Retirement Advantage

[crossbody]

When you have done all they said do...

You rode out the storms of the financial collapses

That versification box got checked

Time was on your side

The dividends and reinvested dividends are going haywire

That MOIC surpassed ends meeting; it's wrapping around

You played the game well...

Question(s): When you retire will you have more per month during retirement than you have coming now? What is the main thing you did to accomplish it?

 

[pknopp]

More? No. But I'm no longer putting money away for retirement.

 

[crossbody]

More? No. But I'm no longer putting money away for retirement.

hmmm... okay, is there a reason why?

 

[sparky]

Question(s): When you retire will you have more per month during retirement than you have coming now?

SS is actually a slight raise for me

What is the main thing you did to accomplish it?

dumb luck

~S~

 

[pknopp]

hmmm... okay, is there a reason why?

Because I'm already retired.

 

[Dekster]

When you have done all they said do...

You rode out the storms of the financial collapses

That versification box got checked

Time was on your side

The dividends and reinvested dividends are going haywire

That MOIC surpassed ends meeting; it's wrapping around

You played the game well...

Question(s): When you retire will you have more per month during retirement than you have coming now? What is the main thing you did to accomplish it?

Nope. I started selling off my real estate to fund 3 whippersnappers' college educations while its a seller's market (so they have no excuse to move back in with me on the other side of it ).

We'll be fine though. I have been loading up the 401K for years and have a commercial property I am selling next month that will net us enough to glide into a pretty secure retirement when the time comes. Everything we have is paid for and with the kids' colleges taken care of, there is really no need to maintain our current incomes through investments. It isn't like we drink champagne at every meal and have gold toilets. We will be able to do all the things we normally do once we get the nest emptied. We will still have income from investments, the real estate I won't be selling off, and retirement plans. The plus side of having lived my entire adult life assuming social security won't be there is that I won't need it to eat now.

 

[MarathonMike]

I retired 5 years ago, wife is partially retired now. Net worth has been steady and not likely to drop much. We saved voraciously, invested in real estate and stocks. Also we rarely go out to eat or take expensive vacations. Not out of sacrifice we just kinda like being home.

 

[crossbody]

I retired 5 years ago, wife is partially retired now. Net worth has been steady and not likely to drop much. We saved voraciously, invested in real estate and stocks. Also we rarely go out to eat or take expensive vacations. Not out of sacrifice we just kinda like being home.

Thank you for providing valuable information that will help others as we inch closer to retirement. I'm 3-5 years from retiring and I want to know what others did so I do not end up below where I could have been.

I think that is so good that you and your wife like to stay at home. I'm sure you travel some times, but home can also be just like a vacation... change the sheets, switch out the decor, cook some international cuisine. Just enjoy a blessed marriage and a well prepared financial retirement.

 

[MarathonMike]

Thank you for providing valuable information that will help others as we inch closer to retirement. I'm 3-5 years from retiring and I want to know what others did so I do not end up below where I could have been.

I think that is so good that you and your wife like to stay at home. I'm sure you travel some times, but home can also be just like a vacation... change the sheets, switch out the decor, cook some international cuisine. Just enjoy a blessed marriage and a well prepared financial retirement.

I credit my wife with much of our financial security. She was raised in a very large family that had to watch every dollar. Once we cleared all debts that's when things took off for us. Good luck!

 

[Lisa558]

More? No. But I'm no longer putting money away for retirement.

And then add in the cost of commuting - for me, about $500 a month. That’s $6000 a year, or close to $9,000 pre-tax.

The offset, of course, is that groceries and gas have gone up, making my annual IRA withdrawal plus SS about the same that I was earning.

 

[WorldWatcher]

Question(s): When you retire will you have more per month during retirement than you have coming now? What is the main thing you did to accomplish it?

Depends on how you slice the loaf.

My wife and I are transitioning this year. She will retire in February and I'll retire in the fall so we've planned the financials for a long, LONG time. But our reseach his grown a lot this year as decision on other things had to be made.

I say it depends on how you slice the loaf because our annual income will either decrease or remain fairly flat depending on whether we just use our 6 retirement income streams or decide to tap into our 401K's.

