Money Mag: Can this Retirement Be Saved?

[deserat]

Was scanning the latest Money Magazine and saw the article "Can this retirement be saved?" I went to the bottom line and it showed:

Income:

Withdrawal from savings $123, 489
Rental Income $36,000
Total - $159,489

Outgo
Mortgages $67, 164
HOA fees, Prop Ins $23, 682
Prop Taxes $22,300
Groceries, dining out $9600
Cars $7200
Util $7200
Credit card payments $6000
Insurance (car, life health) $4775
Marketing of investment prop $4000
Pool, yard maintenance $3252
Gifts, charity $1460
Clothing $1200
Golf fees $252

Assets
NC vacation home $900K
FL residence $770K
FL investment prop $454K
401K/IRAs $120K
Cars (two-Ford and Mercedes) $36K
Life Insurance (cash value) $36K
Brokerage account $34.3K
Carol's Gov't pension $25K
Bank, checking/savings $9K
Total - $2.3843 M

Liabilities
Mortgages $620K
Home equity loan $98K
Credit card debt $31K
Total $749K

He is 61, she is 60 - both eligible for SS of about $32K per year in 1-2 years respectively. They believe in real-estate investment and based on my brief (*VERY* brief) scan, he is going to go back to work because of the real-estate market meltdown.

I did a quick back of the envelope assessment and I say they could do quite well if they did the following:

Sell NC and FL investment properties and pay off all debt - that leaves $605K - take 4% of that yearly ( $24.2K/yr) their eventual $32K per year SS - that's $56.2K. They have no debts, a nice roof and money to 'play' with. During that first year they could look at reducing their food bill ($800/mo), their util bill ($600/mo!) and perhaps their clothing bill. They don't have to worry about property marketing credit card bills or mortgages. They could also look at down-sizing their residence to something which has lower property tax and upkeep costs.

Money mag did tell them to offload the investment properties - however, something like what I did above should be what they show - I'm awfully surprised at the low IRA balance and very small lump-sum pension. I'm also surprised at the credit card balance and how little they actually pay towards that balance - the statement was made that they would like to travel Europe, etc -they'll need a bit more than that above.....Deserat

 

[Mwsinron]

Im just amazed they have 31k in cc debt but think its a good idea to give to charity and play golf. Its like crapping money down the toilet

Credit card debt is EVIL.



And im not saying charity isn't a good thing before I get lynched..

 

[DangerMouse]

I read that article and couldn't believe that they could be that financially naive. Getting rid of the NC vacation home seemed like the obvious solution to their problem.

 

[bssc]

Do their own lawn maintenance
Eat out less
Shop secondhand for clothing.

 

[cj]

Call me conservative, but I sure wouldn't feel comfortable retiring with a 620K mortgage.

 

[UncleHoney]

Looks like a plan to me, probably won't work but it would be fun just to sit back and watch. It might just serve as a good example of how not to do it.

Haven't seen a good train wreck in a long time.

 

[Nords]

Looks like a plan to me, probably won't work but it would be fun just to sit back and watch. It might just serve as a good example of how not to do it.

$4000 on marketing?!?

I'll get the popcorn.

 

[Mwsinron]

Marketing on why they wont pay off that 31k cc debt

 

[bssc]

Maybe we should take up a collection to help them out.

 

[Mwsinron]

Maybe we should take up a collection to help them out.

That would be the liberal way wouldn't it.

 

[bssc]

No, the liberal way would be to raise your taxes and start a government agency to help these poor people and others in the same situation.

