Another Round Retirement Plan

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macher
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Another Round Retirement Plan

Post by macher »

Ok I’m going to start another thread about how much we will need to retire. Looks like we are going to fall short because of the possibility of 1 SS because one of us will outlive each other. For instance my dad passed away at 75 last August and my mom is getting his SS not hers because my dads was the greater of the 2.

Here it goes.

EXPENSES
Living expenses; this will be expenses as if we retired today includes every living expense + retirement healthcare

$36k today’s dollars(3% / year for 14 years)> $55 year 2034

Discretionary spending $20k today’s dollars(3% / year for 14 years) > $30k year 2034

Taxes: future dollars approx $13k

TOTAL $98k future dollars year 2034

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars(2% year for 14 years)> $34k
SS Wife $18k today’s dollars(2% year for 14 years)> $24k

TOTAL INCOME $79k future dollars year 2034

Total future expenses $98k- total income $79k = $19k shortfall

Looks like we would need...
1. $19k / 4% = $475k 4% withdrawal rate
2. $19k / 5.2% $365 annuitized accumulation(100% joint survivor)

Couple issues here...
1. Don’t know how this plays out after year 2034 with living expenses inflation and SS increases of 2% or less and the 4% withdraw rate or annuity option. Although I think as you get older discretionary spending decreases. I see this a lot with elderly family members.
2. If I die early in retirement then my wife gets greater of SS which makes as a protection if I die early which brings what we need from above to... million$ Yikes!

I’m somewhat confident on the 2 SS scenario and will have more saved in another 14 years. But not sure 2034 after maybe the decrease in discretionary spending will help?

Expenses $98k - income $55k = $43k shortfall @ 4% withdraw rate would need $1,075,000

How do others deal with a situation of a possible short fall with 1 SS. Do you ‘insure it’ with a term policy?

Couple notes; I don’t believe in the 25% less SS hype. I’ve read that it isn’t necessarily true. What could happen is either more taxes towards SS and / or later age. So I’m basing SS on this. Don’t want to get in a debate about it. I inflated retirement healthcare at 3% from now until 2034 because my employer hasn’t raised the premium more than 3% in the last 30 years and some years no increase. Currently in today’s dollars for a Cadillac plan it’s $375 / month for 2.

Thanks!
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WoodSpinner
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Re: Another Round Retirement Plan

Post by WoodSpinner »

OP,

How old are you now? Planning a 2034 Retirement? Earlier or Later?

WoodSpinner
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macher
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Re: Another Round Retirement Plan

Post by macher »

WoodSpinner wrote: Tue May 19, 2020 6:05 pm OP,

How old are you now? Planning a 2034 Retirement? Earlier or Later?

WoodSpinner
We are both 53 years old planning to retire in 14 years at 67.
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LadyGeek
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Re: Another Round Retirement Plan

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
macher wrote: Tue May 19, 2020 4:57 pm Ok I’m going to start another thread about how much we will need to retire.
The OP is asking for portfolio help here: Portfolio Questions Saving for Retirement

This discussion is to determine the amount needed to retire.
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David Jay
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Re: Another Round Retirement Plan

Post by David Jay »

You are increasing your expenses at a 3% rate but your income by only 2% - that pretty much guarantees a retirement shortfall.

May I suggest using all real (equivalent buying power as today) dollars, it makes things so much easier, as follows:
EXPENSES
Living expenses; this will be expenses as if we retired today includes every living expense + retirement healthcare

$36k today’s dollars
$20k today’s dollars

Taxes: today’s dollars approx $4K federal, ___ State (3.4K @ 6%)

TOTAL EXPENSES $ 64K

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars
SS Wife $18k today’s dollars

TOTAL INCOME $65K
You created an inflation “hole” for yourself and that is the source of a lot of your angst.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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macher
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Re: Another Round Retirement Plan

Post by macher »

David Jay wrote: Tue May 19, 2020 6:58 pm You are increasing your expenses at a 3% rate but your income by only 2% - that pretty much guarantees a retirement shortfall.

May I suggest using all real (equivalent buying power as today) dollars, it makes things so much easier, as follows:
EXPENSES
Living expenses; this will be expenses as if we retired today includes every living expense + retirement healthcare

$36k today’s dollars
$20k today’s dollars

Taxes: today’s dollars approx $4K federal, ___ State (3.4K @ 6%)

TOTAL EXPENSES $ 64K

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars
SS Wife $18k today’s dollars

TOTAL INCOME $65K
You created an inflation “hole” for yourself and that is the source of a lot of your angst.
Ok thanks! Maybe I can’t get my head wrapped around this.

How do I figure out how much we need to have at age 67 when we retire based on using today’s dollars. The pension isn’t in today’s dollars. That’s what it will be with about 2% increases( conservative going forward)when turning 67. Today’s dollars for the pension with current salary 37 years of service would be @ 3% raises back 5 years would be $16,300.
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Re: Another Round Retirement Plan

Post by David Jay »

macher wrote: Tue May 19, 2020 7:06 pm
David Jay wrote: Tue May 19, 2020 6:58 pm You are increasing your expenses at a 3% rate but your income by only 2% - that pretty much guarantees a retirement shortfall.

May I suggest using all real (equivalent buying power as today) dollars, it makes things so much easier, as follows:
EXPENSES
Living expenses; this will be expenses as if we retired today includes every living expense + retirement healthcare

$36k today’s dollars
$20k today’s dollars

Taxes: today’s dollars approx $4K federal, ___ State (3.4K @ 6%)

TOTAL EXPENSES $ 64K (+ adjust for state tax rate)

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars
SS Wife $18k today’s dollars

TOTAL INCOME $65K
You created an inflation “hole” for yourself and that is the source of a lot of your angst.
Ok thanks! Maybe I can’t get my head wrapped around this.

How do I figure out how much we need to have at age 67 when we retire based on using today’s dollars. The pension isn’t in today’s dollars. That’s what it will be with about 2% increases( conservative going forward)when turning 67. Today’s dollars for the pension with current salary 37 years of service would be @ 3% raises back 5 years would be $16,300.
Sure, if the pension has no COLA, calculate a reasonable figure for that. So you would like to spend $64K and you only have $60K. That's a lot more manageable than the original 94K to 79K delta.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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David Jay
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Re: Another Round Retirement Plan

Post by David Jay »

David Jay wrote: Tue May 19, 2020 7:36 pmSure, if the pension has no COLA, calculate a reasonable figure for that. So you would like to spend $64K and you only have $60K. That's a lot more manageable than the original 94K to 79K delta.
There is a much better way to make up for a shortfall than the 4% rule. Spend some portfolio money on expenses and delay his Social Security to age 70. A 3 year delay costs $78K (26K * 3) and gets an additional 24% (i.e. 32,200 instead of 26,000) real, because the COLA from 67 to 70 is applied to the account. And since you are the higher earner, this larger payout becomes the SS benefit for the survivor when the first spouse passes, reducing the shortfall in that phase of life.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
delamer
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Re: Another Round Retirement Plan

Post by delamer »

Do an expense and income (SS plus pensions) calculation for 1) both spouses living, 2) wife only living, and 3) husband only living.

Try it for Retirement +1 day, Retirement + 10 years, Retirement +20 years.

You can’t know any numbers with exactitude, but you’ll have a better perspective on how much will need to come from your nest egg in each scenario.