So it depends are you talking revenue or are you talking how much you have to live on?

If revenue, if we don't tap 401Ks that will go down to about 80% of our working salaries. Currently we have pretty much max'ed out 401K contributions, which greatly reduces the monthly spending budget and AGI for tax purposes. However there are costs that change and this is often a sticker shock for some people. So in retirement revenue decreases, but 401K contributions stop which offsets the decrease from a spending budget perspective.

Spousal Health insurance with the additional Dental & Vision plans runs about $350 a month a month now. However in retirement Medicare will cost $185 (each) and the supplemental plan we are likely to choose runs another $177 each. Add to that Dental and Vision and total cost goes up to $824 a month. We don't need Medicare Part D (prescription) because we're military retirees. I have decent LTC carry over so that remains flat, but we need to add to my wifes LTC transition from her work and that looks like about another $250 a month. So total goes from $350 a month to over $1000 a month.

As a dual working couple we have tried to ensure a financially secure retirement starting many years ago. We are blessed to meet that goal, but there are a lot of folks that are in for some sticker shock, they aren't going to have as much in retirement as they think. I ran some number and because we have multiple income streams the expected 25% reduction in Social Security benefits circa 2035 will result in a 7% reduction for us because of the multiple sources of income. Not fun, but we'll be OK.

WW

 

[sparky]

I'm new to this, and the hardest part is sitting around in the morning

I haven't needed an alarm clock for decades, i usually get the rooster up , a cup 'o joe, feed the farm....then off to chase a $$

it's hard to break a 1/2 century routine.....

~S~

 

[crossbody]

Depends on how you slice the loaf.

My wife and I are transitioning this year. She will retire in February and I'll retire in the fall so we've planned the financials for a long, LONG time. But our reseach his grown a lot this year as decision on other things had to be made.

I say it depends on how you slice the loaf because our annual income will either decrease or remain fairly flat depending on whether we just use our 6 retirement income streams or decide to tap into our 401K's.

So it depends are you talking revenue or are you talking how much you have to live on?

If revenue, if we don't tap 401Ks that will go down to about 80% of our working salaries. Currently we have pretty much max'ed out 401K contributions, which greatly reduces the monthly spending budget and AGI for tax purposes. However there are costs that change and this is often a sticker shock for some people. So in retirement revenue decreases, but 401K contributions stop which offsets the decrease from a spending budget perspective.

Spousal Health insurance with the additional Dental & Vision plans runs about $350 a month a month now. However in retirement Medicare will cost $185 (each) and the supplemental plan we are likely to choose runs another $177 each. Add to that Dental and Vision and total cost goes up to $824 a month. We don't need Medicare Part D (prescription) because we're military retirees. I have decent LTC carry over so that remains flat, but we need to add to my wifes LTC transition from her work and that looks like about another $250 a month. So total goes from $350 a month to over $1000 a month.

As a dual working couple we have tried to ensure a financially secure retirement starting many years ago. We are blessed to meet that goal, but there are a lot of folks that are in for some sticker shock, they aren't going to have as much in retirement as they think. I ran some number and because we have multiple income streams the expected 25% reduction in Social Security benefits circa 2035 will result in a 7% reduction for us because of the multiple sources of income. Not fun, but we'll be OK.

WW

I was asking about the amount one would have to live on during retirement factoring in their monthly SS, portion of 401k, IRA, annuity, etc... Would they have more coming per month during retirement than they have now during their working years.

 

[crossbody]

Depends on how you slice the loaf.

My wife and I are transitioning this year. She will retire in February and I'll retire in the fall so we've planned the financials for a long, LONG time. But our reseach his grown a lot this year as decision on other things had to be made.

I say it depends on how you slice the loaf because our annual income will either decrease or remain fairly flat depending on whether we just use our 6 retirement income streams or decide to tap into our 401K's.

So it depends are you talking revenue or are you talking how much you have to live on?

If revenue, if we don't tap 401Ks that will go down to about 80% of our working salaries. Currently we have pretty much max'ed out 401K contributions, which greatly reduces the monthly spending budget and AGI for tax purposes. However there are costs that change and this is often a sticker shock for some people. So in retirement revenue decreases, but 401K contributions stop which offsets the decrease from a spending budget perspective.

