Budgeting for the current economic conditions' impact on my future

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Topic Author
Cara
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Joined: Wed Feb 28, 2018 1:02 pm

Budgeting for the current economic conditions' impact on my future

Post by Cara »

I have a pension that's about 41% of what I earned up until I retired in August 2021.

I'm frugal, and I budget, and I balance my budget so I plan to spend or save 100% of my income.

I can no longer invest in tax-sheltered/favorable accounts because I no longer have earned income.

I've seen my retirement investments (tIRA, Roth, and taxable) decrease probably only 10% or so but, with my limited assets (just around $1M when I retired at 60) it's scary (the possibility of that continuing).

I'm concerned about inflation because I will have small, if any, COLA in my pension.

I am assured by my financial advisor that I'm okay - that (with no kids) my husband and I will likely leave behind money - but that's based on projections with modest inflation and investment return assumptions. In addition, with no long term care insurance - my assets may be swallowed by LTC for my older husband or, eventually, for me. So that "left behind" money may actually be needed, at some point - at least, that's how I'm planning.

I can cut my budget a bit, saving almost $400 a month in an attempt to offset future market drops and inflation but - if I do that - where would I put the money that wouldn't just result in having to pay taxes on anything I earn on that money? (I've already invested the max in i-Bonds for the year, for both of us.)

Just looking for ideas, here, though I'm not sure I have many options.
raveon
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Re: Budgeting for the current economic conditions' impact on my future

Post by raveon »

If you are in good health, it might not a bad idea to consider doing some part-time work to have some income. The job market is very good right now. That can be used to contribute to Roth/Pre-tax IRA.
exodusNH
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Re: Budgeting for the current economic conditions' impact on my future

Post by exodusNH »

Cara wrote: Thu May 19, 2022 7:22 pm I have a pension that's about 41% of what I earned up until I retired in August 2021.

I'm frugal, and I budget, and I balance my budget so I plan to spend or save 100% of my income.

I can no longer invest in tax-sheltered/favorable accounts because I no longer have earned income.

I've seen my retirement investments (tIRA, Roth, and taxable) decrease probably only 10% or so but, with my limited assets (just around $1M when I retired at 60) it's scary (the possibility of that continuing).

I'm concerned about inflation because I will have small, if any, COLA in my pension.

I am assured by my financial advisor that I'm okay - that (with no kids) my husband and I will likely leave behind money - but that's based on projections with modest inflation and investment return assumptions. In addition, with no long term care insurance - my assets may be swallowed by LTC for my older husband or, eventually, for me. So that "left behind" money may actually be needed, at some point - at least, that's how I'm planning.

I can cut my budget a bit, saving almost $400 a month in an attempt to offset future market drops and inflation but - if I do that - where would I put the money that wouldn't just result in having to pay taxes on anything I earn on that money? (I've already invested the max in i-Bonds for the year, for both of us.)

Just looking for ideas, here, though I'm not sure I have many options.
Well, remember that even after paying taxes, you have more money. Even if the tax rate were 90%, you'd still have 10% more than not earning that money.

One option is for every $400 you're able to save, put it into a taxable brokerage account, into a total stock market fund. Then, in your tax-deferred accounts, sell $400 of your equities and buy an equivalent amount of bonds.

Or, you could do municipal bonds, but you need to run the numbers to see if the reduced interest is compensated by the lower federal taxes.

And someone replied above, maybe a part-time job? Bank tellers around here are paying $20/hr. If you did that 16 hours a week, you would have earned income and could continue saving in an IRA, plus just the extra cash.
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dual
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Re: Budgeting for the current economic conditions' impact on my future

Post by dual »

Consider investing in treasury inflation protected securities, tips, for part of the fixed income portion of your savings in your tax deferred accounts. They protect you against unexpected inflation. See this thread about the recent 10 year tips auction. It yields 0.3% plus the inflation rate, which is now about 8%.
https://www.bogleheads.org/forum/viewt ... ?t=377195
They are somewhat complicated but there are many people here who can answer your questions. They are not the answer to all your problems but they will help.
Topic Author
Cara
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Re: Budgeting for the current economic conditions' impact on my future

Post by Cara »

Okay, some interesting ideas. I would have to find part-time work-from-home, as we have Covid vulnerabilities in my house that are part of the reason I retired at 60 (to get out of an office where others weren't being careful). But that's something to consider, since I would love to continue to contribute to my Roth.

And I'll consider the "contribute to taxable and reallocate in tax-deferred" - that's interesting...

Thanks - keep 'em coming.

And if anyone has links to legit work-from-home for "older" people, share those, too!
delamer
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Re: Budgeting for the current economic conditions' impact on my future

Post by delamer »

I think there are customer service jobs that you can do from home as long as you have a computer and decent internet service.