For 2 & 3 above, remember that food and medical costs will go down substantially but housing costs won’t change (unless the survivor moves).
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Re: Another Round Retirement Plan

Post by Grt2bOutdoors »

Tax expense of $13K - is that property tax or what you believe federal/state tax will be? So let me give you a real life example, a married couple today, age 65+ and retired, the first $50-$55K has a tax liability of $300-$400. So tell us again, what is the $13K in your estimate composed of?
I can't imagine it will be property taxes. If you knock your tax estimate down by half to $7K I think that will provide plenty of buffer for tax liability and reduce the amount you think you'd need at retirement by about $100K-$150K.
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Re: Another Round Retirement Plan

Post by Golf maniac »

I handled the income reduction (from pension and SS) by getting term life policy that runs until I am 75. I also have a former employer policy that reduces at 65. For us, I calculated that after 75 my wife will be in good shape with our investments. It is just these years until I turn 75 that create risk.
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macher
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Re: Another Round Retirement Plan

Post by macher »

David Jay wrote: Tue May 19, 2020 7:36 pm
macher wrote: Tue May 19, 2020 7:06 pm
David Jay wrote: Tue May 19, 2020 6:58 pm You are increasing your expenses at a 3% rate but your income by only 2% - that pretty much guarantees a retirement shortfall.

May I suggest using all real (equivalent buying power as today) dollars, it makes things so much easier, as follows:
EXPENSES
Living expenses; this will be expenses as if we retired today includes every living expense + retirement healthcare

$36k today’s dollars
$20k today’s dollars

Taxes: today’s dollars approx $4K federal, ___ State (3.4K @ 6%)

TOTAL EXPENSES $ 64K (+ adjust for state tax rate)

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars
SS Wife $18k today’s dollars

TOTAL INCOME $65K
You created an inflation “hole” for yourself and that is the source of a lot of your angst.
Ok thanks! Maybe I can’t get my head wrapped around this.

How do I figure out how much we need to have at age 67 when we retire based on using today’s dollars. The pension isn’t in today’s dollars. That’s what it will be with about 2% increases( conservative going forward)when turning 67. Today’s dollars for the pension with current salary 37 years of service would be @ 3% raises back 5 years would be $16,300.
Sure, if the pension has no COLA, calculate a reasonable figure for that. So you would like to spend $64K and you only have $60K. That's a lot more manageable than the original 94K to 79K delta.
Ok to get my head wrapped around this...

Where we are at in today’s dollars isn’t bad and it makes me feel a lot better. However I’m not seeing how this is going to play in the future since we have 14 years until retirement. Are you saying if we continue to make the same wages currently and we get 2% raises each year the today’s dollars in income and expenses should work out when we retire in 14 years?

Currently for me there are contributions that total 19.5% of my salary of $55k with 2% increases a year and I have $160k in retirement account. My wife doesn’t contribute anything because of her pension.
Last edited by macher on Wed May 20, 2020 7:16 am, edited 2 times in total.
Topic Author
macher
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Re: Another Round Retirement Plan

Post by macher »

Golf maniac wrote: Tue May 19, 2020 9:44 pm I handled the income reduction (from pension and SS) by getting term life policy that runs until I am 75. I also have a former employer policy that reduces at 65. For us, I calculated that after 75 my wife will be in good shape with our investments. It is just these years until I turn 75 that create risk.
I’ll have to look into that. I do have a $385k policy at work but it’s only good if I continue working.
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macher
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Re: Another Round Retirement Plan

Post by macher »

delamer wrote: Tue May 19, 2020 9:04 pm Do an expense and income (SS plus pensions) calculation for 1) both spouses living, 2) wife only living, and 3) husband only living.

Try it for Retirement +1 day, Retirement + 10 years, Retirement +20 years.

You can’t know any numbers with exactitude, but you’ll have a better perspective on how much will need to come from your nest egg in each scenario.

For 2 & 3 above, remember that food and medical costs will go down substantially but housing costs won’t change (unless the survivor moves).
In my expenses I assumed ‘as if we were retired today’ which includes no debt, mortgage paid off, no car loan. I added retirement health care which is included in the $36k today’s dollars living expenses. Food I calculated at $650 / month today’s dollars ‘as if we were retired’.

Housing costs, property taxes will go up. But utilities seem to stay constant for a period of time until there’s and increase. Cable and internet seem to go up every couple of years. Cell phone seems constant. I also included $100 a month house maintenance and $100 a month car maintenance. Home owners and car insurance seem to go up every 3 years.

Our little row house has been recently completely renovated so no need for maintenance for a long time except cosmetics. House was completely paid for but needed a lot of work so we decided to completely renovate the house from top to bottom side to side. We moved from South Jersey back to Philly.

The $20k a year discretionary spending in today’s dollars will definitely go down. My 75 year old + family members don’t travel as much and eat out as much etc.

My main concern is if I die early in retirement I want my wife to be ok. My father died last year at age 75 which got me on track to planning for retirement even though I have been contributing to a 403b for the last 20 years being passive about it. Now I’m more active to find out if we will be ok and especially if I die early that my wife will be ok.

Looking back probably should have saved more but I thought 13-14% of my income was enough plus my wife’s pension. But I can’t look at the past. I have to look what needs to be done now for us to live comfortably but not lavishly.

Or maybe we did good and we will be OK.
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Re: Another Round Retirement Plan

Post by Nate7out »

You have done good, and you should be OK. However, 10 strong years of saving coming up would ease the stress and provide cushion when it comes time to retire. Wife should work full time to both increase the pension and take home pay, this would both improve retirement income stream and in the present allow you to increase your 403b or Roth savings further.

It looks like you saved 15% of your base salary, (e.g. $8250 of $55k in today's dollars), but not 15% of your household income, (e.g. $17,250 of $115k). The 9% that came from employer is helpful to boost your assets, but it does not reduce spending the way saving income does. Lowering expenses brings the goal closer, and increasing savings gets you there quicker.

Also, if you saved 5% out of just your salary, that means $2750 / $115000 was savings, about 2% of gross. Best case, if it scaled up with your OT, you saved $3750 out of your salary. That means your savings out of salary was $3750 / $115000 = 3.3% of household income. This leaves spending and taxes taking up >96% of pay. I include taxes for ease and because you will pay taxes out of 403b to get spending money as well. You were spending 96/3 = 32x your savings. If you saved 15% of gross, $17,250, that would mean you were spending 85/15 = Only spending 5.67x savings. Big difference as to the allocation of your salary. Counting match, spending compared to saving looks like about 14x or saving about 7% of gross. Your retirement funds need to replace your household expenses/taxes which look to have been >96% of income.
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Re: Another Round Retirement Plan

Post by macher »

Nate7out wrote: Wed May 20, 2020 7:47 am You have done good, and you should be OK. However, 10 strong years of saving coming up would ease the stress and provide cushion when it comes time to retire. Wife should work full time to both increase the pension and take home pay, this would both improve retirement income stream and in the present allow you to increase your 403b or Roth savings further.
Yes like I said I just recently started to contribute a total of 19.5% of my salary including 9% employer match.

