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Old 04-01-2010, 05:19 PM
Location: Near a river
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Originally Posted by mathjak107 View Post
heres the deal.. since we dont know how long we will live take the money early.. now normally rule of thumb says if your getting 7% long term return and inflation is 3% then you can spend besides the ss about 4% a year from your nest egg.

remember social security is no different then buying an annuity.

but what if you had an annuity kicking in at age 70 for not only you but your spouse that will almost double your income.,.. well having that annuity or social security being able to almost pay double later on if you live allows you the comfort of drawing say 5-6% from your nest egg early on while your still healthy to enjoy it.. then once you make it to 70 you pay back the ss or purchase that annuity so you refill your nest egg for life.

now the beauty of it is that when you pay it back you can either subtract the return off the years income or take a tax credit ....either way you may end up with low or negative income for the year.

now do a roth conversion with that negative income credit..

its a beautiful thing, you got to spend more ages 62-70 because you knew you were refilling your nest egg later on.... you get double the payments almost for you and your wife and you got tax free income from your converted roth..

of course its a moot point if you dont have the extra money to pay it back with but if you do there are many benefits

its not about the lump sum of money you have , its about what you can draw each year to spend..since on your own you have no clue what market returns will be in the future you cant take more then a certain amount for fear of outliving your money.... i would never worry about ss.. ss is such an ingrained part of american culture and structure i doubt its ever going away... the country couldnt survive with out it... you saw how fast we came of with trillions to save the banks...
I know I"m dense but here's some questions from my BIL that I can't answer.

1) All while collecting SS monthly from ages 62 - 70, you have to pay income taxes on that, do you not? So don't you basically "lose" that amount that is paid in taxes each year? Where is that made up along the way?

2) Can't you only do a Roth UP TO age 70?

3) What kind of vehicle is the money in, in the Roth? If it's a bank CD Roth, you have to be earning (from actual work) at least the same amount of $ that you put in for the previous year. What if you are no longer earning work income? Are you talking about a specific vehicle.

4) For those on disability SSDI instead of SS, how does this work with your payback plan? Can people do this with SSDI.

5)) Are you saying that you are SPENDING those early SS payments and then just paying it all back at age 70 out of savings. Or--are you socking away the SS payments and holding it all to pay it back? If this is the case, that you are just holding it, why bother to do this at all?
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Old 04-01-2010, 10:43 PM
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Originally Posted by Gandalara View Post
I could live on a $2800 pension quite comfortably, and not even touch the $300K!

If your house is paid off, no consumer debt, frugal life-style ... why not?

Whats the CoL in the area? If it's high - move!
Yeah, that's what I was thinking. I make more than $2800 a month now, but my basic living expenses are $1600 a month (more when car repairs and saving for my next car are included, but still less than $2800) and I live in a high cost area where rent for my studio apartment is $850. Of course, it helps that I have cheap employer sponsored health insurance.

But even so....if I had a pension coming in for that amount, I would try not to touch it at all.

Last edited by mysticaltyger; 04-02-2010 at 12:13 AM..
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Old 04-01-2010, 10:47 PM
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Originally Posted by MagnoliaThunder View Post
That's great to know and I'm still looking there...it's my "Texas dream" to be able to live there one day...love love love California. Thanks!
California is not as good up close as it is from a distance....unless of course, you can afford the Pebble Beach lifestyle. That's not the overwhelming majority of us.
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Old 04-01-2010, 10:57 PM
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Originally Posted by hindsight2020 View Post
I ask again, if our friend dave, with a 1/2 a pension and 4 times the mean balance of 401K holders can't outlast his money, what's the outcome for the millions of people with no pension and 50-100K in a 401K???? We got a big problem folks. Where are all these people gonna go? Die quiet deaths? Heck no. Somebody is going to have to pony up the difference for millions of people working full-time till they're too sick to stand. I really don't see this as a matter of 'that's your problem joe' anymore, we're all about to get a bill for this generational short fall. Mr Dave already alluded in jest to his plan B if the money runs dry, "let the state take care of me". Jest aside, this is coming from a guy with a pension and above average 401K balance. Remove the pension and 50% off that 401K, that's dave's equivalent 30 years from now. Anybody else not alarmed by this? Thoughts?
Yes, I'm definitely alarmed. Neither individuals nor the government have prepared for this reality. The most likely result: we're headed for a very ugly crash that will make the recession we're coming out of look like child's play.

