Help Ascertaining Amount Needed to Retire upon?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
AlaskanWolf
Posts: 34
Joined: Sat Feb 22, 2014 3:04 pm

Help Ascertaining Amount Needed to Retire upon?

Post by AlaskanWolf » Fri Feb 28, 2014 4:48 pm

To put it succinctly I grew up spoiled. And until my illness precluded me from working full time in my chosen field of Sales, I was able to continue my lifestyle.

I was told by my Dr's to apply for Social Security Disability at least five years before I did so. I kept insisting to them and myself I would recover and not only regain my income but be able to increase it so as to negate the hundreds of thousands of dollars I'd lost spent on maintaining my lifestyle in addition to the added expenses of Dr's and med, Hospitals, surgeries, you get the idea.

When I finally faced reality and applied for Social Security disability I had gone through all my savings, sold my home and my condo, and decimated my bank accounts. That final day I went to a church and asked for help paying one of my utilities set to be turned off the following day.

I'd been warned it would take six months or more before I heard from Social Security and THEN it would probably be denied and I would have to battle to be added to the rolls of those fortunate ones who had gained accepted status.

To my astonishment, and my IMMENSE relief, I was accepted and had been given my first check in less than one month. Apparently the documentation I supplied was unusually complete.

True to my spoiled nature I went out and bought a new TV that very day. To say I am ashamed as I write this would be an understatement. Today I live monthly on less than I paid in Federal Taxes monthly. And much to my amazement am for the most part HAPPIER than I was back then.

For some years now I have lived on the proceeds from Social Security Disability and the income from whatever part-time job I could hold onto. For about the last 15 years I have managed to have only two part time jobs, the current one I've held for over three years. After years of being on a waiting list I am EXTREMELY fortunate to live in low income housing that is unique in Alaska. For $970 a month I have a two story, two bedroom, one and one half bath single family cottage.

The rent from that, along with my two utilities, natural gas heat, and electricity, and my luxuries, cable TV, Internet and a Cell hone add about $280 to my expenses. Normal and expected Dr bills and meds add up to about $400 a month after Medicare. That's $1650 before food, gasoline, and any unexpected bills like hospitalizations.

My income on a perfect month where I have managed to wok my full part time schedule is about $800 and I get about $1400 a month from SSDI. (I'm allowed to earn up to $1040 a month while receiving SSDI what they term Substantial Gainful Activity). In reality my part time job rarely adds more than $650-$700 a month to my income. I can pay my bills on this income but just barely, and have virtually no "cushion" for those unexpected bumps life throws us all.

So $1650 from $2100 leaves me $450. I am darned if I know where it all goes, but GO it does.

I'm hoping to get some suggestions about what I should strive for as an income when I can no longer work even my part time job. bearing in mind Inflation.

I'm almost 64 and suspect I won't live past 85, although nobody really ever knows. My Father lived to 88 and my Mother to 83. But both lived what can only be called a more healthful life than have I.

Thanks for your assistance! I have found this Forum to be one of my favorite places on the Internet!

freddie
Posts: 920
Joined: Sat Feb 08, 2014 11:06 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by freddie » Fri Feb 28, 2014 5:15 pm

Given the numbers, it sounds to me like you need to get 7k/yr above the 1400 from SSDI. Given your inability to save, it seems like getting a fatter SS check is your only option. What does that pay you at 65 or 70? Long term you need to find much cheaper living arrangements. Think subsidized studio apartment. I have no clue what is available in your area but you might look around because there could be 5+ year wait lists.

User avatar
englishgirl
Posts: 2464
Joined: Thu Mar 01, 2007 5:34 pm
Location: FL

Re: Help Ascertaining Amount Needed to Retire upon?

Post by englishgirl » Fri Feb 28, 2014 5:21 pm

I looked at some of your previous posts, and it looks like you came into some money (or are coming into money) from an inheritance. I'm sorry for the loss of your parents, and your disability problems. I think I would be inclined to invest that money fairly conservatively, like 40/60 stocks/bonds or maybe 30/70. I would try to aim for some growth, but of course you can't really afford to lose principal. And I would try not to touch it at all while you are still able to work. From 30 seconds of googling, I see that SSDI converts to social security and gives you the same amount per month, so that won't go up at full retirement age. If you can continue to work for a while, try to save every time you have a perfect month. Even if it's only $50 to add to your stash from the inheritance.