As for the wife working full time. We will have a talk about that.
Nate7out wrote:It looks like you saved 15% of your base salary, (e.g. $8250 of $55k in today's dollars), but not 15% of your household income, (e.g. $17,250 of $115k). The 9% that came from employer is helpful to boost your assets, but it does not reduce spending the way saving income does. Lowering expenses brings the goal closer, and increasing savings gets you there quicker.
Right saved that much of MY salary because at the time I figured my wife’s pension was sort of like a savings which I now realize wasn’t the right thing to do.
Nate7out wrote:Also, if you saved 5% out of just your salary, that means $2750 / $115000 was savings, about 2% of gross. Best case, if it scaled up with your OT, you saved $3750 out of your salary. That means your savings out of salary was $3750 / $115000 = 3.3% of household income. This leaves spending and taxes taking up >96% of pay. I include taxes for ease and because you will pay taxes out of 403b to get spending money as well. You were spending 96/3 = 32x your savings. If you saved 15% of gross, $17,250, that would mean you were spending 85/15 = Only spending 5.67x savings. Big difference as to the allocation of your salary. Counting match, spending compared to saving looks like about 14x or saving about 7% of gross. Your retirement funds need to replace your household expenses/taxes which look to have been >96% of income.
Ok are you suggesting to start saving total of $17,250 including the 9% employer match? Or a total of 15% of combined salary $14,145?
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Re: Another Round Retirement Plan

Post by David Jay »

macher wrote: Wed May 20, 2020 4:30 amHowever I’m not seeing how this is going to play in the future since we have 14 years until retirement
And that is the point. You can’t know the future and when you try to plug in arbitrary numbers 14 years out you get yourself tied in knots.

In particular, trying to predict inflation into the distant future is unreliable. The simple thing - and probably as good as any other assumption - is assume that the entire economy (wages, expenses, stock and bond markets) will move together with the future inflation rate.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: Another Round Retirement Plan

Post by Nate7out »

I suggest you defer minimum of 15% of household income ($14k you said) to your 403b and get the 9% on TOP of that.

Alternatively, it seems like you might be in the 12% tax bracket - so maybe keep your newly increased 403b contributions as they are and find a way to get $7000 into a Roth IRA on top of that. You have $6k +$1k catch up available per year. I am not sure, but after taxes revert in 2026; with pensions you might be in 15% bracket in retirement.

I hope you didn't take my post as critical, I was just thinking through the implications of various savings rates and matching and typing as I went. Also, this forum is skewed to the top 0.1% as far as retirement preparedness.

I am not fully optimized either, I have paid many 10's of thousands in excess taxes under utilizing a 403b because of the friction of dealing with wife and her high fee/surrender 403b plan. I just thought of a solution this year (which was simple and obvious in retrospect) and finally corrected it. I started a new account, make high contributions, and ignore old account until there is no surrender fee. I did everything, all my wife had to do was sign salary reduction paper and give it to someone at the district office. That part took 3 weeks, :oops:.
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Re: Another Round Retirement Plan

Post by macher »

Nate7out wrote: Wed May 20, 2020 9:01 am I suggest you defer minimum of 15% of household income ($14k you said) to your 403b and get the 9% on TOP of that.
$14k total including 9% which would be 15% of salaries? Or $14k our contributions + 9% employer which would be 24% of salaries?
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Re: Another Round Retirement Plan

Post by Nate7out »

The latter.
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Re: Another Round Retirement Plan

Post by Grt2bOutdoors »

macher wrote: Wed May 20, 2020 9:41 am
Nate7out wrote: Wed May 20, 2020 9:01 am I suggest you defer minimum of 15% of household income ($14k you said) to your 403b and get the 9% on TOP of that.
$14k total including 9% which would be 15% of salaries? Or $14k our contributions + 9% employer which would be 24% of salaries?
24% of your salaries - 15% from your contributions + 9% from your employer.
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Re: Another Round Retirement Plan

Post by David Jay »

You haven't given us even a hint of your current retirement balances, so it is difficult to tell you how much you need to save. For instance: if you have $50,000 of retirement savings between the two of you then you should be looking at 20% - 25% savings rates. If you have $500,000 then you may be able to meet your lifestyle needs at 10% - 15%.
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macher
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Re: Another Round Retirement Plan

Post by macher »

David Jay wrote: Wed May 20, 2020 2:33 pm You haven't given us even a hint of your current retirement balances, so it is difficult to tell you how much you need to save. For instance: if you have $50,000 of retirement savings between the two of you then you should be looking at 20% - 25% savings rates. If you have $500,000 then you may be able to meet your lifestyle needs at 10% - 15%.
Currently have $163k retirement savings

Plus wife’s pension as posted above. Like I said we didn’t invest in the past based on total income because since my wife is getting a pension thought it equated to savings if that makes sense. Trying not to kick myself in the a*ss for not saving based on total household income. Now we are playing catch up which is OK.

Don’t know if this was the right thinking... if my wife were to retire today with 37 years she would get a pension of $16,300 100% joint survivor. If you were to annuitize that at 4.9% that equals $332k today’s dollars or $407k 4% withdraw rate.
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Re: Another Round Retirement Plan

Post by macher »

David Jay wrote: Tue May 19, 2020 8:56 pm
David Jay wrote: Tue May 19, 2020 7:36 pmSure, if the pension has no COLA, calculate a reasonable figure for that. So you would like to spend $64K and you only have $60K. That's a lot more manageable than the original 94K to 79K delta.
There is a much better way to make up for a shortfall than the 4% rule. Spend some portfolio money on expenses and delay his Social Security to age 70. A 3 year delay costs $78K (26K * 3) and gets an additional 24% (i.e. 32,200 instead of 26,000) real, because the COLA from 67 to 70 is applied to the account. And since you are the higher earner, this larger payout becomes the SS benefit for the survivor when the first spouse passes, reducing the shortfall in that phase of life.
That makes sense. I don’t mind working until 70. According to my SS statement at 70 I’ll get $35,148 vs $27,800 at 67.
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Re: Another Round Retirement Plan

Post by macher »

delamer wrote: Tue May 19, 2020 9:04 pm Do an expense and income (SS plus pensions) calculation for 1) both spouses living, 2) wife only living, and 3) husband only living.

Try it for Retirement +1 day, Retirement + 10 years, Retirement +20 years.

You can’t know any numbers with exactitude, but you’ll have a better perspective on how much will need to come from your nest egg in each scenario.

For 2 & 3 above, remember that food and medical costs will go down substantially but housing costs won’t change (unless the survivor moves).
Should I increase living expenses each year?
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macher
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Re: Another Round Retirement Plan

Post by macher »

delamer wrote: Tue May 19, 2020 9:04 pm Do an expense and income (SS plus pensions) calculation for 1) both spouses living, 2) wife only living, and 3) husband only living.

Try it for Retirement +1 day, Retirement + 10 years, Retirement +20 years.

You can’t know any numbers with exactitude, but you’ll have a better perspective on how much will need to come from your nest egg in each scenario.

For 2 & 3 above, remember that food and medical costs will go down substantially but housing costs won’t change (unless the survivor moves).
After reviewing our current living expenses; property tax, home owners and car insurance, gas electric and water, cable internet, cell phone, groceries, gas for car, house maintenance, car maintenance, personal care... they don’t seem to go up as much as I thought. I was calculated these living expenses go up 3% a year. More like maybe 2% every other year average.
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Re: Another Round Retirement Plan

Post by delamer »

macher wrote: Thu May 21, 2020 3:33 pm
delamer wrote: Tue May 19, 2020 9:04 pm Do an expense and income (SS plus pensions) calculation for 1) both spouses living, 2) wife only living, and 3) husband only living.