Spousal Health insurance with the additional Dental & Vision plans runs about $350 a month a month now. However in retirement Medicare will cost $185 (each) and the supplemental plan we are likely to choose runs another $177 each. Add to that Dental and Vision and total cost goes up to $824 a month. We don't need Medicare Part D (prescription) because we're military retirees. I have decent LTC carry over so that remains flat, but we need to add to my wifes LTC transition from her work and that looks like about another $250 a month. So total goes from $350 a month to over $1000 a month.

As a dual working couple we have tried to ensure a financially secure retirement starting many years ago. We are blessed to meet that goal, but there are a lot of folks that are in for some sticker shock, they aren't going to have as much in retirement as they think. I ran some number and because we have multiple income streams the expected 25% reduction in Social Security benefits circa 2035 will result in a 7% reduction for us because of the multiple sources of income. Not fun, but we'll be OK.

WW

Thanks for all of that good information. It seems like you will have more bills during your retirement that will affect any future savings. I'm glad you mentioned all of those added expenses that come with retirement. I forgot to consider that part. What do you mean by LTC?

 

[WorldWatcher]

I was asking about the amount one would have to live on during retirement factoring in their monthly SS, portion of 401k, IRA, annuity, etc... Would they have more coming per month during retirement than they have now during their working years.

Understood, didn't mean to derail.

But a comparision of X dollars per month working vs. Y dollars per month in retirement is a simplistic snapshot that doesn't provide a complete picture. It's a complex situation with many factors.

A more direct answer to your question, since you asked, for our case is - Monthly Income from salaries will decrease in retirement but Disposable Income*** will increase in retirement.

WW
.
.
.
Disposable Income for us is X dollars coming in per month. While working that amount is determine by:

• Adding my wifes wages and my wages to our military retirements,
• Substracting fixed costs FICA Taxes, Pension Fund Contributions, and 401K Contributions,
• Whatever is remaining is available then for the monthly household budget for bills: Income/Prperty Taxes, Insurance, transportaion, housing, groceries, utilities, etc.

In retirement Disposable Income is determined the same way. We'd add pensions, social security, and 401K as "revenue" and substract from it. FICA goes to $0 as you don't pay FICA on Pensions, 401K, and Social Security. Pension Fund and 401K contributions go to $0 as we wouldn't have jobs - the point of retirement.

Where I'm going is that individuals and couples need a compare working vs. retirement budgets. Income will likely changes. Some expenses will decrease, others may increase. For people to understand how much Disposable Income they will have in retirement there are multiple factors to consider.

 

[WorldWatcher]

Thanks for all of that good information. It seems like you will have more bills during your retirement that will affect any future savings. I'm glad you mentioned all of those added expenses that come with retirement. I forgot to consider that part.

I think it's a great point of discussion and a chance for those that are retired or will soon be retired to share "war stories" about their transition. To share what worked, and what bit them in the ass.

What do you mean by LTC?

Long Term Care

It's a type of insurance that goes beyond a medical event covered by Medical Insurance/Medicare for cronically ill persons who need living assistance. Typically medical insurance doesn't cover LTC. LTC services can be provide either in home (visiting care providers), through day factilities (kind of like adult day care), or through residential services (i.e. nursing homes).

WW

 

[Lisa558]

Thanks for all of that good information. It seems like you will have more bills during your retirement that will affect any future savings. I'm glad you mentioned all of those added expenses that come with retirement. I forgot to consider that part. What do you mean by LTC?

LTC is long-term care, and he probably is referring to an LTC policy.

There’s a different option I have taken. It’s a deferred annuity - nicknamed a longevity policy. If you have a lump sum to devote to it, there are benefits over a LTC policy.

The way it works is that you put down a lump sum - say $200,000 - to purchase a deferred annuity, to pay out at later date. Because you are deferring payout, the amount you do get is substantially larger. So if you put down $200k at 65 and defer payment to 85, you would get around $2800 a month for the rest of your life. That, combined with SS, would be a guaranteed payment of around $4500 a month (depending on your SS amount).