Then I think when you get to the point you can no longer work, aim to buy a SPIA with the money at least to provide for the extra $800 a month that you wouldn't be earning. Immediateannuities.com implies that for a 66 year old male in your state, you'd need to invest about $133,000 to get $800 a month from an annuity. Whatever is left over can be invested to try to cover for inflation. Once you've bought your annuity, you could always bump up the stock percentage to, say, 50/50, as you'd know you have a floor of income covered with SS + the SPIA, so you could take a bit more risk with what's left.

You could always buy the annuity now, but the payout will be lower the earlier you start it.

In your situation, it's a matter of working with what you have rather than aiming for a dollar amount. I think if you continue to live frugally, you can continue to be happy. Is there any chance of switching to a one bedroom condo? That might bring your rent down a bit.
Sarah

User avatar
AlaskanWolf
Posts: 34
Joined: Sat Feb 22, 2014 3:04 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by AlaskanWolf » Fri Feb 28, 2014 5:28 pm

freddie wrote:Given the numbers, it sounds to me like you need to get 7k/yr above the 1400 from SSDI. Given your inability to save, it seems like getting a fatter SS check is your only option. What does that pay you at 65 or 70? Long term you need to find much cheaper living arrangements. Think subsidized studio apartment. I have no clue what is available in your area but you might look around because there could be 5+ year wait lists.


Thanks for the reply Freddie!

I plan on moving from ALaska to somewhere warmer, with sand palm trees and lower cost of living.

At my full retirement age, 67 I think, my SSDI automatically becomes conventional Social Security. The only way it will increase is through the almost nonexistent in the past couple of years COLA. I will probably have withing 60 days between $250,000 and $300,000 to invest in an annuity or some such. I'm leaning towards annuities as my ability to ever again have access to this kind of money is NIL.

In addition to that I may have about $120,000 paid out toi me over about a five year period. I plan to work as long as I can but...

I wish some of those "work from Home!" ads were true. :(

User avatar
AlaskanWolf
Posts: 34
Joined: Sat Feb 22, 2014 3:04 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by AlaskanWolf » Fri Feb 28, 2014 9:26 pm

What Am I missing?

COST OF LIVING
Rent $1200
Utilities $250
Cell $110
Internet $125
Cable/Satellite $125
Car Insurance $80
Monthly Meds$150
Monthly Dr $100

Gasoline $80 a month
Food $400
$2620 leaving $280 based on $2900 a month income

Laura
Posts: 7973
Joined: Mon Feb 19, 2007 7:40 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by Laura » Fri Feb 28, 2014 10:36 pm

When you look into purchasing an annuity in a few years make sure you document your poor health. You should be able to increase your monthly payment by demonstrating you have a shorter than normal life expectancy. While waiting makes sense, that will only work if you don't spend the money. If you feel like you are likely to spend the money then moving a little faster on an annuity could make some sense. With interest rates as low as they are, annuity payments are relatively low so waiting could benefit you in that regard. You need to seriously understand your personal financial habits and act accordingly.

Also, when you do get ready to purchase an annuity, make sure and do your research. Costs and payouts can vary so take time to explore your options.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

User avatar
AlaskanWolf
Posts: 34
Joined: Sat Feb 22, 2014 3:04 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by AlaskanWolf » Sun Mar 02, 2014 4:15 pm

"When you look into purchasing an annuity in a few years make sure you document your poor health. You should be able to increase your monthly payment by demonstrating you have a shorter than normal life expectancy."

REALLY?

User avatar
AlaskanWolf
Posts: 34
Joined: Sat Feb 22, 2014 3:04 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by AlaskanWolf » Sun Mar 02, 2014 5:03 pm

Laura wrote:When you look into purchasing an annuity in a few years make sure you document your poor health. You should be able to increase your monthly payment by demonstrating you have a shorter than normal life expectancy. While waiting makes sense, that will only work if you don't spend the money. If you feel like you are likely to spend the money then moving a little faster on an annuity could make some sense. With interest rates as low as they are, annuity payments are relatively low so waiting could benefit you in that regard. You need to seriously understand your personal financial habits and act accordingly.

Also, when you do get ready to purchase an annuity, make sure and do your research. Costs and payouts can vary so take time to explore your options.

