Reverse mortgages are very bad for (imho) 95% to 99% of the people who get them. They do NOT solve long term income / cash flow problems. They waste the resources of the individuals taking them. If a family or individual does not have the cash flow they need, they / he / she should sell their house and move into a more modest house. Getting a reverse mortgage throws away money on fees and interest.
I think I big issue is to live in or move to a state that allows you
to keep more of your money and has cheaper rents or property
taxes. secondly, move to a smaller home that is easier and
cheaper to maintain. My husband and I got hit by the recession and healthcare bills and our savings were decimated. We are lucky that we
have the skills to continue to work part-time (me as a marketing
consultant and he as a professor) and we are also researching the
best states in which to live (and are not freezing cold!). Kiplinger does a
great job of breaking out this information. Florida is near the top
of the list, so is Delaware and PA is a possibility. Our home state of
New Jersey is near the bottom. Then if all else fails in the US, look
at living in Costa Rica or Mexico, where you can live about 40% cheaper.
to keep more of your money and has cheaper rents or property
taxes. secondly, move to a smaller home that is easier and
cheaper to maintain. My husband and I got hit by the recession and healthcare bills and our savings were decimated. We are lucky that we
have the skills to continue to work part-time (me as a marketing
consultant and he as a professor) and we are also researching the
best states in which to live (and are not freezing cold!). Kiplinger does a
great job of breaking out this information. Florida is near the top
of the list, so is Delaware and PA is a possibility. Our home state of
New Jersey is near the bottom. Then if all else fails in the US, look
at living in Costa Rica or Mexico, where you can live about 40% cheaper.
The key to retiring w/o the type of nest egg that few can attain, is to learn to like being frugal.... like finding ways not to spend money.... take up hobbies that don't cost much. I've lived frugally my whole life simply because I like to keep it simple. My parents were young adults during the Depression, so that mindset never left them. A few years ago work in LA dried up. I kept trying, but not much was happening other than gigs... nothing steady or dependable. I was beginning to blow thru my savings... just trying to hang on & get work. I decided that I had to go another route. I had to get in a position where I could live off of SS & my small pension at age 66.... So, at 60, I jumped ship & gave up on finding work in LA. I used some of my savings to buy a home in NM & I paid cash. That took care of what was a continuing major expense... housing. I'll still have taxes, utilities, upkeep, I looked at the home purchase as paying my rent ahead. Because of the move, I've also cut my car expenses by 2/3... because I'm not paying high gas prices on commutes & just on every day errands. Anyone who lives in a major city knows that just errands consume time & gasoline. What I find is that people who have run into work scarcity when in their late 50s or early 60s just keep trying & by doing so eat up savings... which sometimes traps them.... they then lose the ability to make those changes when it is time to retire. Better to take that leap earlier, than to be trapped.
4
Spend less...Live simple. Ride a bicycle to run errands...Pay bills. Drop the cable TV. Grow your own food. Network on food and services...Your grandparents did it years ago. Buy second hand...Yard sales.
2
What makes me a little crazy and something I find very ironic is those who take their social security early AND THEN go out and buy an annuity. This kind of self destructive thinking is why many find themselves short of cash as they age. The one sure way of increasing security in old age is to WAIT before taking social security. Too few do and this fact will cause us all immense social problems not too far down the road.
1
As many have pointed out, an annuity might be a bad comparison. If I take average stock market returns for the past 30 years (~7%) and average inflation (~2-1/4%) and use the $12K at age 62 scenario posed in this article, I could build up an IRA of $42K by age 65 or $143K by age 70. Projecting out further, you still come out ahead until you are into your 90s (when starting at age 65 catches up). Try this exercise yourself with a spreadsheet.
Of course, in your retirement years, low volatility may be more important than maximum return.
Of course, in your retirement years, low volatility may be more important than maximum return.
1
I was told by my investment adviser that I'd be able to take a spousal benefit based on my ex-husband's benefit, but that ended up not to be true. He started his benefit at aged 62, 8 years ago. I am now 63 but due to my continuing to work my benefit is higher than his. That means I can't get anything from his. It's SO confusing!
This is where a computer and the internet comes in handy. The information is out there you only need the desire to find it.
1
Was your "investment advisor" a CFP or RIA? S/he should have known better. And yes, it's always good to do research on your own, too, as someone suggested.
To delay taking SSA benefits to get the 8%/year increases is a faulty strategy and it depends upon your need for the money until you are 70. Our professional advisor corrected us to not wait 2-1/2 years til 70, because he said, why draw down your "own" savings and defer SS, which is a combination of your savings and the government's savings for you (whether it is the interest it makes on your contributions or a deficit boondogle is immaterial, except, if it is the latter, you'd better draw your cash out ASAP!). If you need the money now, you are stressing out to eke out a living until 70 and possibly incurring debt to do so; If you don't need the cash now, you can reinvest your SSA benefit until 70 and possibly earn more than 8% to boot. E.g.: our advisor's company (think Tommy Lee Jones) has a conservative guaranteed plan: you get 6% guaranteed OR what they earn for you each year, whichever is more.
1
The point is that the 8% from the government is a safe annuity. Investing in the stock market has more risk. There is no guarantee that reinvesting the SS checks will earn 8% or more.
10
" If you don't need the cash now, you can reinvest your SSA benefit until 70 and possibly earn more than 8% to boot." Me thinks you need another adviser. This one smells as if he or she is self-serving.
3
He/she probably sold you a variable annuity, which paid him 4 or 5% in commissions and has high fees ( hidden in too many pages of the contract ) and in the present environment, there is no such thing as 6% guaranteed return and "you can take that to the bank"...very expensive investment and very lucrative for the "adviser"...
1
The problem is that many Americans see social security as a retirement plan instead of a minor supplement that may go broke in the near future. Something they should have never counted on and just took as a bonus to their retirement savings. Saving for retirement is not on the list for most Americans- new cars, new trucks ,tatoos, motorcylces, houses they cant afford , keeping up with the Jones is where there money goes. Karen is a great example in this story-she had a lucrative job and decided to pursue a hobby without having her retirement fully funded. Most personal business fail in the first 5 years. She failed to have disability insurance and had to rob Peter to pay Paul. Now she will have to work till 70. We need to teach children in grade school the power of saving and time, and the benefits of not having to keep up with your neighbor. We live in a consumer driven society where the average American has 800$ in their checking account. Sad.
11
The people I know who strain good health and are financially ok are the people I meet at my volunteer jobs.
It is obvious that many people out there need help with there retirement planning based on the comments, reactions and misunderstanding of financial planning. Makes me feel good and a bit sad to know there is a tremendous need for the type of education and advice I provide to people.
1
Any assumption you make about SS could get changed in a heartbeat by our "congress" that only listens to their corporate donors. Already C. Christie is warning everyone that, if elected, he will make SS less beneficial to most of us. Note, as well, the current congress just passed a huge means test for Medicare premiums. The SSDI fund will go insolvent soon, as well as other accounts to pay SS benefits. Wait if you want but it's a gamble on congress favoring the old folks over the corporations... good luck on that.
7
Simply raising the income cap will make S.S solvent. The wealthy investor class which is so quick to cut funds to the poor need to bear more responsibility for their actions of firing workers and outsourcing jobs.
Since the financial industry caused much of the last crisis and supports the wealthy with tax avoidance schemes and off shore shelters then why not eliminate carried interest loopholes on hedge fund managers and tax each share of stock sold and bought. Bonuses and stock options should be taxed at full value when received with no deductions allowed.
Since the financial industry caused much of the last crisis and supports the wealthy with tax avoidance schemes and off shore shelters then why not eliminate carried interest loopholes on hedge fund managers and tax each share of stock sold and bought. Bonuses and stock options should be taxed at full value when received with no deductions allowed.
10
"changed in a heartbeat..." Please. Are you talking about the same congress I am watching?
1
Dont forget to invest in low fee, diversified index funds. The cost savings is massive
12
"...But delaying, even a few years, may help maximize income over the long run."
Check your family history, you may not have the advantage of a "the long run"
Generally it will take 12 years +/- or until you are 74 until you would see a net gain from the monies received in the 47 months between collecting at 62 and 66. And you can earn another $17,000 a year without penalty until 66 which will add to future SS income also and then unlimited salary without penalty at 66, again furthering your future SS payments.
Keeping it simple: at 62 draw $750 for 47 mos. = $35,250.00 DIVIDED by
$250.00 (increased amount at 66 ($1000.00 )) = 141 mos = 11.75 yrs.
Again taking the money early doesn’t prohibit you from further work.
I’ve been fortunate to have an exceptional income generator in Boeing stock and when I'm 70 1/2 my 401k and IRA’s will start paying me an annuity to bring my balance to zero by the time I’m 99.
Being married with two sources of income is advantageous, although there are some duplication of costs from haircuts to automobiles.
Check your family history, you may not have the advantage of a "the long run"
Generally it will take 12 years +/- or until you are 74 until you would see a net gain from the monies received in the 47 months between collecting at 62 and 66. And you can earn another $17,000 a year without penalty until 66 which will add to future SS income also and then unlimited salary without penalty at 66, again furthering your future SS payments.
Keeping it simple: at 62 draw $750 for 47 mos. = $35,250.00 DIVIDED by
$250.00 (increased amount at 66 ($1000.00 )) = 141 mos = 11.75 yrs.
Again taking the money early doesn’t prohibit you from further work.
I’ve been fortunate to have an exceptional income generator in Boeing stock and when I'm 70 1/2 my 401k and IRA’s will start paying me an annuity to bring my balance to zero by the time I’m 99.
Being married with two sources of income is advantageous, although there are some duplication of costs from haircuts to automobiles.
3
I wish the media would cease the hollow advice: you will have to keep working to age XX. Unless workers are self-employed or in some (rare) protected jobs from which they can't be jettisoned, working until 70 or later is not an option. At some point, after what is still euphemistically called "restructuring" their new 35 year old boss will make it clear they are no longer wanted.
25
There is merit to Paul's point. I was lucky to have a government job with a series of good bosses that were not anxious to can me, yet for a variety of reasons I found it prudent t work until late 72. My wife and I are now fortunate to be sitting on what most would regard as a small fortune. Incidentally, we did one thing this article suggests: lived frugally.
3
I know a man who taught himself investment strategies when he was broke in his early 30s. At 62 he did the SS calculation and decided to collect. even though he was financially sound, because he felt that there were some opportunities in the market coming out of the great recession.
He also realized that it would take him from age 66-78 (12 years) to break even with taking his allowance at 62. Of course after 78 that would be when the waiting until 66 would cross the break even mark and he would begin to see the benefit of a higher allowance. The dollar at age 78 will be of lesser value due to inflation (no mention of the declining value of the dollar in any assessment I have seen).
Thus he took the SS at 62, invested the dollars in stocks and mutual funds with great returns. Thus even if he does not make anything else from the investments, it would now take SS (at age 66) more than 25 years to break even. I am more open to listening to his advice.
He also realized that it would take him from age 66-78 (12 years) to break even with taking his allowance at 62. Of course after 78 that would be when the waiting until 66 would cross the break even mark and he would begin to see the benefit of a higher allowance. The dollar at age 78 will be of lesser value due to inflation (no mention of the declining value of the dollar in any assessment I have seen).
Thus he took the SS at 62, invested the dollars in stocks and mutual funds with great returns. Thus even if he does not make anything else from the investments, it would now take SS (at age 66) more than 25 years to break even. I am more open to listening to his advice.
12
There's no advantage to delay collecting Social Security after 70. The 8% per year hike after "full retirement age" stops at 70, with only normal cola kicking in after that.
1
There's a robust school of thought that says grab the money as soon as it becomes available; don't wait for it to grow into a bigger payout. You cannot predict how much longer you will live and--most important--how many vital years you have left. You may have been fit and healthy all your life, but the only thing you know for sure about your future health is that you know nothing.
13
Here's a strategy...save more. Live far beneath your means. If it makes you feel poor, you're right...you are.
10
We're advised to use "dollar cost averaging" when investing in equities for retirement. We're told that following this strategy, we will automatically invest more dollars when share prices are low.
Once in retirement, I assume the converse is the best way to sell equities. That is, "share cost averaging," or selling a fixed number of shares per month (or per quarter, per year, etc.). That way, we redeem more dollars when share prices are high.
Once in retirement, I assume the converse is the best way to sell equities. That is, "share cost averaging," or selling a fixed number of shares per month (or per quarter, per year, etc.). That way, we redeem more dollars when share prices are high.
4
Actually your portfolio should be set up when you retire to have a percentage in low volatility investments so you can withdraw from these with very little investment risk and keep your long term money in better yielding more volatile investments. This will accomplish what you termed 'share cost averaging' in a different. If your advisor has not adjusted your portfolio then talk to him/her quickly.
5
Ok, fellow Boomers. Have a seat. Let's have a serious talk. Just quit your job, OK? Hold someone's hand, and jump into it. The stress of the workplace is just going to eat at you and diminish your chances of actually collecting ANY social security before you die. 'Boomer' is not another word for 'immortal'. Make some space for the upcoming generation, and relieve your coworkers from having to carry you in ways they are just too polite to say. Worried about what you are going to do with all that time? Invent something! But most of all, don't go waiting for a grander social security check. Less money now, for more years, is the same money as more money later, for fewer years.
23
Please take one bit of advise from one who has sued insurance companies and who knows annuities frontwards and backwards: Never buy an annuity. If it really looks good and seems perfect for your situation-never buy an annuity. If your brother in law, your broker and your Rabbi advise it-never buy an annuity.
15
Never buy a hammer either because people have been known to hit there own hand with it - use a screw driver to pound in nails so if you miss it won't hurt as much.
An annuity is a tool that can replace a pension for a person's portfolio in retirement. They are complex and not for everyone or every situation but if you think they are for no one then you don't really know annuities and you don't know everyone's financial situation. For the right situation, a portion of retirement savings in a quality annuity with the features best fitting the owner can help provide a stable flow of income and security. However, they are not for everyone and too much of your savings in an annuity is definitely not a good thing.
An annuity is a tool that can replace a pension for a person's portfolio in retirement. They are complex and not for everyone or every situation but if you think they are for no one then you don't really know annuities and you don't know everyone's financial situation. For the right situation, a portion of retirement savings in a quality annuity with the features best fitting the owner can help provide a stable flow of income and security. However, they are not for everyone and too much of your savings in an annuity is definitely not a good thing.
2
Some pretty idiotic ideas in this one.
Change from a traditional IRA to a Roth? You have to pay ordinary income tax on the entire amount up front. Have fun watching your tax bracket rise instantaneously by a factor of 2 ...
Reverse mortgage? Why not just refinance and avoid all the extra costs?
Set up a line of credit when interest rates are low and use later? Ever heard of "adjustable"?
Buy an annuity, lock in your money, pay huge fines for early withdrawals, face the prospect of a bankrupt insurer like Executive Life?
Downsize when your house is already probably under water?
Change from a traditional IRA to a Roth? You have to pay ordinary income tax on the entire amount up front. Have fun watching your tax bracket rise instantaneously by a factor of 2 ...
Reverse mortgage? Why not just refinance and avoid all the extra costs?
Set up a line of credit when interest rates are low and use later? Ever heard of "adjustable"?
Buy an annuity, lock in your money, pay huge fines for early withdrawals, face the prospect of a bankrupt insurer like Executive Life?
Downsize when your house is already probably under water?
10
It always amuses me to read strategies for how to have money when you retire. The suggestions usually presume a couple with 2 salaries, fully employed and healthy for many years. Yes -- they own a house with a paid off mortgage, and they don't have whopper dental or medical bills. And their children no longer have whopper education debts they help out with.
That may be a large demographic for NY Times readership, but for the rest of us who don't fit into this category, retirement means working for as long as your body holds up, hope your teeth remain in good shape, and you don' get very sick.
If all that holds, you scrimp on rent, food, and clothing, don't go out to eat very often, and watch movies on TV or what you can borrow from the local library. That's a demographic writers who recommend how to live comfortably in retirement don't cover.
That may be a large demographic for NY Times readership, but for the rest of us who don't fit into this category, retirement means working for as long as your body holds up, hope your teeth remain in good shape, and you don' get very sick.
If all that holds, you scrimp on rent, food, and clothing, don't go out to eat very often, and watch movies on TV or what you can borrow from the local library. That's a demographic writers who recommend how to live comfortably in retirement don't cover.
