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Have you remembered to budget for these?
Old 04-16-2010, 10:43 AM   #1
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Have you remembered to budget for these?

Top Five Unexpected Retirement Expenses

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Some people see retirement as a chance to sit back and relax, while others take advantage of their newfound time by traveling the globe. Either way you spin it, retirement costs money -- and some of your bills will be unexpected.

Here, investing and money management experts look at the top five expenses that aren't always factored into a retirement budget or investment plan. The good news? Almost all are related to a positive trend: people are living longer, healthier lives.
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Old 04-16-2010, 11:12 AM   #2
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Do we properly budget for:

Living longer... yes, though we could still be in trouble if one of us lived to be 120...(wishful thinking)

Adult kids with money problem... no because we have no kids, though a (small) portion of our budget (currently charitable contributions) could be used to help elderly parents with money problems... That's a more likely scenario for us.

Higher taxes, higher inflation... yes (I hope). This is the one expense I think we spend a lot of time worrying about and yet we feel woefully unprepared for... Probably because future tax liabilities and inflation are completely unpredictable.

Healthcare costs and dental care... yes, although there are limits (about $10K/year and per person). If costs continue to spiral out of control, we could still get in trouble like everyone else. Moving abroad will be our answer in case we get priced out of the US health care system.

Repairs on your older home... yes. We plan on moving to a low-maintenance home or condo upon retirement to minimize upkeep costs.
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Old 04-16-2010, 11:20 AM   #3
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Interesting list! I think that for the most part, I am prepared. If all of these happened at the same time, things could get a little dicey.

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1. Living Longer
Yes. My financial plan currently goes to age 95, and if/when I live to 85 I will review and revamp so that it will last to 100-105.
Quote:
2. Adult Children With Money Problems
I was thrilled when my 31-year-old daughter married an older (40'ish?), very responsible, sincere, and kind man with health insurance just two weeks before my retirement. Her money problems are his, now, and I don't think it is possible that she would ever come to me for money. She never has.

In the very unlikely event that they should need money or they should split up, I can afford to send them the maximum amount allowed by the IRS (is it $12,000/year now?) until they get back on their feet. Also, my daughter is always welcome to move back in if they split up but she never would. If she did, I would put her on the strictest of budgets so that she wouldn't get too comfortable.
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3. Higher Taxes, Higher Inflation
This is a real killer, and difficult to feel confident about because there is no way to predict how high taxes and inflation could get. No, I am not prepared for hyperinflation such as that endured by Zimbabwe, or for 50% taxation. However, I could handle some increase in taxes or inflation.
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4. Health Costs and Dental Care
Covered. Lifetime health benefits with my federal retirement (though who knows what will happen in our health care system right now). As for dental care, I always pay in cash and my dentist gives me a discount for that. Sure, a root canal will impact my budget especially when it occurs the same month as my TV blows up and my A/C quits (as happened in spring, 2006). Not a problem.
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5. Repairs for Your Older Home
Most repairs are just part of my budgeted expenses, just as dental care is. These are the irregular large expenses that make up about half of my annual budget.

On the other hand Frank had to have $15K-$20K of under-the-slab plumbing and related costs such as backfilling the soil under and around his house this year. That isn't in my budget so I would probably have to invade my principal (shudder).
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Old 04-16-2010, 11:24 AM   #4
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I think that's a good list - but also that folks on this forum have got those things well covered.
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Old 04-16-2010, 11:57 AM   #5
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They forgot to mention helping our elderly parents .
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Old 04-16-2010, 12:21 PM   #6
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Originally Posted by Moemg View Post
They forgot to mention helping our elderly parents .
I think the list needs to expand to six items, or maybe a top ten.
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Old 04-16-2010, 12:53 PM   #7
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Originally Posted by Nords View Post
I think the list needs to expand to six items, or maybe a top ten.
OK, here's #7:

7. Hurricane evacuations lasting over a week and other associated hurricane costs not covered by insurance. Or, other weather related unexpected expenses as needed depending on where you live. Tornados? Earthquakes? Floods? These go in this category.

