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Sharing 23 years of Frugal Retirement
Old 07-18-2012, 09:06 PM   #1
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Sharing 23 years of Frugal Retirement

Having kept some notes on our retirement, I am thinking to share them here as an overview of the ways my bride and I managed to stay out of the working world since 1989. We live simply, with no travel, and apart from any expensive social life, though our life in retirement communities FL and IL, is very social.

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Everyone has different ideas on what retirement should be. One size does not fit all.

I have some thoughts and experiences to share, not as recommendations, but just as food for thought.

First, we've been retired for almost 23 years, so a lot of our experience will not be the same as yours.

With no pension (assets from pension plan were used for starting a small business... no net gain or loss) retirement started out as "give it a try"... if it doesn't work out, go back to work... Retirement prompted by a cancer scare.

Age 53 to age 65 was tough from the health insurance angle... Even then, before medicare kicked in @ age 65, we paid about $11,000/yr... BTW... medicare is not free... we still pay about $8,000/yr (2 persons) for medicare and supplement, and another thousand for basic Pharma.

Social Security... Important to check with SS for your expected benefits. Just a phone call or visit to SS office. Has to do with how much you put in... Husband and wife... Higher income sets base SS for couple... If the smaller payout is less than 1/2 of the larger, that spouse gets 1/2. If the second income is over 1/2 of the larger, then that amount is paid. In my case, even though my wife worked, her calculated SS would have been less tha 1/2, so she gets 1/2 of my payment. (Even if she had never worked, she would still get 1/2 of my SS. It's just the way the rules are written.)
In my case, I had always maxed the pay in. We took SS at age 62 so it was a reduced amount. We began receiving checks in 1999, and currently receive (2 of us)(with cumulative COLA's) a total of nearly $23,000/yr. $15K for me, $7500 for my bride. That was the max at that time... it's higher now of course.

At the time we decided to retire, we had a detailed plan... a budget... income and outgo... and looking back 22 years, despite huge variances from our initial plan, we are almost exactly on the budget.

There are hundreds of financial planners on line where you put in your estimates of assets, and return and inflation, and come up with the amount you need to retire. In our case it doesn't work... All of the planners make the assumption that you will want to maintain your asset capital until you die... In our case, had we followed their plan, we NEVER would have retired.
We just decided to die at age 85... dead broke. Made our planning much easier. Personal decision of course, but if you plan to spend down capital assets, it makes planning easier.

Our plan is extremely simple... On the spending side, we have three different budgets that we can adjust as circumstances warrant. Best case... Nominal... and Austerity.

On the Asset/Nest Egg side, We boil our assets down into three categories.
1. Fixed assets... house, auto, and other valuable non cash items... real property, jewelry, . We do not count household goods... (experience tells us that this is not realistic)
2. Non Income producing assets... bank accounts, cash, cash value life insurance policies.
3. Income producing assets... stocks, bonds, annuity.

All of these items are kept on a spread sheet and periodically updated. It's easy to come up with a total value... and then to average the income from the total...

To calculate where we stand in our retirement plan, we add
a. Social security amount.
b. Amount of interest earned on income producing assets.
c. ... and add the Total Assets divided by the number of years between now and age 85.

That establishes how much we can spend, which we then adjust to our best/nominal/austerity budget.

Sounds funky, but it works,and it takes about 2 minutes to tell if we're on budget or not.

The second part of this budgeting thing, is that we've been blessed by not having any debt. All of this makes for very simple accounting. One more thing... we don't try to calculate for inflation. In fact, it has not been a problem over the past 20 years. This may have to change.
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Old 07-18-2012, 09:12 PM   #2
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#2
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When we first retired, we thought to use a financial planner, and had him draw up a plan. His calculations had us "short" in capital to the tune of about
$200,000... which would tell us we had to work for another 10 years. We spent a month or so agonizing over this, before deciding to give it a try anyway. Best decision ever... We're ahead of his plan too.

