Sharing 23 years of Frugal Retirement

[REWahoo]

Quote:

Originally Posted by Buckeye I forgot to include the information but the OP said they dropped the liability portion because they purchased an umbrella policy. That's much different than what we have. Our umbrella doesn't kick in until after a $300k/$500k limit on our auto policy and $300k on our renters insurance. Has anyone else heard of first dollar coverage on liability for an umbrella policy?

Not me. Like you, I had to increase my auto liability limits in order to get an umbrella policy.

[MasterBlaster]

What poster "Imoldernu" speaks of is the premise for Ralph Warners book "Get a Life: You Don't Need a Million to Retire Well"

In the book Ralph describes very eloquently how piling up more and more dollars may actually be detrimental to a happy retirement. The stress and (perhaps) poor eating and health habits from working long hours can really take its' toll. Also if people just work they may not make lifelong friends outside of work that they can chum around with once the work stops. Also people need to develop many interests outside of work perhaps long before the work stops.

This book is a great read if anyone is interested:

http://www.amazon.com/Get-Life-Dont-.../dp/1413300847

Also my inner frugal spidey-sense can't help but notice that it's available used for less than a dollar (plus shipping) on Amazon

[Buckeye]

Quote:

Originally Posted by REWahoo Not me. Like you, I had to increase my auto liability limits in order to get an umbrella policy.

I wonder what the word "dropped" meant by OP? Reduced instead of removed? Can you even have an auto policy without liability included? Maybe I'm misreading the post.

Yes, OP would save money if he had a $1 million liability on his auto policy and dropped the liability (i.e. reduced the limit) when he purchased an umbrella policy.

[KingB]

Quote:

Originally Posted by imoldernu #3 ___ On "SIMPLIFY" Our own simplification is not in throwing things out... egad... I'm a hoarder, but under control. I keep "Stuff" that I may need for repairs, for replacement... Like all kinds of paint, wood pieces, computer parts, plumbing stuff and like that. Our simplification is in our lifestyle. First, our house(s) inside... spartan... easy to clean less to walk around. Outside, very unfancy... perennials... very limited Halloween/Christmas/Seasonal flowers, and other decor.

Thanks for the very good information.

Doesn't keeping/maintaining 2 home add complication, rather than simplification to your life?

[imoldernu]

Quote:

Doesn't keeping/maintaining 2 home add complication, rather than simplification to your life?

Ah... Yes. Excellent point. We are nearing the time (maybe another 2 years) when we'll decide to stay "north".

There's a reason for buying the house. I have a number of points that I haven't covered, and that's one of them.... It has to do with the legal "look back" policy, wherein if a nursing home is in the future, owning a home, is partial insurance against losing it all, if one of the partners has to go on Medicaid. The State can take almost all savings, but can't take the home.

[imoldernu]

About the Umbrella policy... Can't remember the details, since we did this about 6 years ago. We carry our house and our cars with one company... We had 500K liability on the cars. When we took on the umbrella liability policy, it covered all three. Since y'all seem to think that this isn't correct, I'll go back to the company and see if I'm telling you wrong. Could it have to do with an accident free record? The agent suggested the umbrella policy and as I recall, by dropping the car liability, the net cost of adding the Umbrella policy was only $80.

[Buckeye]

Quote:

Originally Posted by imoldernu About the Umbrella policy... Can't remember the details, since we did this about 6 years ago. We carry our house and our cars with one company... We had 500K liability on the cars. When we took on the umbrella liability policy, it covered all three. Since y'all seem to think that this isn't correct, I'll go back to the company and see if I'm telling you wrong. Could it have to do with an accident free record? The agent suggested the umbrella policy and as I recall, by dropping the car liability, the net cost of adding the Umbrella policy was only $80.

I (and many others) want to know the company that writes your umbrella policy if you have first dollar liability coverage!

My umbrella policy costs about $340 per year plus I think it cost me an additional $200 for the liability limit increase on my auto policy to mesh with where the umbrella kicks in. The true cost of the liability policy is over $500 per year.

[psweath]

Quote:

Originally Posted by imoldernu Goodness, no... We visit and stay in contact on a regular basis... what I meant was that we don't live in each other's lives. Like, we don't visit our problems on them and they do the same... Makes for a great relationship... always happy, always upbeat. Some of our friends talk to their kids three or four times a day...and are involved in every minute of their lives. Easy to do... I suppose that having four boys helps here...

Unbelievable. How did that conversation go? "Um boys, let's talk. We just want to be clear that visiting and staying in touch is ok, as long as you're not having any problems in your lives. If you are, please don't visit those on us whatever you do. We'd prefer you always be happy and upbeat around us. Oh, and no more of those sappy Christmas or birthday cards and definitely never a gift, ok?"