My parents are dead and buried so they'd better not be causing me any expenses. Hurricane expenses are irregular large expenses and budgeted for in the same way as similar expenses such as root canals or a broken A/C unit. But when they are large, due to catastrophic events causing damage as bad as or worse than Hurricane Katrina caused in New Orleans, I might have to invade the principal and then tighten the belt and re-pay myself in years after that.
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Old 04-16-2010, 02:01 PM   #8
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I think the list needs to expand to six items, or maybe a top ten.
Right. Here's another:
Your body stays healthy but your mind doesn’t. Who cares for you and who manages your finances.
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Old 04-16-2010, 02:11 PM   #9
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I agree that most people who post here have thought about and have plans for at least 4 out of 5. The "financial support for adult children" is often in the "miscellaneous unlikely events" category.

But, I'm skeptical about this statement
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Few people realize that working part-time during your retirement will take a huge bite out of your Social Security payments; Macko says that the government can tax you up to 85% on the benefits if you are working part-time.
I've never heard of the 85% in this context. He seems to be confusing taxes with work offsets. Even the offsets are recovered when SS recalculates your benefit.
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Old 04-16-2010, 04:49 PM   #10
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Gotta admit that I do not budget. Well, I guess I sorta budget. I make sure that my average expenses do not go over my current guaranteed income plus various "side cash" acquisitions that I pull in from time to time. For me life is good when it is kept to a very simple mode.
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Old 04-16-2010, 04:55 PM   #11
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Originally Posted by Independent View Post
I agree that most people who post here have thought about and have plans for at least 4 out of 5. The "financial support for adult children" is often in the "miscellaneous unlikely events" category.

But, I'm skeptical about this statement

I've never heard of the 85% in this context. He seems to be confusing taxes with work offsets. Even the offsets are recovered when SS recalculates your benefit.
From the SS website:

You can work while you receive Social Security retirement (or survivors) benefits. When you do, it could mean a higher benefit for you in the future. Higher benefits can be important to you later in life and increase the future benefit amounts your family and your survivors could receive.
While you are working, your earnings will reduce your benefit amount only until you reach your full retirement age. After you reach full retirement age we recalculate your benefit amount to leave out the months when we reduced or withheld benefits due to your excess earnings.

We use a formula to determine how much your benefit must be reduced:

If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.

For 2010, that limit is $14,160.

In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.

If you will reach full retirement age in 2010, the limit on your earnings for the months before full retirement age is $37,680.
(If you were born in 1944 or 1945, your full retirement age is 66 years.)

Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.

Caution: If you apply for benefits more than 6 months after you reach full retirement age, we can only pay the benefits for the previous 6 months.

Note: If your earnings will be over the limit but you will be retired for part of the year, we have a special rule that applies to earnings for one year. The special rule means we cannot deduct excess earnings from any whole month we consider you retired, regardless of your yearly earnings.

If you are not already receiving benefits, be sure to contact us at the beginning of the year you reach full retirement age. Even if you are still working, you may be able to receive some or all of your benefits for the months before you reach full retirement age.
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Old 04-16-2010, 05:19 PM   #12
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1. My plan goes to 95. Even at that age, there should still be income from the pensions and something from SS.

2. If the plan works, there should be funds left in the retirement portfolio for them. This might mean they'd get some of it in advance.

3. I taxed 100% of all income and used a higher rate in my plan to account for increases. If you planned for higher inflation, you'd never retire, so I'll stick to the standard 3% and just do without if necessary.

4. We're one of the lucky ones who have medical covered. We do pay extra for dental though.

5. Home repairs are part of annual expenses. If we end up doing better on investment return, I'll likely up the repair/replace pot. It also helps that I can do many of the repairs myself and I have at least one mechanically inclined son.
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Old 04-17-2010, 09:17 AM   #13
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Originally Posted by Zarathu View Post
From the SS website:

You can work while you receive Social Security retirement (or survivors) benefits. When you do, it could mean a higher benefit for you in the future. Higher benefits can be important to you later in life and increase the future benefit amounts your family and your survivors could receive.
While you are working, your earnings will reduce your benefit amount only until you reach your full retirement age. After you reach full retirement age we recalculate your benefit amount to leave out the months when we reduced or withheld benefits due to your excess earnings.