Laura


Laura, I'm hoping y "financial habits" change now. For neigh on 20 years I have lived very frugally. I'd like to be be able to live somewhat more extravagantly now.

I don't mean buying a Cigarette boat like I had in the 70's. Nor telling Brooks Brothers I was back as a regular customer.

But I'd like to be able to buy all of my Medicines except for those the Dr's will only write as 30 day supplies as 90 day supplies. I'd like to be buy to buy 3 or 4 pairs of shoes instead of relying on the three pair I have for over 15 years. I'd like to be able to buy 5 or six pairs of pants and maybe twenty shirts. (TWENTY!!) And a new Patagonia jacket to augment the one I've had as my only Winter coat in Alaska since 1990.

freddie
Posts: 920
Joined: Sat Feb 08, 2014 11:06 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by freddie » Sun Mar 02, 2014 5:41 pm

Annuities are based on life expectancy. If they think you will be dead at 72 they will give you more cash.

250k is a decent amount of money if you only need it to last ~20 years and you really only need to get out ~10k/yr. I would definitely think about putting some in SPIA (something like 200k should pay out around 12k/yr) and keep some of the other money for a cushion for things to come up.

When ever I see budgets that have 280/month at the end, I always ask the question, at the end of the year is the savings account 3k higher? If it isn't there is unaccounted for money. I find it a lot better to add up all of last years bills and see what that number is.

AlaskanWolf wrote:"When you look into purchasing an annuity in a few years make sure you document your poor health. You should be able to increase your monthly payment by demonstrating you have a shorter than normal life expectancy."

REALLY?

Laura
Posts: 7973
Joined: Mon Feb 19, 2007 7:40 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by Laura » Sun Mar 02, 2014 10:28 pm

Annuity companies calculate how much they believe they will need to pay you during your life and they do that based on an estimate of how long you will live (your life expectancy). If you are in poor health and document that, they will change the formula they use to take that into account. That means that each payment should be larger than for someone in good health and expected to live for a long time. This benefits you if you are in poor health.

It does sound like you have been very frugal and I think you can afford a new jacket after all of these years. But, if you are planning to move to a warm climate, maybe you don't need a new one. :happy

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

Dandy
Posts: 4888
Joined: Sun Apr 25, 2010 7:42 pm

Re: Help Ascertaining Amount Needed to Retire upon?

Post by Dandy » Mon Mar 03, 2014 7:52 am

Don't give up on finding out where that $450 a month goes. In your situation you will benefit greatly by knowing where your money goes. Plugging that leakage is better than earning that money - it is all after taxes. You don't have to do it forever just a month or two should help you identify any opportunities to save. Even if you don't save a dime at least you will know.

Good health and good luck

rec7
Posts: 2273
Joined: Tue Oct 28, 2008 7:22 pm
Location: ST LOUIS

Re: Help Ascertaining Amount Needed to Retire upon?

Post by rec7 » Mon Mar 03, 2014 8:48 am

There are many small and mid size towns in the Midwest you could live on the $1400 and not work. In states like KS, MO, TX
Of course you still would have to be wise with your spending.

User avatar
dratkinson
Posts: 4044
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Help Ascertaining Amount Needed to Retire upon?

Post by dratkinson » Mon Mar 03, 2014 11:50 am

If you could find a location with a lower cost of living, you could stretch your existing income.

Suggest searching for:
cost of living
cost of living by state
cost of living calculator
cost of living retirement
cost of living overseas

The US has come island territories and possessions that may have lower costs and your desired beaches, but medical care and hurricanes/typhoons may be more troublesome.

I remember the south being cheaper (Arkansas, Louisiana, Mississippi, Alabama), but the heat, humidity, and creepy-crawly insects drove me away.

I remember past topics about the sometimes lower cost of retiring overseas, but don't know how that would play with your SS benefits.

Idea: Get the annual $1K Savers Tax Credit. Work part-time to get "earned income". Contribute $2K of "earned income" to a Roth IRA, make up the shortfall in your income (the $2K IRA contribution) from your expected windfall. This should qualify you for the annual $1K Savers Tax Credit. See: http://www.irs.gov/Retirement-Plans/Pla ... 99s-Credit)

That's all that immediately comes to mind.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

Post Reply