Did you tell them about the cancer scare? I'm surprised you see them at all.

[imoldernu]

FWIW.... the Insurance company...
Personal Liability Insurance | American Family Insurance
Will confirm w/agent... Y'all could be right...
What might have happened was that I already had 500K liability on the cars... and the umbrella allowed us to reduce the amount in the cars... I'm just not sure. CRS dontcha know.

edit... to add lik to PDF on Umbrella policy.
http://www.amfam.com/pdf/insurance/u...y-umbrella.pdf

[Purron]

Quote:

Originally Posted by psweath Oh, and no more of those sappy Christmas or birthday cards and definitely never a gift, ok?" Did you tell them about the cancer scare? I'm surprised you see them at all.

Our family agreed to give up cards and gifts years ago. We realized we were buying stuff none of us needed or wanted. Instead, we have great visits and treat ourselves to a nice meal for various occassions. I think it's improved the quality of our relationship since there's no pressure to buy the "right gift".

[imoldernu]

#5
___

When I started posting here, I didn't know how much experience regular members had. This may be a little on the simple side... and my income level may be well below that of others....Anyway...


Net Worth

In order to calculate the amount you may need to retire, net worth is the benchmark that is used to determine how long your money may last.

Net worth is also the most difficult number to tie down... practically, theoretically, statistically and comparatively. Not the number... but the way in which it is used for planning.

Don't even bother to look for national statistics, unless you're prepared to jump through hoops to determine urban rural, male female, family vs individual or couple, and then to figure at your current age. Mostly a thing for financial planners. FWIW, a generally accepted net worth figure for age 55-64 is $232,000... but that is meaningful only in the context in which it was determined.

Here's the overly simple way that I see to calculate net worth. (yeah, I know I covered this before, but I'm covering it again.)

Add the current cash value of all of your belongings. The TRUE value... What you would get if you sold it on the open market, today. That means the $2,000 diamond ring is worth $300... the comic book collection is worth $150, not the $1200 shown in the catalog, and the $23,000 car you bought in 2009 is worth $10,000 today.

Don't forget to net out your "worth" by subtracting the credit card debt, the auto loan, and the house mortgage. If you have stocks, pick a point in time to calculate their worth... not before the crash.

Being honest with yourself here is important. (My first attempt at doing this, overstated our net worth by about 35%, and turned the rest of my planning upside down.)

So why "net worth"? Simply because, that, coupled with any ongoing income is what you'll have to live on in your years of retirement. (Unless of course you incorporate winning a lottery in your plans.)
.................................................. ......

So here's how I use net worth... Not the normal planning guide , but my own guide....

1. Instead of starting from what you need to retire, look at what you'll have to retire on. "Reality based planning"

2. Calculate how much income you can count on, from fixed sources. Social Security, Guaranteed Pensions, Annuities, Don't try to calculate inflation... either here or in your retirement expenses, later on. If you're planning on investment income from stocks or bonds, use a conservative ROI percentage, not the 8% that your pension fund uses.
(Note: For planning purposes, don't used income compounding... this is an offset to the inflation factor that you won't be considering.
Example: (use annual figures for simplicity)
..........Social Security... $22K
..........Pension........... $10K
..........Stock............. $5K
..........Pt. Time work..... $8K
..........Tot. income....... $45K

3. Spending down net worth...
Calculate this, by taking your total net worth (let's say $230K) and dividing this by the number of years between your retirement date,and your currrent life expectency.
Thus if you retire at 62 and your life expectency is 85, your number is 23 ... 85 -62 = 23
Now, you can spend down that at $10,000 per year.
$230 / 23 = 10K

4. Your simple retirement plan would thus allow you to spend
$45K + $10K or $55,000 per year.
.................................................. .

The obvious... What about inflation? All I can say here, is that somehow, over the past 20 years inflation and income has somehow equalized, probably due to the low CPI... but for simple, basic planning purposes, up until now, this has not affected my own plan.


At the very least, whether this scenario looks right for you or not, it gives some kind of a base to build on.

As stated earlier, this would be a best circumstance budget, built from the income expectations.

You might consider creating a "nominal" budget, by simply not using the sell-down of assets.

Of course, an austerity budget is built from the ground up... based on minimal expenses.

[packrat44]

Quote:

Originally Posted by Buckeye I wonder what the word "dropped" meant by OP? Reduced instead of removed? Can you even have an auto policy without liability included? Maybe I'm misreading the post. Yes, OP would save money if he had a $1 million liability on his auto policy and dropped the liability (i.e. reduced the limit) when he purchased an umbrella policy.