But that’s all I know.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
averagedude
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Re: Budgeting for the current economic conditions' impact on my future

Post by averagedude »

From what I gather from your post, I say to listen to your financial advisor. He knows your financial picture more than anyone on this forum does providing the limited information you have provided to us. Me personally, I have always been concerned about the purchasing power of the dollar. I have always believed that inflation risk was a bigger worry than lackluster long term stock market returns. Most people on this forum feel your pain because we too have experienced a 10% drawdown on our portfolio, but the market is well ahead of the tops that were put in before the pandemic took place. For the last century, a 60/40 portfolio has had successful outcomes in times of inflation, provided you have a conservative safe withdrawal rate . You are frugal, you budget, and obviously you seem to be mindful of running out of money so I believe you will be fine and you should stop worrying. I would be more worried of the outcome of behavior decisions that you might make than the long term investment returns that a moderate portfolio will provide . You are always welcome to present your entire financial picture with a list of your investments, and the wise people on this forum could provide you with good advice on the answers to your question. From all I know, you could easily have 80%, or even 100% of your future income needs being met by your pension and social security alone.
KlangFool
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Re: Budgeting for the current economic conditions' impact on my future

Post by KlangFool »

OP,

I do not understand why do you think you have a problem.

A) What is your current annual expense?

B) What is your pension?

C) What is your social security benefits?

D) What is your spouse's social security benefits?

E) What is your plan for medical insurance until medicare?

F) How old are you?

G) What is your asset allocation?

Most Americans retired with far less than that with no pension. If you provide your numbers, we can probably show you that you have no problem.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
Cara
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Joined: Wed Feb 28, 2018 1:02 pm

Re: Budgeting for the current economic conditions' impact on my future

Post by Cara »

Thanks - I've requested a portfolio review before, but find it difficult to compile/format correctly so I have avoided updating it. To answer your direct questions, though:

A) What is your current annual expense?
$27,403 (excluding taxes)
B) What is your pension?
$36,316
C) What is your social security benefits?
none yet - will collect in 10 years
D) What is your spouse's social security benefits?
I don't include my husband's benefit in our expense/income because I want to rely only on my own - his is "icing on the cake" - but it's $16,657
E) What is your plan for medical insurance until medicare?
For $2094 annually (for now), I have retiree coverage
F) How old are you?
60
G) What is your asset allocation?
Desired allocation is 50 stock / 45 bond / 5 cash (I know, I know, but I'm nervous). I'm only 2% off in the stock/bond, in actuality.

When I write this all out I know things look fine. But those expenses and medical costs are present day, and I'm worried about future days!
KlangFool
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Re: Budgeting for the current economic conditions' impact on my future

Post by KlangFool »

Cara wrote: Thu May 19, 2022 8:47 pm Thanks - I've requested a portfolio review before, but find it difficult to compile/format correctly so I have avoided updating it. To answer your direct questions, though:

A) What is your current annual expense?
$27,403 (excluding taxes)
B) What is your pension?
$36,316
C) What is your social security benefits?
none yet - will collect in 10 years
D) What is your spouse's social security benefits?
I don't include my husband's benefit in our expense/income because I want to rely only on my own - his is "icing on the cake" - but it's $16,657
E) What is your plan for medical insurance until medicare?
For $2094 annually (for now), I have retiree coverage
F) How old are you?
60
G) What is your asset allocation?
Desired allocation is 50 stock / 45 bond / 5 cash (I know, I know, but I'm nervous). I'm only 2% off in the stock/bond, in actuality.

When I write this all out I know things look fine. But those expenses and medical costs are present day, and I'm worried about future days!
In in the worst case, medical expense at 20K per year, you still have no problem. You can cover it with your pension and social security. Your portfolio is just icing on the cake. So, where is the problem?


Pension = 36K per year
Social security = 12K per year
Portfolio = 40K per year

Total = 88K per year.

Assume medical expense = 20K per year, other expense = 27K. Total = 47K per year.


If you cannot afford medical insurance and expense, we have a bigger problem. It is not longer a money problem.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
Cara
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Joined: Wed Feb 28, 2018 1:02 pm

Re: Budgeting for the current economic conditions' impact on my future

Post by Cara »

KlangFool wrote: Thu May 19, 2022 9:04 pm In in the worst case, medical expense at 20K per year, you still have no problem. You can cover it with your pension and social security. Your portfolio is just icing on the cake. So, where is the problem?
I’m thinking easily $54K or more, if assisted living or more becomes needed.
KlangFool
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Re: Budgeting for the current economic conditions' impact on my future

Post by KlangFool »

Cara wrote: Thu May 19, 2022 9:51 pm
KlangFool wrote: Thu May 19, 2022 9:04 pm In in the worst case, medical expense at 20K per year, you still have no problem. You can cover it with your pension and social security. Your portfolio is just icing on the cake. So, where is the problem?
I’m thinking easily $54K or more, if assisted living or more becomes needed.
I had been unemployed for more than 1 year a few times. I had to get my medical insurance from the market place and max up deductible. So, I have no idea where your 54K comes from.