Last edited by mysticaltyger; 04-02-2010 at 12:14 AM..
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Old 04-01-2010, 11:12 PM
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Originally Posted by hindsight2020 View Post
I look at my parents and their two 75% high three pensions. Yeah I could live out the rest of my days on 75% of my high three. They never had a single exposure to the stock market, and their real estate, as mortgage leveraged as they are for a couple in their early 60s (i.e. they shouldn't have any), is largely self-liquidating at death, and they know it, which is why they sleep like babies at night. Their kid, no pension, is somehow supposed to replicate their lifetime benefit on a de facto casino table and 30% of what I take home? It's just not possible, clicking my heels won't change that.
Actually, it's not true that your parents didn't / don't have any exposure to the stock market.

Reality: WE ALL DO, whether we personally invest in it or not.

What do you think these government pensions invest in???? Largely: stocks, bonds, cash, and commercial real estate.

I work in the public sector and we are facing major layoffs this year because they are going to have to put A LOT more money into the pension fund in large part because of the stock market crash (and also unfavorable demographics with the Baby Boomers retiring).

There have been a fair number of stories in the financial press about the obligations of public sector pensions....and the obligations are pretty huge.

Last edited by mysticaltyger; 04-02-2010 at 12:15 AM..
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Old 04-01-2010, 11:14 PM
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Originally Posted by loveautumn View Post
Really, 59 is quite young to be retiring unless you have some serious physical limitations and why collect SS @ 62? I'd say keep working until you absolutely can't anymore. These days early retirement is a pipe dream unless you have a government pension (high) with medical benefits.
It's not a pipe dream. It just requires living a lifestyle based on actual need vs. perceived need/wants. In short, you can retire much earlier than age 59 if you don't buy into the "American Dream" bs.

Check out these web sites:


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Old 04-01-2010, 11:19 PM
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Originally Posted by Bette View Post
It is no secret that my husband and I have had to help my family financially and so much has gone there. Family is important, however, and we would do it again. What goes around comes around.

We are both self employed, work long hours and try to be there for our families and personal commitments.

We are nowhere near the amount the OP has and will most likely not have any pensions. However, we look at my husband's parents. His mom was only 42 when he left home; his dad was 48. They had about 25 years to really sock it away.

When my husband grew up, he had nothing. They lived very modestly (their choice). When we got married, they were 55 and 61. I think it was about then that they really ramped up the savings. He worked until 72 and would have worked much longer if his employer would have let him. (We think the state had a big pension increase if you got to 40 years - he "retired at 39 years 10 months 5 days. He has a great pension (which is more than he made as an employee) and SS - my sweet MIL had Alzheimers at 66 and passed away when she was 74.

We still have a child in college but we are starting to see where our expenses have gone down some. Our goal for the next 18 months is to work off debt and then start saving.

We're looking at another 20 years but a couple of years ago thought it would be less. Now, when we're in our 70's, I hope our clients still will want us around! At least where we live is where a lot of people retire to so we're here already!!

I try to look at the less fortunate and count my blessings every day.

I do think of my MIL depriving herself of so many things (basic even) and she didn't even get to enjoy the fruits of her labors. That makes me very sad.
Your post regarding your DH's parents gets at a truism of previous generations. His parents worked longer and didn't live as long, so they spent less time in so-called "retirement".

Since, by and large, the Baby Boomers have not saved enough, and the government is highly indebted, the only way we're going to get through this is if people work longer and retire later. Otherwise, we're going to end up in a situation like Greece, or most likely, even worse.
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Old 04-01-2010, 11:28 PM
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Originally Posted by triciajeanne View Post
The newer employees coming in , or those who were courted to come to new localities are not so fortunate. And as more and more municipalities experience a reduction in property tax revenues and the like, they are cutting staff more and more - check out the exodus from Florida of public servants - staff, senior/junior - people who never figured they would be "let go" are being "let go".

Public service is about as secure as the private sector now, and actually that's been happening over the past 10 years, maybe more. Maybe the federal government is a bit more secure than that which we at the more local levels experienced. I have first hand seen the cutbacks in both jobs and benefits at the state and the local level. I have seen the resultant economic devastation it causes for so many people. In time, the further decrease in revenues and the impossibility of providing the level of services with reduced staff, reduced revenues etc will more and more cut into that "high-quality of life/low cost of living" that all the retirees are seeking. It's almost a perfect storm.

