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This is something I keep trying to explain to my husband.
He thinks we need to retire with millions in the bank because his coworkers have millions in the bank.
No, it really depends on your lifestyle in retirement.
If you plan on taking world cruises, and living the high life, then yes, you'll need more money.
But if your house is paid off, you live where taxes are low, and you're happy with a week at the lake as vacation time, then you'll need a lot less.
The whole thing would be much easier to plan for if we had universal health care though. It's the medical expenses I worry about.
Everyone saying we need millions just for medical is something I don't understand.
Once you hit 65 you are on a universal health care plan... Medicare.
While Medicare isn't free it's a pretty good deal with a total of $548/month for both of us. That covers our Part B, two Plan G's and two Plan D's for pharmacy.
$548*12=$6,576
Our Part B deductibles are $166 each bringing our total annual cost to $6,908 which covers everything but pharmacy. Throw another $1,000 each for pharmacy co-pays ($1,000 would cover most of us) and it appears the most we can expect would be $8,908.00 and that is is the worst of the worst happens.
Over 20 years that's $178,160.00 for a worst case scenario for a couple. Per person would be half that or $89,080.00 and most likely even less.
Not a small amount of money to be sure, for my wife and I it appears medical will be our biggest single expense at $742/month for everything for both of us representing nearly 17% of our projected retirement income stream. Not a small amount to be sure but it is far from the millions I've heard mentioned.
401k will be around $300k (hopefully). Pulling $12000 per year should last 25yrs.
Pension should be about $1300 month
Social......about $2200 with wife's
No mortgage, no car payment.
Moving to Fla. About $125k towards house.
Everyone saying we need millions just for medical is something I don't understand.
Once you hit 65 you are on a universal health care plan... Medicare.
While Medicare isn't free it's a pretty good deal with a total of $548/month for both of us. That covers our Part B, two Plan G's and two Plan D's for pharmacy.
$548*12=$6,576
Our Part B deductibles are $166 each bringing our total annual cost to $6,908 which covers everything but pharmacy. Throw another $1,000 each for pharmacy co-pays ($1,000 would cover most of us) and it appears the most we can expect would be $8,908.00 and that is is the worst of the worst happens.
Over 20 years that's $178,160.00 for a worst case scenario for a couple. Per person would be half that or $89,080.00 and most likely even less.
Not a small amount of money to be sure, for my wife and I it appears medical will be our biggest single expense at $742/month for everything for both of us representing nearly 17% of our projected retirement income stream. Not a small amount to be sure but it is far from the millions I've heard mentioned.
Medical costs are the wild card in everyone's retirement planning. Medicare is teetering on the brink of insolvency, and Republicans have control of both houses of congress. Nobody is going to be fixing it. The cost of supplemental insurance could easily double or triple. Mine just jumped 18% in April. There are also some very expensive things that Medicare doesn't cover. If you become debilitated, which is quite common in old age, somebody has to change your diapers. That can be far beyond the capability of an aged and feeble spouse, even if they are in good health. Medicaid won't pay for anything until all your assets are gone, and the quality of public assisted care is typically dismal. Medicaid is also administered by the states, and some states are determined to cut the program to a bare minimum. I didn't see anything in your budget for long term care insurance, but going without it can ruin all your plans.
This is how we feel. We are not afraid to go for a nice bike ride instead of going to the mall and spending the extra money that we happen to have that week.
I'm with you guys! "A man is rich in proportion to the number of things he doesn't need."
Everyone saying we need millions just for medical is something I don't understand.
Once you hit 65 you are on a universal health care plan... Medicare.
While Medicare isn't free it's a pretty good deal with a total of $548/month for both of us. That covers our Part B, two Plan G's and two Plan D's for pharmacy.
$548*12=$6,576
Our Part B deductibles are $166 each bringing our total annual cost to $6,908 which covers everything but pharmacy. Throw another $1,000 each for pharmacy co-pays ($1,000 would cover most of us) and it appears the most we can expect would be $8,908.00 and that is is the worst of the worst happens.
Over 20 years that's $178,160.00 for a worst case scenario for a couple. Per person would be half that or $89,080.00 and most likely even less.