Another time, I hope to get in to some specifics that we've discovered that have allowed us to stay ahead of the game... like starting off with very affordable housing... buying the right cars... older deluxe with low mileage ... food savings, drug price savings... taking advantage of state plans for seniors that few even know about... keeping entertainment costs very low... planning for nursing home... advantages of owning a house, insurance savings, medical and dental and optical savings... tax advantages.

All in all, I believe that retirement may be more affordable than you may think.

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.

The more important simplifiction part of our lifestyle is in intrapersonal relationships. Having lived in some 22 different houses and locales since our marriage, we realized early on, that "staying in touch" with neighbors and friends was an impossibility, so we don't spend a lot of time with phone calls, emails and things like "get togethers" and Christmas cards. 25 years ago, we came to a mutual agreement with our kids, all boys, not to spend time in each others' lives. We have a great relationship that is always upbeat, and happy. We don't exchange cards or gifts... not because we don't care, but it's just so much simpler.

I realize that much of what we do is different, and many of our friends don't agree with our laissez faire approach, but it's like "different strokes"... and it works for us.

In the Winter months, we live in a very active manufactured home, Senior (over 55) Park (Community) of 350 homes in Florida.. There are dozens and dozens of activities going on all the time. The best part of this, is that it provides all of the entertainment we could possibly handle... and yet we can pick and choose, without having to make commitments. Out time is our own... We are free to do what we want, and when we want, and we are extremely protective of that freedom.

In the early years 1991 through 2002, we still had commitments, like bowling or shuffleboard, and I taught computer classes. We volunteered in short term projects... building fixing repairing and organizing and running major parties for the community... pot lucks, and car caravans to Daytona Beach... and other Florida beaches. Since then, we pick and choose.
Now... (except for my bride's bridge games) we come and go with the wind... Having a large, heated, community swimming pool and hot tub is great!
Entertainment is basically free... Even our parties... with endless beer, wine and incredible food... along with great local band entertainment for dancing... cost between $10 and $15/couple... (used to be $4 to $6 couple), but you know... inflation. In the winter, there is a party almost every week. "Economies of scale".
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Old 07-18-2012, 09:14 PM   #3
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Thank you for sharing your experience. Simplicity works.

What were the toughest periods in your 23 years? How did you deal with them?
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Old 07-18-2012, 09:17 PM   #4
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#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.

The more important simplifiction part of our lifestyle is in intrapersonal relationships. Having lived in some 22 different houses and locales since our marriage, we realized early on, that "staying in touch" with neighbors and friends was an impossibility, so we don't spend a lot of time with phone calls, emails and things like "get togethers" and Christmas cards. 25 years ago, we came to a mutual agreement with our kids, all boys, not to spend time in each others' lives. We have a great relationship that is always upbeat, and happy. We don't exchange cards or gifts... not because we don't care, but it's just so much simpler.

I realize that much of what we do is different, and many of our friends don't agree with our laissez faire approach, but it's like "different strokes"... and it works for us.

In the Winter months, we live in a very active manufactured home, Senior (over 55) Park (Community) of 350 homes in Florida.. There are dozens and dozens of activities going on all the time. The best part of this, is that it provides all of the entertainment we could possibly handle... and yet we can pick and choose, without having to make commitments. Out time is our own... We are free to do what we want, and when we want, and we are extremely protective of that freedom.

In the early years 1991 through 2002, we still had commitments, like bowling or shuffleboard, and I taught computer classes. We volunteered in short term projects... building fixing repairing and organizing and running major parties for the community... pot lucks, and car caravans to Daytona Beach... and other Florida beaches. Since then, we pick and choose.
Now... (except for my bride's bridge games) we come and go with the wind... Having a large, heated, community swimming pool and hot tub is great!
Entertainment is basically free... Even our parties... with endless beer, wine and incredible food... along with great local band entertainment for dancing... cost between $ 8 and $14/couple... (used to be $4 to $6 couple), but you know... inflation. In the winter, there is a party almost every week. "Economies of scale".
.................................

