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As a person who much of their working years whose annual income exceeded the SS cap I would suggest that the maximum SS benefit alone wouldn't suffice. It is a considerable difference between your working income and with that working income the probability of wanting to be that frugal in retirement is slim.
Perhaps in your area. That is not the case in ours. There are definitely two financial camps in this forum. Having lived in California, I have experienced both lifestyles. Most people that live in HCOL areas have no clue how inexpensive it can be in LCOL areas.
Last edited by MichiganGreg; 11-21-2021 at 12:49 PM..
We used to struggle while working and grossing about 130k year, due to the mortgage, child support for 12 years, alimony for 2 years, all the employment taxes, children's education, contributions to retirement savings etc.
One might aver that the real savings in the above situation are because children reached adulthood, consequences of the marriage resolved themselves, and the mortgage was paid off. This can be achieved, depending on one's circumstances, decades before retiring... or linger into one's old age. For the latter example, a former boss had a child with one wife, at age 50; and another child with another wife, at age 56. In his early 70s he was working full-time, paying alimony to a couple of wives, having split property with other ex-wives, still supporting the younger child, and paying college-tuition for the older one.
Meanwhile for a person who never marries, never has kids, enjoys decent health, and spends a lifetime living in a cheap apartment, the biggest cost-reduction comes from (1) lower income tax, maybe by moving to a cheaper state, and (2) cessation of saving money for retirement.
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Originally Posted by yakker
...The answer; It's complicated, but with a modicum of planning you will be golden.
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Originally Posted by TuborgP
As a person who much of their working years whose annual income exceeded the SS cap I would suggest that the maximum SS benefit alone wouldn't suffice. It is a considerable difference between your working income and with that working income the probability of wanting to be that frugal in retirement is slim.
As Yakker noted above, "it's complicated". A heroically dedicated saver may be used to frugality as a kind of ostentation and dissociation from the common-horde. It is unlikely for this behavior to change upon retiring.
We have several members who frequent this board who intentionally live modestly, saving the majority of their income. While I applaud their compounded gains as investors, the point here, is that such savers would, in fact, do fine on SS alone. Their lives are already structured that way.
We took our SS at age 62, that's almost 20 years ago for me and 17 years for her. Our combined SS is only $34K annually, and 85% is taxed. Our savings has increased YTD by $52K. It’s not that we want to save, there is no more room for anything else to buy. So yes, our income in retirement is much higher than working.
Perhaps in your area. That is not the case in ours. There are definitely two financial camps in this forum. Having lived in California, I have experienced both lifestyles. Most people that live in HCOL areas have no clue how inexpensive it can be in LCOL areas.
Incomes tend to be higher in HCOL areas so the probability of a higher percentage of people being over the cap is greater. Sure if you can command that salary in a LCOL living area you might have that option. The question is did your working lifestyle lend itself to making that adjustment in retirement?
It is for many about desired lifestyle in retirement!
For many with the assets a lifestyle of frugality as defined to me in this forum years back isn't a option as I was told bymany'
So my current response is based on that.
Why isn't AARP working for its members to get dental care? Are they ADA supporters? When I go to the dentist it feels like I'm competing with him for my annual SS benefit!
Actually - Congress is trying to get it included in Medicare. Dental, Hearing and Vision.
The "secret" I believe is creating several sources of independent income with the realization that one of them might disappear. Ask yourself if you could still thrive (not survive) if one of them took a hit, then build your plan accordingly.
This. We NEVER took for granted the inheritance. My volatile MIL could have given it away in a heartbeat. We also worked as if the pension (government) might also be altered because of the Great Recession.
We realized in our mid-40’s we had not even started to save and it was all on us - so we shoveled it for the better part of 18 years - until it hurt. We took frugal to another level completely.
In the end - I, being the SOLE provider - my spouse could not find decent work in commission sales world and I was making ONLY $60K at the end of my career. My take home, however was a mere 2200 a month. After taxes. Everything else went into the retirement pot.
Now - we have a home that is completely paid off in a HIGH COL area of California. We’re living off the now $31K government pension ($2600 a month), $1070 Social Security from me (spouse won’t get his until next year which will be nice). Pretty close to what we were living off in the LOW COL state we moved from. It all feels like gravy.
We have interest income from the inheritance but we don’t touch it - and our 401K and retirement vehicles are growing - untouched.
I still think younger folks still need to feel the fear that it will be all on them to save - because frankly - that’s the truth. But they can save and win at retirement regardless.
