Another Round Retirement Plan

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Another Round Retirement Plan

Post by macher » 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!

User avatar
WoodSpinner
Posts: 1420
Joined: Mon Feb 27, 2017 1:15 pm

Re: Another Round Retirement Plan

Post by WoodSpinner » Tue May 19, 2020 6:05 pm

OP,

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

WoodSpinner

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Tue May 19, 2020 6:16 pm

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.

User avatar
LadyGeek
Site Admin
Posts: 62839
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Another Round Retirement Plan

Post by LadyGeek » Tue May 19, 2020 6:29 pm

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.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
David Jay
Posts: 8368
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Another Round Retirement Plan

Post by David Jay » 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.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » 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

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.

User avatar
David Jay
Posts: 8368
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Another Round Retirement Plan

Post by David Jay » 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.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
David Jay
Posts: 8368
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Another Round Retirement Plan

Post by David Jay » Tue May 19, 2020 8:56 pm

David Jay wrote:
Tue May 19, 2020 7:36 pm
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.
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
Posts: 9949
Joined: Tue Feb 08, 2011 6:13 pm

Re: Another Round Retirement Plan

Post by delamer » 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).

Grt2bOutdoors
Posts: 22435
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Another Round Retirement Plan

Post by Grt2bOutdoors » Tue May 19, 2020 9:12 pm

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.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Golf maniac
Posts: 420
Joined: Wed Dec 27, 2017 2:02 pm
Location: Florida

Re: Another Round Retirement Plan

Post by Golf maniac » 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.

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Wed May 20, 2020 4:30 am

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
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Wed May 20, 2020 4:33 am

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.

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Wed May 20, 2020 6:07 am

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.

Nate7out
Posts: 65
Joined: Wed Jan 16, 2008 2:06 pm

Re: Another Round Retirement Plan

Post by Nate7out » 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.

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.

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Wed May 20, 2020 8:09 am

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?

User avatar
David Jay
Posts: 8368
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Another Round Retirement Plan

Post by David Jay » Wed May 20, 2020 8:46 am

macher wrote:
Wed May 20, 2020 4:30 am
However 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

Nate7out
Posts: 65
Joined: Wed Jan 16, 2008 2:06 pm

Re: Another Round Retirement Plan

Post by Nate7out » 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.

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:.

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » 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?

Nate7out
Posts: 65
Joined: Wed Jan 16, 2008 2:06 pm

Re: Another Round Retirement Plan

Post by Nate7out » Wed May 20, 2020 1:45 pm

The latter.

Grt2bOutdoors
Posts: 22435
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Another Round Retirement Plan

Post by Grt2bOutdoors » Wed May 20, 2020 2:31 pm

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.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
David Jay
Posts: 8368
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Another Round Retirement Plan

Post by David Jay » 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%.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Wed May 20, 2020 3:28 pm

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.

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » 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 pm
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.
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.

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » 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?

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Fri May 22, 2020 7:08 am

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.

delamer
Posts: 9949
Joined: Tue Feb 08, 2011 6:13 pm

Re: Another Round Retirement Plan

Post by delamer » 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.

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Fri May 22, 2020 10:54 am

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.

EnjoyIt
Posts: 3953
Joined: Sun Dec 29, 2013 8:06 pm

Re: Another Round Retirement Plan

Post by EnjoyIt » 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 pm
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.
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.

Topic Author
macher
Posts: 135
Joined: Tue Apr 14, 2020 5:21 pm

Re: Another Round Retirement Plan

Post by macher » Fri May 22, 2020 2:58 pm

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 pm
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.
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.

Post Reply