Try it for Retirement +1 day, Retirement + 10 years, Retirement +20 years.

You can’t know any numbers with exactitude, but you’ll have a better perspective on how much will need to come from your nest egg in each scenario.

For 2 & 3 above, remember that food and medical costs will go down substantially but housing costs won’t change (unless the survivor moves).
Should I increase living expenses each year?
I always use current dollars, and assume income and expenses will increase at the same rate (although in your case that means discounting your wife’s pension to 2020 dollars). That’s a pretty conservative way to look at them.
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macher
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Re: Another Round Retirement Plan

Post by macher »

delamer wrote: Fri May 22, 2020 9:11 am
macher wrote: Thu May 21, 2020 3:33 pm
delamer wrote: Tue May 19, 2020 9:04 pm Do an expense and income (SS plus pensions) calculation for 1) both spouses living, 2) wife only living, and 3) husband only living.

Try it for Retirement +1 day, Retirement + 10 years, Retirement +20 years.

You can’t know any numbers with exactitude, but you’ll have a better perspective on how much will need to come from your nest egg in each scenario.

For 2 & 3 above, remember that food and medical costs will go down substantially but housing costs won’t change (unless the survivor moves).
Should I increase living expenses each year?
I always use current dollars, and assume income and expenses will increase at the same rate (although in your case that means discounting your wife’s pension to 2020 dollars). That’s a pretty conservative way to look at them.
If I use 2% inflation my wife’s pension is $16,300 in today’s dollars. I used a calculator to reverse inflate back 14 years.
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Re: Another Round Retirement Plan

Post by EnjoyIt »

macher wrote: Thu May 21, 2020 3:29 pm
David Jay wrote: Tue May 19, 2020 8:56 pm
David Jay wrote: Tue May 19, 2020 7:36 pmSure, if the pension has no COLA, calculate a reasonable figure for that. So you would like to spend $64K and you only have $60K. That's a lot more manageable than the original 94K to 79K delta.
There is a much better way to make up for a shortfall than the 4% rule. Spend some portfolio money on expenses and delay his Social Security to age 70. A 3 year delay costs $78K (26K * 3) and gets an additional 24% (i.e. 32,200 instead of 26,000) real, because the COLA from 67 to 70 is applied to the account. And since you are the higher earner, this larger payout becomes the SS benefit for the survivor when the first spouse passes, reducing the shortfall in that phase of life.
That makes sense. I don’t mind working until 70. According to my SS statement at 70 I’ll get $35,148 vs $27,800 at 67.
You may not necessarily need to work till 70 to collect SS at 70. You can retire earlier and live off your savings for a few years and then start collecting SS once you are 70.

Also understand that if one person retires expenses will go down some. In addition as people age discretionary expenses also tend to decrease.

So if at 70 you will get $35k from SS, spouse will get half or $17.5k plus you will get her pension at $16k that means you will have $68.5K. That is how much you spend. Now all you need is savings to get you both to 70, also provide a cushion and maybe a little extra cash when one of you passes away to cover the $17.5k shortfall of SS income.

Looks to me like you are in decent shape. I would still keep saving because you may find one day that although you want to work, work may not want you.
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macher
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Re: Another Round Retirement Plan

Post by macher »

EnjoyIt wrote: Fri May 22, 2020 11:14 am
macher wrote: Thu May 21, 2020 3:29 pm
David Jay wrote: Tue May 19, 2020 8:56 pm
David Jay wrote: Tue May 19, 2020 7:36 pmSure, if the pension has no COLA, calculate a reasonable figure for that. So you would like to spend $64K and you only have $60K. That's a lot more manageable than the original 94K to 79K delta.
There is a much better way to make up for a shortfall than the 4% rule. Spend some portfolio money on expenses and delay his Social Security to age 70. A 3 year delay costs $78K (26K * 3) and gets an additional 24% (i.e. 32,200 instead of 26,000) real, because the COLA from 67 to 70 is applied to the account. And since you are the higher earner, this larger payout becomes the SS benefit for the survivor when the first spouse passes, reducing the shortfall in that phase of life.
That makes sense. I don’t mind working until 70. According to my SS statement at 70 I’ll get $35,148 vs $27,800 at 67.
You may not necessarily need to work till 70 to collect SS at 70. You can retire earlier and live off your savings for a few years and then start collecting SS once you are 70.

Also understand that if one person retires expenses will go down some. In addition as people age discretionary expenses also tend to decrease.

So if at 70 you will get $35k from SS, spouse will get half or $17.5k plus you will get her pension at $16k that means you will have $68.5K. That is how much you spend. Now all you need is savings to get you both to 70, also provide a cushion and maybe a little extra cash when one of you passes away to cover the $17.5k shortfall of SS income.

Looks to me like you are in decent shape. I would still keep saving because you may find one day that although you want to work, work may not want you.
Thanks! Yea that shortfall looks like savings will cover it. $36k living expenses + $20k discretionary spending looks good. Now I know why I was in angst trying to figure this out in future dollars.

Just increased savings rate to 15% of both incomes + 9% match.
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Re: Another Round Retirement Plan

Post by macher »

Ok didn’t want to post this because I have delusions of living for another 14 years until we retire. But the truth is I have cancer and even through I’m doing good doesn’t seem we can plan for the next 14 years. Sorry wasn’t facing reality.

Here are the facts.

We currently have a mortgage of $72k that we used to completely renovate the house we are living in. We took this before I was diagnosed with cancer 2 years ago. No other debt.

Current living expenses: $41,100 includes $550 / month mortgage 15 years left and $300 / month car payment 3 years left.

Me: 53 years old currently have $160k in my 403b and recently started contributing 26% of my salary $55k ($14,300) + 9% employer match($4950) = $19,250 TOTAL. Current balance as well as future contributions are 65% Cref Equity Index 35% TIAA Traditional

Wife: 56 years old will get a pension of years of service x 1.25% x last 5 years average salary. Current salary is $39,400 working 28 hours a week and has 26 years of service. She I’ll work until 67 and will have 37 years of service.

Life Insurance: can’t get life insurance because of cancer. Had a 20 year term policy that expired around 5 days before I was diagnosed.

Group Life Insurance(my work) currently $377k based on previous year salary x 6 + 10% of base.

I’ll answer the question because you might be asking why my wife works 28 hours a week and not 40 hours. She has worked 28 hours in the past by choice since we thought we didn’t really need the income. She’s an admin assistant and is making top scale. She could get a 40 hour position but the way the university works is she’ll have to start at the bottom or maybe between the bottom and 1/3 which would equal her current salary at 28 hours a week. It’s very possible her department would give her more hours but there’s a hiring freeze and max 2% raise. So although it’s possible in the future it’s not possible now.

In reference to the group life insurance policy. Yea I know it’s only good if I continue employment. But I’m not planing on leaving. If and when the cancer comes back and I won’t last I can go on short term disability for 6 months and still be considered on the books. Or I would drag myself into work. I have to check beyond that 6 month mark.

Need some guidance. My only concern if my wife will be ok financially. Sorry I didn’t disclose this previously.
Last edited by macher on Mon Jun 01, 2020 12:50 pm, edited 1 time in total.
EnjoyIt
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Re: Another Round Retirement Plan

Post by EnjoyIt »

Sorry about the diagnosis.

