Retirement Planning - Lessons Learned

[shooterdon]

If you have the means, having a mortgage in retirement is no different than having a mortgage in your working years.

If you have the means...get the mortgage paid off. It takes a huge load off your mind. Even if your IRA tanks, you have your home.

If you have any credit card debt, you should not retire. You have established a lifestyle that is above your means. If you cannot control it you are going to be in trouble quickly.

Have all or most of your "toys" paid for.

If you have a spouse or partner that wants to retire "in style" and you cannot afford it...get rid of her/him if you can. If married to her/him prepare for "issues".

Cost of divorce should be evaluated. Many seniors realize they will not enjoy retirement with the person they have only had to endure 24 hours a day for two days a week. Spending 7 days a week them, with no work to escape can trigger it. If you have friends and your partner does not...that is a another "red flag".

You will need/want about 65% of your pre-retirement income until you learn to live on less.

If you do not have a company pension or government job pension, do not depend on SS. Which means you need about $500k to $1 million in investments.

About 15% of people over 65 live in poverty and only 58% live at double (or more) than the poverty level. The good news about living in poverty is that life expectancy goes down so you may not suffer for long.

Lots of folks do not have "Golden Years".

 

[riptides]

If you have the means...get the mortgage paid off. It takes a huge load off your mind. Even if your IRA tanks, you have your home.

If you have any credit card debt, you should not retire. You have established a lifestyle that is above your means. If you cannot control it you are going to be in trouble quickly.

Have all or most of your "toys" paid for.

If you have a spouse or partner that wants to retire "in style" and you cannot afford it...get rid of her/him if you can. If married to her/him prepare for "issues".

Cost of divorce should be evaluated. Many seniors realize they will not enjoy retirement with the person they have only had to endure 24 hours a day for two days a week. Spending 7 days a week them, with no work to escape can trigger it. If you have friends and your partner does not...that is a another "red flag".

You will need/want about 65% of your pre-retirement income until you learn to live on less.

If you do not have a company pension or government job pension, do not depend on SS. Which means you need about $500k to $1 million in investments.

About 15% of people over 65 live in poverty and only 58% live at double (or more) than the poverty level. The good news about living in poverty is that life expectancy goes down so you may not suffer for long.

Lots of folks do not have "Golden Years".

Dang...what a ball buster....now I don't want to retire.

 

[turnkey4099]

I'm late to the thread and didn't read all of it.

One thing that is important if it hasn't been mentioned.

Get a funeral policy and make sure everybody in the family knows what you want. Funerals are expensive and left to the survivors they will overspend enormousley "what will the neighbors think if we ddon't go whole hog".

I bought mine about 20 years ago and waited dtoo long then. My first bid for cremation was $7xx. 5 years later when I bought it had risen to $1700. I'm sure it has gone up a lot higher.

Make a will if you haven't. Name your estate executor and a backup. You need a Power of Attorney for that plus on for someone as a medical boss. MAKE SURE EVERYDODY knows what you want in the 'end care' stuff. I for sure did not want to end up conneccted to a bunch of tubes and wires

I'm 85 and in good health except for a bit of arthritis in the spine...hoping to have that cleared up next month. Live alone as my partner died 10 years ago. Alone is not fun but I do have regular contact with good friends. .

 

[JethroB]

If you have the means...get the mortgage paid off. It takes a huge load off your mind. Even if your IRA tanks, you have your home.

If you have any credit card debt, you should not retire. You have established a lifestyle that is above your means. If you cannot control it you are going to be in trouble quickly.

Have all or most of your "toys" paid for.

If you have a spouse or partner that wants to retire "in style" and you cannot afford it...get rid of her/him if you can. If married to her/him prepare for "issues".

Cost of divorce should be evaluated. Many seniors realize they will not enjoy retirement with the person they have only had to endure 24 hours a day for two days a week. Spending 7 days a week them, with no work to escape can trigger it. If you have friends and your partner does not...that is a another "red flag".

You will need/want about 65% of your pre-retirement income until you learn to live on less.

If you do not have a company pension or government job pension, do not depend on SS. Which means you need about $500k to $1 million in investments.

About 15% of people over 65 live in poverty and only 58% live at double (or more) than the poverty level. The good news about living in poverty is that life expectancy goes down so you may not suffer for long.

Lots of folks do not have "Golden Years".