23
You may get some insight from Nicholas Kristof's sunday article:
http://www.nytimes.com/2015/08/09/opinion/sunday/nicholas-kristof-usa-la...
http://www.nytimes.com/2015/08/09/opinion/sunday/nicholas-kristof-usa-la...
3
Whoa, what a minute! If I understand Obama and the left, all these uneducated, unskilled immigrants with huge families, that we are importing whole sale, are going to pay for all our retirements?! What's going on here? Could it be that getting cheap votes and cheap labor ( an unholy alliance between the left and right if there ever was one) is just a sham and we, the middle class tax payer, is going to be stuck with the bill for everything? Maybe it's time to start thinking of what's best for American citizens right now and into the future instead of trying to fix the worlds and everyone who doesn't have a nice life on the planet as were doing now.
7
Don't believe that reverse mortgages & fixed annuities are for everyone. I like saving more, spending less, waiting until full retirement age to collect SS, learning how to maximize SS (lots of good books out there on this complicated subject), etc. And most importantly, remember that the quality of life is better at 67-72 than it is at 75-90, assuming you are lucky enough to get to 90! And one last thing, live & do not be afraid to die.
12
I am single, retired at age 53, 18 years ago. One might want to examine individual income investments, not just a few but a number of them. The very large propane retailers pay about 8-10%(hint); there are some pretty solid reits (RMR hint)paying above 7%; closed end funds(bonds, preferreds, utility/infrastructure) aren't the solution in and of themselves but offer a mix. Depending upon the market to go up consistently is akin to playing the casino. And of course, by all means, hopefully own a home with no debt.
2
Every time I read the claim that reverse mortgages are "backed by the federal government" I want to scream. That backing is not a protection for the home owner but for the BANKS!
11
You are wrong about reverse mortgages government insurance only protecting the banks. There are two types of Mortgage Insurance on HECM reverse mortgages. The upfront MIP, a percentage of the Maximum Claim amount, is either .5% or 2.5% depending on the circumstance and the amount needing to be drawn by the borrower. There is also annual mortgage insurance 1.25% of the outstanding balance. The insurance does in fact protect the lenders, but it also protects the borrowers and their heirs.
When the last borrower permanently leaves the home, the loan becomes due. However, the most that can be owed is the house. In the event the borrower owes more than the house is worth (by appraisal) at that point, their estate can satisfy the loan by offering the lender a deed in lieu of payment. Additionally, if the estate wants to keep the property they can redeem it for 95% of the appraised value if it's less than what is owed. If there is still equity in the home, the estate can sell the house, repay the loan and keep the remaining equity.
There would not be any HECM reverse mortgages without the HUD insurance guaranteeing that the lenders will be made whole if the borrower ends up owing more than the house is worth.
HECM's are not for everyone, but there is value in them and with the majority of the aging population owning a home and not having enough retirement savings, they are a viable economic solution for a growing number of people.
When the last borrower permanently leaves the home, the loan becomes due. However, the most that can be owed is the house. In the event the borrower owes more than the house is worth (by appraisal) at that point, their estate can satisfy the loan by offering the lender a deed in lieu of payment. Additionally, if the estate wants to keep the property they can redeem it for 95% of the appraised value if it's less than what is owed. If there is still equity in the home, the estate can sell the house, repay the loan and keep the remaining equity.
There would not be any HECM reverse mortgages without the HUD insurance guaranteeing that the lenders will be made whole if the borrower ends up owing more than the house is worth.
HECM's are not for everyone, but there is value in them and with the majority of the aging population owning a home and not having enough retirement savings, they are a viable economic solution for a growing number of people.
you clearly don't understand finance very well. Take it from me, I do... The federal government IS INDEED backing the banks, but the net impact of this is that their risk is reduced, and therefore they are able to PROVIDE DEBT TO YOU AT A LOWER RATE. It's the same thing with mortgages backed by the government... so no need to scream, because it's very relevant advice. You're getting helped by the government here, which is making business at lower rates profitable for the banks, who otherwise would have to charge you more.
In England, anyone at any age can mortgage 40% of their property without showing any other income. This is preferable to reverse mortgages which leave you in the lurch should you end up having to move to a nursing home due to health issues.
What is the law in North America? It is better to get a mortgage on your own home, or downsize than a reverse mortgage which takes the property from you once you move.
Likewise, one is generally advised to convert their pension to a lump sum just in case they die fairly young. By converting, you have later flexibility should you live long and can leave the funds to others if life is fairly short.
What is the law in North America? It is better to get a mortgage on your own home, or downsize than a reverse mortgage which takes the property from you once you move.
Likewise, one is generally advised to convert their pension to a lump sum just in case they die fairly young. By converting, you have later flexibility should you live long and can leave the funds to others if life is fairly short.
You (if you move) or your heirs (if you die) have the option to redeem the house (pay off the reverse mortgage and fees) if you choose to or can (if your home is in an increasing market) or your heirs can let the reverse mtg company foreclose on the property.
I do not like reverse mortgages in the vast majority of situations because of the excessive fees, etc and the unscrupulous nature of some (many?) sales reps. One company I'm familiar with had a tie to an "investment adviser" who then put the proceeds in a fixed annuity with huge fees. And the homeowner was given a "checkbook" from the annuity company and didn't understand that those checks were premature withdrawals. You can imagine how well that went.
I do not like reverse mortgages in the vast majority of situations because of the excessive fees, etc and the unscrupulous nature of some (many?) sales reps. One company I'm familiar with had a tie to an "investment adviser" who then put the proceeds in a fixed annuity with huge fees. And the homeowner was given a "checkbook" from the annuity company and didn't understand that those checks were premature withdrawals. You can imagine how well that went.
1
Julie M, I would be very interested in knowing the names of both the Reverse Mortgage Company and the Investment Adviser you are referring to and I am sure so would the CFPB and insurance commission since this type of practice has been outlawed for many many years. I have been in this business for over 8 years and I find it very hard to believe that this type of thing is still going on with all the gov't regulations and crack downs on these businesses.
The Reverse Mortgage Industry as a whole is one of the most heavily regulated and scrutinized in the country. If this is in fact really happening, please turn these companies in as NO ONE in our industry wants them doing business that way!
The Reverse Mortgage Industry as a whole is one of the most heavily regulated and scrutinized in the country. If this is in fact really happening, please turn these companies in as NO ONE in our industry wants them doing business that way!
This is a great article NYTimes, thank you. The situation is terrible and will get worse. Citizens of all ages are looking at a hard times in the future or now. Even those who have assets and investments will run into extreme problems with supporting themselves in the future. For us in 2008 our net worth was very good. Even with a allocation of assets we lost so much in that year recovery was not going to replace our later years support. I was 63 then and was shocked that my extended family would not have my backup and resources to be secure. We have a society where dividends and interest pay pennies now for years. Company pensions have gone. Republicans wan't to cut entitlements. Housing being built is limited and mostly high-end. And an investment community that is predatory with their client's money. People say downsize. Where? How? When? A simple life would work for my wife and I. The generation working now like my children with children are in an economy that demands all kinds of outsized expense. Many of are helping our families with their problems financially.
I am a producer and now a content marketing one man band. I don't even understand the concept of retirement. Greed has a lot to do with this. I work for charities doing videos to raise funds. Children's welfare is one of my favorites.
So what I dreamed of doing was backing up my family and making documentaries to help children's welfare like autism. Instead we are trying to adapt and help in a lifeboat.
I am a producer and now a content marketing one man band. I don't even understand the concept of retirement. Greed has a lot to do with this. I work for charities doing videos to raise funds. Children's welfare is one of my favorites.
So what I dreamed of doing was backing up my family and making documentaries to help children's welfare like autism. Instead we are trying to adapt and help in a lifeboat.
2
Retirement is not about the money -- unless you don't have enough. And then it becomes ALL about the LACK of it.
22
Retired and pretty satisfied:
1. Live as long as you need to.
2. Leave something to friends.
3. Have regrets only about your economies, whether too few, or too many.
4. Work for yourself at some time in adulthood.
5. Spend time appreciating all your parents provided - especially memories.
6. Before retiring, clean out the garage (or that closet, that spare room).
7. Give away something you found useful, to a stranger.
8. Stop wearing a watch for a while. Sense time and space by sunrise, midday and sunset, the tides, solstice and equinox, the position of planets and stars. (include Pluto)
9. Revisit a special place of childhood and accept disappointment or re-enchantment.
10. Think about this saying: "What you do not use yourself, do not give to others. For example, advice."
Now, do the math part alone, with help only if you absolutely must.
1. Live as long as you need to.
2. Leave something to friends.
3. Have regrets only about your economies, whether too few, or too many.
4. Work for yourself at some time in adulthood.
5. Spend time appreciating all your parents provided - especially memories.
6. Before retiring, clean out the garage (or that closet, that spare room).
7. Give away something you found useful, to a stranger.
8. Stop wearing a watch for a while. Sense time and space by sunrise, midday and sunset, the tides, solstice and equinox, the position of planets and stars. (include Pluto)
9. Revisit a special place of childhood and accept disappointment or re-enchantment.
10. Think about this saying: "What you do not use yourself, do not give to others. For example, advice."
Now, do the math part alone, with help only if you absolutely must.
28
Great advice, Leslie! I agree that we should live as long as we want. I adhere to what I call AAA75, meaning Alive, Active and Alert at 75. Zeke Emanuel expressed the idea beautifully in The Atlantic: http://www.theatlantic.com/features/archive/2014/09/why-i-hope-to-die-at...
I base my work, medical treatment and financial plan on being dead by 75, which would suit me just fine. I may go sooner, and that's well and good. If I'm still thriving at 75, without dementia or debilitating disease, I may stick around a little longer. I am 64 now, and I find the existence of an end point very helpful in planning for life, death and family.
I base my work, medical treatment and financial plan on being dead by 75, which would suit me just fine. I may go sooner, and that's well and good. If I'm still thriving at 75, without dementia or debilitating disease, I may stick around a little longer. I am 64 now, and I find the existence of an end point very helpful in planning for life, death and family.
This is an addendum to what I wrote below. If you receive a reverse mortgage rather than moving, expenses for property taxes and maintenance do not go down. I am not sure that I will move out of my family home, a lot probably depends on where my children end up and how much of a burden it becomes, but if you have other priorities for your retirement -- like traveling or a hobby -- think about how much further your assets will go if you are not devoting so much of your income to a larger, more expensive home than you need.
10
I have a reverse mortgage on my bungalow at the beach and I LOVE it. With two union pensions that bring in $2300 a month (after withholding), not having a mortgage of $1550 is a little better for my lifestyle. If you can't afford maintenance and taxes on a home you're living in for free, something is screwy somewhere.
I've always questioned that idea of retirement. You retire to do what? Travel? It seems that would have been more fulfilling at a younger age where you can run up the hills and stairs, perhaps see better w/o the bifocals, eat whatever you want without 'issues'. Garden? Why not work for a landscaper. Etc.
If you quit working, you likely slow down, and when you slow down, you might as well get on the bar stool, drink heavily, and hang it up.
I plan to never retire. It really makes no sense. Granted, as a 50+ person, my 'nest egg' is probably some dried fruit and a real egg, but I should sit on the couch and watch TV? Go to a physician and get more Pharma for my "well being"? What rot.
Don't buy into it, folks. Live, live well, and when Death comes knocking, tell him you're busy living.
And if he's persistent, you can smile because you've lived, and instead of worrying if your children (or the government) will be happy about their windfall, you can smile really big knowing you left a few debts behind. There *is* such a thing as a free lunch, baby :)
If you quit working, you likely slow down, and when you slow down, you might as well get on the bar stool, drink heavily, and hang it up.
I plan to never retire. It really makes no sense. Granted, as a 50+ person, my 'nest egg' is probably some dried fruit and a real egg, but I should sit on the couch and watch TV? Go to a physician and get more Pharma for my "well being"? What rot.
Don't buy into it, folks. Live, live well, and when Death comes knocking, tell him you're busy living.
And if he's persistent, you can smile because you've lived, and instead of worrying if your children (or the government) will be happy about their windfall, you can smile really big knowing you left a few debts behind. There *is* such a thing as a free lunch, baby :)
15
I looove being retired: no getting up early, no commute on the freeway (there AND back). No customers saying you're rude when they demand the impossible while you're actually knocking yourself out trying to do your best for them, time a doctor's appointment without the major hassle that goes with leaving work early. and so on. If you have nothing to do while retired, my advice is "get a life."
11
I am thinking about how long to work and when to retire: not because I want to sit on the couch and watch TV, but because of health issues that make it difficult to work properly. It's not always a simple choice and it's not always because a person is lazy.
It would be better if the Federal Reserve were not trying to keep the Government spending/debt with Zero interest rates. My $118,000 would at 4%CD yield $4,720 to add to my SS each year.
15
Let's see, the one single example is of a woman who got sick so had to use her 401k monies and then plans to work to 70 years to maximize SS. Most other examples/suggestions are about/for couples who are more readily able to live on "one income" or live on less, who draw two SS checks, who have a home to reverse mortgage and who have a significant other to turn to when they move thousands of miles from other family & friends. As usual, not a very-useful article for singles.
40
Actually, not a particularly useful artical for anyone. Was there a revelation in the entire piece? No. Just a string of scenarios that are pretty common and entirely predictable.
1
I was laid off in a corporate Reduction in Force in 2006 at age 54, worked for the same company as a contractor until 2011, was laid off again, got a "good" job in a non-profit from 2012-13 when the whole department (me and one other person about my age) was "laid off. I was 61 at the time and survived on unemployment and had no choice but to take my Social Security at 62. Also, with no way to afford health insurance, thank God and Obama for Affordable Health Care, otherwise I wouldn't have health insurance. Did I pay my dues? I have a Masters Degree and worked all of my life until I hit my fifties and the RIF's started. I really get fed up when I hear people say some seniors "don't want to work until seventy." I would STILL be working (and I am, for myself now) but because of my age--nothing else--I was expendable.
60
Obviously, it is not a strategy that works for everyone, but selling your house and moving to a cheaper abode would be the biggest boost a person might give to themselves. If you have equity, it can be conservatively invested, and additional savings (taxes, mortgage, maintenance) could be salted away. As for moving outside the U.S., just remember, Medicare provides very limited health coverage when you live abroad.
7
Now that our son has left for college my wife and I bought a 900 sf condo, a quarter of the home space we had maintained for 20 years. We banked a good chunk of the equity we'd built up and have radically reduced our living expenses. This year I retired while my wife continues to work. Our total utility bills seldom exceed $100 per month, even in the New England. We sacrifice a lot of space but it's working out and we can afford to live well at a much lower cost.
13
I'm so grateful I got to live in Japan at age 16. Aside from the amazing cultural and life-transformative experience, it showed me people can live so well with less space. I can't stand Mc.Mansions. You couldn't pay me to live in one. Using less resources, enjoying vertical living, NYC is a place that offers so much even if you have modest means. The key is to live within them. The yoga principle of aparigraha- non-greediness helps as well. My favorite word of late? Enough. In this country, more of us have it than we admit, (and many really have too much.) It's complex alas, since our economy is a 'consumer' economy. But if we choose to consume experiences, it usually takes up less space.
1
Articles like this are useless for the majority of Americans, who depend on pensions and Social Security, often only the latter.
23
Fewer and fewer workers are eligible for pensions.
I'm trying to follow the Harry + Sally scenario. They spend $60k a year. If they collect $4000/mo in SS checks, then they are short by $12k a year, right? So it should take 33 years to go through their savings. Or am I missing something?
6
Concept is right but timeline is off. The $4000/mo is based on both of them waiting until 66 to collect.
They are NOT 66 now, and they are spending $60,000/year NOW. Harry will not get his $2200/mo until a year from now and Sally will not get her $1800 until 3 years from now. Quick back of envelope calcs - without know exact bdays, no inflation, COLA, returns on the 400k, etc. - indicates they will spend about $140k of that $400k between now and when they are both 66 when they are then collecting $4000/mo.
So then the arithmetic is $260,000/$12,000 = 21 years!
They are NOT 66 now, and they are spending $60,000/year NOW. Harry will not get his $2200/mo until a year from now and Sally will not get her $1800 until 3 years from now. Quick back of envelope calcs - without know exact bdays, no inflation, COLA, returns on the 400k, etc. - indicates they will spend about $140k of that $400k between now and when they are both 66 when they are then collecting $4000/mo.