What does social security look like for you and her? If you are not sure, log into SSA.gov and find out. See how much you will get and see how much she will get. Understand that when you pass away she will be entitled to your SS or hers whichever is greater. That in addition to her pension should put her in a pretty decent place if expenses are managed. The way I see it, you may need to have enough cash available to supplement her till SS kicks in.
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Re: Another Round Retirement Plan

Post by LadyGeek »

Likewise, sorry to hear the diagnosis.

In addition to investments, the best thing you can do for your wife is to get everything prepared from an estate planning perspective.

See the wiki: Estate planning - and do a deep dive into the "Further reading" section.

Take care of this now. There are many things to discuss with your wife. It is far better to go through a difficult discussion now, than not be prepared when the time approaches.

Especially important are to have Power of Attorney (POA) documents in place so she can take over when you lose the capacity to do this yourself.
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macher
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Re: Another Round Retirement Plan

Post by macher »

EnjoyIt wrote: Mon Jun 01, 2020 11:56 am Sorry about the diagnosis.

What does social security look like for you and her? If you are not sure, log into SSA.gov and find out. See how much you will get and see how much she will get. Understand that when you pass away she will be entitled to your SS or hers whichever is greater. That in addition to her pension should put her in a pretty decent place if expenses are managed. The way I see it, you may need to have enough cash available to supplement her till SS kicks in.
Just looked at my SS statement online. It makes a reference to survivors if I die this year my spouse will get $2158 a month at full retirement age. Which would be 11 years for her. Her SS the last time I checked was less at full retirement age.

The only cash that would be available is my group life policy if we can make that work if the cancer comes back and there’s no hope which would be $375k.
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Re: Another Round Retirement Plan

Post by EnjoyIt »

macher wrote: Mon Jun 01, 2020 12:30 pm
EnjoyIt wrote: Mon Jun 01, 2020 11:56 am Sorry about the diagnosis.

What does social security look like for you and her? If you are not sure, log into SSA.gov and find out. See how much you will get and see how much she will get. Understand that when you pass away she will be entitled to your SS or hers whichever is greater. That in addition to her pension should put her in a pretty decent place if expenses are managed. The way I see it, you may need to have enough cash available to supplement her till SS kicks in.
Just looked at my SS statement online. It makes a reference to survivors if I die this year my spouse will get $2158 a month at full retirement age. Which would be 11 years for her. Her SS the last time I checked was less at full retirement age.

The only cash that would be available is my group life policy if we can make that work if the cancer comes back and there’s no hope which would be $375k.
Once the mortgage is paid off, it appears that your expenses are $27,900/yr. Your SS will cover $25,890/yr. Add in pension and it sounds like she will be ok even without the life insurance paying out. The way I see it, you need to raise enough cash to pay off the mortgage and cover her expenses from your passing to when she collects SS and pension. If she works some, then less money will be needed.
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Re: Another Round Retirement Plan

Post by macher »

EnjoyIt wrote: Mon Jun 01, 2020 12:36 pm
macher wrote: Mon Jun 01, 2020 12:30 pm
EnjoyIt wrote: Mon Jun 01, 2020 11:56 am Sorry about the diagnosis.

What does social security look like for you and her? If you are not sure, log into SSA.gov and find out. See how much you will get and see how much she will get. Understand that when you pass away she will be entitled to your SS or hers whichever is greater. That in addition to her pension should put her in a pretty decent place if expenses are managed. The way I see it, you may need to have enough cash available to supplement her till SS kicks in.
Just looked at my SS statement online. It makes a reference to survivors if I die this year my spouse will get $2158 a month at full retirement age. Which would be 11 years for her. Her SS the last time I checked was less at full retirement age.

The only cash that would be available is my group life policy if we can make that work if the cancer comes back and there’s no hope which would be $375k.
Once the mortgage is paid off, it appears that your expenses are $27,900/yr. Your SS will cover $25,890/yr. Add in pension and it sounds like she will be ok even without the life insurance paying out. The way I see it, you need to raise enough cash to pay off the mortgage and cover her expenses from your passing to when she collects SS and pension. If she works some, then less money will be needed.
Made a mistake. I fixed it above

Living expenses : $41,100 includes $550 mortgage 15 years left and $300 car payment 3 years left. Without mortgage and car payment expenses are $30,900.
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Re: Another Round Retirement Plan

Post by macher »

This is my calculation and would appreciate it if someone can correct it or is it about right.

Plan #1

1.Let’s say I die my wife will get $375k group life insurance

2. Wife pays off $75k mortgage and $10k car loan which is $85k

3. $375k life insurance - $85k = $290k

4. After mortgage payed off and car loan expenses will be $30,900 + $6600(cushion) = $37,500

5. Wife currently doesn’t make enough take home pay to cover $37,500 however knowing her director who has a great heart I’m sure she might increase her hours to 35 hours because of the situation. This would also cover her medical for 1 person coming out of her pay each period. Salary would be $49,300

6. Wife’s pension would be more. If she would to retire today(she isn’t won’t be for another 11 years) with 37 years of service and working 35 hours her pension would be 37 x 1.25% x $45,993 (average last 5) = $21,271 no COLA.

7. Wife takes $290k + my current $160k 403b = $450k and doesn’t touch it for another 11 year’s until she retires

8. My SS if I die this year according to SS would be $24k including Medicare deduction

Plan #2 if wife can’t get her hours increased to 35

1. Would need $105k to cover expenses for the next 11 years until she retires

2. $105k cover expenses + $75k payoff mortgage + $10k pay off car = $190k

3. $375k life insurance - $190k = $185k

4. Add $185k to my $160k 403b = $345k which she won’t touch until she’s retired in 11 years.

5. Wife’s pension if she retires today with 37 years of service(won’t be retiring for another 11 years) would be 37 x 1.25% x $36,745 = $16,994 no COLA

6. My SS if I dies this year would be $24k including Medicare deduction.
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Re: Another Round Retirement Plan

Post by EnjoyIt »

Plan #3
You both keep working for a few more years and all the numbers improve. But as I mentioned before she just needs enough money to get to pension and SS Collection age. Your SS and pension appear sufficient even if she stops working today.

Every year you two are employed is another year you don’t need to save, plus another year of paid off expenses, plus another year of savings.

Why not create a spreadsheet using today’s dollars with no inflation and see what it would look like every year over the next 5 years. This would consist of 15 different calculations with both working, only she works, no one works and see how the math works out. You will be surprised that you are in far better shape than you think.

I would strongly consider spending some money on enjoying yourselves together. This is something you would be more comfortable doing once you run the analysis.
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Re: Another Round Retirement Plan

Post by macher »

EnjoyIt wrote: Mon Jun 01, 2020 2:21 pm Plan #3
You both keep working for a few more years and all the numbers improve. But as I mentioned before she just needs enough money to get to pension and SS Collection age. Your SS and pension appear sufficient even if she stops working today.

Every year you two are employed is another year you don’t need to save, plus another year of paid off expenses, plus another year of savings.

Why not create a spreadsheet using today’s dollars with no inflation and see what it would look like every year over the next 5 years. This would consist of 15 different calculations with both working, only she works, no one works and see how the math works out. You will be surprised that you are in far better shape than you think.