We use a formula to determine how much your benefit must be reduced:

If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.

For 2010, that limit is $14,160.

In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.

If you will reach full retirement age in 2010, the limit on your earnings for the months before full retirement age is $37,680.
(If you were born in 1944 or 1945, your full retirement age is 66 years.)

Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.

Caution: If you apply for benefits more than 6 months after you reach full retirement age, we can only pay the benefits for the previous 6 months.

Note: If your earnings will be over the limit but you will be retired for part of the year, we have a special rule that applies to earnings for one year. The special rule means we cannot deduct excess earnings from any whole month we consider you retired, regardless of your yearly earnings.

If you are not already receiving benefits, be sure to contact us at the beginning of the year you reach full retirement age. Even if you are still working, you may be able to receive some or all of your benefits for the months before you reach full retirement age.
I read that, too, and didn't see any mention of taxes or of an 85% rate. So I figured the article was wrong. Is that the way you see it?
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Old 04-17-2010, 09:31 AM   #14
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Here's some more on this issue:
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Will you receive higher monthly benefits later if benefits are withheld because of work?

Yes. If some of your retirement benefits are withheld because of your earnings, your benefits will be increased starting at your full retirement age to take into account those months in which benefits were withheld.
As an example, let us say you claim retirement benefits upon turning 62 in 2010 and your payment is $750 per month. Then, you return to work and have 12 months of benefits withheld. We would recalculate your benefit at your full retirement age of 66 and pay you $800 a month (in today’s dollars). Or, maybe you earn so much between the ages of 62 and 66 that all benefits in those years are withheld. In that case, we would pay you $1,000 a month starting at age 66.
How Work Affects Your Benefits

According to Andrew Biggs, the adjustment is "actuarially fair", meaning that you don't lose benefits, you simply defer them.
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Old 04-17-2010, 09:34 AM   #15
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Well.... I've known for years that anyone can work under social security. there is just a limit to how much you can work.

For me it means that I can pick up my pension, my social security, and work for about a day and a 1/2, and still stay under the boundary that keeps me from getting SS. I cannot work in education in PA(beyond a similar minimum to SS), but I can work in education in Maine. I have a friend who is now working full time as a teacher in Maryland,and drawing a full pension for 35 years of teaching in PA. She drives the same amount to each job.

And since this came right out of the US GOV website, I have to assume that the poster was affectedby fear mongering in the workplace. Fear mongering is everywhere. When the unemployment in my state rose to 9.7% it was on the front page of the newspaper. This past month PA was one of the top three in gains in employment in the country. Was it on the front page? Heck no. It was buried at the bottom of the business page in the back of the paper. The new services see good news as NO NEWS.

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Old 04-17-2010, 10:00 AM   #16
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Originally Posted by Independent View Post
Here's some more on this issue:
[URL="http://www.ssa.gov/pubs/10069.html"]

According to Andrew Biggs, the adjustment is "actuarially fair", meaning that you don't lose benefits, you simply defer them.
Actually, there are not a lot of good reasons to defer benefits until later.

If you don't need the money then simply save it. If you put it in some safe fund or even CD's you will get money from the savings. I figured it out for me for what I will get per year by saving the SS pension from age 62 to age 70, and then how long it will take until I actually have made more money from taking the later amount. I was 83 years old before I came out ahead.

If something happens between age 62 and 70 that I need some extra funds, I will not have them. If I should die before I'm 83, then I will never have received as much as I could. Lets say I don't need it all but I could use a little bit for my health insurance. I work part time up tot he 14,000 limt and save 9,000 of it along with my 21000 from ss until I'm 70. 8 x 30 = 240,000, not including interest compounded. So at 70 I have an additional third of million bucks. If I expect to live another 20 years, I divide 290K by 20 which is 14,500 I can add to my SS and pension. Doing that, I will never ever catch up to having waited til 70 to get the "full" benefits.