And, even if that is true, your 88K per year of retirement income can cover that. So, where is the problem?

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
Cara
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Re: Budgeting for the current economic conditions' impact on my future

Post by Cara »

That $54k is assisted living costs

Okay - no problem. I’m just nervous about drops in investment values and increases in costs of living in the future. I was looking for some reassurance and I got it!
jharkin
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Re: Budgeting for the current economic conditions' impact on my future

Post by jharkin »

Cara wrote: Thu May 19, 2022 8:47 pm Thanks - I've requested a portfolio review before, but find it difficult to compile/format correctly so I have avoided updating it. To answer your direct questions, though:

A) What is your current annual expense?
$27,403 (excluding taxes)
B) What is your pension?
$36,316
C) What is your social security benefits?
none yet - will collect in 10 years
D) What is your spouse's social security benefits?
I don't include my husband's benefit in our expense/income because I want to rely only on my own - his is "icing on the cake" - but it's $16,657
E) What is your plan for medical insurance until medicare?
For $2094 annually (for now), I have retiree coverage
F) How old are you?
60
G) What is your asset allocation?
Desired allocation is 50 stock / 45 bond / 5 cash (I know, I know, but I'm nervous). I'm only 2% off in the stock/bond, in actuality.

When I write this all out I know things look fine. But those expenses and medical costs are present day, and I'm worried about future days!

????

Your only problem is you can’t let go of your fear.

Your pension alone more than covers expense, plus you have 1MM and SS. Even if the market crashed like 1929 and you live to 125 you would never run out of money. Go enjoy it.
harvestbook
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Re: Budgeting for the current economic conditions' impact on my future

Post by harvestbook »

I'm 60 and I think in terms of bridges to the next little safety net--Medicare, Social security, possible small inheritance. Even without much money, I am wondering where will I ever spend all that money. I'm poking around Bogleheads and financial news out of intellectual curiosity more than anything--what are my feelings, and do they matter? What are other people feeling? People with feelings are extremely lucky in my view, because for some people bears/recessions are true nightmares and they have no time to feel, only react.

Time is the most important asset, and I feel great at 60. Enjoy the day.
I'm not smart enough to know, and I can't afford to guess.
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Wiggums
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Re: Budgeting for the current economic conditions' impact on my future

Post by Wiggums »

We are 60 and retired.

You are in good shape. There is a lot of market noise right now and we just ignore it. I don’t see the need to cut back on your expenses. Your asset allocation is very reasonable.

Good luck to you.
"I started with nothing and I still have most of it left."
Topic Author
Cara
Posts: 150
Joined: Wed Feb 28, 2018 1:02 pm

Re: Budgeting for the current economic conditions' impact on my future

Post by Cara »

Thank you all!
Exchme
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Re: Budgeting for the current economic conditions' impact on my future

Post by Exchme »

What are you paying the financial advisor? If it's a typical AUM advisor, don't forget to include the fund operating expenses that can probably only be found in the prospectus, but are often very significant and are on top of the advisory fee. Invest yourself using Boglehead principals of super low cost index funds, pocket what your advisor would have skimmed off and relax, you'll be fine.
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HMSVictory
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Re: Budgeting for the current economic conditions' impact on my future

Post by HMSVictory »

Cara,

Take a nice deep breath. You are a millionaire and you are going to be fine. Can I assume you also have a paid for home?

Turn off the 24/7 news channel. Stop checking your investments.

With the constant barrage of negative news via our phones / tablets / computers / tvs it can be hard. This is the source of your anxiety. Its all noise.

Fear drives ratings / clicks / views and ad revenue - its that simple.

As the other posters have noted you have no need for income from your portfolio - it doesn't get any better than that. May I suggest you use some of your portfolio income to go on a very nice vacation? Maybe someplace you have dreamed of going but were too frugal to go? Life is short - enjoy the ride.
Stay the course!
BernardShakey
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Re: Budgeting for the current economic conditions' impact on my future

Post by BernardShakey »

KlangFool wrote: Thu May 19, 2022 10:21 pm
Cara wrote: Thu May 19, 2022 9:51 pm
KlangFool wrote: Thu May 19, 2022 9:04 pm In in the worst case, medical expense at 20K per year, you still have no problem. You can cover it with your pension and social security. Your portfolio is just icing on the cake. So, where is the problem?
I’m thinking easily $54K or more, if assisted living or more becomes needed.
I had been unemployed for more than 1 year a few times. I had to get my medical insurance from the market place and max up deductible. So, I have no idea where your 54K comes from.