I would strongly consider spending some money on enjoying yourselves together. This is something you would be more comfortable doing once you run the analysis.
If my wife stops working today she would have 26 years of service x 1.25% vs 37 years of service x 1.25%. Plus she can’t collect until at least 65 or else she ‘gets penalized’ for collecting early. For instance she can retire today but would get 50%. Full retirement age is considered 65 at the university under the old defined pension.

Example. 26 years x 1.25% x $36,745(last 5 average) / 50% = $5971 no cola.
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Re: Another Round Retirement Plan

Post by hand »

macher wrote: Mon Jun 01, 2020 8:49 am Wife: 56 years old will get a pension of years of service x 1.25% x last 5 years average salary. Current salary is $39,400 working 28 hours a week and has 26 years of service. She I’ll work until 67 and will have 37 years of service.
Does your wife have any interest in working additional hours during the last 5 years of her career or otherwise have the ability to increase her salary within the existing pension scheme? This could significantly increase the value of her pension.
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Re: Another Round Retirement Plan

Post by macher »

hand wrote: Mon Jun 01, 2020 2:42 pm
macher wrote: Mon Jun 01, 2020 8:49 am Wife: 56 years old will get a pension of years of service x 1.25% x last 5 years average salary. Current salary is $39,400 working 28 hours a week and has 26 years of service. She I’ll work until 67 and will have 37 years of service.
Does your wife have any interest in working additional hours during the last 5 years of her career or otherwise have the ability to increase her salary within the existing pension scheme? This could significantly increase the value of her pension.
She’s willing to work more hours. If she could get more hours in her department it would work out but I said earlier the issue is she’s an admin assistant and is close to to top scale on the classification. If she goes to another dept within the university she can’t carry over her wage. She would almost need to start at the bottom of the classification wage scale working 40 hours a week which would equal her current 28 hours a week if that makes sense. I will have to double check on this but I’m pretty sure that’s how it works at the university.

However since her job is very secure the university has a hiring freeze and minimal raises because of COVID. But she has excellent relations with her director and there’s a possibility she can get her hours increased if there was a situation that would warrant it and director has the power to do so if she wanted.
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Re: Another Round Retirement Plan

Post by cherijoh »

macher wrote: Tue May 19, 2020 4:57 pm Ok I’m going to start another thread about how much we will need to retire. Looks like we are going to fall short because of the possibility of 1 SS because one of us will outlive each other. For instance my dad passed away at 75 last August and my mom is getting his SS not hers because my dads was the greater of the 2.

Here it goes.

EXPENSES
Living expenses; this will be expenses as if we retired today includes every living expense + retirement healthcare

$36k today’s dollars(3% / year for 14 years)> $55 year 2034

Discretionary spending $20k today’s dollars(3% / year for 14 years) > $30k year 2034

Taxes: future dollars approx $13k

TOTAL $98k future dollars year 2034

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars(2% year for 14 years)> $34k
SS Wife $18k today’s dollars(2% year for 14 years)> $24k

TOTAL INCOME $79k future dollars year 2034

Total future expenses $98k- total income $79k = $19k shortfall

Looks like we would need...
1. $19k / 4% = $475k 4% withdrawal rate
2. $19k / 5.2% $365 annuitized accumulation(100% joint survivor)

Couple issues here...
1. Don’t know how this plays out after year 2034 with living expenses inflation and SS increases of 2% or less and the 4% withdraw rate or annuity option. Although I think as you get older discretionary spending decreases. I see this a lot with elderly family members.
2. If I die early in retirement then my wife gets greater of SS which makes as a protection if I die early which brings what we need from above to... million$ Yikes!

I’m somewhat confident on the 2 SS scenario and will have more saved in another 14 years. But not sure 2034 after maybe the decrease in discretionary spending will help?

Expenses $98k - income $55k = $43k shortfall @ 4% withdraw rate would need $1,075,000

How do others deal with a situation of a possible short fall with 1 SS. Do you ‘insure it’ with a term policy?

Couple notes; I don’t believe in the 25% less SS hype. I’ve read that it isn’t necessarily true. What could happen is either more taxes towards SS and / or later age. So I’m basing SS on this. Don’t want to get in a debate about it. I inflated retirement healthcare at 3% from now until 2034 because my employer hasn’t raised the premium more than 3% in the last 30 years and some years no increase. Currently in today’s dollars for a Cadillac plan it’s $375 / month for 2.

Thanks!
Are you planning on retiree healthcare from your employer? You need to be aware that the retiree pool isn't usually the same as the employee pool. A friend who worked at my former employer took a package and was on COBRA first then switched to un-subsidized retiree health care. Her insurance more than doubled when she went on the retiree plan.

In addition, retiree healthcare is NOT a guaranteed benefit like yout pension. Unless you work for the Federal government, I really wouldn't count on it for the long term.

Several friends retired from my first ex-employer (not the same one mentioned above). At that time (before the ACA), the company subsidized the Retiree health care. They started out paying $X/month with them paying 30% of the premium and the company 70% (which was about the same ratio as for employees. The next year the total premium went up 10%, but they were expected to pay 40% of the total.

Year 1 total premium = X/.30 = 3.33X
Year 2 total premium 1.1x 3.33X = 3.667X
Their part of year 2 total premium = 0.40 x 3.667X = 1.467X

So instead of a 10% premium increase (which was around what we had been seeing as employees every year), they saw an out-of pocket premium increase of ~47%. The same thing happened the next year with them being expected to pick up 50% of the total cost. I think the year after that they did away with retiree healthcare altogether.
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Re: Another Round Retirement Plan

Post by macher »

cherijoh wrote: Mon Jun 01, 2020 3:00 pm
macher wrote: Tue May 19, 2020 4:57 pm Ok I’m going to start another thread about how much we will need to retire. Looks like we are going to fall short because of the possibility of 1 SS because one of us will outlive each other. For instance my dad passed away at 75 last August and my mom is getting his SS not hers because my dads was the greater of the 2.

Here it goes.

EXPENSES
Living expenses; this will be expenses as if we retired today includes every living expense + retirement healthcare

$36k today’s dollars(3% / year for 14 years)> $55 year 2034

Discretionary spending $20k today’s dollars(3% / year for 14 years) > $30k year 2034

Taxes: future dollars approx $13k

TOTAL $98k future dollars year 2034

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars(2% year for 14 years)> $34k
SS Wife $18k today’s dollars(2% year for 14 years)> $24k

TOTAL INCOME $79k future dollars year 2034

Total future expenses $98k- total income $79k = $19k shortfall

Looks like we would need...
1. $19k / 4% = $475k 4% withdrawal rate
2. $19k / 5.2% $365 annuitized accumulation(100% joint survivor)

Couple issues here...
1. Don’t know how this plays out after year 2034 with living expenses inflation and SS increases of 2% or less and the 4% withdraw rate or annuity option. Although I think as you get older discretionary spending decreases. I see this a lot with elderly family members.
2. If I die early in retirement then my wife gets greater of SS which makes as a protection if I die early which brings what we need from above to... million$ Yikes!

I’m somewhat confident on the 2 SS scenario and will have more saved in another 14 years. But not sure 2034 after maybe the decrease in discretionary spending will help?

Expenses $98k - income $55k = $43k shortfall @ 4% withdraw rate would need $1,075,000

How do others deal with a situation of a possible short fall with 1 SS. Do you ‘insure it’ with a term policy?