Its all smoke and mirrors by the SS administration to try to get people to no take SS early. There are way better ways. And if the SS system comes apart, then you have money to supplement it starting at age 70 anyhow.

Z
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Old 04-17-2010, 10:02 AM   #17
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1. Living Longer.
My plan goes to 95. Even at that age, there should still be income from the pensions and something from SS.

2. Adult Children With Money Problems
Should be okay - the unknown is our son who has health problems (cerebal palsy) but has been off all medications for 3 years. He was uninsurable when we tried to get private insurance after he graduated, but he managed to get a job with insurance at a bank and is well covered at present.


3. Higher Taxes, Higher Inflation
I think we are covered here. We have an SWR under 3%, but raging inflation will be a bit issue as my main pensions are not COLA'ed

4. Health Costs and Dental Care
We're are lucky to have medical covered. We do pay extra for dental but major dental such as root canals, gum disease is covered under medical.

5. Repairs for Your Older Home
We rent an apartment so no problems there and are free to move to cheaper places if need be or buy a house for cash if we want to.

6. Natural Disaster
We rent, so no problem with property damage, and we have very little in personal goods.

7. Care for parents
All dead bar FIL who is 85 and in excellent financial shape.

8. Long Term Care for ourselves
Should be plenty of funds to cover this.
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Old 04-17-2010, 12:21 PM   #18
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1. Living Longer. Planned for that - spreadsheet goes to over 100.

2. Adult Children With Money Problems - no kids

3. Higher Taxes, Higher Inflation - No pension - I'll just have to pay whatever.

4. Health Costs and Dental Care - While employed, with dental insurance, I had all my ancient (25+ year old) fillings replaced. This is in the past year or so. Healthcare will be hideous - I've budgeted $20K/year for the 18 months after COBRA and before Medicare. After I'm 65 I've budgeted close to 11K inflating by 8%. I figure I'll adjust as needed. Probably this is high for the near future.

5. Repairs for Your Older Home - Ugh. Replace the driveway. At some point replace the furnaces/air conditioners (we have zoned HVAC so two of each). Waiting until they die.

6. Natural Disaster
No way to predict....

7. Care for parents
Not an issue - they are financially okay.

8. Long Term Care for ourselves
Should be enough $.

I did a lot of spreadsheet analysis of my current expenses and predicted future ones, and padded it significantly but not too much. I plan to reassess at the end of each year so the year starts out with the asset base I really have. I'll be able to see how far off I am (and in which direction).
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Old 04-17-2010, 12:34 PM   #19
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1. Living Longer. Have one of those pensions that pays until I die. Took the option for reduced monthly income so my wife could have it if I die first. This would actually be better since she's way more social than I, and I might die of loneliness after her.

2. Adult Children With Money Problems - they refuse to take money from me now.

3. Higher Taxes, Higher Inflation - yeah.... we can take in college students in our house if necessary to pay for taxes. Also could work part time up to the 14K limit for SS for each of us.

4. Health Costs and Dental Care - have as good a plan as can be found until 65, then the supplemental from the pension group is pretty cheap for both of us.

5. Repairs for Your Older Home - We have allowed funds from sale of our present house to pay for everything that might go wrong that we can think of. We'll replace all appliances, fix the roof, and even buy an extra well pump and sewage pump at current prices just in case. I'll be replacing most of the copper pipe with pvc, and buying a new hot water heater to keep in reserve is we need one. basically everything that could go wrong with the house we have budgeted a replacement now.

6. Natural Disaster
Insurance is in force for this at very low deductbile, and the deductible is in a savings account for possible use.

7. Care for parents
very old. dad died. mom is independent on her own pension and in a facility. In-laws are pretty wealthy and can take care of themselves, and we'll still get an inheritance. They are also pretty sickly and probably won't last much longer.

8. Long Term Care for ourselves
Dollars with two SS's, my pension, and savings, should work for us. but one never knows what might happen, and you can't budget for everything. We'll buy one lottery ticket a week.

Z
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Old 04-17-2010, 01:36 PM   #20
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I think the list needs to expand to six items, or maybe a top ten.
or maybe just one.
1. sh*t happens!
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