Now it doesn’t cover ALL your long-term care, but then again, neither does the LTC policy (but the latter admittedly covers more). The advantage, as I saw it, is that you start collecting at 85, or whatever age you select, REGARDLESS of whether you are in a long-term care facility.

There are various options, too. You can pick a “period certain” - say, 10 years - rather than lifetime, and the payments will be higher. So if you pick 85, you are covered until 95. IF you live past 95, and the payments stop, realistically you only have a few years remaining, and if you could cover that one your own, it’s a nice option.

In my case, Dad lived to 94 and Mom is going strong, thank Gd, at 96 (next month), so I like the lifetime option.

You might want to look into this and weigh the pros and cons of a longevity policy vs a LTC policy.

 

[iamwhatiseem]

When you have done all they said do...

You rode out the storms of the financial collapses

That versification box got checked

Time was on your side

The dividends and reinvested dividends are going haywire

That MOIC surpassed ends meeting; it's wrapping around

You played the game well...

Question(s): When you retire will you have more per month during retirement than you have coming now? What is the main thing you did to accomplish it?

About the same, but the advantage will be less bills.
We retire in 5 years, we have enough equity in our home to downsize and pay cash for a smaller house. So - no mortgage. Well actually we will carry a small mortgage to ensure homestead exemption on taxes.
Also I purposefully bought a newer used vehicle 2 years ago, so that will be paid off - so no car payments.
Essentially we will be debt free. Our main income sources will be our two soc security checks, and I have a pension that will pay us $1400 a month on top of that. All of the 401ks and 403bs and CDs - we will just let them sit. Won't need to tap into them.

 

[Lisa558]

As far as current living expenses, I have done something similar with an IMMEDIATE annuity - where you put down a lump sum and payments start immediately, or within a year.

What I did was total my basic and necessary expenses - food, insurance, utilities, TAXES, etc., - and figure out how much above my guaranteed SS I was short. Then I bought an immediate annuity that makes up the difference,

This way, I know that even in the worst of cases, I will be able to cover the basics. So if, Gd forbid, the market crashes and I lose half my investments, I won’t be forced to sell at a low. I can tighten my belt until it recovers.

You can use IRA money to make the purchase, and there are no tax consequences for the withdrawal. (You will of course have to pay taxes in the annuity income itself.)

 

[WorldWatcher]

LTC is long-term care, and he probably is referring to an LTC policy.

There’s a different option I have taken. It’s a deferred annuity - nicknamed a longevity policy. If you have a lump sum to devote to it, there are benefits over a LTC policy.

The way it works is that you put down a lump sum - say $200,000 - to purchase a deferred annuity, to pay out at later date. Because you are deferring payout, the amount you do get is substantially larger. So if you put down $200k at 65 and defer payment to 85, you would get around $2800 a month for the rest of your life. That, combined with SS, would be a guaranteed payment of around $4500 a month (depending on your SS amount).

Now it doesn’t cover ALL your long-term care, but then again, neither does the LTC policy (but the latter admittedly covers more). The advantage, as I saw it, is that you start collecting at 85, or whatever age you select, REGARDLESS of whether you are in a long-term care facility.

There are various options, too. You can pick a “period certain” - say, 10 years - rather than lifetime, and the payments will be higher. So if you pick 85, you are covered until 95. IF you live past 95, and the payments stop, realistically you only have a few years remaining, and if you could cover that one your own, it’s a nice option.

In my case, Dad lived to 94 and Mom is going strong, thank Gd, at 96 (next month), so I like the lifetime option.

You might want to look into this and weigh the pros and cons of a longevity policy vs a LTC policy.

Lisa558,

IIRC you were - what I'll call - in a benefits career? Either as an advisor or provider? (Sorry if I'm not remembering that correctly).

If I do remember correctly, could you talk about payout types for annuities. My understanding is, and it all depends on the contract, is that benefits can simply end with the death of the receiver, they may be provisions for a "death benefit" depending on how far into the annuity and remaining value, or there may be options for survivorship to provide incomie to a suviving spouse.

And this can greatly impact the "cost" of the annuity contract and the benefits received. So for example an annuity with survivorship may have the same "costs" be the annuity amount is less because the insuer is assuming risk for two people in terms of longevity.

WW