I'm backing up a bit to tell you how we started out in the early days. We had lived in the Chicago Suburbs, Next to Naperville... an upscale town... high prices, taxes, traffic congestion, and one of the highest average (non California) incomes in the nation. We knew we wouldn't afford to stay there... so made our choice... to Really downsize...

We bought into a campground (the nations largest family campground) where you own your land... but can only live there for a maximum of 185 days/year. We bought a beautiful spot on a small lake. It's a "Park Model"... (look that up, if you don't know what it means) it's just a permanent type camper, similar to a standard manufactured home, but just 12 feet wide and 34 feet long. (400 square feet)... add a 400 sq foot add a room and a 400 sq. ft deck...

Now here's where the savings come in... even today, you can buy a used unit similar to mine for as little as $15 to $20 thousand dollars, including the land. (We paid somewhat more, because of the lake setting). The really nice part is the cost of staying there... Campground annual dues $1100... including use of all facilities... um-metered water and sewer. Taxes $500, insurance $500... All inground utilities. Total annual "resort" costs = about $2400.

[Mod Edit: Commercial link removed]

Amazing place... quiet as the moon... despite the 6500 sites. 43 miles of roads, 18 miles of wooded trails, two Olympic sized pools, dozens of playgrounds, 10 tennis courts, 16 "comfort stations" (large bathroom/shower buildings)... a very large campground store... 7000 sq ft. ...our own Tru Value Hardware and lumber store, our own gas station, propane station, and a full service bank... A fully gated community with a 24 hr. security staff of 25 -35 people, 7 small lakes, a fishing sporting goods store, two restaurants, a nature center, three craft and meeting centers, two large outdoor pavilions, two senior centers, seven computer "hot spots", canoe rentals, a large sand beach... and a fully staffed activities department... Snow mobile trails, Sledding hills ice rinks (in winter)... and the whole campground is nestled in a climax black oak forest... trees, fields, wetlands and almost every temperate zone animal, bird, and plant. To us it's Shangri-la... it's a working man's park... which means that on any given day less than 10% to 20% of the units are occupied. It's a weekend/week off type of vacation retreat, with perhaps 200 snowbird seniors, who live there for 1/2 the year.

BTW... all of this in a township with a population of 204 people.
The website has more details, with real estate info.

It's something to consider for anyone on a limited budget. This type of community (though perhaps not so large)... exists in many other states... The Tip of Texas, and Arizona come to mind, as many of our friends do the 50/50 annual winter/summer move.
.................................................. ..
An interesting side note, I think, is that in both our North and South communities, many of our neighbors and friends supplement their income by working for the community, or in doing odd jobs... lawn mowing, lawncare, sewing, home healthcare, carpet cleaning and housekeeping. it's a symbiotic relationship. We also trade services.

We have since bought a permanent home in a continuous care full service retirement community with single family homes, a 60 apartment house, an assisted living and rehab center, and a full service nursing home and Alzheimer unit. that is another part of our retirement story... to save for another time...
[Mod Edit: Commercial link removed]
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Old 07-18-2012, 09:20 PM   #5
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I'm very impressed with both your plan and how well you've carried it out. The only issue I have with your approach is this:
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We just decided to die at age 85... dead broke.
That's not an assumption I can afford to make - 100 or maybe 95, but not 85. Odds are at least one of you, maybe both, will make it beyond 85.
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Old 07-19-2012, 05:13 AM   #6
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Originally Posted by REWahoo View Post
I'm very impressed with both your plan and how well you've carried it out. The only issue I have with your approach is this:

That's not an assumption I can afford to make - 100 or maybe 95, but not 85. Odds are at least one of you, maybe both, will make it beyond 85.
That DOES sound strange, I suppose... In fact, not really that absolute. We do have three spending plans. The Optimum, bigger budget... the Nominal, less spending... and the austerity, de minimus. The age 85 is based on "optimum" spending. The fallback is austerity... and we feel we can live on about $15000
less/year. We adjust accordingly. Anyway, nothing is totally safe.