So then the arithmetic is $260,000/$12,000 = 21 years!
3
Isn't there a ceiling on social security benefits for couples and isn't it below $4000 monthly?
My understanding is it is a "family" maximum, not a "couple" maximum. I read that he family maximum does not affect the amount of benefits that can be paid to a married couple when both have been in the work force. Each receives his or her own benefit. There is a family maximum on the amount of benefits that can be paid on a single earnings record.
But I am not an accountant or tax advisor, so check with someone qualified.
But I am not an accountant or tax advisor, so check with someone qualified.
The penalty for claiming retirement benefits at age 62 is 30 percent, not 25 percent. The penalty is reduced for each month later you wait to file. Most people retire early despite the penalty.
8
I would fact check that if I were you, especially if you are basing some financial decision on it. It is 30% only if you were born in 1960 or later, in which case you won't be eligible for another seven years anyway. For those turning 62 this year or next year, it is 25% (b.
The living less section of this article got surprisingly little space...
Mr. Money Moustache: http://www.mrmoneymustache.com/ has been quietly advocating his lifestyle of extreme saving and minimal spending.
(Hint: it's not at all about deprivation)
Mr. Money Moustache: http://www.mrmoneymustache.com/ has been quietly advocating his lifestyle of extreme saving and minimal spending.
(Hint: it's not at all about deprivation)
4
First thing all of us old people, people in the last third of their lives, whether they like to think of themselves as old people or not, should petition the government to not tax social security, exempt those elderly without children in school from school taxes and cap the tax rate for IRA retirement fund accounts to 10%.
50
As the elderly population explodes, Social Security payments will explode as well. To continue meeting the needs of retired Americans our nation must have a large and GROWING workforce to collect SS and Medicare taxes from. And that is why even those without school age children MUST pay their share of school taxes. Since we ALL depend on a thriving workforce to pay out our benefits we must ALL contribute to educating that workforce for the future.
9
We pay taxes for schools so we can ALL live in an educated society. Do you want your future doctor, lawyer, and accountant to be well-educated ? Then pay your taxes.
20
Who paid for your kids to attend school? Were your contributions to SS tax exempt at the time?
Sheesshh...
Sheesshh...
22
This is all far too complicated. Just tax 25 percent of the assets of the wealthiest 10 percent of U.S. households, offshore accounts, Swiss bank accounts, unaccounted for cash in safety deposit boxes, etc. Do this every 30 years. Distribute to the other 89 percent. To avoid further complications, cut the sum into equal portions. Even the lowest of the 89 percent should get a leg up. The top 10 percent will like this about as much as Huey Long's Share the Wealth program. But it won't hurt the super rich. Junior can probably still get his Cayenne Turbo or whatever. Oh, and keep 65 as retirement age for max SSA benefits. Some politicians are going to get burned by that third rail. Originally there were to be no changes for those born in 1955 or earlier. Now look at it!
25
I am really in favor of being able to plan the exact death date. I will make it the last month in which I can bicycle, walk, dance without physical problems, and function well enough mentally to not be a pain in the butt to others. I then will spend my every last cent up to that date, including gifts to people, animals and groups I want to support from heaven or hell, most likely purgatory if it exists in my case. I had always liked the idea of limbo but it got wiped out along with Pluto.
44
I couldn't agree more!!!
The most important thing to know about retirement is where to retire.
And in this case where to live while you work.
Know the state and it's laws, even archaic common laws, because they can take your savings and your retirement.
Please read here at this safe change.org site
http://chn.ge/1fhM4si
Knowing which states are safe to live in is critical. Please don't even drive through NC before reading about the law and my experience.
Meg Conway, formerly of NC
And in this case where to live while you work.
Know the state and it's laws, even archaic common laws, because they can take your savings and your retirement.
Please read here at this safe change.org site
http://chn.ge/1fhM4si
Knowing which states are safe to live in is critical. Please don't even drive through NC before reading about the law and my experience.
Meg Conway, formerly of NC
6
Against my better judgement, I read your blog. For a 40% contingency fee, you should be able to get, with no upfront costs to you, a good attorney to take a good case. I fear, however, you do not have a good case. You are right to warn retired people, arguably more prone to falls, to stay out of pure contributory negligence states. "Comparative negligence," I.e., plaintiffs and defendants are responsible for their percentage of fault, is the more enlightened approach today. Also, judges rarely rule from the bench in hearings such as yours, so it is not a "private decision." I feel sorry for your injury, and it also highlights the need for a better healthcare system.
not to mention climate change. how to factor that in??
I wish that just once, in a planning for retirement article, the author would mention what usually happens to people who live to an old age.
Alert! The health care industry takes all of your money and then the government insists that you 'spend down' - to Nothing - in order to qualify for Medicaid.
Surely someone on the NYTimes staff has a parent in Assisted Living or a nursing home?
Alert! The health care industry takes all of your money and then the government insists that you 'spend down' - to Nothing - in order to qualify for Medicaid.
Surely someone on the NYTimes staff has a parent in Assisted Living or a nursing home?
124
Sometimes adult children take financial advantage of their parents who need or are already in a nursing home. They may choose an inferior nursing home or deny their parent(s) the extra care they need once in the nursing home, just to preserve their own inheritance. Very sad but true.
2
Why shouldn't one spend down before qualifying for public assistance? I've no wish to pay higher taxes so that others can freeload because they want to "leave something to the children." Use your own savings before you tap mine.
17
Well yes, Medicaid is for poor people. It's natural that folks with assets wouldn't qualify for Medicaid.
9
For all the hype about retiring 'overseas' it's not an option for most. The really nice countries, like Italy and Spain and even Portugal, are available only to the rich. As for Mexico and South America, two-thirds of retired Americans, who move to Mexico or any country is South America, move back within two years, according to government statistics. The authors of all these news articles on how wonderful it is to live outside The US, don't tell you that postal service is often horrible, both to and from The US; that banking can be a real pain; and that physical safety is almost always a big concern. Not to mention plentiful and large bugs and spiders. In Mexico especially, noise is also another problem: there is always an all-day celebration over something. I looked into moving overseas extensively, for at least 5 years. The only place I would even think of living is Panama -- and I couldn't handle the humidity there.
21
Living in New York the Postal Service is terrible, the banks are a pain and the noise is horrendous.
11
And those considering an overseas retirement should also be mindful that Medicare is generally NOT usable outside the United States!
9
Don't retire to another country and expect it to be just like the US, only cheaper. The decision to move out of the US can be the key to a more comfortable retirement, financially and otherwise, but you've got to have a spirit of adventure, a willingness to adapt to a new culture and confidence in your ability to meet new challenges. Done right, you'll get a chance to make your retirement years not just cheaper, but more interesting, more stimulating and more engaging than might be the case otherwise. But you've got to be optimistic, not timid.
Did you ever bother to look at what happens in other nations with retirement and savings? When do Americans start to enjoy life, after they retire? Is this all part of the "American dream" work til you drop? What happens to those who don't save enough or have enough social security? Is there something socialist about giving all Americans a aged pension that is means tested?
34
Social Security is already biased in favor of workers who earned low wages in their working years, as a higher percentage of their wages is replaced in retirement. I retired over a decade ago and have no complaints. I also saved/invested a higher percentage of my income while working.
4
Greece might be a place to start. Retirement at age 50 supported by a big fat government pension. Look where that has got them. After leaving the workforce pension incomes are now being reduced.
Those rules that let spouses finagle better benefits by gaming one another's accounts seem rather unfair to never-married citizens who paid in FICA taxes at the same rates as the marrieds. Where's our scheme to maximize payout?
Single and never married taxpayers -- and voters -- are a growing constituency. I hope lawmakers begin to take heed.
Single and never married taxpayers -- and voters -- are a growing constituency. I hope lawmakers begin to take heed.
65
Your best revenge is to live a very long life and stay in good health so that your can enjoy your retirement while collecting your monthly benefits. Google Ida May Fuller.
2
as a couple who will benefit from this, I fully agree it is an odd system, and needs a second look
My US friends are generally much less prepared for retirement than my overseas and Canadian friends. Sad!
Working or moving somewhere less expensive may be the only option for many. http://www.firecalc.com/ is a great calculator.
Working or moving somewhere less expensive may be the only option for many. http://www.firecalc.com/ is a great calculator.
4
So, to paraphrase: if you haven't planned ahead, starve (excuse me -- practice starving). We seem to get variations on this article a half dozen times a year.
16
#1 If at all possible, increase your mortgage payments to pay off your mortgage as soon as possible. Your debt-free home is very valuable financially and psychologically. #2 If you're going to be financially independent, you're going to have to learn the art of investing yourself and not be dependent on others for advice. Knowledge breeds success and confidence. Go to the Vanguard website and start learning. #3 Be patient. Make time work for you.
11
Why is this article telling people to pay less taxes?You would think,an article in the pro tax/pro big govt NY Times would encourage people to maximize their tax burden,to enable the welfare state.
8
To finance a welfare state, the rich would have to pay their fair share. So this will never happen.
35
"fewer" taxes.
19
Yes! Fewer taxes, and less people like that commenter...
2
I love it. The only way you can really retire is move to another country. Quite a social safety net. We should all move to Mexico. It would also balance out the the immigration problem. They all want to come and we need to move there to survive our old age.
86
Actually Mexican net migration to the USA has been at approx. -0- since 2008. Here in Mexico there is universal health care, a few tiers of options from all private, to employer subsized to all govt. Also very cheap very good University for the 20% of population who qualify academically. So yes, we are in decent shape in Mexico, no longer as cheap as it used to be but all the benefits of 21st C living.
19
besides a visceral drug war that makes living in certain places untenable
2
Only problem - no Medicare unless you're willing to make a lot of unscheduled and sometimes lengthy vistis back to the U.S.
3
I divorced after 12 years of marriage. My ex made more than me so when I reach my normal retirement age of 66.5 I plan to take social security based on his earnings and then take my own at age 70 when it will max out. If you're divorced after at least 10 years of marriage this may be your best option for maximizing social security. I have another 10 years before I can do this and it doesn't have any effect on his social security payout.
15
Enjoy the ride on the dime of those who do not benefit from such schemes yet paid in at the same rate as you did.
13
Caution on this one. You lose this option if you remarry. If you remarry before age 60, you also lose the option to collect survivor benefits if your current spouse is alive.
4
In order for this to be allowed, you can not have remarried before the age of 60. Also, if your ex dies, instead of getting one half of his benefit (which is what you will get while you grow your own full benefit until age 70), you can then claim his whole amount. And, yes, they always seem to earn more, but that is a whole different discussion.
Sorry to bring up a financial journalist from another paper here but...
I like Jason Zweig's angle on SS: it IS an annuity. It is a steady income stream until death that you've been paying into since your first paycheck. With this in mind you can broaden the scope of, and be a little more aggressive with (if it suits you), the rest of your investments / savings.
I like Jason Zweig's angle on SS: it IS an annuity. It is a steady income stream until death that you've been paying into since your first paycheck. With this in mind you can broaden the scope of, and be a little more aggressive with (if it suits you), the rest of your investments / savings.
22
And it's an annuity that has a cost of living adjustment to some degree.
1
The article glibly assumes that most of us will live well into our nineties when the break even analysis might support delaying Social Security. But all of the experts on the subject qualify this with a big IF: health issues, bad family genetics, and yes, life shortening stress brought on by a monstorously tortourous job. Under those circumstances, collect as early as possible.
52
And all the while life expectancy goes up, trapping all the poor souls in those "monstorously tortourous" jobs. Makes you pine for the good old days when most of the population worked dawn to dusk on farms without running water, indoor plumbing or electricity and young men were drafted to fight and die, and young women had limitless opportunities. Gee we have it tough.
1
Small risk if I delay SS and die soon.
Big reward if I delay SS and live a long time. Plus the spousal benefit is much higher. I'm waiting 'til 70.
Big reward if I delay SS and live a long time. Plus the spousal benefit is much higher. I'm waiting 'til 70.
1
Yes, my financial advisor advised me to collect at age 62 in view of the "break even" issue. Other considerations I took into account (especially as a high-income individual): the possibility that means testing will be employed in the future for SS, just as it has been for Medicare premiums (which have been taking an increasingly larger bite out of my monthly SS payment); the possibility that the SS program will be underfunded or otherwise generally eroded in the coming decades.
2
A person should start saving as soon as their career is established. The benefit of compounding through the years cannot be duplicated later. Your children should pay their student loans, leave the nest asap, and become financially independent. They should do whatever that takes (two jobs, etc.). One's property should be paid for by retirement. A reverse mortgage is the worst thing a person could do to themselves. If you need a reverse mortgage you cannot afford where you live so downsize, move, sell the house, etc. As far as Social Security: they hope you will take it at 65, 66 or 70 because the funding is so low. If you put that money early (62) into a good growth mutual fund you are ahead of the game until age 78/79 or so. People will develop cancer in their 60's, heart disease, diabetes and will not make it to those later years but they do not know it. The average person in good health dies at 84/85 read the obituaries. If you cannot discipline yourself not to spend your early social security and save it then do not take it until later but only as a last resort.
11
This can onlywork if you have stopped working for pay. If you take Sociial Security early (before your full retirement age) you will be penalized 50% of each dollar earned after the maximum allowable amount (I believe it is somewhere around $17,500/yr). You would be better off waiting to collect if you are still pulling down a reasonable salary.
2
I'm too risk-averse to count on dying by the average age, or to substitute volatile stock market investments for Social Security.
As the article explains, every year you delay taking your Social Security benefit, it grows 8%. Guaranteed. Risk-free. The stock market can't match that.
As the article explains, every year you delay taking your Social Security benefit, it grows 8%. Guaranteed. Risk-free. The stock market can't match that.
2
and, if you continue to work, you will likely pay income tax on that SS
The advice I would like to see is what to do with divorce and child support. If one is over 50 and still has under age children one is required to pay in most states a large percentage of earnings beyond the needs of the children. For three children often in the range of 40% of after tax income. The more one earns the more one pays and if one sticks to the intent of the law it is impossible to save and certainly counterproductive to try to earn more with, for example, a second job.
2
Here's a calculator I did which shows graphically the benefit of delaying taking Social Security. If shows how you can fill in the retire years before taking Social Security at age 70 with a variety of other income sources. And yes, one source is part time work.
https://www.yourmoneypage.com/retire/retiretotaldd.php
https://www.yourmoneypage.com/retire/retiretotaldd.php
2
Yes, savings and investing early and smartly for retirement is the best possible strategy. But let's not worry excessively whether one is having enough money for retirement and, therefore, spending money needlessly on financial advisors. There is an industry thriving and benefiting from giving retirement financial advice. Let's take advantage of the fact that Americans' retirement incomes/benefits are paid in US dollars. It's a global reserve currency and it's strong, i.e., the exchange rates to local currencies are favorable to the US dollars. More Americans should be retiring to less expensive oversea countries, where the quality of life is much better and the costs of living are much lower than in the US. What retired Americans need to retire oversea (and take advantage of the purchasing power of the US dollars) is an open mind, tolerance, and young and healthy enough to enjoy living.
14
Keep in mind that, as of today, you cannot use your Medicare benefit if you are living overseas. If you suspend paying your premiums it will be more expensive if you ever come back to the States and reactivate the benefit.
2
And a spouse who wants to go. And health insurance for that locale, because Mediare won't pay overseas. And a little place here in the US--one bedroom apartment--to return to if/when illness or old age necessitate moving back here for medical care. And family who are willing to come see you in another country, or a special nest egg just for going to and fro.
Retiring overseas sounds great, but it isn't that simple.
Retiring overseas sounds great, but it isn't that simple.
14
Most countries allow foreign residents to purchase health insurance in their national plan and the costs are much lower than the Medicare premiums.
Where you want to live in your retirement is a lifestyle choice. For many Americans, to be able to retire in the US is to work longer and save more, which reduces the amount of time that they can enjoy the fruit of their labor.
Where you want to live in your retirement is a lifestyle choice. For many Americans, to be able to retire in the US is to work longer and save more, which reduces the amount of time that they can enjoy the fruit of their labor.