And, even if that is true, your 88K per year of retirement income can cover that. So, where is the problem?

KlangFool
She is concerned about lack of LTC insurance. Without LTC insurance, she and her husband could burn through their savings pretty quickly if / when that need arises.
An important key to investing is having a well-calibrated sense of your future regret.
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Sandtrap
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Re: Budgeting for the current economic conditions' impact on my future

Post by Sandtrap »

Cara wrote: Thu May 19, 2022 7:22 pm I have a pension that's about 41% of what I earned up until I retired in August 2021.

I'm frugal, and I budget, and I balance my budget so I plan to spend or save 100% of my income.

I can no longer invest in tax-sheltered/favorable accounts because I no longer have earned income.

I've seen my retirement investments (tIRA, Roth, and taxable) decrease probably only 10% or so but, with my limited assets (just around $1M when I retired at 60) it's scary (the possibility of that continuing).

I'm concerned about inflation because I will have small, if any, COLA in my pension.

I am assured by my financial advisor that I'm okay - that (with no kids) my husband and I will likely leave behind money - but that's based on projections with modest inflation and investment return assumptions. In addition, with no long term care insurance - my assets may be swallowed by LTC for my older husband or, eventually, for me. So that "left behind" money may actually be needed, at some point - at least, that's how I'm planning.

I can cut my budget a bit, saving almost $400 a month in an attempt to offset future market drops and inflation but - if I do that - where would I put the money that wouldn't just result in having to pay taxes on anything I earn on that money? (I've already invested the max in i-Bonds for the year, for both of us.)

Just looking for ideas, here, though I'm not sure I have many options.
To OP:

Question to help you get more and better comprehensive responses.

1. As above: What type of Financial Advisor are you using? What are the fees?

2. Again, for better responses applicable to "you", instead of short opinion, consider the following:

More comprehensive suggestions might be had if you please reformat you original post and include the data suggested in the link below (use pencil icon) Otherwise a lot of assumptions have to be made for substantive actionable input.
Like this:
Portfolio Review Request
https://www.bogleheads.org/forum/viewt ... =1&t=6212

Thanks!
j :D
Wiki Bogleheads Wiki: Everything You Need to Know
Californiastate
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Re: Budgeting for the current economic conditions' impact on my future

Post by Californiastate »

Human's somehow need to worry about something constantly. Mass media banks on it. We have our concerns too. One concern is not enjoying my retirement because I'm worried about something I haven't foreseen in our FP. We're fortunate. It could be the other way around. We could be concerned about something that is clearly inevitable.
money2churn
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Joined: Mon Jan 18, 2021 11:12 am

Re: Budgeting for the current economic conditions' impact on my future

Post by money2churn »

My only suggestion would be to focus on the mental and physical health of you and your spouse. A plan for regular exercise and a healthy diet would be first and foremost in my mind. If you're already doing this, great! Good luck!
Topic Author
Cara
Posts: 150
Joined: Wed Feb 28, 2018 1:02 pm

Re: Budgeting for the current economic conditions' impact on my future

Post by Cara »

Sandtrap wrote: Fri May 20, 2022 9:52 am 1. As above: What type of Financial Advisor are you using? What are the fees?

2. Again, for better responses applicable to "you", instead of short opinion, consider the following:
I'm with Mark Zoril/Planvision, and pay $8 a month. He reassured me last year that all was good - I was just looking for confirmation of that in light of current conditions, I guess.

I have submitted a portfolio review (pre-retirement) and probably will do that again, thanks. I just takes some effort on my part to gather and format it correctly.
Californiastate wrote: Fri May 20, 2022 10:23 am Human's somehow need to worry about something constantly. Mass media banks on it. We have our concerns too. One concern is not enjoying my retirement because I'm worried about something I haven't foreseen in our FP. We're fortunate. It could be the other way around. We could be concerned about something that is clearly inevitable.
That's calming. Thanks.
money2churn wrote: Fri May 20, 2022 10:37 am My only suggestion would be to focus on the mental and physical health of you and your spouse. A plan for regular exercise and a healthy diet would be first and foremost in my mind. If you're already doing this, great! Good luck!
I am encouraging my husband to do this, as he's older and has more health issues, but I can only encourage him so far. I don't think he makes the connection between mental/physical health and enjoyment, for some reason.
I, on the other hand, have actually made this priority #1, in retirement. I'm in pretty good health, but have familial health issues that may fall on me so I'm doing everything I can to stay healthy - because I want to live a very long time. Thanks.
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