 

[mathjak107]

i love their planning articles . sometimes they are soooooo off base though you have to wonder what they were thinking. my wife and i were reviewed in an article by them last year. although the long term care debate i had with them made sence the rest of their advice was just so so .

if anyone hasnt seen the article ill see if cnn still has it on there web site

http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/03/01/8370203/index.htm

 

[teejayevans]

i love their planning articles . sometimes they are soooooo off base though you have to wonder what they were thinking. my wife and i were reviewed in an article by them last year. although the long term care debate i had with them made sence the rest of their advice was just so so .

if anyone hasnt seen the article ill see if cnn still has it on there web site

http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/03/01/8370203/index.htm

Maybe it's just me, but why would you publish your most intimate financial
statistics? I've seen people post details on this site as well, maybe I value
privacy more than others?
TJ

 

[dex]

Maybe it's just me, but why would you publish your most intimate financial
statistics? I've seen people post details on this site as well, maybe I value
privacy more than others?
TJ

I agree with you.

 

[Tracy42]

Anybody notice the wife would rather send her husband back to work than part with the NC vacation home. Now that's love...Tracy

 

[gandalf42]

Anybody notice the wife would rather send her husband back to work than part with the NC vacation home. Now that's love...Tracy

Yes, I noticed that. I wrote them off at that point. She said the vacation home had "memories". Apparently she preferred the past memories of a vacation home that they spent little time at to making new memories with a retired husband. Ouch!

 

[FinanceDude]

Yes, I noticed that. I wrote them off at that point. She said the vacation home had "memories". Apparently she preferred the past memories of a vacation home that they spent little time at to making new memories with a retired husband. Ouch!

What a witch............ : :

 

[tryan]

yeah, if you want burn thru a 160k/year with a 1.6m portfolio ... you better keep working. In his shoes, I'ld send the wife back to work.

 

[Nords]

She said the vacation home had "memories". Apparently she preferred the past memories of a vacation home that they spent little time at to making new memories with a retired husband. Ouch!

There seems to be an implicit assumption that her cherished memories were made with her husband...

 

[megacorp-firee]

There seems to be an implicit assumption that her cherished memories were made with her husband...

 

[NinjaPigeon]

No, the liberal way would be to raise your taxes and start a government agency to help these poor people and others in the same situation.

Hey, no liberal attacks I'm liberal and have no desire to help stupid people. And the government is even more inept than these people at handling money. This liberal is all too excited to watch the subprime meltdown receive zero government help

And I'd tell the wife if she wanted to keep the vacation home, SHE could go back to work Pretty sure we had a thread similar to this several months ago where the guy's wife didn't understand why he'd want to retire after 30 years of working and supporting her instead of continuing to work so she could keep the McMansion...

 

[mathjak107]

I agree with you.

at first we were apprehensive but then thinking about it we said why not? its bizarre but people will talk to strangers and co-workers about their sex lives, cheating and marital problems but for some reason we have this thing about our finances being taboo.

the problem i think is most people are either embarresed by what they have or lie thru their lifestyle and dont really have the assets to back up the life they try to show to others.

we also did an article in the last fidelity magazine. no reservations what so ever. in fact they were lots of fun. we had a blast doing the photo shoot

 

[teejayevans]

at first we were apprehensive but then thinking about it we said why not?

Any friends and family start asking you for loans?
You get any contact from FAs wanted to help you manage your portfolio?
You get any contact from various charities, some of which you never heard
of?
BTW, did I mention I'm the head of the "save the mosquito" foundation...

I assume the benefit is some free financial advise? ie they didn't pay you?
TJ

 

[mathjak107]

we thought we would get a flood of calls and junk mail. got not one, nothing. not even a call from a long lost relative. ha ha

no they dont pay you, i was just curious to see how my plans stacked up against their proffessionals view

 

[chinaco]

What a witch............ : :

Switch the w with a b and put selfish in front. The only other explanation is STUPID!

The ridiculous part is that it is the house is an inanimate object. It can only fall into about 2 categories investment or toy...possibly a combination of both. Memories are in her mind... they do not have an opportunity cost. She should just take some pictures. If you think about it... this is emotion run a muck.

I really don't buy the memories part... I would buy the status symbol part or defining oneself with an object. Heck, they could probably sell it and rent the same place when they take a vacation and come out better off financially.

They will sell that place. No choice! Look at the realestate holdings all very illiquid. The taxes and insurance alone will probably suck up Carol's pension.

Their standard of living is going to plummet.