2
Here's another strategy that worked for us. Retire at 63 and take Social Security. Then join the Peace Corps which welcomes seniors. While in the Peace Corps, your monthly SS benefits accumulate for two years, you learn to live on much less and enjoy life more, you do meaningful volunteer work, have a valuable cultural immersion experience, learn another language, and your medical expenses are all covered. When your service ends, you will be eligible for Medicare. You can also travel extensively during the annual 24 days paid leave, and you can now choose your country.
200
Joining the Peace Corps is a wonderful idea. But if you don't need your SS while you're doing it why take the big hit on your lifetime benefits by starting them at age 62? You could still join the PC and then have a larger benefit in a couple more years.
4
I love your comment. Could you advise me on where to begin my research on this?
Thank you.
Meredyth
Thank you.
Meredyth
Now that's a PLAN!
2
'...Harry, 65, and Sally, 63 — with a $400,000 portfolio and $60,000 in annual expenses...'
How do people of this age have $5000 a month in expenses?
Most older people have paid off their mortgage, which is the largest expense, so it is hard to understand how anyone could have that amount of debt.
If you live way above your means and have two expensive new cars and a large house for only two people, then of course you will not have enough savings for retirement.
Not that hard to figure out what the problem is and it is not Social Security.
How do people of this age have $5000 a month in expenses?
Most older people have paid off their mortgage, which is the largest expense, so it is hard to understand how anyone could have that amount of debt.
If you live way above your means and have two expensive new cars and a large house for only two people, then of course you will not have enough savings for retirement.
Not that hard to figure out what the problem is and it is not Social Security.
24
I think 5,000 per month is low. After paying for two kids growing up, going to college and trying to travel as a family we still have a large mortgage.
8
They pay proprty taxes on Long Island and their health insurance premiums out-of-pocket.
10
You think $5000 is a lot? After taxes, mortgage, retirement savings, etc. I probably live on half that. But I'm single, so two of me would be $5000/month. I live in a condo, not a house, and do not drive an expensive car. I do save for short/medium term expenses, and travel, and buy gifts. I also pay property tax, gasoline and gas tax, home insurance, car insurance, etc. When older I plan to look into long term care insurance--another expense. If you are younger than 65, you have to buy health insurance. If older, you pay Medicare Part B premium and a Medigap policy. $5,000/mo in expenses for two people in their early 60's sounds a little low to me. (The 63 yo might pay $17,000/year for a health insurance policy.)
8
Bad advice for reverse mortgage, many seniors don't understand the complex of the fine printed policies,their houses lose before their life. A choice of overseas is better. Work hard and save hard if possible.
9
Obviously dying young is the best approach. You can avoid all of this.
43
This is probably a futile dream but I wish that the Fed would increase interest rates back to a reasonable level. My wife and I were conscientious about saving all of our lives and we don't want to trust our savings to Las Vegas East (Wall Street).
Unfortunately, when we planned on having our savings safe in FDIC accounts we couldn't anticipate that interest rates would drop to near zero. Might we live to see our accounts once again getting a reasonable return? I probably shouldn't hold my breath.
Unfortunately, when we planned on having our savings safe in FDIC accounts we couldn't anticipate that interest rates would drop to near zero. Might we live to see our accounts once again getting a reasonable return? I probably shouldn't hold my breath.
44
We are semi-retired at 63. We lived frugally and were lucky in real estate investments. The purpose of financial independence is for a secure and fun lifestyle. We can do pro bono projects that keep us connected to younger people. It's about relationships now instead of earning a paycheck. I won't take SS until 70 because I think of it as longevity insurance. Most people take it early because they can't afford to wait. I am against the political forces that are trying to raise the FRA to 70.
22
After a financially devastating divorce about 19 years ago I began anew. I had nothing. Zero! I was 49 years old and basically broke, homeless and without a job too. I took stock of my situation and did the following. I moved in with mom. She said go upstairs and pick out a room. I took any jobs. And also returned to graduate school. I earned two post-graduate degrees and qualified for a PA Management program through civil service and the Governor's Office of Adm. In 19 months I graduated, got the new job position, bought a small townhouse with money saved and prepared for retirement in 16 years. I kept my external jobs to afford my new home. I saved. Then saved some more. When the real estate market turned good I traded my home for new, larger one with greater appreciation. I also contributed to deferred compensation and every raise went to that fund. Finally, 3 years ago I retired. With my state pension and SS I was ok. My deferred comp and another personal retirement fund put me over the top. I will be 68 in the fall. I own an $700,000 home in Florida and have greater than $600,000 in cash. My net worth is greater than $1 million. I saved, worked hard and saved some more. I fought the depression of divorce and loss. Fourteen years ago I remarried. My wife liked my savings program and followed my lead. Her assets are now greater than mine. She too was divorced, broken and worked relentlessly.
Now we play, relax, cruise and take care of each other. Worked and saved!
Now we play, relax, cruise and take care of each other. Worked and saved!
110
You have a pension.
Nuf said.
Nuf said.
9
Jay, let me do the math (I am a math whiz after all)...
You own a $700K home + you have $600K cash and your net worth is greater than $1000K. I have news for you. Your net worth is either greater than $1300K or you have a mortgage on your home. In the latter case I have bad news for you: you do not own a $700K home.
Sincerely, PaulN (don't kill the messenger, please)
You own a $700K home + you have $600K cash and your net worth is greater than $1000K. I have news for you. Your net worth is either greater than $1300K or you have a mortgage on your home. In the latter case I have bad news for you: you do not own a $700K home.
Sincerely, PaulN (don't kill the messenger, please)
15
Worked and saved and lived with your mom. While I admire your tenaciousness, I hope you can acknowledge the extent to which your strategy relied on a resource that many people would not have access too. Nearly two years of no housing costs gives you a significant leg up.
22
This week I attended a funeral of a man who had a reverse mortgage on his house. His wife is in excellent health, but no longer has a home as the bank is taking it. A reverse mortgage seems like a very poor option.
128
Sorry to hear that. Evidently she was not a party to the reverse mortgage. This is a horrible mistake unless it was a late life marriage predated by the mortgage.
7
Banks love to play tricks on customers. They intentionally write riders that screw the homeowner.
The same homeowners who bailed the banks out in 2008-2016... the big banks still receive quantitative easing and they have deregulation...
The same homeowners who bailed the banks out in 2008-2016... the big banks still receive quantitative easing and they have deregulation...
8
That changed recently.
Social security is a forced program across all demographics. Each individual has to choose the best way to gain access to their money (it is my money I paid taxes on it and the government took it) and the money my employers paid into it (they accounted for this money as part of my total compensation) for their circumstance. Some people never gain access to their money because they die before they are eligible. If they had a family perhaps the family will receive the money. Others receive far more than they paid into it.
My personal goal was to get back what I and my employer paid into it, plus a nominal amount of interest. I'm fortunate enough to have to pay taxes on the money social security pays me. So now I've paid taxes on the money going in, and I'm paying taxes on it coming out. I took it at 62 and I'm still working on getting my money back.
I believe the government works hard at trying to get you to delay until 70, hoping for their best, not yours.
My personal goal was to get back what I and my employer paid into it, plus a nominal amount of interest. I'm fortunate enough to have to pay taxes on the money social security pays me. So now I've paid taxes on the money going in, and I'm paying taxes on it coming out. I took it at 62 and I'm still working on getting my money back.
I believe the government works hard at trying to get you to delay until 70, hoping for their best, not yours.
18
Social Security, formally called Federal Insurance Contributions Act (FICA), is an insurance program, which, like insurance in general, pools the receipts and distributes benefits to those who qualify.
It is similar to fire, car, and life insurance. In those cases, the first two in particular, you should hope never to collect.
A problem with peoples' understanding of Social Security is that most do not understand the difference between mean and median. The former is skewed heavily by items with high numbers, say income or wealth. The latter is a better indicator for most people. What really counts is what your account is how your account is performing.
There is much talk about "privatizing" Social Security. The argument is that people, on average would be better off. But IRAs, 401(k)s, etc. are savings plans that are really self insurance. Would you self-insure your health or your house?
It is similar to fire, car, and life insurance. In those cases, the first two in particular, you should hope never to collect.
A problem with peoples' understanding of Social Security is that most do not understand the difference between mean and median. The former is skewed heavily by items with high numbers, say income or wealth. The latter is a better indicator for most people. What really counts is what your account is how your account is performing.
There is much talk about "privatizing" Social Security. The argument is that people, on average would be better off. But IRAs, 401(k)s, etc. are savings plans that are really self insurance. Would you self-insure your health or your house?
6
I agree. The government encourages you to wait until 70, hoping you drop dead before that. All the mutual funds, IRA's, 401k's, etc. do the same thing. If you listen to them you never have enough money and you'll never retire because once you retire your money stops flowing in to these IRA's and 401K's and the mutual fund managers earn their money on the amount they manage. Work till you drop. Not me. I bailed at 62, will never work again.
10
An insurance program that costs me 12.5% of my income is a little excessive. I think the program started at 2% (1 + 1) which was reasonable for insurance. Call it what you will but 12.5% is an investment. The government had to raise the cost to continue to pay what was promised to buy votes.
I didn't get to make a decision of when to take Social Security. I became disabled at 55 and that morphed into Social Security. My wife was so tired of working for jerks that she stopped working at 60 despite my pleas to stay to at least 62.
I'd invested in stocks when the recession began wit hopes of a good return after the recovery. I'd assumed well. All the stocks I'd bought were worth 5-7 times more than I'd paid for them.
Unfortunately both our mothers developed Alzheimers. They like most Boomer's mothers hadn't worked in their earlier years and didn't have pensions or if they did start later had minimal ones.
We drained our reserves by selling all the stocks before reaching maximum potential. We reached a point where we couldn't care for them by ourselves any longer. Siblings, even those with the resources to do so did not help. One even drained what savings she had wrote $30K worth of checks to pay his bills.
Fortunately we have a beach house that we rent out to provide additional income. And we've no mortgages on either home. Money from her 401k is untouchable and will be there to care for my wife after I am gone. My wife wanted to know why I was sure I was going first. I grew up in Miami. There are a lot more widows there than widowers.
The point of all this? Plan all you like. But real life has a tendency to destroy plans no matter how well made.
I'd invested in stocks when the recession began wit hopes of a good return after the recovery. I'd assumed well. All the stocks I'd bought were worth 5-7 times more than I'd paid for them.
Unfortunately both our mothers developed Alzheimers. They like most Boomer's mothers hadn't worked in their earlier years and didn't have pensions or if they did start later had minimal ones.
We drained our reserves by selling all the stocks before reaching maximum potential. We reached a point where we couldn't care for them by ourselves any longer. Siblings, even those with the resources to do so did not help. One even drained what savings she had wrote $30K worth of checks to pay his bills.
Fortunately we have a beach house that we rent out to provide additional income. And we've no mortgages on either home. Money from her 401k is untouchable and will be there to care for my wife after I am gone. My wife wanted to know why I was sure I was going first. I grew up in Miami. There are a lot more widows there than widowers.
The point of all this? Plan all you like. But real life has a tendency to destroy plans no matter how well made.
73
"Man plans, God laughs."
7
"Life is what happens while you're making other plans."
You illustrate this so clearly, and while your situation is so so deeply personal, it isn't unique. Younger than expected disability, aging / ill parents (or even adult siblings) who need help, one major medical event or accident, mental illness (no good coverage for that!), these are the experiences of many.
So glad you were bold during the recession and invested on the upswing. That took courage, and to the extent that you were able to reap rewards, what a help. Imagine if that had not been the case, or you hadn't taken that fortuitous risk.
I hope things get easier for you both. I hope we all can somehow 'survive' getting older ...
You illustrate this so clearly, and while your situation is so so deeply personal, it isn't unique. Younger than expected disability, aging / ill parents (or even adult siblings) who need help, one major medical event or accident, mental illness (no good coverage for that!), these are the experiences of many.
So glad you were bold during the recession and invested on the upswing. That took courage, and to the extent that you were able to reap rewards, what a help. Imagine if that had not been the case, or you hadn't taken that fortuitous risk.
I hope things get easier for you both. I hope we all can somehow 'survive' getting older ...
2
The ground of a certain rich man brought forth plentifully:
And he thought within himself, saying, What shall I do, because I have no room where to bestow my fruits?
And he said, This will I do: I will pull down my barns, and build greater; and there will I bestow all my fruits and my goods. And I will say to my soul, Soul, thou hast much goods laid up for many years; take thine ease, eat, drink, and be merry.
But God said unto him, Thou fool, this night thy soul shall be required of thee: then whose shall those things be, which thou hast provided?
And he thought within himself, saying, What shall I do, because I have no room where to bestow my fruits?
And he said, This will I do: I will pull down my barns, and build greater; and there will I bestow all my fruits and my goods. And I will say to my soul, Soul, thou hast much goods laid up for many years; take thine ease, eat, drink, and be merry.
But God said unto him, Thou fool, this night thy soul shall be required of thee: then whose shall those things be, which thou hast provided?
So let me get this straight:
The Boomers did not save enough either because they did not earn enough, did not save enough or simply had no idea how much they needed. So the solution is to game the system of outdated rules made back in the 1930s to maximize their Social Security benefits.
So, when the Trust Fund runs out in 2033, what are the later generations who are and have been paying HIGHER FICA rates all along suppose to get as benefits?
Hey, it is not our fault that you guys were foolish enough to bid old housing up to the tune of $700K - $1M and think that was a good idea. It was not our idea to outsource/offshore everything, It was not our idea to put the country into $18 TRILLION in debt and STILL not fix the infrastructure, control the cost of healthcare spending, LOSE two wars and have one of the most corrupt political system in the world.
This is what I mean by selfish and arrogant.
The Boomers did not save enough either because they did not earn enough, did not save enough or simply had no idea how much they needed. So the solution is to game the system of outdated rules made back in the 1930s to maximize their Social Security benefits.
So, when the Trust Fund runs out in 2033, what are the later generations who are and have been paying HIGHER FICA rates all along suppose to get as benefits?
Hey, it is not our fault that you guys were foolish enough to bid old housing up to the tune of $700K - $1M and think that was a good idea. It was not our idea to outsource/offshore everything, It was not our idea to put the country into $18 TRILLION in debt and STILL not fix the infrastructure, control the cost of healthcare spending, LOSE two wars and have one of the most corrupt political system in the world.
This is what I mean by selfish and arrogant.
27
Hey, I'm a Boomer, and I didn't own a house. I didn't run a company or make decisions on where to put jobs. I didn't choose the policies that put the country into debt. I didn't vote for - in fact, I voted against - candidates who have ignored infrastructure. I don't spend outsized amounts for healthcare (but I do for insurance), and I didn't support the wars.
You want to be taken seriously? Stop smearing an entire generation with baseless accusations and focus your blame where it belongs. Who knows, you might learn something.
That is what I mean by self-righteous and ignorant.
You want to be taken seriously? Stop smearing an entire generation with baseless accusations and focus your blame where it belongs. Who knows, you might learn something.
That is what I mean by self-righteous and ignorant.
52
Well, as a boomer, I have to agree. We have certainly screwed things up. I have retired in Colombia, South America, and life is good for an old rich hippy. According to International Living Magazine, you can live well in the Andes mountains for $500.00 a month because the weather is between 72 and 78 degrees, 365 days a year. I would be middle class in the U.S., but in Colombia I'm a rich Gringo with a full time maid and cook, and a full time personal assistant and driver. There are now 25,000 expat Americans in the city of Medellin.
9
Boomers supported the two generations before them. In both those generations, few women worked, so 50% of the population was supported by Boomers for 20-30 years and more, including their near free and outrageously expensive medical care, without contributing one dime.
That does not even include the fact that even the men who worked full time contributed pennies on the dollar, compared to what they have taken out.
Many Boomers, and I am one of them, saved and invested wisely, so that they could give their children with the down payment on their homes (both children for me!) and have enough to live on, so they will not be a burden to their children in their old age.
There are many Boomers who have either not bothered to save, mostly because they lived above their means or, most astoundingly, did not want to 'work full time' or do something they 'did not love'...two acquaintances told me this separately, as if the rest of us love doing the opposite. (There are people like that in every generation, it is just that few Boomers got along well enough with their WWII generation parents to live off them permanently in their basements.)
Most Boomers will work until they are closer to 70, unlike their parents and grandparents who, if they worked at all, retired young on generous pensions.
