retiring

[bigtiller]

1) It takes 12 years from when you begin drawing early SS until you break even. (I worked there 28 years.)
2) Medicare cannot kick in until you turn 65. The cost of health insurance before Medicare begins should be a major factor in your decision.
3) Take everything anyone tells you with a heavy dose of skepticism. Social Security is a complex, some say bizarre, system. Your brother-in-law is NOT an expert, and us experts made a lot of mistakes too. Lawyers, CPAs, talk show hosts, and financial consultants are human beings who deal with many different things for many different people; they cannot always get it perfect.

All you need to retire and live comfortably is a crystal ball and a lot of money, or at least one heck of a pension. Tell your kids to sock away as much as they can since SS was never intended to provide a big retirement, just a part of it. For the rest of you it's either pat yourself on the back for having done things right decades ago, or be a greeter at Wal-Mart. Your ship has already sailed.

Is that right?
My numbers are much different.
It will take 36 months to get back the money I paid in and another 36 months to get back the money my employer paid on my behalf.

But, I retired at 51 and have not had any earned income since. Maybe those 11 years with no income is the difference.

One thing is for sure, when I do break even, I'm not going to ask them to stop sending it.

 

[Chris616]

I can see the point here if someone feels like they are "enduring" their lifestyle. The people I've known who are living well below their means are not enduring anything. They are living the life they choose. If they already have everything they truly want, then why spend more money, just because it's available.

Another point is that there are many unknowns in future planning. It's not just a matter of having the ability to do somewhat complex calculations.

Many people don't have guaranteed returns on their investments. It depends on the overall market. The unknown rate of return can have a huge impact on money that is available.

Inflation is unknown, lifespan is unknown, and medical costs can be a huge unknown. My dad lived to be 94, and he needed 24/7 care towards the end. Home health care was not covered by insurance. If he was near the end of his means, he would have needed to go into a nursing home. It was much nicer for him to live in his own house with his own dog on his lap during his final days.

Those are all good points, Rick.

You're right. "Enduring" isn't how many retirees who are living below their means view their lifestyle, but I know people who spend less than they could in retirement because that is what they're accustomed to doing. They are comfortable, but there are things that they'd like to spend their money on but don't because they don't really know how much they can safely spend.

You're right about there being unknowns in planning for the future, but proper planning should take those things into account. For example...

It is counterintuitive, but depending on how far into the future you're projecting, how long you'll live doesn't have a big impact on how much you can spend. The tool that I use for retirement financial planning predicts a sustainable yearly spending rate in retirement based on dozens of input parameters. I have the plan set to run out of money 35 years into the future, but if I reduce that to 25 years it only reduces the amount available for yearly spending by about 10%. If those numbers were 15 years and 5 years into the future, it would make a much bigger difference.

As you've written, the rates for inflation and return on investments are important. That's why a financial plan that predicts available spending based on a range of inputs is important to have. If someone can see, for example, that even with a 0%-3% return on their investments above inflation that they're still spending less than they could, they'll have more confidence to "loosen the purse strings", if that will make life more enjoyable for them. Too many retirees have a "financial plan" that is "If I don't touch the capital I won't ever run out of money".

Chris

 

[kenmac]

But, I retired at 51 and have not had any earned income since. Maybe those 11 years with no income is the difference.

Yes, If you retire early, and stop paying into the SS system, When you reach the age when you can draw SS, you will draw less than you would draw if you had continued to work until at least 62.
The longer you pay into the system, the more $$ you will draw

 

[ovrszd]

I know what you mean. I have been there.

I was in business when the economy tanked in 2008 . If I hadn't saved, I would have not been able to have gotten through it.

I was able to pay all my supply houses for equipment I had bought and keep the doors open, pay people. There was no xtra.
Not going to say it wasn't tough because I was stiffed by many contractors.

I was able to hang in and was able to recover, when all the banks, and mortgage companies begin to call to have equipment, and plumbing replaced, that had been stolen from foreclosed homes.