I work in the public sector in CA and what you are saying hasn't happened here to the same extent as in FL, but it is going to. One city in my area raised the retirement age for new employees. My city is definitely going to be laying off this year--some are still in denial, I think.

But even in good times back in the late 1990s, I could see that they were doing everything they could to avoid hiring full time employees where I work (part time folks aren't eligible for the pension). So, I figured, if this was what was happening during the dot.com boom, then I knew it was going to get ugly down the line. And now those chickens have come home to roost.....made worse by public sector unions in denial of reality.

Newsflash to California public sector union members: Retiring at 55 (50, for police and firemen!) is no longer financially sustainable. Failure to acknowledge this reality is going to cause defined benefit pensions to be completely eliminated for the young folks, and may even affect their ability to pay your pension if things get bad enough.

PS to Baby Boom union members: Thanks a lot for your shortsighted thinking. The young people feel great being dumped on! Just don't complain when they're still living at home in their 30s.
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Old 04-01-2010, 11:46 PM
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Originally Posted by hindsight2020 View Post
Basically it's a question of purpose. If the purpose of working is so that I can bring home just enough money to afford the the roof, food, clothing, medicine and transportation that will keep me healthy and able enough to allow me to make it to work tomorrow, that's not a life worth living in the first place. Working a job just so that I can afford to work at that job, we call that an infinite loop construct, an oxymoron of a life.
There's some truth to your argument here. But here's my beef with it... A lot of people in Gen X / Y and Americans in general have inflated expectations of what they "need" and severely overestimate the role that material possessions will play in their happiness or "self actualization" as you say.

The roof: Can be a studio or 1BR apartment. Or even involve roommates. Even Western Europeans, so admired by the political left for their generous welfare state, do not have nearly the amount of living space that average Americans do. Are they really less happy for it??? In some cases. But in most cases, I doubt it.

Vehicle: Does it really need to be one of those oversized, gas guzzling SUVs that were still selling like hotcakes until around 2008? I think not.

Clothing: How expensive are clothes, really?

Medicine: This is one area where the young are legitimately screwed. It's not our fault the medical system is in an out of control upward cost spiral. This has been going on for 2 or 3 generations now, and members of the previous 2 or 3 generations have done nothing to try to reign in the high costs of our wasteful and ineffective way of doing health care. Rather than figuring out how to deliver care more effectively and how to focus on preventing the need for all these pills & surgeries; they decided to fight each other about who should pay for our wasteful system instead, passing around a hot potato while costs spiraled ever upward.

However, there is some scope for hope here. It all starts with eating REAL food, not the processed food substitute that they call food and that many of us were (regrettably) raised on.

I suggest a short and easy read for people of all ages on the subject would be:

Food Rules by Michael Pollan:

Amazon.com: food rules

And how about all the other stuff people blow money on? How much do people blow on: tatoos & peircings, eating out (even now!), alcohol, recreational drugs, big screen tvs, cable tv, $100 a month cell phone plans, $4 coffee, etc.???? Do these things really lead to self actualization or even plain old happiness? I don't think so...Especially if you're living payday to payday, they're actually sources of unnecessary stress in life.

Last edited by mysticaltyger; 04-02-2010 at 12:29 AM..
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Old 04-02-2010, 12:04 AM
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Originally Posted by triciajeanne View Post
. I think the point was quality of life -squirreling away every dime for when you are eighty-five years old.
OK, back up. Wait a minute...Stop right there

Why is it that every time someone suggests saving for retirment, a large number of people chime in with comments like this. "Oh, oh, it's not worth it to scrimp and save EVERY DIME for when I'm 85!!!!"

I really get tired of the hyperbole and melodrama. Is there no happy medium? Is it not possible to make a habit of socking away 5%, 10%, or 15% of one's salary for retirement and still enjoy life???? Most people who do, don't even miss the money.

C'mon! Let's get real here. Most people blow money right and left on stuff that does not really bring them much pleasure or fulfillment. They're just in the unconscious habit of spending all they have. They're not really paying attention to what's important....just going on with the flow of what everyone else around them seems to be doing and not really asking any deeper questions. I've helped a friend with her finances (and moderate income) and seen this effect first hand. She now socks away 16% of her income for retirement and really doesn't miss the stuff she was blowing money on. Heck she doesn't even know what she blew money on!

It's entirely possible to do BOTH--That is....blow some money on fun stuff and sock some away for both short and long term goals. It's not an either/or proposition for the vast majority of people.

Last edited by mysticaltyger; 04-02-2010 at 12:34 AM..
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