So take heart. Boomers will drop dead of exhaustion right after they retire and the actuarial tables will finally function as they should.
That does not even include the fact that even the men who worked full time contributed pennies on the dollar, compared to what they have taken out.
Many Boomers, and I am one of them, saved and invested wisely, so that they could give their children with the down payment on their homes (both children for me!) and have enough to live on, so they will not be a burden to their children in their old age.
There are many Boomers who have either not bothered to save, mostly because they lived above their means or, most astoundingly, did not want to 'work full time' or do something they 'did not love'...two acquaintances told me this separately, as if the rest of us love doing the opposite. (There are people like that in every generation, it is just that few Boomers got along well enough with their WWII generation parents to live off them permanently in their basements.)
Most Boomers will work until they are closer to 70, unlike their parents and grandparents who, if they worked at all, retired young on generous pensions.
So take heart. Boomers will drop dead of exhaustion right after they retire and the actuarial tables will finally function as they should.
18
I could never understand not collecting S.S. as soon as possible assuming an early retirement at about 62 or 63. Sure you get a larger monthly check if you wait until 66 but at that point someone who started collecting at 62 has already collected $83,000.00. By age 70 that same person has already collected $165,000.00. You have to bet that you're going to live a long time to justify waiting. There are no guarantees in life and I'm sure that billions are left on the table as people bet wrong and died before they collected barely anything.
33
There are also more and more people living into their 80's and 90's. Remember that the "average life expectancy" numbers include everyone who dies before they reach 62 and can think about whether to take their Social Security benefit then or later.
5
I agree! I just did the simple math and decided to take it as I don't have any guarentee that I will live long enough to recoup all the money I would be leaving on the table. And as another reader pointed out, it is my money that cannot be left to my heirs, so I took it and am glad I did!
3
Good point. If you are sick and in poor health then collect earlier. But I am assuming I will live to be post-90. My mother is almost 90 and my father lived to be 93. I am in great health and take care of myself. My father retired at 62 but lived to 93. He really left a ton on money on the table and my poor mother suffers for that decision.
1
This article fails to address healthcare costs. Even with Medicare, out of pocket expenses can approach 25% not to mention drug costs. And if you need long term care of any kind, it can cost over $100K a year, easily. My father was paying over $10K a month for his care. He did not have LTC insurance.
13
Die young is the obvious solution.
1
Strategy number one: Maintain your health.
81
That can be difficult to do. Both my husband and I are afflicted with two somewhat rare diseases. They both came out of the blue, no one knows the causes, could be genes, could be something else. Luckily we were in very good health before, but the diseases are both hard to treat and there is no cure. Honestly, you can buy health.
3
Yep. Not easy to do with our polluted food and environment. According to Sherry Rodgers, M.D., who is diplomate in four medical specialties and lectures at medical schools on six continents, you best bet is to buy a far infared sauna and sweat out the chemicals on a daily basis.
1
Yes! People don't think of that when this question is addressed. Of course things can happen even if you take good care of yourself, but for the biggies of heart disease and stroke, diabetes, many cancers, and Alzheimer's, you can do a lot to affect the odds significantly. Planning for retirement needs to involve planning for your body's long-term health. This is why I consider good nutrition and reasonable expenses related to exercise (don't go overboard, but yes, some good workout shoes and clothes are worth it if they're possible for you) as investments rather than expenses. Thank you for mentioning this strategy.
I retired at age 41 (63, today) and I am still doing fine, though perpetual zero interest rates were definitely not on my radar when I quit. My wife is 56 and also left her regular job at 41 and now works for herself out of the home. She does not need to work but appears to enjoy the social activity.
Here are six alternative financial strategies:
1) Keep it simple. Avoid complex investment strategies. Nuff said...
2) Avoid debt like the plague, especially in an era where savings rates are so low. I paid off my mortgage when I retired and have not paid a dime of interest since that day in 1994.
3) Forget about taxes because rules change. Major life choices should not be influenced by anything remotely as mundane and trivial as tax regulations.
4) The future is unknown. Say no to any long range kind of contract that will impede your financial flexibility or limit your freedom as these are insidious sources of risk. For example, I took social security at 62, would never take a reverse mortgage, would not touch an annuity, etc.
5) The key to being able to save is to do your own chores and avoid wasting money on idle consumption. Although my savings are adequate and I buy whatever I need to buy, I spend very little money simply because I have so few wants.
6) Live and love. That is the main thing, each moment, every day.
Do not put happiness off. Money should never be the main thing.
The main thing is the main thing.
Here are six alternative financial strategies:
1) Keep it simple. Avoid complex investment strategies. Nuff said...
2) Avoid debt like the plague, especially in an era where savings rates are so low. I paid off my mortgage when I retired and have not paid a dime of interest since that day in 1994.
3) Forget about taxes because rules change. Major life choices should not be influenced by anything remotely as mundane and trivial as tax regulations.
4) The future is unknown. Say no to any long range kind of contract that will impede your financial flexibility or limit your freedom as these are insidious sources of risk. For example, I took social security at 62, would never take a reverse mortgage, would not touch an annuity, etc.
5) The key to being able to save is to do your own chores and avoid wasting money on idle consumption. Although my savings are adequate and I buy whatever I need to buy, I spend very little money simply because I have so few wants.
6) Live and love. That is the main thing, each moment, every day.
Do not put happiness off. Money should never be the main thing.
The main thing is the main thing.
235
There is one other piece of advice I would add to this. While you are employed, pay your self first.
6
Someone who was able to retire at 41 is probably not a useful role model for 98+% of the population....
1
So well said!
If you start at an early age, spend less than you earn and save the remainder you will do fine. The first step is to save raises, don't upscale your lifestyle. If you could live on the money you got before the raise, keep doing so.
48
The reverse mortgage, even if removed from the shyster deals of the past, still looks like one very expensive way to remain in a home you probably should sell. If I get it, your interest totals will increase as the amount borrowed increases, and with interest rates set to increase anyway, this is going to substantially reduce the value to the owner.
23
Reverse mortgages are only a good deal for the banks.
10
I have been working with reverse mortgages for over 11 years now and have helped many people improve their financial circumstances. It is not something to be done without complete understanding and with a vision of your future plans. The intent is to allow seniors to remain in their homes should they so wish -- and today there are even more safe-guards built into the product to make sure that that is a sustainable goal. It is worth a discussion if you think it could make a difference in your life.
1
Here's the deal. Age 78 is the break-even point for _total_ return from Social Security. Don't just focus on the size of the check.
If you live past 78, you should wait. If you die before 78, take the money NOW.
Trouble is, we don't really know how much time we got left...
If you live past 78, you should wait. If you die before 78, take the money NOW.
Trouble is, we don't really know how much time we got left...
73
Age 85 for women.
If you are married and the higher earning spouse, only one of you has to live to 78. It's a much harder decision if you're single.
I just applied for SS at age 62 (I am also retired military). Many folks asked why I did not wait until full retirement age.
Well...can anyone guarantee that I will be still alive at 70?
Or healthy enough to still travel?
A friend of mine just died from cancer at 68. He had high hopes for retirement...motorcycle, convertible and a RV. He had planned to travel the US with his wife when he retired at 65. But for the last 5 years he battled cancer.
Tomorrow is not promised to anyone.
Well...can anyone guarantee that I will be still alive at 70?
Or healthy enough to still travel?
A friend of mine just died from cancer at 68. He had high hopes for retirement...motorcycle, convertible and a RV. He had planned to travel the US with his wife when he retired at 65. But for the last 5 years he battled cancer.
Tomorrow is not promised to anyone.
149
If someone had a crystal ball and could know that you WOULD live past 70, perhaps,even well past 70, and that taking SS early WOULD guarantee that you'd outlive your money what would you do then? The odds are in your favor that you will indeed make it past 70 but you're betting against that. In essence you are gambling but gambling with your financial security. No, tomorrow is not promised to anyone but why make a major financial decision based on the worst case scenario? If you can't get by without taking early SS, that is a different matter or perhaps if you have a family history of early death from heart disease or cancer. .
4
Of course tomorrow is not promised to anyone.
But consider:
Will your life style be significantly better in the next few years if you take the money now?
Will your life style ten or twenty years from now be significantly worse if you take the money now and don't have the money then?
When last heard, you won't be able to take that extra money with you if you do die at 68.
But consider:
Will your life style be significantly better in the next few years if you take the money now?
Will your life style ten or twenty years from now be significantly worse if you take the money now and don't have the money then?
When last heard, you won't be able to take that extra money with you if you do die at 68.
6
So true. My father took Social Security early and died two years later. He would have had no retirement at all had he waited. Personal health issues should definitely be taken into account when making these decisions.
"Living on Less" does not mean "living less". My wife and I left the academic/corporate world in my early fifties to serve as Christian missionaries for fifteen years, mostly in very poor countries. We did not live the life of typical rich expat communities, but lived among people. When the time came for retirement, we were alarmed that our highest earning and potential savings period was spent in mission and failed to accumulate enough for retirement.
Then, we found we have a much simpler lifestyle than our age group and we learned how to adjust to available resources and not to waste when we have enough. Food, clothing, living space, transportation even choice of medicines are carefully budgeted and followed. For the past three years, we found we could meet Social Security and moderate pension for living costs, including 10% to the church, and we rely on our savings for discretionary items.
Missionary life taught us how to live abundantly with moderate financial resources. Fortunately we find that we can continue the simple lifestyle. We do not feel short changed at all. After all, we even did the extended exotic travels before our retirement!
Then, we found we have a much simpler lifestyle than our age group and we learned how to adjust to available resources and not to waste when we have enough. Food, clothing, living space, transportation even choice of medicines are carefully budgeted and followed. For the past three years, we found we could meet Social Security and moderate pension for living costs, including 10% to the church, and we rely on our savings for discretionary items.
Missionary life taught us how to live abundantly with moderate financial resources. Fortunately we find that we can continue the simple lifestyle. We do not feel short changed at all. After all, we even did the extended exotic travels before our retirement!
24
Somehow, it is a bitter pill to swallow to work a lifetime and have to live in poverty. I notice Pat Robertson took the King Solomon route and kept all of those 10% tithes for himself.
I guess he is a sheep sheerer.
I guess he is a sheep sheerer.
21
'...we were alarmed that our highest earning and potential savings period was spent in mission and failed to accumulate enough for retirement...'
What is scary is that so many people only realize this when they are ready to retire.
What is scary is that so many people only realize this when they are ready to retire.
3
If you read the statistics, the average person dies within three years of retiring. I know two people who this happened to just recently.
So the best way to extend your savings? Stay HEALTHY and do not die at 68!
So the best way to extend your savings? Stay HEALTHY and do not die at 68!
13
The average lifespan in the U.S. is currently around 78.8 years old. Do your "statistics" show that the average person retires at 75.8 years old? No wonder they die within three years of retiring. :-)
1
Where did you get that statistic? I don't think it is accurate. Please supply a source for your comment. Many people live 30 more years and need quite a bit of money to live that long.
7
Goggle life expectancies by country. The WHO now lists the U.S. as 42nd in the world in life expectancy at 78 years. 50% of the Japanese live past 89 years. We now have the most toxic food supply in the world. The average American diet contains 120 lbs of chemicals per year. Personally, I buy nothing sold in a box, bottle, can, or package by an American food company.
3
The best plan is the 'early plan'. Start preparing as young as possible. Saving 5% of your income at an early age is doable for most. The money can be used for real estate, stocks or best, both. I waited till I was 52, which was way too late, now I'm playing catch up. Live and learn.
10
I read my first investment book which I borrowed from the public library at the age 16, at a time when I was still wearing hand me downs from a rich cousin. Investment skills never go out of fashion. Now more than 50 years later, I have been able to enjoy 10 years of retirement (and counting). The reality is that many Americans will struggle financially in their old age. We will be lucky if Social Security and Medicare benefits are not cut back in coming years. If we got to war with Iran, the government will be even worse off financially and the likelihood of domestic cutbacks will increase. Iam not running for office in 2016. I don't have to pander to the neo-cons.
One thing not mentioned in the article is to reduce expenses. If you have credit card debt at 15%, the actual rate of return to pay that off may be greater than putting money in a retirement account earning 5% maybe, even considering the tax advantage. And if you keep the card paid off that's one less bill to pay after retirement. I'm doubling up on mortgage principal payments so that I will own my house free and clear before retiring. One less check to write per month, and if I want to do the reverse mortgage thing I can.
4
There is very little in the way of software to estimate how to spend your money at retirement. It's all focused on capital accumulation while you are working.
You should not depend on a single figure of , say 4%. If your investments are doing well, you may be able to spend more, if the markets are down, spend less. You usually know in advance when you need to paint the house of replace the roof. This needs to be part of your multi-year planning.
My financial advisor likes to have an annual portfolio review, but this never includes guidance on spending rates. Granted this is difficult news to deliver, because you are telling people they can or can't spend on XYZ, but it's an essential part of managing your retirement income.
You should not depend on a single figure of , say 4%. If your investments are doing well, you may be able to spend more, if the markets are down, spend less. You usually know in advance when you need to paint the house of replace the roof. This needs to be part of your multi-year planning.
My financial advisor likes to have an annual portfolio review, but this never includes guidance on spending rates. Granted this is difficult news to deliver, because you are telling people they can or can't spend on XYZ, but it's an essential part of managing your retirement income.
6
My portfolio pays 4.2%. That's how much I can spend. The dividends come in, and they are available for spending. I never touch my principle, and just let stock prices fluctuate. Simple, isn't it?
5
Do you need software?
Develop a good budget and figure out long term and short term goals. Figure out what your mandatory vs discretionary expenses.
Fortunately, my financial advisor does provide advice on what I can spend, based on my long term goals, cash flow and savings.
Develop a good budget and figure out long term and short term goals. Figure out what your mandatory vs discretionary expenses.
Fortunately, my financial advisor does provide advice on what I can spend, based on my long term goals, cash flow and savings.
1
About Social Security: It is considered so horrifying to take SS before full retirement age or even 70 that one can no longer admit to having done so in polite company. But there are rational, total-benefit-maximizing reasons to do so in some cases. For example, life expectancy is a factor. Also, does one delay taking from a well-invested IRA by taking SS now? Is there an older ex-spouse from which one is likely to receive a higher benefit in the future?
Personally, I consulted 2 Social Security experts (both former SSA employees), and did my own research, before deciding to retire for health reasons and start my SS at age 63. I did so with some trepidation and I don't tell any friends my decision. If I live past the crossover point (where total SS benefits are actuarially equal over time regardless of when started), I don't expect to be receiving SS on my own record (at least not for long) but, if I am, I have a nice IRA. Meanwhile, SS and my spouse's pension income protect the IRA, which is professionally managed and outperforms SS. (The IRA is not guaranteed like SS supposedly is, but I have other guaranteed assets.) My spouse was over 70 and had already started his (smaller) SS when we married.
Personally, I consulted 2 Social Security experts (both former SSA employees), and did my own research, before deciding to retire for health reasons and start my SS at age 63. I did so with some trepidation and I don't tell any friends my decision. If I live past the crossover point (where total SS benefits are actuarially equal over time regardless of when started), I don't expect to be receiving SS on my own record (at least not for long) but, if I am, I have a nice IRA. Meanwhile, SS and my spouse's pension income protect the IRA, which is professionally managed and outperforms SS. (The IRA is not guaranteed like SS supposedly is, but I have other guaranteed assets.) My spouse was over 70 and had already started his (smaller) SS when we married.
3
Your spouse has a pension.
2
True. but he is 10 yrs older than me and I don't get the pension when he dies. So, while his pension obviously impacts our current income, it will not affect my long-term income, which is the primary reason for not taking SS "early." (Also, as a second marriage, our separate assets pass to our respective children.)
A friend kept working until age 70, now has maximum Social Security benefits, mandatory RMD from retirement accounts. Nice Income BUT guess what? HUGE Medicare premiums, huge taxes. My DH and I retired and took Social Security at 62yo, have lower Social Security benefits but also the lowest Medicare premiums. We are in a lower tax bracket than she is, doing Roth conversions for MANY years. ALSO...several friends sold real estate or securities at 63yo, resulting in large capital gains. Medicare looks back 2 years so at 65yo when they started paying for Medicare premiums they paid a lot since their income was high.