If we had planned to maintain our "capital", I figure that we would have had to delay retirement for about five more years. Our kids are comfortable with this, and encouraged us to retire early... especially with the background thought of cancer.

Lots of trade offs, in any case.
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Old 07-19-2012, 05:15 AM   #7
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Very sage advice.. Thank You ! It is good to hear from someone with so much experience. Looking forward to the next installment.
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Old 07-19-2012, 05:30 AM   #8
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Originally Posted by REWahoo View Post
I'm very impressed with both your plan and how well you've carried it out. The only issue I have with your approach is this:

That's not an assumption I can afford to make - 100 or maybe 95, but not 85. Odds are at least one of you, maybe both, will make it beyond 85.
+1, I wouldn't be comfortable with a planning horizon to age 85, but I like the concept. It would be easy to adjust the formula that imouldermu uses and divide it by (100 - current age) rather than (85 - current age). Or perhaps from age 75 onwards just divided by 10. If you wanted some cushion you could deduct the cushion before doing the division. His approach is conceptually similar to the required minimum distribution calculation for tIRAs.
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Old 07-19-2012, 05:32 AM   #9
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Originally Posted by walkinwood View Post
Thank you for sharing your experience. Simplicity works.

What were the toughest periods in your 23 years? How did you deal with them?
Quote:
What were the toughest periods in your 23 years? How did you deal with them?
Yeah... Probably the toughest period was in the early days, when we were'nt sure we'd make it. We bought the smallest house, old cars, and didn't spend.
A confession here... Before we actually retired, I spend weeks of planning... actual planning of when we would buy a place to live... how much to pay, how much to spend on furniture (Nothing... we did with what we had... our first place was a 27ft. trailer... 20 years old.)... A come down, from a 2500sf home. That was only our sole residence for about a year. It wasn't until around the year 2005 that we felt really safe.

Then another toughie... We had private Healthcare HMO, and moved beyond the allowed area, so used our previous neighbor's address as our own... Back then, there was no way to get into a healthcare program with a pre-existing. We skinned by in 1993, when we were in FL, and my bride had a stroke... $175K in healthcare expenses... We had to sweat that one out... (she's ok today ). The HMO paid. A GREAT relief when Medicare kicked in.
To tell the truth... not too many crises in those days... We had a great retirement.
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Old 07-19-2012, 05:51 AM   #10
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#4
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I'll take a few minutes to go over some of the ways we try to keep expenses under control... This might be a little embarrassing, but what the heck, it's what we do.

First off, food shopping. We buy most fruits, veggies and things like bread and canned goods at the huge farmer's/flea markets in the area. The rest of the food is purchased at Save-A-Lot, and Aldi's... both of which we have calculated, save us about 30-35% from the "Name" Markets, and about 20% from Walmart. Generics work well for us. We gave up shopping the "Sales"... and don't usually buy the brands that have coupons. Nothing wrong with that... just too much work.

Next... I call my old golf cart "Salvage 1". On general principles, I hate seeing "good stuff" going into the land fills. On Trash day I always make a "Salvage 1 run"... and pick up TV's computers, bicycles, lawn mowers and lawn tools, and other things that others discard. I rebuild and refurbish, and then give most of the recycled stuff away, keeping what I need. Recently, I picked up a $700 recliner, almost new... from a house where the widow couldn't bear to see her husbands chair in the corner.
Have done this my entire life... the last time I bought a mower, or power tool was about 35 years ago... It's has gotten to the point when my neighbors give me a list of the things they need. I'm also the source for nuts, bolts and those little things that many spend $$$ to travel to Lowes or Home Depot for. I haven't been to either of those stores for two years.