I have my houses, autos, and umbrella with USAA. They require liability on the autos if you have an umbrella. When I put a truck in storage and asked for only Comp to cover it in case of a fire, etc, I found USAA automatically added liability back on the vehicle. Now when I put a vehicle in storage for an extended time I drop all coverage for that vehicle.

[imoldernu]

#6
___

Where you live.
Where you're going to live.
Downsizing.
Protecting the surviving spouse.
.................................................. ....
No one can give advice on this, but it's good to think about it anyway.

In our case, we lived in suburbia/exurbia... and compared to where we moved, the actual costs were reduced by about (today's prices) $7,000
House mortgage(extrapolated) $3000
House Taxes $2500
Entertainment, eating out... $1,000
Maintenance/services ....$500
Auto costs.... $600
Shopping/buying for house $800

That may sound like a lot, but in our case, much of the expense amounted to little more that the frills associated with living in a more upscale community, where just about everything from gas to common services like auto and house maintenance services are more expensive.

You can check out the income statistics for US communities by googling
income statistics by city.
From our original home to our current home, the average wages go from from $88K to $41K... in a distance of about 95 miles. In our case, we didn't have to sacrifice services, as is the case in some rural communities... but this is something to consider. Hospitals and specialty care becomes much more important as we age. A tough part about moving (at a later age) is the losing and replacing of social contacts. Very small communities may be somewhat closed for people who aren't naturally outgoing. We spent a fair amount of time... maybe 20 hours, riding around the new town, going into businesses, city hall, hospitals, grocery stores, post offices, govrenment offices, nursing homes, libraries, etc, etc... as well as visiting different neighborhoods, and (in our case), a community college.

If downsizing is a part of your retirement plan, and relocation is being considered, I'd suggest that you take plenty of time to make a choice.

The thought of moving farther away was at one time a consideration. A good friend made the choice to move to a South American Country in an American enclave... for the obvious reason of making the Dollar go farther. In this case it was a bad choice. He (they) could not adapt to the loss of culture and services, and returned within a year.

This is all general stuff, that you surely already knew, but frankly, I hadn't though much about. We "lucked out" in our choices... but much of that was by chance. In retrospect, I would have done more research. As it is, there are some apsects of snowbirding that can be negative, as in certain types of homeowners or condominium associations. Especially in this economy.

I'll come back to "protecting your spouse" in another post.

While I think of it, here are two of many hundreds of Senior advice sites. The first is for Senior Care... and the second, (a good source) legal advice.

Caregiving Questions | Senior Health and Legal Questions | Caring.com

http://www.uaelderlaw.org/

[imoldernu]

#7
___

Perhaps the most important part of this thread on retirement, is the matter of protecting one's assets... and even more important, thinking ahead to protect the assets of a spouse, when health requires extraordinary expenses.

Since we, and our spouses will always be healthy, we don't think about what could happen. We just assume we'll both die at the same time.

Statistically that ain't gonna happen. If you already have a net worth of 2 Million dollars, don't read the rest... It doesn't apply to you.

Current medicaid law allows for payment of nursing home expenses under certain conditions. If you understand those conditions, you could save hundreds of thousands of dollars for yourself, your spouse, or your estate... (your kids).

Here are the things you should know about:

Current nursing home costs average from $75,000 to $90,000/yr. A friend on Long Island is currently paying over $135,000/yr. for just basic care.

The state (medicaid) does not automatically pay for this.

You should understand "exclusions".

Know that the "look back period" is now 5 years.

...........................................
As long as a married couple have assets, if one spouse should have to go into a nursing home, the couple's assets will be used to pay for the medical care until the assets go below a certain level, at which time, the state medicaid program will pay for the nursing home care. The asset level varies by state.
............................................

Here's an example that happened to friend, that points up the importance of planning ahead. Bob retired with his wife May, to Florida from Maine. He sold his Maine house for $280,000 and planned to use this as his nest egg during his retirement. He bought a mobile home..(downsized)for $35,000. Shortly after retiring, May began a long slide into Alzheimers, and after three years has to go into a nursing home. (at the time $65,000/yr.) She lived there for 5 years before passing away. Because Bob and May had assets from the sale of their house, medicaid would not pay, and The nest egg was gone.
..............................................
Now, here's what happens....
1. In counting assets, Bob is allowed certain exclusions. In General, the exclusions in his case, were... His house @ $35,000, His car $20,000, Cash (then, $40,000) and some smaller amounts like burial plot and non cash life insurance.
2. The logical thing to have done would be to give away the money in the nest egg, so the state wouldn't take it. That's where the lookback comes in. If he had given away the money to his kids, the state would not have taken the money... but... to prevent this from happening, the state will "look back" five years and deny medicaid payment,if this 'gift" transaction had taken place.

