 62, so the difference can’t be much.” The effort to examine what should be one of the most important decisions she makes was too much, yet I remember a few years back when she was buying a new vehicle, we would run the other way when we saw her, because she spent weeks asking everyone about and agonizing and debating on what car with what options and color. The reality is that it probably will make no difference to her, she will probably have plenty to live on at 62, but she doesn’t have any real numbers to even compare.
This is not atypical from my experience in my own immediate circles. Few people at all spend any time getting a clear picture and projection of what their expenses are/will/can/should be and then examining their income sources and modeling it, despite there being hundreds of free online calculators that can give you a good handle on where you are. A “gut feel” was good enough. If I had a dime for every time I heard “I’m sure we’ll be fine/have enough/no problems” etc, I could have retired even earlier. Another favorite is “I have a long ways to go, so I’m not going to worry about it now”.
A good friend sadly used to say “seems like cancer runs in my family, so I’m living for today”. A year or so before he retired he was diagnosed with a rare blood cancer and is in remission but the stats are not good. Virtually no one with his form lives more than 6 years. He didn’t even talk about it until we were all retiring in a few weeks, and we thought he was kidding. He’s handling it better than I would.
I'm fairly certain that a lot of people who take SS early are probably taking it before they otherwise would due to medical reasons.
My mom's father had significant heart trouble since his early 50s. He retired from the chemical plant at 62, took SS immediately, and took the pension as a lump sum, betting that he would die quickly. He made it to 77. Grandmother is still around at 83 and has been retired since 1995 or 1996.
If you've had a lot of medical issues and truly don't expect to live very long, taking at 62 may make sense. For most, especially those with lower incomes or savings like my parents, continuing to work until at least FRA makes more sense.
Quote:
Originally Posted by TimAZ
Sounds like your parents have an excellent retirement plan, and you are it.
I'm not a huge fan of where we're from. I have an easy job, great boss, and make a top 10% salary for the local area. I'm not getting rich, but things are decent for now. My first several years out of college were rocky and I'm a little more conservative on major life changes since things are going fairly well for now.
Still, I've made it patently clear to them that I don't like it here. My boss isn't from here, her kids have moved on, and they're "remodeling the home." She's under a ton of stress and I wouldn't be surprised if she finds something else. It wouldn't take much to upset my little apple cart and make me start looking too. It also depends on if I get a promotion/significant raise or not. I think I can do better somewhere like Raleigh, Charlotte, etc. I want to be somewhere where there's a bit more affluence and culture. If I were to get married and kids get in the picture, I wouldn't want to raise them around here.
I'm 33. They're 62. We're not getting any younger. I have no burning desire to have kids or get married, but I'm not ruling it out, and I doubt I'll find someone who is really long-term material around here. What I'm not going to do is being living somewhere like Raleigh, Charlotte, or Nashville, with them needing help and refusing to move, and me running back here every weekend. They've made it clear they don't want to live anywhere else, and since I don't want to be here permanently, something will give.
Last edited by Serious Conversation; 09-06-2019 at 08:40 AM..
What works and is practical for one, may not be for another. Prior to our move to TN, many of these suggestions would have been very practical on our property in NorCal, and in fact some were in practice. However our move to lower COL TN was our biggest money saver, eclipsing what all of these would have saved by a factor of 10.
OT but....As far as shoes and purses, I am GUILTY AS CHARGED. I have over 40 pairs of shoes, and probably 16-20 purses. However, I've never paid over $59 for a purse, so I don't think that's awful. Some are tiny clutches for dress up, some are small crossbody strap type, some are bigger everyday types in different colors, some are large tote types, some are more like a fanny pack in a couple colors, etc. Many are as much as 10 years old and I've weeded them out several times, but I keep buying more. Shoes... I have several sandals in various colors (and levels of worn-out-ness), sports shoes for different sports and they aren't really interchangeable (court shoes, golf shoes, running shoes, slip-on tennies, soft and hard hiking boots), cowboy boots in multiple colors, snow boots, faux UGGs in 2 colors, dressy heels, dressy boots, loafers, etc. All have their own purpose and place in my life. Some are 8 years old and get worn 2 or 3 times a year. Others get worn several times a week, and are replaced probably once a year. On some days I might wear 3 pairs in one day (sandals around the house, sport shoes for golf or pickleball, then dressy shoes to go out to dinner, for example). DH, on the other hand, wears sport shoes or sandals 95% of the time. He has 2 pairs of sandals, two pairs of white court shoes (old and new), black running shoes, one pair of loafers, and golf shoes, so 7 pairs total.
The significant difference is that you all are financially secure. They're not. You all have consistent government pension income coming in. There was probably a big delta between what your CA home sold for and what you bought the TN house for. Their pension income from various private sector employers is going to be meager. They don't have a lot in private savings or home equity.