Cars... Big savings... I have a 1998 Lincoln Town car that looks new... 98,000 miles, and a 1996 Cadillac SLS that I bought from an estate four years ago for $5,000... 0 to 60 in 6.3 seconds ... It had 24,000 miles at the time, and the original tag price was $46,000. Since I do my own maintenance, brakes, tune ups, oil changes etc... our only expense is for gas and tires. I figure the Lincoln is good for 150,000 miles, and the Cadillac... (Now has 67,000 miles) is good for about 125,000 miles. Since that totals more than 100.000 good miles left, and we only travel about 8.000 miles a year, we probably will never get a chance to buy another car. Sad. We love the luxury of a top of the line car, and both cars look brand new.

Side note on car insurance... we have our house, and both cars with same agency, giving us big time discounts... We also added a $1 million umbrella liability policy for the cars and the house. Net additional cost was just $80 since we were able to drop the liability part of the car policies. We get a $50 policy reduction on each car for taking senior safe drivers course. Both cars have zero deductible and the total cost for insuring two cars ('cuz of the town where the cars are garaged)... is $1500...

House taxes... When we bought our "big house" as opposed to Woodhaven (campground) and Florida... we received a total of about $1700/yr in in tax breaks because of Homestead exemption and Senior Tax freeze... Fortunately we bought just before a revaluation, in 2004.

Now here's another point about retirement on a budget. Take a long hard look to see if your state government has any programs for low income seniors. the Operative word here is "income". Illinois has some very substantial benefits for Seniors, that count only "income", and not assets. After telling a friend about this, she investigated her home state and found she was eligible for benefits in excess of $1500... that no one had ever told her about. the Illinois program is called "SeniorCare". Because of budget constraints, the program has been curtailed, but during the years we were in the program, we calculate that it saved us about $7000.

It took us a while to realize that so many businesses offer Senior discounts. Even "Goodwill Industries" offers this. It's not difficult to ask... we just say... "We're Seniors"...

Now... some embarrassing things... Since the barber "scalped" me on the day before my wedding, I have never been to a barber... I just learned to cut my own hair... Lets see... at about $10 every three weeks, since 1958... that's about $8500... and I also cut my bride's hair... so that's maybe a total of $15000. Not bad for the $20 investment in the barber kit... (and that's not counting the wait... and the back and forth travel... whooeee!)

Cheap?... you bet... We buy clothes at the end of the season... never buy unless it's at least 70% off. Another cheap trick... that we found both up north and here in the south... The town next to us in Illinois is an "old money" community. the ladies from 7 churches have joined to form a resale outlet, based on high turnover... Because so many families give... the outlet (open 3 days a week), has an incredible amount of very excellent brand name clothing and other goods... that they sell at extremely low prices. All you can fit into one of those Walmart style wire handled baskets for $4. Suits, shirts, cocktail dresses, jackets... anything... $4. I fit into the basket, 8 sport shirts, two sweaters and a new belt, before we left Illinois, for $4. Tommy Hilfiger, Yves st Laurent... the very best labels, and most probably only worn a few times. These little "Jewel" stores are in many towns... Just have to look... and not worry that your neighbor will know where you bought your "fashions".

It certainly helps to be able to fix things... the only thing I won't tackle is Air conditioning... We haven't supported the tradesmen at all in the past 30 years... Just two air conditioning repairs... one for a car, the other for the house.

We spent at lot of time picking out the right place to live... Many things to consider... Am positive that counts... a lot!. The town we lived in (Illinois) before retirement has an average income of $88K... The town we live in now, in IL.... the income is about $43K. More about retirement locations another time.
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Old 07-19-2012, 05:58 AM   #11
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Thanks for sharing so far, your approach is very interesting.
We might be interested to check out the campsites you mentioned and appreciate a PM.
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Old 07-19-2012, 06:42 AM   #12
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On this "drop dead at 85" concept it sounds more like using a 32 year horizon to calculate your optimal budget (i.e., SWR) while holding a couple of budget downgrades in reserve if the optimal budget started looking like it would really burn out by 85. In your original post you said you are almost exactly on the budget. That would imply that at age 76 your nest egg is seriously depleted on the way to drying up in a decade. Is that the case or are you now in position to live longer or even, mirabile dictu, still holding your original capital? Were you able to stay on your optimal budget all the way through or did you have to fall back to nominal or even austerity during any downturns?