As it happened, May died, an Bob had nothing but his Social Security left to live on.
.................................................

Here's what I took from this...
Nine years ago, we owned a mobile home, and a park model trailer in a campground. Understanding Bob's situation, we took some of our savings, and purchased a home outright. This took the money out of our assets and put it into the house "exclusion". Now, if one of us shold have to go into a nursing home, the state may take from our savings account, but they will not take the house... Essentially this means that one of us will still be able to keep some substantial assets, hopefully enough to stay above the poverty level.
.............................................

This is just one of many, many reasons to look ahead to the future.
See the link to Elder Law on Exclusions. (website)

This is not a pleasant, nor a fun post. Most of you probably have some understanding of the laws, but the matter of elderlaw is extremely complex.

IMHO, when a case involving medical expense, or the legal position of any older relative, the very first thing to do is to contact an geriatric or eldercare lawyer. Not just any lawyer, but one who is deeply involved in elderlaw.
Bookmark the site on Elderlaw. There is a series of Q and A's bout real life situations, that should shed much light on a difficult subject. I thought I was relatively knowledgeable but found that in more cases than not, I had no idea of how the law treats estates and legal matters involving older people.


I have more nighmare stories about friends or neighbors who lost literal fortunes because of small errors in handling legal matters, either because of mistake in timing, or failure to obtain proper legal permissions. Anyone who has dealt with estate administration will understand what I'm talking about.

FWIW, I don't pretend to be a legal reference, and so some of the above may be wrong. Feel free to correct errors.

Just to point up the dangers involved in ignorance of the law. Back to the long Island situation, which involved a very good friend who has since passed away.

When Jim's wife showed early signs of Alzheimers, he sought advice from his children, who were lawyers, but not versed in elderlaw. They suggested that he "gift" to his 8 grandchildren to lower his liquid assets by $200,000, which might later be required to pay for his wife's coming nursing home costs. The gifting was legal. Two years later his wife went into a nursing home. When he declared his assets, he made no mention of the "gifts". After paying for two years of care, he had depleted what was left in his bank account, and the transfer of costs for the nursing home care went to the state. His wife lived in the nursing home for three more years.
As the state went over the accounting, they reviewed the "lookback" period, and found that the "gifting" had been omitted from the application. My friend was charged with medicaid fraud, and found guilty, and sentenced to a jail term. His children hired a criminal lawyer, who, for a considerable payment $150,000, managed to get the sentence revoked. Unfortunately, the interim years of stress took its' toll, and led to his early death... aged 78, but probably unnecessary.

A lesson in crime and punishment, but my point is that the law is involved, and has to be respected. Ignorance of the law is no excuse. Thus the suggestion for the Elderlaw Lawyer.

[youbet]

Quote:

Originally Posted by imoldernu As the state went over the accounting, they reviewed the "lookback" period, and found that the "gifting" had been omitted from the application. My friend was charged with medicaid fraud, and found guilty......... A lesson in crime and punishment

I wonder how your friend's children, "the lawyers," feel about having given their dad such lame advise.

No doubt, when the Medicaid form asks whether you've gifted money during the past five years, and you have, better answer "yes."

[walkinwood]

Your point about owning your home to shelter some of your assets was a revelation to me. I knew that you could keep your home when qualifying for medicare, but didn't put the two together.

A good reason to avoid a mortgage as you get older. (if you can afford to pay for the house, obviously)

[Retire2013]

Dear imoldethanu,

I would like to thank you for taking the time to share all of this useful information.

Have a wonderful evening!

Retire 2014

[Purron]

Just had a memory of MMND, not sure why...

[KingB]

Quote:

Originally Posted by walkinwood Your point about owning your home to shelter some of your assets was a revelation to me. I knew that you could keep your home when qualifying for medicare, but didn't put the two together. A good reason to avoid a mortgage as you get older. (if you can afford to pay for the house, obviously)

qualifying for medicare. I didn't think owning a home has anything to do with medicare qualification. I think you meant medicaid.

Anyway, is there a limit on how many houses you own? In the OP's case, he has 2.

[haha]

Quote:

Originally Posted by walkinwood Your point about owning your home to shelter some of your assets was a revelation to me. I knew that you could keep your home when qualifying for medicare, but didn't put the two together.

You can be a billionaire, all cash, and qualify for Medicare. You may mean Medicaid?

Ha