21
This article is too simplified to include advice like this. It is easy to trigger high Medicare premiums from one-off events - say, if you decide to sell your house. Or need to take out a significant amount in a single year from taxable sources ( like traditional IRAs) for any reason - medical costs, repairs. Thinking about everything way ahead is one way to elude some of the surprise penalties --- but until recently I rarely saw any mention of this consequence. The point is - it was meant to catch higher income folks, but can catch many with middle incomes.
8
Please quantify those "huge" Medicare premiums. Medicare premiums are quite reasonable, even if one is paying a higher premium than others. You can calculate your estimated premium at 65, based on your income here (estimate it if you aren't yet 65): https://www.medicare.gov/eligibilitypremiumcalc/
7
I'm so impressed with acronyms (not) but it would be nicer to understand what you're getting at.
Btw, 63yo is understood, but RMD and DH...? Required Mandatory Deduction? Dead Husband? Dear Husband?
Btw, 63yo is understood, but RMD and DH...? Required Mandatory Deduction? Dead Husband? Dear Husband?
Congress is considering repeal of the Windfall Elimination Provision (WEP) which unfairly penalizes public servants who earned a pension and Social Security from a second job or summer employment by reducing earned benefits by a sliding formula. The H.R. 5697 passage could add an additional 20-30k in lifetime benefits with no impact on the Social Security Trust Fund. Millions of us in this situation should immediately contact your congressman and support this much-needed relief.
19
As one of those penalized retired public servants, I appreciate this information.
Like many other commentators, I followed the suggestions of older colleagues when it came to planning for retirement. This strategy was not mentioned (yes, financial advisers are good too), but speaking with colleagues who were much closer to retirement than I made a big difference in how I approached the planning process.
Like many other commentators, I followed the suggestions of older colleagues when it came to planning for retirement. This strategy was not mentioned (yes, financial advisers are good too), but speaking with colleagues who were much closer to retirement than I made a big difference in how I approached the planning process.
1
The average federal pension pays $33,000 annually, $2750 a month, far more than Social Security but with a much lower contribution percentage, so no sympathy here.
1
Not true for many state retirees like me.
1
My medicare payments rose by an amount exceeding the inflation-indexed raise in Social Security this year. My IRAs have twice been reduced by 60% after Republican manipulation and Congressional collusion with Wall Street thieves. There is no hope for America's elderly unless we utterly destroy corporate capitalism and adopt the models of Western Europe. I say this as a 10th and 12th generation Yankee WASP, and 5th generation college graduate with two graduate degrees, who worked up until my 70th birthday. If I had it to do over, I'd have been out of this country in my 20s.
170
My IRAs dropped 20% in the down market and recovered twice that when the market recovered because I did not sell and am fully diversified in low fee index funds.
Anyone who lost a lot of money in the bear market did the opposite.
Anyone who lost a lot of money in the bear market did the opposite.
3
Yeap, come to Colombia, South America, it's great and has the best weather in the world.
1
You nailed it.
My husband worked for a corporation, which was more than 100 years old. He was fully vested. He had always planned to retire with a comfortable pension and good lifelong benefits. He followed all the rules.
In the late 1980s, junk bonds became the weapons of mass destruction and deregulation gave all the power to the "Barbarians at the Gate." His company was pillaged and taken into bankruptcy. We lost almost everything. He went into a deep depression and was ill for the rest of his life.
Moral: Whatever you expect...something else will happen.
My husband worked for a corporation, which was more than 100 years old. He was fully vested. He had always planned to retire with a comfortable pension and good lifelong benefits. He followed all the rules.
In the late 1980s, junk bonds became the weapons of mass destruction and deregulation gave all the power to the "Barbarians at the Gate." His company was pillaged and taken into bankruptcy. We lost almost everything. He went into a deep depression and was ill for the rest of his life.
Moral: Whatever you expect...something else will happen.
1
Ladies & Gentlemen:
Regarding all those retirement calculators...
I tried dozens and, trust me, they are all worthless. Just create a retirement calculator on your own using a spreadsheet. If you are not capable of doing so then no no calculator, no website, and no financial advisor will be able to help you, especially since the one and only goal of the latter is to make themselves richer by using guess who's money.
Regarding those longevity tables...
They are all useless too. You are not a male/female but, say, a non-smoking male doing this and that job with this and that family history. The only way to get accurate predictions about your life expectancy, is to get actual quotes from single premium (almost) immediate annuities starting with various dates, say, in one year increments. Then analyze the results. Life insurance companies are in the business of making money so their policies will be based on your personal circumstances. For instance, a 65 year male college professor is expected to live about 5 years longer than an average male of the same age (according to SocSec and TIAA/CREF annuity quotes).
Good luck!
Sincerely, PaulN
Regarding all those retirement calculators...
I tried dozens and, trust me, they are all worthless. Just create a retirement calculator on your own using a spreadsheet. If you are not capable of doing so then no no calculator, no website, and no financial advisor will be able to help you, especially since the one and only goal of the latter is to make themselves richer by using guess who's money.
Regarding those longevity tables...
They are all useless too. You are not a male/female but, say, a non-smoking male doing this and that job with this and that family history. The only way to get accurate predictions about your life expectancy, is to get actual quotes from single premium (almost) immediate annuities starting with various dates, say, in one year increments. Then analyze the results. Life insurance companies are in the business of making money so their policies will be based on your personal circumstances. For instance, a 65 year male college professor is expected to live about 5 years longer than an average male of the same age (according to SocSec and TIAA/CREF annuity quotes).
Good luck!
Sincerely, PaulN
11
Sorry for the typos such as "no no", "who's", etc.
Ladies & Gentlemen:
Let me recommend strategy #7 (or perhaps it should be called #1)...
Start saving for your retirement from the day you start to receive your first allowance from your parents and lead a frugal life (not cheap, not stingy, but just smartly frugal). Then, when it is time to retire, your only worry will be how to spend all the money you accumulated.
Sincerely, one who followed his own advice for 60 or so years.
Let me recommend strategy #7 (or perhaps it should be called #1)...
Start saving for your retirement from the day you start to receive your first allowance from your parents and lead a frugal life (not cheap, not stingy, but just smartly frugal). Then, when it is time to retire, your only worry will be how to spend all the money you accumulated.
Sincerely, one who followed his own advice for 60 or so years.
117
Sound advice...yet it turns out that people can save and lead frugal lives, and still end up with insufficient savings.
A serious illness, a dishonest business partner, an adverse legal judgment, a disabled child--any one of these may undo decades of savings & frugality for a person of average means.
A consistent habit of saving will improve the likelihood you'll achieve financial security. But luck undeniably plays a role.
A serious illness, a dishonest business partner, an adverse legal judgment, a disabled child--any one of these may undo decades of savings & frugality for a person of average means.
A consistent habit of saving will improve the likelihood you'll achieve financial security. But luck undeniably plays a role.
2
We did this and now have retired to FL. We have enough, but not a lot. And we don't work.
Why would you always live for the future and not in the present? This seems like it could lead to a very impoverished way of constructing a life.
Frugal, not overly oriented towards 'stuff', seems OK. But life is about beauty and growth and possibilities and opportunities and living !! Live a true life of your own and life will be its own reward.
Frugal, not overly oriented towards 'stuff', seems OK. But life is about beauty and growth and possibilities and opportunities and living !! Live a true life of your own and life will be its own reward.
Most people assume that their savings won't decline in value, but they need to prepare for the possibility that the market will go down early in their retirements and that they will need to sell at a low price to obtain income. The combination of a market decline and living expenses can reduce savings fast. This is called sequence of return risk. As for annuities, keep in mind that a life annuity with 10 guaranteed years of income costs about the same for a 65-year-old as a straight life annuity. Always go for the 10 year period certain. If buying a life annuity seems like a gamble, you can purchase 10 years of guaranteed income and know in advance that you will be able to survive a market drop without selling stocks or going hungry. Finally, the low interest rates are not the only measure of the value of an income annuity. Because rates are low, stocks are high. You could take your inflated stocks and use them to lock in 10 years of income from say, 65 to 75, or 75 to 80. There are many ways to produce retirement income, and many ways to get by. Look for an advisor who has a retirement certification from The American College, Retirement Income Industry Association, or CFA Institute.
5
It's important to maintain a cash reserve in retirement. This can be in the form of money markets, CDs, or cash value life insurance.
During those periods when markets underperform, drawing from this reserves to cover shortfalls in annual withdrawals allows time forthe underlying investment assets to recover without cannibalizing holdings.
During those periods when markets underperform, drawing from this reserves to cover shortfalls in annual withdrawals allows time forthe underlying investment assets to recover without cannibalizing holdings.
Really? The author holds up as an example Americans who live and work and benefit from their citizenship, who leave and retire in the Philippines to avoid taxes and any meaningful contribution to the society that gave them a good life.
What a disappointing ending to the article. I'm sure when the Hammerslags have a major medical issue, they'll be on the first plane back to good ole' U.S. and let Medicare pay for their new knees, hips, etc.
What a disappointing ending to the article. I'm sure when the Hammerslags have a major medical issue, they'll be on the first plane back to good ole' U.S. and let Medicare pay for their new knees, hips, etc.
24
I think the Hammerslags were quite clear in saying that they could live on $2,000 or less per month in the Philippines, not that they were avoiding taxes. And they paid into Medicare, so why shouldn't they use it if need be?
8
American citizens are taxed on their world-wide income regardless of where in the world they are residing. There is an allowed offset for taxes paid to the country where they are residing on income earned there, but that would not be applicable to the Hammslags unless they are employed in the Philippines which does not appear to be the case.
3
Many people do the same by moving from blue states, where their children got a good education and they had good jobs, to red states, purely for lower taxes.
2
The problem with "file and suspend" until age 70 is the fact that RMDs (Required Minimum Distributions) from IRAs begin at age 70.5
That can cause a big tax problem. It can create very high marginal tax rates for the money withdrawn from an IRA.
That can cause a big tax problem. It can create very high marginal tax rates for the money withdrawn from an IRA.
2
If your problem is that your retirement income is too high and your IRA has too much money in it, then you should do the opposite of what all the retirement advice articles recommend. These articles are written for the average person who may not have enough money.
If you have saved too much, then retire at age 60, take SS at 62, and start your pension immediately. See what the total of your pension, social security, and investment income is, and take enough our of your IRA to max out the benefits of your target tax bracket.
You don't have to spend all the money, you can just move the IRA withdrawals to a taxable account if you want. This strategy would b e suitable for a single or a couple with between 5 and 10 million in financial assets, most of it in IRAs. There are not articles for these people, you have to figure it out yourself.
If you have saved too much, then retire at age 60, take SS at 62, and start your pension immediately. See what the total of your pension, social security, and investment income is, and take enough our of your IRA to max out the benefits of your target tax bracket.
You don't have to spend all the money, you can just move the IRA withdrawals to a taxable account if you want. This strategy would b e suitable for a single or a couple with between 5 and 10 million in financial assets, most of it in IRAs. There are not articles for these people, you have to figure it out yourself.
3
The file and suspend problem, for some of us, is how it provides preferential treatment to married individuals over singles.
5
I can only hope that taxes will be my biggest concern in retirement.
1
What is the american equivalent of the philipenes - Central Maine, maybe? Rochester? Oneonta? North Dakota?
23
Detroit. Inexpensive housing, a predicted reasonable climate as the world warms,..... a vibrant art scene. Not such good infrastructure . . .
4
Central Maine isn't that cheap anymore...
1
Snow in the Philippines? I doubt it. It's tropical with lots of mangoes, papayas, pineapples, guavas and other exotic fruit and an abundance of fish.
I found trying to plan for retirement very confusing. There seemed to be an infinite series of unknowable variables. The most ridiculous piece of all was trying to figure out what age to take Social Security, especially with all the little trick options involving drawing from your spouse's account. In the end, I just closed my eyes and jumped.
It made me think of Rumsfeld's quote about the unknown unknowns.
It made me think of Rumsfeld's quote about the unknown unknowns.
12
Fidelity uses totally unrealistic numbers for their calculation. They predict an 8.73%/yr return on the market and 5%/yr raise in pay for workers.
These companies lie to investors and give freebies only to the wealthy. It is objectipnable they charge high fees to low income people.
It is the scammed and the scammed nots.
These companies lie to investors and give freebies only to the wealthy. It is objectipnable they charge high fees to low income people.
It is the scammed and the scammed nots.
Being Gen X, I fatalistically assume that retirement will be like home mortgages and student loans: the ant will wind up covering the grasshopper, who will raise hell when the time comes.
7
At least you have not have to support the previous two generations of non-working women for 50+ years, as did Boomers.
1
Being a baby boomer I don't understand this. What does it mean
It is NOT about the money. Retirement is about physical, intellectual and emotional freedom. Priceless.
With day to day pressures of work and the constant drumming of advertising in your head, it is near impossible to attain any sort of balance and freedom. Soon after retirement, the true nature of life and of your life will be revealed to you. It is not about the money.
With day to day pressures of work and the constant drumming of advertising in your head, it is near impossible to attain any sort of balance and freedom. Soon after retirement, the true nature of life and of your life will be revealed to you. It is not about the money.
120
THANK YOU, Lou H in NY, for the absolute BEST answer of all the answers that have been listed here - and I've read them all. I live in rural Montana, (but did work at 34th & 5th in Manhattan for many years.) I've lived here for 8 years and am still working and making much less than I did in N.Y, but this is of my own choice. Things are much slower here and now, and that is also my choice. I am considering retiring, (perhaps) this, or next year as I'll be 62. Living simply for the past several years has given me the opportunity to gradually become more used to what to expect when I do leave the workforce. Just me & my Dog. It's not the money, it's the FREEDOM.
3
Except if you don't have enough money, in which case it IS about the money.
As long as you have enough for the things you want to do. That might be buying a used paperback once a week, or taking the grandchildren to the zoo.
1) Practice Living on Less: We own our home, and our taxes and expenses are low. We currently live on one salary and each puts half of her/his salary in our 401K. If I start drawing from my 401K at age 59.5, we could afford to draw out for our current monthly expenses for 14 years. And three years after I can start drawing my wife can start drawing out of her 401K if you wants.
2) Maximize Social Security: Because of our 401Ks, we are in no hurry to draw Social Security. We also both receive a state pension check when we retire.
3) Reduce Taxes: I don't anticipate that we will ever draw out more than $30K per year between the two of us.
4) Get a Reverse Mortgage: Not going to happen.
5) Buy an Annuity: Probably not.
6) Our house is quite valuable. We could easily downsize to a less expensive house and property that would be easier to maintain. In fact we will probably downsize at some time so that we can buy and maintain an apartment overseas.
7) Retiring overseas: We can retire inside the European Community if we like. The big advantage would be health care. Our biggest worry about living in the U.S. is that if Republicans win the White House Obamacare will probably end, making health insurance much harder to purpose. We'll have a gap of several years between the time we retire and the time we reach Medicare age. Fortunately we are both generally healthy, and we lead and will continue to lead active, healthy lives.
2) Maximize Social Security: Because of our 401Ks, we are in no hurry to draw Social Security. We also both receive a state pension check when we retire.
3) Reduce Taxes: I don't anticipate that we will ever draw out more than $30K per year between the two of us.
4) Get a Reverse Mortgage: Not going to happen.
5) Buy an Annuity: Probably not.
6) Our house is quite valuable. We could easily downsize to a less expensive house and property that would be easier to maintain. In fact we will probably downsize at some time so that we can buy and maintain an apartment overseas.
7) Retiring overseas: We can retire inside the European Community if we like. The big advantage would be health care. Our biggest worry about living in the U.S. is that if Republicans win the White House Obamacare will probably end, making health insurance much harder to purpose. We'll have a gap of several years between the time we retire and the time we reach Medicare age. Fortunately we are both generally healthy, and we lead and will continue to lead active, healthy lives.
36
I agree with much of this advice, though my wife and I are a bit older and facing retirement sooner. One area that needs more discussion is retirement abroad, which we have discussed frequently. Yes (as I have indicated several times in comments on these pages), health care in France is excellent and more affordable than in the U.S. But the big concern is Medicare, which will not make any payments for medical care outside the U.S. We have paid Medicare taxes our entire working lifetimes, yet if we retire abroad, we cannot receive the benefit we have purchased. Why? Officially, the response is that Medicare cannot verify the quality of care, a deeply paternalistic position, and the difficulty in transferring payments abroad, again not very compelling in the 21st century. And in many senses, if more Americans retired abroad, it would save Medicare money by reducing the costs the fund needs to disperse. I'd like to suggest that more Americans contact their representatives to demand change in the Medicare system.