Couple notes; I don’t believe in the 25% less SS hype. I’ve read that it isn’t necessarily true. What could happen is either more taxes towards SS and / or later age. So I’m basing SS on this. Don’t want to get in a debate about it. I inflated retirement healthcare at 3% from now until 2034 because my employer hasn’t raised the premium more than 3% in the last 30 years and some years no increase. Currently in today’s dollars for a Cadillac plan it’s $375 / month for 2.

Thanks!
Are you planning on retiree healthcare from your employer? You need to be aware that the retiree pool isn't usually the same as the employee pool. A friend who worked at my former employer took a package and was on COBRA first then switched to un-subsidized retiree health care. Her insurance more than doubled when she went on the retiree plan.

In addition, retiree healthcare is NOT a guaranteed benefit like yout pension. Unless you work for the Federal government, I really wouldn't count on it for the long term.

Several friends retired from my first ex-employer (not the same one mentioned above). At that time (before the ACA), the company subsidized the Retiree health care. They started out paying $X/month with them paying 30% of the premium and the company 70% (which was about the same ratio as for employees. The next year the total premium went up 10%, but they were expected to pay 40% of the total.

Year 1 total premium = X/.30 = 3.33X
Year 2 total premium 1.1x 3.33X = 3.667X
Their part of year 2 total premium = 0.40 x 3.667X = 1.467X

So instead of a 10% premium increase (which was around what we had been seeing as employees every year), they saw an out-of pocket premium increase of ~47%. The same thing happened the next year with them being expected to pick up 50% of the total cost. I think the year after that they did away with retiree healthcare altogether.
Yes planing retirement healthcare from employer. It’s currently $375 for 2 / $190 for 1. The health care hasn’t really increased that much in my 23 year’s at same employer and my wife 26 years. It has never gone up more than 3% a year some years no increase. It’s Independence Blue Cross MediGap Security 65 Premium.

I’m very confident about the pension and retirement healthcare. It’s an Ivy League university not that means anything maybe it does. They have deep pockets and a nice endowment.
Last edited by macher on Mon Jun 01, 2020 3:54 pm, edited 2 times in total.
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Watty
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Re: Another Round Retirement Plan

Post by Watty »

macher wrote: Tue May 19, 2020 4:57 pm Taxes: future dollars approx $13k

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars(2% year for 14 years)> $34k
SS Wife $18k today’s dollars(2% year for 14 years)> $24k

TOTAL INCOME $79k future dollars year 2034

Total future expenses $98k- total income $79k = $19k shortfall
I did not read through the entire thread but you should double check your tax numbers.

According to this calculator an over 65 couple would owe no federal income taxes with $21K in taxable income and $44K in Social Security.

https://www.olt.com/main/home/taxestimator.asp

You can use tax software to do a dummy tax return to figure out what state taxes you would owe but many states do not tax Social Security.
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macher
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Re: Another Round Retirement Plan

Post by macher »

Watty wrote: Mon Jun 01, 2020 3:44 pm
macher wrote: Tue May 19, 2020 4:57 pm Taxes: future dollars approx $13k

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars(2% year for 14 years)> $34k
SS Wife $18k today’s dollars(2% year for 14 years)> $24k

TOTAL INCOME $79k future dollars year 2034

Total future expenses $98k- total income $79k = $19k shortfall
I did not read through the entire thread but you should double check your tax numbers.

According to this calculator an over 65 couple would owe no federal income taxes with $21K in taxable income and $44K in Social Security.

https://www.olt.com/main/home/taxestimator.asp

You can use tax software to do a dummy tax return to figure out what state taxes you would owe but many states do not tax Social Security.
Go to the most recent post in the thread done today.
Topic Author
macher
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Re: Another Round Retirement Plan

Post by macher »

Watty wrote: Mon Jun 01, 2020 3:44 pm
macher wrote: Tue May 19, 2020 4:57 pm Taxes: future dollars approx $13k

INCOME
Pension $21k at age 67
SS Me $26k today’s dollars(2% year for 14 years)> $34k
SS Wife $18k today’s dollars(2% year for 14 years)> $24k

TOTAL INCOME $79k future dollars year 2034

Total future expenses $98k- total income $79k = $19k shortfall
I did not read through the entire thread but you should double check your tax numbers.

According to this calculator an over 65 couple would owe no federal income taxes with $21K in taxable income and $44K in Social Security.

https://www.olt.com/main/home/taxestimator.asp

You can use tax software to do a dummy tax return to figure out what state taxes you would owe but many states do not tax Social Security.
My wife would be single because of my life span living in PA and would have to pay taxes
Topic Author
macher
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Re: Another Round Retirement Plan

Post by macher »

EnjoyIt wrote: Mon Jun 01, 2020 12:36 pm
macher wrote: Mon Jun 01, 2020 12:30 pm
EnjoyIt wrote: Mon Jun 01, 2020 11:56 am Sorry about the diagnosis.

What does social security look like for you and her? If you are not sure, log into SSA.gov and find out. See how much you will get and see how much she will get. Understand that when you pass away she will be entitled to your SS or hers whichever is greater. That in addition to her pension should put her in a pretty decent place if expenses are managed. The way I see it, you may need to have enough cash available to supplement her till SS kicks in.
Just looked at my SS statement online. It makes a reference to survivors if I die this year my spouse will get $2158 a month at full retirement age. Which would be 11 years for her. Her SS the last time I checked was less at full retirement age.

The only cash that would be available is my group life policy if we can make that work if the cancer comes back and there’s no hope which would be $375k.
Once the mortgage is paid off, it appears that your expenses are $27,900/yr. Your SS will cover $25,890/yr. Add in pension and it sounds like she will be ok even without the life insurance paying out. The way I see it, you need to raise enough cash to pay off the mortgage and cover her expenses from your passing to when she collects SS and pension. If she works some, then less money will be needed.
Ok thanks. I’m currently contributing $14,300 and employer is contributing 9% of salary. We have an emergency fund of 3 months.

Since you suggest to raise enough cash to pay off mortgage and cover expenses vs group life insurance from my passing until she can collect SS and pension... what do you suggest where I should contribute my part of my current contributions of $14,300? I have to contribute a minimum of 5% to get the 9% match. Currently I’m contributing 26% of my salary.

Wife would need $75k to payoff mortgage + $105k to cover expenses = $180k until she’s able to collect SS and pension. My thinking was she would use the group life to pay off mortgage and set aside $105k to cover expenses then my current 403b balance of $160k would grow with no contributions for another 11 years + money left over from the group life. I’m basically thinking that the $375k group life is sort of a savings although it’s not tangible now but will be tangible when I pass. Not sure if this is the right thinking or not :(

According to the internet I have a 5 year life expectancy of 25%. My doctor says cancer research and technology is way better than even 2 years ago and it gets better all the time. If you saw me I look like a healthy 53 year old man with no signs of looking like I have cancer. That doesn’t do anything for our situation.
EnjoyIt
Posts: 4720
Joined: Sun Dec 29, 2013 8:06 pm

Re: Another Round Retirement Plan

Post by EnjoyIt »

macher wrote: Tue Jun 02, 2020 4:59 am
EnjoyIt wrote: Mon Jun 01, 2020 12:36 pm
macher wrote: Mon Jun 01, 2020 12:30 pm
EnjoyIt wrote: Mon Jun 01, 2020 11:56 am Sorry about the diagnosis.