By the way, congratulations on living the good life. I think pulling the plug with a nest egg set for a good run on a thirty year horizon (with room to fall back) is a sensible plan. If things go really bad, no horizon is safe.
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Old 07-19-2012, 07:09 AM   #13
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#3
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25 years ago, we came to a mutual agreement with our kids, all boys, not to spend time in each others' lives. We have a great relationship that is always upbeat, and happy. We don't exchange cards or gifts... not because we don't care, but it's just so much simpler.

..
[Mod Edit: Commercial link removed]

I find it hard to believe you have a great relationship when you have no contact with your children .
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Old 07-19-2012, 07:30 AM   #14
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I understood that there is no contact with the kids
but
Imoldernu & bride are having a great relationship, even though without card and gifts.
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Old 07-19-2012, 07:32 AM   #15
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I find it hard to believe you have a great relationship when you have no contact with your children .
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...
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Old 07-19-2012, 07:58 AM   #16
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Thanks for explaining.
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Old 07-19-2012, 07:59 AM   #17
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On this "drop dead at 85" concept it sounds more like using a 32 year horizon to calculate your optimal budget (i.e., SWR) while holding a couple of budget downgrades in reserve if the optimal budget started looking like it would really burn out by 85. In your original post you said you are almost exactly on the budget. That would imply that at age 76 your nest egg is seriously depleted on the way to drying up in a decade. Is that the case or are you now in position to live longer or even, mirabile dictu, still holding your original capital? Were you able to stay on your optimal budget all the way through or did you have to fall back to nominal or even austerity during any downturns?

By the way, congratulations on living the good life. I think pulling the plug with a nest egg set for a good run on a thirty year horizon (with room to fall back) is a sensible plan. If things go really bad, no horizon is safe.
Good point... Our nest egg is in good shape (everthing is relative ) and we only started getting into the capital during the past year.

Hopefully, I'll get to some points on 70 1/2 IRA required distributions later on...
but it worked out that the monies that we used was from interest... always under the income tax level, so we haven't paid income taxes since the beginning of our retirement... until now.

During the early years, we spent at the "nominal rate"... Guess you can call us "cheap!" We adjust, when unexpected costs come in. Have turned it into a game. Takes cooperation.

I can't say enough about living in an active (working class) retirement community (Our Florida home)... So much going on in terms of "free" activities that pot lucks take the place of going out for dinner, and entertainment is free... ('cept for a $6 annual activities fee)...

As for our plan... This is probably weird, but we looked at the planning year by year, and didn't use the planners... We estimated what our rents and expenses would be... and included things like buying the "regular house" in 2004. We calculated the healthcare costs, replacement costs for cars, computers, repairs, depreciation etc... The decision to retire came after the cancer scare, during the recovery period, so I had a lot of time. Dozens and dozens of pages that estimated capital appreciation, and now capital losses.
The "big spreadsheet" had a bottom line for every year... to age 90. It was a one time deal, that worked...
The initial decision was a very close call, and we rolled the dice.

I'm not that smart... There's a lot of luck that goes along with the current happiness.
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Old 07-19-2012, 09:04 AM   #18
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I found your comment about dropping the liability portion of your auto and homeowner's insurance very interesting.

We had to actually increase our liability coverage on our auto policy to match up to where the umbrella policy limit starts.
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Old 07-19-2012, 09:22 AM   #19
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Originally Posted by Buckeye View Post
I found your comment about dropping the liability portion of your auto and homeowner's insurance very interesting.

We had to actually increase our liability coverage on our auto policy to match up to where the umbrella policy limit starts.
Usually people drop collison coverage for older cars rather than dropping liab. coverage.
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Old 07-19-2012, 09:25 AM   #20
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Originally Posted by golfnut View Post
Usually people drop collison coverage for older cars rather than dropping liab. coverage.
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?
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