They would be "OK-ish" if they stopped the spending, but there's no reason to think that she'll stop just because she retires. She hasn't shown any indication that she's going to stop doing that. She's done in about five weeks and yet the shoes are still coming in. He rationalizes it by saying "if it helps her feel better."
Between them, they probably made close to $100,000 last year. That's not bad money for this area. He makes about $60k and she makes about $40k. They shouldn't be in this position, but her reckless consumer spending is really hurting.
The thing about retirement is that for many people it comes much quicker than they expect. Due to medical setbacks, mostly, but also due to being laid off and then being unable to find comparable work.
There's nothing wrong with claiming Social Security at 62 if you don't have stable, significant income, or continuing to work is a real struggle. Yes, you get substantially less per month, but it's calculated so that if you don't live beyond average life expectancy you will receive roughly what people receive who claim at a later age and receive more per month. Many of us will die in our 60s or 70s, so it's not a terrible bet to take Social Security early.
@Serious Conversation, you need to live your life and let your parents lead theirs. You're still young and you'll have a lot of things and places to explore.
When your father stops working he and your mother will have to figure out how to adjust their expenses to their income, one way or another.
My parents sold their house and moved into an apartment after they retired and their income didn't meet their expenses anymore. Moving is a struggle but it's often the sensible choice.
They would be "OK-ish" if they stopped the spending, but there's no reason to think that she'll stop just because she retires. She hasn't shown any indication that she's going to stop doing that. She's done in about five weeks and yet the shoes are still coming in. He rationalizes it by saying "if it helps her feel better."
Between them, they probably made close to $100,000 last year. That's not bad money for this area. He makes about $60k and she makes about $40k. They shouldn't be in this position, but her reckless consumer spending is really hurting.
And if I put on my retired-actuary hat, what would her spending over the last 30 years on excess "wants" have added up to if it had been saved and invested wisely? I say "excess" because it's nice to splurge once in awhile along the way- but not at that level. It's really sad that at that income level they weren't able to save much.
A couple of days ago I talked to a deacon in my church; less than 2 months ago her husband was diagnosed with an aggressive form of leukemia and died 3 weeks later. She was to sign papers yesterday to put her little house on the market, as-is because she can't afford to fix it up. She'd told me quite awhile ago that they'd spent most of their retirement savings on their "dream trip" to Greece but would be OK on SS alone. (I should mention that their dream trip was probably flights in Coach and a modest cruise- nothing over-the-top- so I doubt they had much saved.)
Except now the SS is reduced by 1/3. She's moving to a one-bedroom apartment in a good retirement community. I looked at the pricing on-line and I'm guessing she won't have much left over after the monthly payments but at least she'll have meals and a roof over her head. I'd wondered what would happen when one of them died. It happened sooner than expected.
Are these folks in good health and strong enough to keep working?
Because that's what it's gonna take in most instances to produce the cash that living decently requires.
Not so much... It's rarely better to move away from the places and people you know ...and who know you.
Especially not if the location is the ones with a good social welfare infrastructure in place.
Find a low or subsidized cost seniors building in/near the same town you're in now.
"living DECENTLY" - that's the point. People who didn't save anything for retirement were living above their means. To some people, living decently means a room indoors with access to a shared bathroom, maybe kitchen privileges. To some people, living decently means a 4 bedroom house, two new cars, a few expensive vacations a year, new clothing on a frequent basis, etc.
Let's say you are going to receive a thousand a month in social security. Let's say you have saved a hundred thousand in an IRA. You invest the IRA in something paying 5% a year - that's 5K/yr, or about $450/month. Plus, you are not gonna live forever, so let's say you can withdraw some of the principle, too. So you take out an additional 4K/yr. So now you've got about 19K/yr in income. You get a part time job that pays you a thousand a month. So now you've got about 30K/yr in income. In many parts of the country, you can have a one bedroom apt, a paid off used car, and even eat out occasionally on that, maybe take the occasional road trip or cheap vacation on that. It's not how I want to live in retirement, but it's living.
They would be "OK-ish" if they stopped the spending, but there's no reason to think that she'll stop just because she retires. She hasn't shown any indication that she's going to stop doing that. She's done in about five weeks and yet the shoes are still coming in. He rationalizes it by saying "if it helps her feel better."
Between them, they probably made close to $100,000 last year. That's not bad money for this area. He makes about $60k and she makes about $40k. They shouldn't be in this position, but her reckless consumer spending is really hurting.
Just about everyone has an emotional relationship with money. Your mother's is only more nakedly obvious than most. Your father understands this. Have him explain it to you. Oh wait, he already did: "It helps her feel better."
If we were all compelled to be honest, that's what we'd all say: "I bought that boat because it makes me feel better about myself." Or "I bought that high-end Mac because I feel I deserve it."
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She's moving to a one-bedroom apartment in a good retirement community. I looked at the pricing on-line and I'm guessing she won't have much left over after the monthly payments but at least she'll have meals and a roof over her head. I'd wondered what would happen when one of them died. It happened sooner than expected.