Great points! I'll disagree with a couple though.

65% of pre-retirement income is on the low side. Most advisors say 80%-ish. Lots of variables.

The rule of thumb for retirement income from financial investments is about 3 1/2 to 4% of principal. This takes into account income taxes, inflation, and not outliving the principal. So $1M will net about $35-40k a year on average. Again a lot of variables.

And as mentioned before medical insurance cost, particularly if your under 65. The premium is my largest expense.

 

[cdaigle430]

Funny how this topic comes up today. Last week I had a meeting with the boss and HR where I was told my position was terminated and I am welcomed to apply for another job within the company. There are none that I qualify for, I am in my 50s and deaf. After 23 years...just like that your done.

I am in a state where IT jobs are scarce and pay little....no one will come close to paying the salary I made...so what do I do? Retire early? File for Social Security Disability?

Move to a third world country?

I remember hearing companies like to get rid of the older folks and now I believe them(age discriminations). Keep in mind yes IT jobs are plenty in place like Maryland...but I would have to move. Also I cannot work with customers or venders and I have other complications I will not mention here.

I do have a lot of anxiety and I am a little worried....will try and retire now if I can and get over having to deal with working for others for good.

 

[fried1765]

Good thread. I've got 4 years on you (62 this week) and am hoping to leave my job at 65... not because of SS, but that's when I should be able to afford it. I will still need to do something part time butbit will be on my schedule. By then everything should be paid for, if I make enough to pay for expenses I won't need to touch my 401K for a while. I don't need much except my health, so as long as that stays as it is now I should be good.

The minimum yearly withdrawal under the 401K rules is something like 4% per year.
I have been withdrawing that minimum for 10+ years, and my 401K value keeps slowly rising.
Just a number (%) you might want to think about.

 

[MossRoad]

...
Free and clear always trumps tax deduction!

Building wealth trumps free and clear on a mortgage.

There's ZERO tax deduction from a mortgage until your interest paid during the year (plus any other itemized deductions) exceeds your standard deduction.

The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 in for 2020, up $200, and for heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.

On a $250,000 mortgage at 3% interest, your annual payment will only be $12,684. Your total payment doesn't even equal the standard deduction, let alone the interest portion of it, so there's NO tax advantage to having a mortgage. There IS a wealth building advantage in that you can take that extra money that you're paying down that 3% loan early with and investing it at 8% average return.

So yes, it is nice to be free and clear. We've been "in the black" since we said "I do" back in 1985. "In the black" is not "free and clear". It means you have a positive net worth. One should be more concerned with building that positive net worth (in the black) than they should be with attaining the goal of "free and clear". Once you hit a point in your life where if you sell everything you own, then pay off everything you owe, and the amount left is enough to afford you a monthly income that will last you the rest of your life in the style you are happy with, that's when you've made it financially.

So while we are technically not debt free (we have a home equity loan with a balance, and that's considered a mortgage), we have enough to last us more than the rest of our lives.

Concentrate more on building wealth than being in the clear. It's a better strategy.

 

[caver]

+1 on make a will. It was one of the earliest questions my (then) new financial advisor asked. One thing I would have done different is just hired someone to rough in a cabin for me at my retirement property. I'm still not there and now have to focus more on a quick and dirty remodel of this house I neglected for years. My old home town just isn't the same anymore so I have no urge to move back. I retired at 55 a couple years ago and hope to move over to my property some day. My medical insurance premium takes 1/4 of my pension. At 59.5 I will be able to pull from the 401K. If you do plan to move start de-hoarding NOW

 

[MossRoad]

....If you do plan to move start de-hoarding NOW

Amen! Built a garage addition just to consolidate the basement, shed, rented storage shed items into one place for industrial sized de-cluttering and sell-off of too much stuff. Spent the better part of Saturday just going through boxes of saved items from my father's estate.... he died in '95! It's easy to become a slave to your stuff. If you spend more time dealing with your stuff than using/enjoying your stuff, you have too much stuff.... stuff.

 

[RustyA]

1. Have a will, power of attorney, healthcare directive
2. Figure out a plan for health insurance especially if one of you get's diagnosed with something bad
3. Have a plan that is flexible for both of you (see above diagnosis)
4. Try to be debt free
5. Find someone you really trust to give you solid legal and financial advice 5-7 years ahead of time
6. Take peace that you have things arranged so your spouse and family know your wishes