Incomes tend to be higher in HCOL areas so the probability of a higher percentage of people being over the cap is greater. Sure if you can command that salary in a LCOL living area you might have that option. The question is did your working lifestyle lend itself to making that adjustment in retirement?
It is for many about desired lifestyle in retirement!
For many with the assets a lifestyle of frugality as defined to me in this forum years back isn't a option as I was told bymany'
So my current response is based on that.
I get it; not surprisingly, this conversation is- and should be, based on personal experience.
Sorry for the TL;DR, but the answer to your question "....did your working lifestyle lend itself to making that adjustment in retirement?" is a resounding yes.
Up until the last 5 years of my career, I did OK, but was never a very high earner compared to HCOL states. Once I got to Michigan, that all changed, but prior to retirement our COL was always fairly high. Most of my career, we were a single earner couple, and in the last few years had a MIL to support too. An important decision I made at the start of this final stretch was to buy the largest fixer upper (a foreclosure) in the best area we could find for three adults. That turned out to be a really good choice in the long run, but caused us to spend a lot to fix it back to great shape. Needless to say, we never had a lot of discretionary cash all during my working years.
This all changed in retirement; we hit a good period.
I rolled over the 401K into a small IRA we already had and is not being touched. We lucked out when we sold our workday house, it was in great shape, and our equity not only cleared all of our debt, but allowed us to build a new smaller house with a ridiculously low mortgage, and to put aside a decent cash emergency fund. For the first time in our lives, our income (combined SS) is more than 2.8 times our total expenses. Once one of us passes, that will drop to 2.45 times, but is still not bad. We are spending half of our remaining discretionary cash on building a new music studio, and saving the rest. Since we don't need or touch our retirement savings, when RMDs hit, our income will go up again.
I guess maybe we sound like outliers, but deep down, I suspect that if people are not afraid to open up, we may find there are a lot of other stories out there similar to ours.
I get it; not surprisingly, this conversation is- and should be, based on personal experience.
Sorry for the TL;DR, but the answer to your question "....did your working lifestyle lend itself to making that adjustment in retirement?" is a resounding yes.
Up until the last 5 years of my career, I did OK, but was never a very high earner compared to HCOL states. Once I got to Michigan, that all changed, but prior to retirement our COL was always fairly high. Most of my career, we were a single earner couple, and in the last few years had a MIL to support too. An important decision I made at the start of this final stretch was to buy the largest fixer upper (a foreclosure) in the best area we could find for three adults. That turned out to be a really good choice in the long run, but caused us to spend a lot to fix it back to great shape. Needless to say, we never had a lot of discretionary cash all during my working years.
This all changed in retirement; we hit a good period.
I rolled over the 401K into a small IRA we already had and is not being touched. We lucked out when we sold our workday house, it was in great shape, and our equity not only cleared all of our debt, but allowed us to build a new smaller house with a ridiculously low mortgage, and to put aside a decent cash emergency fund. For the first time in our lives, our income (combined SS) is more than 2.8 times our total expenses. Once one of us passes, that will drop to 2.45 times, but is still not bad. We are spending half of our remaining discretionary cash on building a new music studio, and saving the rest. Since we don't need or touch our retirement savings, when RMDs hit, our income will go up again.
I guess maybe we sound like outliers, but deep down, I suspect that if people are not afraid to open up, we may find there are a lot of other stories out there similar to ours.
I don't think you are a outlier nor are we. The last decade has just redefined retirement for many. We just visited with old neighbors from our old area and the Mrs said to me isn't this just ridiculous how much money we are making. We have all been retired for a decade plus and have similar pension/SS/investment profiles. Needless to say for many reason most of the people we knew there were or could have been. For those that did the three legged plan with seriousness/success and stayed married and healthy etc our retirement incomes whether fully cap gain realized or not exceeds our working income at this point.
Not spending everything you make and just continuing to invest is yielding amazing results.
This is all the luck of retiring when we did followed by the decade plus we had. Ours started out before the Great Recession and didn't look real rosy at all in the early years with the Great Recession. It didn't. include SS and was just pensions and a shrinking retirement portfolio.
I think back to my participation in the forum then and the notion of frugal living as defined by participants then. They had a income threshold and if you were over it frugal was not a term you were suppose to use. So even though we were counting. pennies and shopping bargains etc etc we didn't qualify. Now we don't worry about those things anywhere as much if at all.
Encouraging to those struggling to still get to where we should be......
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