1
"We also both receive a state pension check when we retire." Do you have any idea how few Americans are in that position?
9
Dear Jon Davis:
Please explain me how you can retire in, say, the EU if you are not a EU citizen? I, as a US citizen can go and live in any EU county for up to 90 days. Then they kick me out (or I become an illegal alien). EU healthcare? You get nothing unless you pay for it yourself.
Of course, if you have an EU citizenship, then my comments don't apply.
So, my dear Jon Davis, please tell me how your strategy #7 works. Please don't tell me that you forgot, to tell us that you or your wife have a dual citizenship from one of those EU countries.
Sincerely, a US citizen (well, I renounced my Hungarian citizenship when Hungary was still a communist dictatorship; some would say it still is).
Please explain me how you can retire in, say, the EU if you are not a EU citizen? I, as a US citizen can go and live in any EU county for up to 90 days. Then they kick me out (or I become an illegal alien). EU healthcare? You get nothing unless you pay for it yourself.
Of course, if you have an EU citizenship, then my comments don't apply.
So, my dear Jon Davis, please tell me how your strategy #7 works. Please don't tell me that you forgot, to tell us that you or your wife have a dual citizenship from one of those EU countries.
Sincerely, a US citizen (well, I renounced my Hungarian citizenship when Hungary was still a communist dictatorship; some would say it still is).
2
My full retirement age is 67 and the Social Security Administration tells me that if I take benefits at 62 I can expect a little less than $19K per year. If I wait until I'm 70 however, I can expect benefits of just over $33K per year. I'm planning to wait, mainly so I can lock in the larger benefit for my spouse after I (likely) pass away before her, since I was the higher earning spouse. Delaying seems like a no brainer if you are the higher earning spouse. Single folks have a more difficult decision to make.
8
My dad retired at 62 and took social security, despite all the admonitions of his friends. He enjoyed travel and living in the country instead of grinding away in an office. Not long before he died at 68 he said that taking early social security was the best move he ever made.
How many people know that you can start collecting at 62 and just bank or invest the social security payments? There is a little known option that, at age 70, you can change your mind, return everything you've taken in social security, and start all over again at the higher rate? Sounds like good way to hedge your bets if you can. Earn interest or dividends on your money instead of letting the government hold on to it for nothing. If you die during that period you'll have used as little as possible of your own savings so your kids will get a little inheritance to give them a leg up on college payments or a home.
How many people know that you can start collecting at 62 and just bank or invest the social security payments? There is a little known option that, at age 70, you can change your mind, return everything you've taken in social security, and start all over again at the higher rate? Sounds like good way to hedge your bets if you can. Earn interest or dividends on your money instead of letting the government hold on to it for nothing. If you die during that period you'll have used as little as possible of your own savings so your kids will get a little inheritance to give them a leg up on college payments or a home.
11
Congress could repeal that provision at any time, and is likely to do so if too many people do it.
However, you could still take SS at 62 and just save the money. If you saved $160K in 8 years, you could probably get about $6K in supplementary income from the portfolio, which Congress could never take away. I've been considering this idea as an approach for myself.
However, you could still take SS at 62 and just save the money. If you saved $160K in 8 years, you could probably get about $6K in supplementary income from the portfolio, which Congress could never take away. I've been considering this idea as an approach for myself.
3
At the moment, the 8%/year is a much better deal than what the stock market is doing. I'm holding out for 70.
2
No you can't. The policy with respect to withdrawal of the application was changed a while ago and limited to within 12 months from the entitlement date.
So if you did this at 62 you would have until age 63 to change your mind and void the claim. And you could not do it again.
So if you did this at 62 you would have until age 63 to change your mind and void the claim. And you could not do it again.
4
I just turned 62 and received my first ss check a few days ago. My husband is younger, loves his job and expects to retire no sooner than 7 years from now. It made sense to start collecting now, it goes straight to pay down our (small) second mortgage, and when that's gone will be dedicated to pay off our home (the only debt we have). Like many my age, I didn't think I'd live this long, but since there's longevity in my family, I'm grateful that Social Security is there for me (us).
5
You should have filed on your husband's record...
1
Tara I don't know if your getting your advice from but most of it in this article is very poor. Studies show it takes until 80 to make up the lost social security in comparison to taking it at 62. annuities are completely worthless and only make insurance companies money. Reverse mortgages are a worst investment than annuities. It's better to sell your home and fast equity.
14
Especially since many older people live in large houses that they raised their families in.
Even the photo accompanying the article shows a large house, as if a single person or a couple needs a three or four bedroom house with three bathrooms.
Downsize and buy a small apartment...it is a huge relief to let go of all those possessions and not have to deal with yard work and upkeep.
Hint: Your adult children would far prefer to stay in a hotel when they visit you.
Even the photo accompanying the article shows a large house, as if a single person or a couple needs a three or four bedroom house with three bathrooms.
Downsize and buy a small apartment...it is a huge relief to let go of all those possessions and not have to deal with yard work and upkeep.
Hint: Your adult children would far prefer to stay in a hotel when they visit you.
Oops bad typing.
Try this strategy. Worked for us.
1. Buy a house at 27 way below what you can afford, pay it off by 47. Every time you get a raise you put it towards the house payment. Every time you can afford it refinance from a 30 to 20 to ten year mortgage. Mortgage interest is not, is not a good write off. It takes one of your dollars to create 28 or 33 cents in tax breaks. When you pay off your house the month after you pay it you divert that into a mutual fund so you don't spend it.
2. Save everything you can in your 401k at work.
3. Don't buy a bunch of crap you don't need and can't afford like a couch for 3k when you are a teacher.
4. Don't buy your kids the lastest clothes or a new car. Our 17 year old drives his mom's old 11 year old car.
5. Stop keeping up with the Jones'. Get some counseling if you are so insecure you need to do that.
6. Stop using coupons. They are a rip. You can buy the same product at Sams for less than what you pay someplace else and then use the coupon at the other place.
7. Don't, I mean don't use the financial advising business. If you must get 50 references, must of them are charlatans. Its easy. Put your money in a diversified fund from American Funds or Fidelity etc. and leave it there!
8. Take your social security at 62. You have no idea how long you are going to live. The difference between taking it at 62 and your retirement age is negligible when you take into account the extra you draw by taking it at 62.
Try this strategy. Worked for us.
1. Buy a house at 27 way below what you can afford, pay it off by 47. Every time you get a raise you put it towards the house payment. Every time you can afford it refinance from a 30 to 20 to ten year mortgage. Mortgage interest is not, is not a good write off. It takes one of your dollars to create 28 or 33 cents in tax breaks. When you pay off your house the month after you pay it you divert that into a mutual fund so you don't spend it.
2. Save everything you can in your 401k at work.
3. Don't buy a bunch of crap you don't need and can't afford like a couch for 3k when you are a teacher.
4. Don't buy your kids the lastest clothes or a new car. Our 17 year old drives his mom's old 11 year old car.
5. Stop keeping up with the Jones'. Get some counseling if you are so insecure you need to do that.
6. Stop using coupons. They are a rip. You can buy the same product at Sams for less than what you pay someplace else and then use the coupon at the other place.
7. Don't, I mean don't use the financial advising business. If you must get 50 references, must of them are charlatans. Its easy. Put your money in a diversified fund from American Funds or Fidelity etc. and leave it there!
8. Take your social security at 62. You have no idea how long you are going to live. The difference between taking it at 62 and your retirement age is negligible when you take into account the extra you draw by taking it at 62.
NM NYC: The home pictured is mine and it's not large, 2bd/2bath, 1600SF
Wow! Cut expenses, cut expenses more, draw down your house (and pay an outrageous insurance fee for your bank, not you), and move to a developing country. This is an exercise in awful and awful-er. And a portrait of how impoverished America actually is.
It is also a powerful statement for the need to reinvent pensions. They were cut as unaffordable, though we don't seem to have any problem affording massive income inequality.
Hmmm. A move to a developing country is looking more attractive by the minute.
It is also a powerful statement for the need to reinvent pensions. They were cut as unaffordable, though we don't seem to have any problem affording massive income inequality.
Hmmm. A move to a developing country is looking more attractive by the minute.
36
The people who seem best able to retire comfortably are people who are childess, but I wouldn't reccomend it as a retirement strategy.
7
It's working for me. I plan to retire next year while my friends with kids still in high school or college will be working for at least four more years. Plus all the childrearing expenditures they felt they needed to give their kids all the advantages of growing up. And maybe in the future the boomerang kids' living expenses.
Childfree worked for me.
Childfree worked for me.
1
Worked for me too. Mortgage-free home & cottage, no debt, socking away lots of tax-deferred $$ every year. Risk mgmt inc private disability insurance & LTC in place. A future filled with independence, creative pusuits, volunteerism and travel instead of the worry and woes of so many parents. Wouldn't trade for a billion dollars.
There is some excellent software to work on your retirement financial planning, including Social Security strategies: ESPlanner by Laurence Kotlikoff: www.esplanner.com
You have to pay for this, but it is definitely worth it.
You have to pay for this, but it is definitely worth it.
5
Our expenses will be WAY down after retirement. Gas, lunches, espresso with co-workers, work clothes, going out to eat because we're too tired to cook or couldn't get to the store.
All that goes away and I can't wait. Looking forward to more home-cooking, and I make better lattés anyway.
All that goes away and I can't wait. Looking forward to more home-cooking, and I make better lattés anyway.
5
Some people go up, some people go down. I just retired, and now I'm paying $600 a month for retiree health insurance instead of $100 a month for employe health insurance. I'm driving and traveling more, instead of just taking the subway to work every day and only driving on weekends.
So it definitely depends.
So it definitely depends.
7
Medical costs could raise expenses again even if you are healthy now and even if your luck holds you could face higher expenses as you age. Maybe you're saving enough now or will have low enough retirement expenses early on ..to save enough to covermthisemhigher bills.
While he was far from poor and lived frugally, from age 90-95 my father required assistance coping with medical challenges where costs weren't covered by Medicare and he didn't have the funds to cover the costs himself.
This left limited options: pay for private care (too costly and would have depleted all his funds well before he died) depend on family to cover the shortfall ( we did but that threatened our financial future), depend on family to help care for him physically (we did) while paying for limited private care or ..the worst option, divesting all assets and moving into a nursing home (didn't happen because he would have been heartbroken and we loved him too much to force him to do that) .
While he was far from poor and lived frugally, from age 90-95 my father required assistance coping with medical challenges where costs weren't covered by Medicare and he didn't have the funds to cover the costs himself.
This left limited options: pay for private care (too costly and would have depleted all his funds well before he died) depend on family to cover the shortfall ( we did but that threatened our financial future), depend on family to help care for him physically (we did) while paying for limited private care or ..the worst option, divesting all assets and moving into a nursing home (didn't happen because he would have been heartbroken and we loved him too much to force him to do that) .
5
Reverse Mortgage? Buy an Annuity? This advice seems to totally contradict most of the advice that I hear the daytime pundits provide to many older Americans looking for advice on what to do when it is probably too late. The best advice to me is to pay off all debt (most importantly the house), work as long as you are enjoying it, save as much as you can, budget smartly, and learn to life a miser's life. Stockpile that cash and then move somewhere cheap and enjoy!
7
If you refinanced at current low mortgage interest rates, paying off the mortgage may not be the best investment you can make. Remember that the interest paid on a mortgage is tax deductible when deciding on your strategy. Consider the alternative of retirement plan contributions.
3
It's been interesting for me to read about people who either never consider moving to a less expensive area or reject the idea outright.
2
Betsy Miller: Many retirees I know don't want to be forced out of their homes by high property taxes because they have ties to the community they rasised their family in. They want to live near their adult children and be a real part of their grandchildren's lives. Oftentimes those "less expensive" areas are thousands of miles away. Tought to get on a plane every time you want to see your grandaughter.
I strongly recommend attending one or more of the free retirement seminars offered by various firms. I went to an Edward Jones 2-hour presentation/sales pitch and learned a surprising amount including considerations that I'd never heard elsewhere.
Example: Your assets pass to your heirs in your estate. Social Security benefits do not. Depending on whether or not you are consuming assets and what you'd like to leave for heirs, there is an argument for taking Social Security sooner for some people.
The seminar presenter also suggested using one of many free or low-cost Social Security maximizer tools, something I found very enlightening.
A lot of money is at stake and more than a bit of financial security. Most people would likely benefit from a consultation and a bit of advice from experts.
BTW: I never spent a nickel with Edward Jones and have no assets in an EJ account.
Example: Your assets pass to your heirs in your estate. Social Security benefits do not. Depending on whether or not you are consuming assets and what you'd like to leave for heirs, there is an argument for taking Social Security sooner for some people.
The seminar presenter also suggested using one of many free or low-cost Social Security maximizer tools, something I found very enlightening.
A lot of money is at stake and more than a bit of financial security. Most people would likely benefit from a consultation and a bit of advice from experts.
BTW: I never spent a nickel with Edward Jones and have no assets in an EJ account.
4
It's worth noting here that the Obama administration proposed to wreak havoc on retirement accounts in the 2016 Budget. As a Third Generation Democrat, I find myself feeling fortunate most of the Obama's proposals for targeting retirement accounts will likely not get through this Republican congress. Obama bizarrely wants to force distributions from Roth IRAs, force complete distribution of inherited IRAs across only 5 years, and limit IRA balances. This is a President who is unwilling or unable to take-on the heavy lifting of income disparity, Wall Street corruption, college tuition escalation, and age discrimination in the workplace...so he focuses on retirement plans. It's enough to make a 3rd Generation Democrat vote Republican, except they are even worse.
14
Please provide some proof that Obama has made these proposals.
I read the NYT every day and have never heard of this before. Are you sure this doesn't come from Fox News commentators? They are not a reliable source for information.
I read the NYT every day and have never heard of this before. Are you sure this doesn't come from Fox News commentators? They are not a reliable source for information.
1
Just do a google search of "Obama and IRAs".
Yes, those proposals were awful and clearly slanted favorably towards those with defined benefit pensions (eg government employees) vs those of us saving for our own retirement. Luckily they've not come to pass. Maybe the NYT didn't cover those proposals. They were covered in the WAPO and the various finance magazines.
Yes, those proposals were awful and clearly slanted favorably towards those with defined benefit pensions (eg government employees) vs those of us saving for our own retirement. Luckily they've not come to pass. Maybe the NYT didn't cover those proposals. They were covered in the WAPO and the various finance magazines.
Don't forget another smart way to enhance resources: Homesharing. There are many emerging models--rented, co-owned; singles and/or couples; w/ friends or family; or compatible housemates you never met before but can find thru newly established search/match databases. Live better for less in a supportive tiny community. We 3 boomer women have enjoyed a wonderful cohouseholding experience for 11+ years after buying a house together in 2004. It's safer, cheaper, easier, and more fun.
94
As a man who retired 2½ years ago, I find two parts of the advice very sensible: Maximize Social Security, and Practice Living on Less or Radically Downsize. Reversed mortgage and fixed or variable annuity are different kinds of animals, particularly the annuities, where one has to dig into, understand, and trust the fine print and the rating agencies' reports on how sound is the annuity provider. In general, for all kinds of long-term commitments, it is best to be very, very cautious in "signing a pact with the devil".
3
Diversify the portfolio. All of the advice here assumes the economy will not collapse. I buy a bit of gold and silver. At least it is not notional like "money" today. And learn a skill with one's hands. I am farming for sideline income during retirement.
1
Downsizing can be a good retirement strategy; however, refraining from upsizing might be even better.
The average house size in 1950 was 983 square feet (average family size 3.54).
Today's average house size (for our now "average" 2.54 person family) is 2600 sq. feet.
http://www.npr.org/templates/story/story.php?storyId=5525283
The average house size in 1950 was 983 square feet (average family size 3.54).
Today's average house size (for our now "average" 2.54 person family) is 2600 sq. feet.
http://www.npr.org/templates/story/story.php?storyId=5525283
10
For two people!
It is astounding how many retirees live in the same large house they raised their children in.
Too much work!