Not a small amount of money to be sure, for my wife and I it appears medical will be our biggest single expense at $742/month for everything for both of us representing nearly 17% of our projected retirement income stream. Not a small amount to be sure but it is far from the millions I've heard mentioned.
If most people end up needing millions from long term SNF or sophisticated, expensive care, they are just going to be out of luck. Most people will never get that, and honestly, shouldn't fret over something that is largely unachieveable.
There are a lot of retirees out there far less affluent than most on this board and, while some folks would say the lifestyle is insufficient, risky, etc., they're muddling through alright.
There is no such thing as ghost income. There is cutting costs and improving cash flow but that is not income ,it is cost cutting.
They may appear similar for a while but they are not. Cost cutting has a bottom . After which when expenses increase you are dead in the water. Income has growth potential forever .
Folks like to take the cost cutting ability of a house or cutting bills as increasing income but it is just improving cash flow ,income never changes.
This is why wall street looks at both profits and revenue. Profits can come from cost cutting and cost cutting always has a bottom
Not everyone wants to live on Wall Street, and I don't know anyone who thinks their cost of living can be zero. However, taxes are a big part of retirement planning. You don't have to budget anything for retirement savings, because you are retired. You don't have to budget anything for mortgage PI because there is none. You can afford to let your income drop, and income you don't have is income you don't have to pay taxes on. If you are earning $150k while you are working, you can plan for $120k in retirement with no reduction in actual disposable income. Lots of other expenses drop too. My gasoline bill dropped $10,000 a year. My clothing budget went way down. Vehicle repair and replacement expenses were cut by 2/3.
You have to look at both sides of your cash flow when planning for retirement. Many people actively plan to minimize their retirement income because of income tax. In my case, if I pay 25% federal and 9% state income tax, I lose 34% of every dollar of income above a certain level and 27% of all capital gains. In my very real world example, the $20,000/year I spent retiring my mortgage is actually worth $29,000 in paper income. Our actual disposable income went up when my wife and I quit working, and our tax bill went down by many thousands of dollars.
That's why focusing on the income side of retirement gives a distorted picture. People think they were earning $150,000 while they were working, but they were actually only earning around $110,000. That's why structuring retirement income is so important. You can stick it in a Roth and it's tax free, you can buy municipals and dodge most of the taxes, or you can invest in rentals and write off management, maintenance and depreciation. In my state, every dollar I depreciate on a rental returns 34 cents in federal and state income tax savings. When it's all depreciated out and I need the cash I invested, I can sell it and pay capital gains at 27% (state and federal). That's a 7% return on top of the rental income, some of which is exempt from income tax because of depreciation. Let's say you buy a rental property for $500,000, $400,000 of which is building. That means you can depreciate a little more than $9,000 a year. The taxes you don't have to pay (a little over $3,000 in my case) are what I refer to as "ghost income". From any other source it would take over $12,000, an extra $1000/month, to put the same amount of money in my pocket.
Gross income is just a nuisance. Anything over the 15% tax bracket is costing you money. What you want to aim for is a collection of assets that contribute to your lifestyle while not being taxable. "No mortgage" heads the list. No matter how smart you are, in this climate you won't find any investment that returns the 10% the feds will take away when you jump from 15% to 25%. Of course, you have to plan for that years in advance. Pay down the mortgage instead of putting money in tax deferred savings.
larry , you are still only improving cash flow by cutting expenses . making better use of existing income is not increasing income nor will it ever be increased income .
you need to do both in retirement . cutting expenses is one aspect but after expenses are cut as much as can be further increases IN EXPENSES must be met with increased income .
they are distinctly different . there is no such thing as phantom income . there is only improving EXISTING CASH FLOW when you lower expenses, .
making up a name and calling something by a different name when it isn't does not make it correct .
.
Last edited by mathjak107; 07-12-2016 at 12:13 PM..
Not if you buy it when you are 30 and lock in the premiums.
Of course that's a gamble as well - paying steadily for 15-20 years before most start to fund their LTCi...and another 15-20 years the company you go with has to remain solvent to pay you. And having to forecast ahead another 15-20 years in planning the kind of coverage you think you might need, etc., etc.
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