Timing is critical to success. Actually, timing is extremely critical to business success.

I'm sure there were many business owners like yours that were newly established in 2008 that didn't make it. Timing is critical.

 

[KennyG]

Yes, If you retire early, and stop paying into the SS system, When you reach the age when you can draw SS, you will draw less than you would draw if you had continued to work until at least 62.
The longer you pay into the system, the more $$ you will draw

Kind of. Your benefit is based on the highest 10 years (40 quarters) that you paid in. It takes 40 quarters to qualify for a benefit. Because the calculation of credit doesn't factor in inflation, when you quit early you will generally have an inflation eroded basis to calculate your benefits. However, once you have 40 quarters credited, additional work just lets you drop older, lower income quarters.

 

[buckeyefarmer]

I want to retire at 60, but will probably wait till 62.

I work for health insurance.

 

[ovrszd]

I want to retire at 60, but will probably wait till 62.

I work for health insurance.

Very common. You'll get there.

 

[Travelover]

.............Another consideration.... what would you say is a healthy investment into one's retirement fund? 10% maybe? Let's go large and say 15%. ................

The way to calculate this is to work backward. There are endless calculators on the internet to help you with this or you can write a simple spreadsheet to calculate it yourself. Basically, you need to have 25 times as much saved as you plan to spend in a year in retirement. Figure out what you need to live on including health insurance and taxes, subtract out Social Security and pensions, adjust for average inflation and you have your spending and your required nest egg. Now use an on line calculator to see how much you need to invest yearly based on historical returns on your investments. I was 100% stock until I retired, but a more cautious approach might be 80% stocks / 20% bonds.

The 25X figure is informative because it makes you realize that if you can cut spending in retirement by $1000 yearly, you need $25,000 less in savings. Similarly if you are paying an advisor 1% and you can only withdraw 4%, the advisor is taking a quarter of your spending money every year.

If it looks like you will come up short, you may need to up your income through better skills / education, a second job or more contribution from the spouse.

 

[ericm979]

Two useful retirement planning tools:

Optimal Retirement Planner - Home and Essential Parameter Form

FIRECalc: A different kind of retirement calculator

 

[two_bit_score]

I can see the point here if someone feels like they are "enduring" their lifestyle. The people I've known who are living well below their means are not enduring anything. They are living the life they choose. If they already have everything they truly want, then why spend more money, just because it's available.

Another point is that there are many unknowns in future planning. It's not just a matter of having the ability to do somewhat complex calculations.

Many people don't have guaranteed returns on their investments. It depends on the overall market. The unknown rate of return can have a huge impact on money that is available.

Inflation is unknown, lifespan is unknown, and medical costs can be a huge unknown. My dad lived to be 94, and he needed 24/7 care towards the end. Home health care was not covered by insurance. If he was near the end of his means, he would have needed to go into a nursing home. It was much nicer for him to live in his own house with his own dog on his lap during his final days.

I agree about the 'enduring' moment.

My wife's aunt just passed recently. She was 90+, one adopted son. She and her husband, who preceded her, had accumulated several million $$ in cash and real estate and financial instruments. She was known to be frugal all her life. They were joked about at family events because it was very likely that the covered dish they brought was a left over they took home from Cracker Barrel or some place. At the Christmas gift exchange if you got her gift you may have given it to her a few years ago. She frequently shopped at Goodwill or other thrift shops. Nice home, nice car, nice clothes, just frugal. If asked if she was enduring anything in her lifestyle I would never expect she would feel that she was. She would probably think that everyone else was a spend thrift but she was way too nice to ever say that or act that way. Many years ago I bought a very well cared for used Mercedes 280C from a doctor friend at a real good price. She asked me a lot of questions about that car but never ventured an opinion other than 'It's nice'. I know she thought I was a crazy spendthrift for buying a Mercedes! She could have bought a dozen brand new and never missed it.



TBS