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

 

[TimberHole]

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 caution 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.

This sounds like the same logic I kept running across. At 25 times annual retirement income a 4% return will provide the income without depleting the principal. Why can’t the average joe plan on using the principal in his retirement account? I don’t get it.

 

[MossRoad]

This sounds like the same logic I kept running across. At 25 times annual retirement income a 4% return will provide the income without depleting the principal. Why can’t the average joe plan on using the principal in his retirement account? I don’t get it.

I think the thought of using the principle, at least for us, is that once it's gone, it's gone. If you outlive your principle, you're screwed.

If you have enough principle, you can live off of the interest and continue to invest for eternity, or until you expire, whichever comes first. You can leave something nice for someone, some organization, charity, etc...

For example, my wife and I, when we retire, if everything goes according to plan, will earn almost 2X more in interest from our investments than we earn from our jobs. If social security is still there, that will just be icing on the cake. So we'll have no need to spend any of the principle to continue living in the style we are currently accustomed to for the rest of our lives. So why spend any of the principle? We'll leave the principle to our kids and/or leave it to various nature and social agencies, depending on the circumstances at the time of our deaths.

At least, that's the current plan. :laughing:

 

[TimberHole]

I think the thought of using the principle, at least for us, is that once it's gone, it's gone. If you outlive your principle, you're screwed.

If you have enough principle, you can live off of the interest and continue to invest for eternity, or until you expire, whichever comes first. You can leave something nice for someone, some organization, charity, etc...

For example, my wife and I, when we retire, if everything goes according to plan, will earn almost 2X more in interest from our investments than we earn from our jobs. If social security is still there, that will just be icing on the cake. So we'll have no need to spend any of the principle to continue living in the style we are currently accustomed to for the rest of our lives. So why spend any of the principle? We'll leave the principle to our kids and/or leave it to various nature and social agencies, depending on the circumstances at the time of our deaths.

At least, that's the current plan. :laughing:

That’s a great plan! Congrats on your success! That said I still think a huge number of folks are not in such a good retirement position and their retirement life could benefit a great deal from spending the principal using a relatively high age for the expiration of the account. Maybe 90 years of age. Am I in left field on this?

 

[drssg]

This sounds like the same logic I kept running across. At 25 times annual retirement income a 4% return will provide the income without depleting the principal. Why can稚 the average joe plan on using the principal in his retirement account? I don稚 get it.

To be fair, you can do whatever you want. I have a buddy from high school who basically retired in his early fifties shortly after he became homeless. He just stopped trying and dared the world to let him starve to death, but he's up for every handout he can find.

I wasn't familiar with the "25 times" rule, but it sounds like a simple starting point to a complicated question. From there, the individual can consider his personal risk tolerance for investing, his risk tolerance for running out of money, his love (or hate) of working, all sorts of things. I think it really warrants discussions with one or more professionals to confirm the reasonableness of assumptions being made.

 

[MossRoad]

That’s a great plan! Congrats on your success! That said I still think a huge number of folks are not in such a good retirement position and their retirement life could benefit a great deal from spending the principal using a relatively high age for the expiration of the account. Maybe 90 years of age. Am I in left field on this?

No, you're not in left field. You're quite right. :laughing:

Right as in correct. But 90 may be too soon. Just because some people's family history predicts younger death, I'm currently sitting here watching Gold Rush while babysitting my sleeping soon-to-be 92 year old father-in-law with dementia while his 79 year old wife is at a musical with my daughter. They both worked factory jobs, invested wisely, and are enjoying their retirement. Dementia only set in about a year ago. He's lived a lot longer than both his parents, and his older siblings. By all predictions, he should have died about 10-15 years ago, yet he's like the energizer bunny until 2 years ago, when nerve pain stopped him from mowing the lawn with a walk behind mower every other day! They put him on pain killers, and made him stop drinking beer. He went downhill fast after that. The lack of intense exercise coupled with the loss of calorie intake from the beer did him in, I think. But he's a happy little guy when he's awake. :thumbsup:

 

[MossRoad]

I should mention that I've known my in-laws longer than I knew my own parents, who are long passed away. They've always treated me like one of their own, and are the most kind and caring in-laws a guy could have. Dang, it's dusty in here.... :laughing:

 

[drssg]

I should mention that I've known my in-laws longer than I knew my own parents, who are long passed away. They've always treated me like one of their own, and are the most kind and caring in-laws a guy could have. Dang, it's dusty in here.... :laughing:

I never thought of it that way, but that's also the case with just my mom, and my in-laws are also awesome. It's nice to see your family looking out for each other. :thumbsup:

 

[MossRoad]

I never thought of it that way, but that's also the case with just my mom, and my in-laws are also awesome. It's nice to see your family looking out for each other. :thumbsup:

Yeah, my mom passed away when I was 27. My dad when I was 34. I started dating my wife when I was 18. I'm 58. So I've known them for 40 years, while I only knew my mom 27 and dad 34. I told my mother-in-law this a few years ago. She was shocked and didn't realize it was that long ago. Heck, SHE knew my mom for 9 years and my dad for 16. They all got along really well. Makes for an easier marriage if everyone gets along. :thumbsup:

 

[Jstpssng]

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

Yet that's why she had the money in the first place.

 

[two_bit_score]

Yet that's why she had the money in the first place.

Yes it was! That point was never lost on me!


TBS