It is astounding how many retirees live in the same large house they raised their children in.
Too much work!
1
This is such a good point! We live in a 1400 square foot house but could easily afford a bigger one (on paper anyway). But why? There are only three of us and we don't need that much space. Our income is in the top 3-5% but we choose to live well below our "potential" life-style. We never did upsize -- we had good reasons to stay where we are -- and I am SO glad. I started saving for retirement later in life due to prolonged graduate school but since then I have saved 15-20% of my income. I have a younger spouse with a good job and a potential pension (I say potential because another strategy is to assume nothing stays the same). Our biggest expense, and only expense other than our mortgage, is private school tuition. And yes, we could probably retire several years sooner if we sent the kid to public school but life is about informed choices.
1
If the skills and passion are there it would help many in retirement or semi retirement to have a part time business. At 63 years old I own rental properties and do some stock trading. Income from rental properties is not considered ordinary income so it does not calculate against the max you can earn while collecting SS, which I do. Stock trading is done in an IRA so taxes are only paid when I withdraw from the account... gives you control.
I am encouraging my 2 millennial kids to invest in real estate while pursuing careers in other fields. With the advantage of a long time horizon it affords the possibility of some financial independence later in life when the work force no longer needs you. Good for the young folk if they can diversify their income streams. Work to create some self sufficiency.
I am encouraging my 2 millennial kids to invest in real estate while pursuing careers in other fields. With the advantage of a long time horizon it affords the possibility of some financial independence later in life when the work force no longer needs you. Good for the young folk if they can diversify their income streams. Work to create some self sufficiency.
10
Good advice. I bought and sold houses while I was working including an ocean front house in great need of repairs. We sold everything off after a while but fixed up and kept the beach house. In the 16 years we've owned it we've increased rentals from the original owners 6-8 weeks to 28 weeks last year. There were no unrented weeks even during the recession. People prioritize vacation.
Today we're getting about $40K from the rents, equal to what we get from Social Security and my wife hasn't touched her 401K of about $400K.
And we go to the beach house in the cold months and relax and do planned maintenance projects and meet contractors to do the rest. The house has also tripled in value and provides tax sheltering.
If possible one should plan on having at least one house in their retirement portfolio.
Today we're getting about $40K from the rents, equal to what we get from Social Security and my wife hasn't touched her 401K of about $400K.
And we go to the beach house in the cold months and relax and do planned maintenance projects and meet contractors to do the rest. The house has also tripled in value and provides tax sheltering.
If possible one should plan on having at least one house in their retirement portfolio.
1
Very good article. Fixed immediate annuities (the only ones you should own) are best purchased at age 75+, when future health can be best evaluated, and the compounding risks of inflation (which most IAs don't adjust for) are lessened. I also recommend keeping your home equity as a large emergency fund, to be used only if your retirement Plan A fails.
Finally, be sure to squeeze as much from your retirement nest egg as possible by minimizing investment fees. A simple Vanguard index fund portfolio, managed by you, should cost no more than .1% per year.
Robert Bradley
Author, Investing in Four Hours
Finally, be sure to squeeze as much from your retirement nest egg as possible by minimizing investment fees. A simple Vanguard index fund portfolio, managed by you, should cost no more than .1% per year.
Robert Bradley
Author, Investing in Four Hours
7
Regarding Social Security :
The Government keeps track of the inflation for elderly (the CIP-E) that is higher than the CPI but does not use it, because it would lead to higher outlays.
The differences is about 0.2% which does not sounds much, but in 20 years will shrink your SS check by 4%.
Nothing to be alarmed about, but it is useful to know that the inflation adjustment of SS depends on how the Government chooses to calculate it.
The Government keeps track of the inflation for elderly (the CIP-E) that is higher than the CPI but does not use it, because it would lead to higher outlays.
The differences is about 0.2% which does not sounds much, but in 20 years will shrink your SS check by 4%.
Nothing to be alarmed about, but it is useful to know that the inflation adjustment of SS depends on how the Government chooses to calculate it.
18
Can someone explain what this means and what the practical take-home lesson is??
2
@LeoK ~ My interpretation is that the annual calculation for an increase to SS results in an increase that does not keep pace with inflation.
2
LeoK: It measn the government deliberately underestimates the cost of living that raises in social security are based on so it won't have to pay realistic cost-of-living increases to the elderly.
I have found that after being kicked out of my job at age 61, I am still able to live below my income. I have a budget, but seem to come in under it every month. When I take my pension at age 65, and then Social Security at age 66, I will probably be able to save even more money.
The one thing you should never do as a retiree, if you can possibly avoid it, is spend down your capital. You may live a long time n retirement, and even a slight increase every year will be helpful.
The one thing you should never do as a retiree, if you can possibly avoid it, is spend down your capital. You may live a long time n retirement, and even a slight increase every year will be helpful.
41
I was downsized and replaced out of the blue after 10 years by someone making about half my salary. Any change can be scary at first. I took my Social Security about a year or so before I wanted to but the difference turned out to be a small amount each month. I've had to cut back a little but am surprised by how little I spend by not going to work every day. Fortunately I'm a successful private investor who trades every day in the stock market and no longer needs any other source of income. I recommend this to any senior looking to maximize their retirements savings.The upside is incredible and hard to believe.
17
It's not clear exactly what you are recommending.
4
But how savvy about the market does one need to be?? If one doesn't enjoy - actually, hates - reading company earnings reports, etc, is it worth the money you might (MIGHT) make to spend a couple hours every day doing something you hate?? Why retire at all then?!?
A professional card shark might recommend that as a way to make money, but most people won't be able to play at that level nor feel comfortable with the risks.
A professional card shark might recommend that as a way to make money, but most people won't be able to play at that level nor feel comfortable with the risks.
6
Retire to the Phillippines. Thanks, NYT, now I've got the retirement strategy I need. It is for advice like this that I subscribe to the NYT.
128
I retired to South America. Best thing I ever did, and not only because it's affordable.
3
Why not? We live very well here for well under $2000/month. We know many ex-pats who have retired to faraway places and who live very nice lives for not much money. It's a big world. The US isn't the only place to live.
5
Living overseas to lower your cost of living and put some spice in your life? You will never know.
2
I've done the Social Security math. If I wait til the full age, 66, to finally collect the higher benefit, it would take me until I was 79 to recoup the money I did not collect all those years since age 62. What's more, reverse mortgages -- toted on TV by a former GOP presidential candidate no less -- simply rob the younger generation of even modest inheritances amid the demise of pensions and falling wages. Is that the legacy you want to leave?
131
The article is not about leaving a legacy but having a successful retirement. If you want to leave money to your heirs then live like a hermit and they will get the benefit. You can't have it both ways.
64
Exactly. A friend's dad was talked in to a reverse mortgage he didn't really need. His house, a beautiful little home on the water, had to be sold at a fire sale price because the bank that held the reverse mortgage was going in for a foreclosure when the heirs couldn't raise the money to pay off the amount owed fast enough. A cherished summer vacation gathering spot for the family, which had been in the family for decades was lost.
DO YOUR HOMEWORK and get unbiased advice before purchasing any reverse mortgage or annuity.
DO YOUR HOMEWORK and get unbiased advice before purchasing any reverse mortgage or annuity.
11
Why is leaving a financial legacy necessary or important?
18
This article presupposes that social security is going to be around when we're 70.
That's 19 years away for me. I'm not holding out any great hope.
And we're not saving much either. I guess our plan is to wait for the revolution. Or, the apocalypse.
That's 19 years away for me. I'm not holding out any great hope.
And we're not saving much either. I guess our plan is to wait for the revolution. Or, the apocalypse.
44
You need to fight and vote for Social Security to be funded, a simple change in the cap and we are all covered. Check out what Bernie Sanders is saying. You paid in, there is absolutely no reason not to collect. Do not believe the lies about how SS is going bankrupt, it is not. I am so tired of people such as yourself who believe the liars, throw your hands up and give up without a fight. Also start saving--maybe ask for a raise and don't touch that money! Nineteen years is right around the corner--SSI will be there for you, but don't vote Republican, they are out to destroy it, first by doing means testing (Chrisite last night) which means the upper middle class will be excluded, if that happens you can then kiss SSI goodbye. No means testing-- remember it is insurance.
96
Social Security going away? Not going to happen. We need it more than ever.
6
People said the same thing you are saying 19 years ago, guess what? SS is still here. When I got into my Union 30 years ago people were saying it will be gone in 10 years, guess what? It's still here. Try to be optimistic is all I'm saying. By all means save as much as possible but don't let the republicans talk you into dismantling SS, remember it was created as a trust and if the politicians stop borrowing money from it there will be plenty for everyone
38
I'm one of those waiting until I'm 70 (only five months to go). Among comments from my ex-coworkers who planned to start taking checks as soon as they could was one that always floored me. "What happens if you die before you reach 70?" My only response was (and is) "Well, if I'm dead, I won't regret waiting." Most didn't 'get it'. I'm told I have a weird sense of humor....
188
I feel the same way, and can't believe the payout difference - 32% more at age 70 compared to 66!
With a father still going strong at age 88, and an 84-year old mother with no illness and lots of energy, I have to at least PLAN on living long, even if it doesn't turn out that way.
With a father still going strong at age 88, and an 84-year old mother with no illness and lots of energy, I have to at least PLAN on living long, even if it doesn't turn out that way.
9
I couldn't agree more. I wish the NYT and others who write articles like this would provide a few hypothetical examples for single people: how long does it take to recoup the $$ you "lose" by not taking SS at the earliest possible moment? As a single woman most of whose relatives lived into their late 80s or 90s, I plan to keep working until almost 70 and wait until then to collect, health permitting.
8
See David/acton 's comment. The Social Security Administration has it figured - you basically get equivalent amounts over the long run, no matter when you begin, and a bonus of you outlive the "payback" period. Most experts recommend waiting if you can, if you expect to be alive, because if you are looking solely at the income generated, there is nowhere else you can park the money and earn *8% a year right now.
1
While some people actually enjoy working well into their 60s and 70s, many with other interests would rather be enjoying something else while they are still young, mobile and healthy.
While the financial experts all warn against taking Social Security too early, it might be the best strategy for enjoying life while you can.
Giving away the value of your home with a reverse mortgage seems like a bad bargain, unless you have no other options. Real estate is a good diversification opportunity if balanced against equities and other assets.
I have seen more bad decisions than good by previous generations and try to learn from their mistakes. Many Millennials likewise seem to be learning lessons about spending and saving from their spendthrift Boomer parents.
While the financial experts all warn against taking Social Security too early, it might be the best strategy for enjoying life while you can.
Giving away the value of your home with a reverse mortgage seems like a bad bargain, unless you have no other options. Real estate is a good diversification opportunity if balanced against equities and other assets.
I have seen more bad decisions than good by previous generations and try to learn from their mistakes. Many Millennials likewise seem to be learning lessons about spending and saving from their spendthrift Boomer parents.
66
I am blessed to have a defined benefit retirement plan, though I'm not always sure 42 years of my life was worth it. Hope I live a bit longer than my retirement date to enjoy it and not have to give it all to a nursing home.
120
So live for both. Carpe Diem.
1
'...I'm not always sure 42 years of my life was worth it...'
Better than working 42 years for no pension!
Better than working 42 years for no pension!
13
If your defined benefit plan is like mine (from a DOW-30 company) it's not indexed for inflation. Every year it's worth 3-4% less.
Contrast with social security which is indexed.
Yessir, as Ronald Reagan explained to us, the government is not the solution, it's the problem. Enjoy your "solution" ...
Contrast with social security which is indexed.
Yessir, as Ronald Reagan explained to us, the government is not the solution, it's the problem. Enjoy your "solution" ...
1
How is it only 1.5 to 2.5 percent of Social Security beneficiaries manage to wait until they are able to collect the maximum amount? That seems very low.
26
It has to do with so many professionals in their 50s being jettisoned from the workforce and cast away without any hope of finding decent employment.
189
To start with, taking your first Social Security check at 65 means you will need to cash those checks until you are 78 or 79 before recovering the money you rejected by not collecting Social Security from ages 62-65. The life expectancy of the American male is 76. Waiting until 65 is, at least for men, presuming that you will beat well-established statistical odds.
17
If you do the math, assuming a single person, you find that the total payout from social security collected from age 66 to age 89 is equal to the total payout from social security collected at the maximum rate from age 70 to 89. If most of the people in your family did not live past 89, including siblings, then start at age 66. If your family is typically long-lived, wait till 70. Remember, this is just a cash flow spigot- there's no payout once you die.
10
My issue with too many retirement planners is that they seem to proceed on the assumption that the retiree(s) will need a constant level of income from age 65 or 66 until the day they die. The studies on spending patterns don't bear that out, most showing a dramatic fall-off in spending after the mid-70s. It makes sense that one will have less need for travel, new clothes, entertainment, etc. at 87 than they did at 67. The big unknowable, of course, is healthcare expense.
157
I agree with you. I don't understand why the calculators don't allow you to reduce your expenses as you get older. Most of them let you only put in how much of your original income you will need for the next so many years. If you put in 80% they calculate throughout the span of your life. I think it would be safe to assume that for the years 70 to 79 you might spend 85%, but after that I think it would drop to 65% even with inflation. Anyhow, good point. I wish I know how do that in excel
23
I've seen my mother and friends' parents wind up giving all their savings to people who wheel them around, feed them, etc. You may reduce your expenditures for awhile, but when you really need basic care, that's when the siphoning of your accounts takes place.
4
That discounts the fact that many retirees have large expenses for medical, assisted living, and nursing home care in the final years of life. You can jigger the calculators by using the lowest level of anticipated expenses as your basic income need and then adding special expenses for those years where you expect your expenses to be higher than that. That's what I've done, and things are going okay after I lost my job in the Obama depression.
The best annuities for retirement should, yes, be fixed (not variable) and have some other properties, too. The most important is an annual increase, either as a fixed percentage or an inflation adjustment. More details are here (with no sales pitch whatsoever) plus some ways to find a well-rated insurance company: http://bit.ly/1MWshjW Oh, and there's also a calculator to help estimate a safe withdrawal strategy from an IRA or 401k.
5
Tara, how do you avoid tax by moving IRA funds to a Roth IRA? My IRA is from an old 401k distribution that is taxable as soon as I withdraw money. May as well leave it where it is now.
3
The 401k distribution is taxable but once in Roth IRA, growth is not taxable. It probably wouldn't make sense to do the conversion if you were going to be taking the Money out of the Roth IRA right away. But if you were going to leave it in for say, 5-10 years, the tax free growth might make up for the tax hit of the conversion.
12
One does NOT avoid taxes by converting tax-deductible 401-K or IRA funds into a Roth - rather taxes are due at the time of conversion; but if one's income is much lower in the year of the conversion, it may not be as taxing, everything else being equal. The benefit of a Roth in retirement is that the funds are not taxed when withdrawn, if you meet certain guidelines such as being past 59 1/2 years of age and the Roth account is at least 5 years old. Any number of online calculators are available to run the numbers - in my case it makes no sense to do so even though I can meet the Roth distribution requirements.
5
Timmy, converting a regular IRA to a Roth IRA requires you to pay taxes on the amount converted. Probably not what you want! On the other hand, if you have savings in a 401k and want to roll them over to an IRA, you can do that tax-free.
3
Most of the articles I read consider the cash on hand and SS. I would like to see something that factors in a pension. I'm thinking I could get by with less cash if I have a pension.
11
Lucky you to have a pension.
Your pension will certainly help your cash flow. You should look at what you pay out for living expenses every month and look at how much your pension will cover. Then figure how to provide for any shortfall (e.g. Social Security, savings or reducing expenses).
Your pension will certainly help your cash flow. You should look at what you pay out for living expenses every month and look at how much your pension will cover. Then figure how to provide for any shortfall (e.g. Social Security, savings or reducing expenses).
10
One of the best free, online retirement calculators I have found is www.firecalc.com. It provides multiple options, including SS & pension payments, changes in spending habits with increasing age, portfolo composition, etc, etc. And I have no financial interests in this, other than sharing this website with others.
16
That's a big 'if'.
1
Could someone please explain me how raising the SS income cap would solve the problem? Wouldn't then the benefit cap be raised equally and we would be back to square one? Or do you propose raising the income cap w/o a corresponding raise in the benefit cap? That would be quite a scandal, wouldn't it be?