What does social security look like for you and her? If you are not sure, log into SSA.gov and find out. See how much you will get and see how much she will get. Understand that when you pass away she will be entitled to your SS or hers whichever is greater. That in addition to her pension should put her in a pretty decent place if expenses are managed. The way I see it, you may need to have enough cash available to supplement her till SS kicks in.
Just looked at my SS statement online. It makes a reference to survivors if I die this year my spouse will get $2158 a month at full retirement age. Which would be 11 years for her. Her SS the last time I checked was less at full retirement age.

The only cash that would be available is my group life policy if we can make that work if the cancer comes back and there’s no hope which would be $375k.
Once the mortgage is paid off, it appears that your expenses are $27,900/yr. Your SS will cover $25,890/yr. Add in pension and it sounds like she will be ok even without the life insurance paying out. The way I see it, you need to raise enough cash to pay off the mortgage and cover her expenses from your passing to when she collects SS and pension. If she works some, then less money will be needed.
Ok thanks. I’m currently contributing $14,300 and employer is contributing 9% of salary. We have an emergency fund of 3 months.

Since you suggest to raise enough cash to pay off mortgage and cover expenses vs group life insurance from my passing until she can collect SS and pension... what do you suggest where I should contribute my part of my current contributions of $14,300? I have to contribute a minimum of 5% to get the 9% match. Currently I’m contributing 26% of my salary.

Wife would need $75k to payoff mortgage + $105k to cover expenses = $180k until she’s able to collect SS and pension. My thinking was she would use the group life to pay off mortgage and set aside $105k to cover expenses then my current 403b balance of $160k would grow with no contributions for another 11 years + money left over from the group life. I’m basically thinking that the $375k group life is sort of a savings although it’s not tangible now but will be tangible when I pass. Not sure if this is the right thinking or not :(

According to the internet I have a 5 year life expectancy of 25%. My doctor says cancer research and technology is way better than even 2 years ago and it gets better all the time. If you saw me I look like a healthy 53 year old man with no signs of looking like I have cancer. That doesn’t do anything for our situation.
I would strongly consider what your risk profile is and invest it based on your asset allocation. You may consider a higher bond percentage considering she may need to tap that cash in less than 5 years. When I retire I plan my asset allocation at 60/40. I am comfortable at taking some risk plus there is plenty of discretionary spending that I can also comfortably cut back on if needed. You need to decide your risk tolerance.

My parents retired at 60/40 and comfortably accepted the recent bear market. There are some bogleheads who are very risk averse and retire on 20/80. To make it simple for your spouse you may consider a life strategy fund that auto rebalances to 60/40 or 40/60 depending on what you choose.

Lastly, she doesn’t necessarily have to pay off the mortgage. It is more important to have that money as opposed to paying it off completely which she/you may still decide to do. When considering debt, it will eventually be paid off and therefor can be considered differently with regards to your expenses. Many here accept that they need 25x (some a little higher) expenses for retirement. Your situation is different. You need Y dollars to cover mortgage plus Z dollars to cover expenses until she collects SS and pension.

How confident are you about this group life policy?
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Topic Author
macher
Posts: 212
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher »

EnjoyIt wrote: Tue Jun 02, 2020 9:01 am
macher wrote: Tue Jun 02, 2020 4:59 am
EnjoyIt wrote: Mon Jun 01, 2020 12:36 pm
macher wrote: Mon Jun 01, 2020 12:30 pm
EnjoyIt wrote: Mon Jun 01, 2020 11:56 am Sorry about the diagnosis.

What does social security look like for you and her? If you are not sure, log into SSA.gov and find out. See how much you will get and see how much she will get. Understand that when you pass away she will be entitled to your SS or hers whichever is greater. That in addition to her pension should put her in a pretty decent place if expenses are managed. The way I see it, you may need to have enough cash available to supplement her till SS kicks in.
Just looked at my SS statement online. It makes a reference to survivors if I die this year my spouse will get $2158 a month at full retirement age. Which would be 11 years for her. Her SS the last time I checked was less at full retirement age.

The only cash that would be available is my group life policy if we can make that work if the cancer comes back and there’s no hope which would be $375k.
Once the mortgage is paid off, it appears that your expenses are $27,900/yr. Your SS will cover $25,890/yr. Add in pension and it sounds like she will be ok even without the life insurance paying out. The way I see it, you need to raise enough cash to pay off the mortgage and cover her expenses from your passing to when she collects SS and pension. If she works some, then less money will be needed.
Ok thanks. I’m currently contributing $14,300 and employer is contributing 9% of salary. We have an emergency fund of 3 months.

Since you suggest to raise enough cash to pay off mortgage and cover expenses vs group life insurance from my passing until she can collect SS and pension... what do you suggest where I should contribute my part of my current contributions of $14,300? I have to contribute a minimum of 5% to get the 9% match. Currently I’m contributing 26% of my salary.

Wife would need $75k to payoff mortgage + $105k to cover expenses = $180k until she’s able to collect SS and pension. My thinking was she would use the group life to pay off mortgage and set aside $105k to cover expenses then my current 403b balance of $160k would grow with no contributions for another 11 years + money left over from the group life. I’m basically thinking that the $375k group life is sort of a savings although it’s not tangible now but will be tangible when I pass. Not sure if this is the right thinking or not :(

According to the internet I have a 5 year life expectancy of 25%. My doctor says cancer research and technology is way better than even 2 years ago and it gets better all the time. If you saw me I look like a healthy 53 year old man with no signs of looking like I have cancer. That doesn’t do anything for our situation.
I would strongly consider what your risk profile is and invest it based on your asset allocation. You may consider a higher bond percentage considering she may need to tap that cash in less than 5 years. When I retire I plan my asset allocation at 60/40. I am comfortable at taking some risk plus there is plenty of discretionary spending that I can also comfortably cut back on if needed. You need to decide your risk tolerance.

My parents retired at 60/40 and comfortably accepted the recent bear market. There are some bogleheads who are very risk averse and retire on 20/80. To make it simple for your spouse you may consider a life strategy fund that auto rebalances to 60/40 or 40/60 depending on what you choose.

Lastly, she doesn’t necessarily have to pay off the mortgage. It is more important to have that money as opposed to paying it off completely which she/you may still decide to do. When considering debt, it will eventually be paid off and therefor can be considered differently with regards to your expenses. Many here accept that they need 25x (some a little higher) expenses for retirement. Your situation is different. You need Y dollars to cover mortgage plus Z dollars to cover expenses until she collects SS and pension.

How confident are you about this group life policy?
I called yesterday about the group life policy. There’s no proof of insurability unless it’s $500k over. I’m at $375k. There’s no stipulations if one is terminally ill like myself as long as it’s under $500k.
EnjoyIt
Posts: 4720
Joined: Sun Dec 29, 2013 8:06 pm

Re: Another Round Retirement Plan

Post by EnjoyIt »

You have $160k in your 403b
Your spouse makes $39,500/yr
Expenses are $41,100/yr
You have a mortgage a $72k mortgage @550/month
You have 3 years left on a car note $300/month

Your 160k 403b will easily cover mortgage and car note and her income plus the remaining of your 403b will cover the rest of her expenses. So as long as you keep contributing for a few years and she is willing to work a little afterwards she is fine even without the life insurance. Like I said create a spreadsheet with these scenarios and see how it all plays out over the next 11 years. I really think it will give you some piece of mind.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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