Oh how my world has turned upside down - looking for advise

[FANOFJESUS]

How much can you save on housing in this area?

 

[Tom52]

I think your health care costs will be high but otherwise your finances sound all right even if you don't move (but that is a very good idea to sell your house even below market value--you will likely sell it for more than you bought it for?--and move somewhere where taxes are lower). Imagine the stress if you hadn't started your 5-year-plan, and more importantly, if you hadn't started saving even before that.

I hope your wife continues to enjoy good health and you are so right about man plans while God laughs. But sometimes we laugh as well, and I hope you can too.

Actually, I probably will not break even on the sale of my house. I paid $125,000 in 1987, then I did two major remodels and landscaping about 8 and 10 years ago, totalling another $200,000. Before the real estate market tanked a year or so ago, I was just getting ahead as the house would have likely sold for $375,000-$395,000. I am truly guessing when I said my house is worth about $275,000 in today's market.

 

[Tom52]

How much can you save on housing in this area?

If we move back to our home state of Iowa, I think the housing is cheaper if you can stand to live the rural or small community life. I would guess a house in the $150,000 - $200,000 range. I might consider renting first, just to see where this whole adventure leads. If it were not for the parents I would head further south.

 

[Tom52]

I still do not think you are in bad shape. I am guessing you both would have at least 3k a month in SS at 62.

Good guess, I just looked at the most recent SS statement, mine is $1679, DW = $1,416. But I assume these amounts drop if you stop contributing before retirement age.

 

[OAG]

Good guess, I just looked at the most recent SS statement, mine is $1679, DW = $1,416. But I assume these amounts drop if you stop contributing before retirement age.

No they would not drop very much. The SSA uses 35 years of earnings. They also adjust them each year (well 2009 may be an exception) up for the CPI or Wage Increases (depending on age). At your age you can pretty much plan on the amounts they show you a FRA (or an amount very close to it).

 

[FANOFJESUS]

If we move back to our home state of Iowa, I think the housing is cheaper if you can stand to live the rural or small community life. I would guess a house in the $150,000 - $200,000 range. I might consider renting first, just to see where this whole adventure leads. If it were not for the parents I would head further south.

I am not an expert on Iowa but I am guessing a 100k would do the job.

 

[Alan]

Good guess, I just looked at the most recent SS statement, mine is $1679, DW = $1,416. But I assume these amounts drop if you stop contributing before retirement age.

They will drop a lot less than you think. If go to the SS site Social Security Online - The Official Website of the U.S. Social Security Administration you can use their calculator to get an accurate estimate assuming you stop work at a particular age. Do this just to set your mind at rest.

My guess is you'll also get a job between now and drawing SS - I get the impression that you are pretty well motivated and are going to get through this set back okay.

 

[Lsbcal]

Tom, just a few thoughts as there has been a lot said here (and I've only read parts of it). If the Ibonds are high rate ones (like 3.2% for the fixed part) then you do not want to sell them as they are good for 30 years and should be considered keepers. You said you have Vanguard funds, good start. Why not consolidate everything with VG if you have not already done so. It will make record keeping much easier. CD's can be purchased through their VBS accounts (you may have to open one of these). You may be able to transfer CD's to VG -- not sure about this.

Vanguard offers a free investment anaylsis and even a retirement estimate if you have something like $1M with them. It's at least a starting point and when I did it the rep was very knowledgeable and brought up some points I had not considered.

The way I deal with anxiety is to spend a lot of time planning. So you might want to become much more financially informed. This will take some time of course.

FIRECalc is an excellent tool. When you run it keep in mind we've already gone down a lot, so the worst case declines should be considered to have already happened to your portfolio. It could go down some more, of course. But I'd also focus on what has happened in the past after major declines i.e. how recoveries of the past have done given your AA.

 

[FANOFJESUS]

I just put in all your number and you have enough money until 95 if you keep your spending to 38k and earn 5% on all you money. I also put in your SS at 36k a year starting at 62. That is if you do not work again. I even bumped your spending up to 50k a year and you still had money at 95. Flexible Retirement Planner

 

[samclem]

Tom52,
The better I understand your situation, the more clear it becomes that you and your wife are going to be fine. From a financial side, it was good to read that your $40K yearly expenditure budget is not an estimate you built one night, but an "as we lived it" figure. Lots of folks believe they can tighten their belt, but have trouble actually making the one big mindset adjustment and thousands of little behavioral adjustments needed to cut their expenses. You and your wife are miles ahead of the game there.

As Alan suggested, you can go to the SS site right now and get an estimate of what your checks will be. Be sure to use the version of the calculator that asks you to manually enter your income for each year. It will only take a few minutes, and you can do it for both yourself and your wife. Together you guys will probably be receiving $25k per year from SS, which will rise with inflation. That will go a long way toward meeting your living expenses.

Medical insurance: I'd second the recommendation that you read Martha's FAQ on private health insurance. Also, the idea of getting a job, any low-stress job you'd enjoy, for the health coverage is something to consider.

I agree with the idea to move to a lower cost area. After you figure out what your health insurance/health expenses budget will be, you can add it to your existing budget and you'll have a good idea of the amount you'll need for the next 8-10 years until Social Security and Medicare kick in. I think you'll find that you and your wife will be able to afford a very comfortable house--certainly not a mansion, but a home that you'll be happy to live in for many years and which will meet all your needs. It sounds like you and your wife enjoy simple pleasures and spend most evenings (and soon most days) right at home. It makes sense to find a home with the amenities you want in a neighborhood in which you'll feel safe (and which is not declining). Think about the town, too--look for a town of the size and with the amenities you'll want for the next decade or two at least. I'm only saying that you should take your time and make a careful selection of the home, and be sure to think through your priorities carefully. Right now, because of the immensity of the changes in your life, I sense you might reflexively cut to the bone when budgeting for the house, which could prove to be a mistake.

In a similar vein: I wouldn't cut back much on your expenses right now. You are comfortable with your life, you don't spend too much, your wife enjoys going to the beauty salon occasionally, you eat out every few weeks--keep doing all of that. You've had a lot of stressors in your life recently, and more are coming. These little items are part of your lives and are not extravagant--these small things will become more important to your morale as the big stuff starts changing around you.

Some short comments on your investments: If I were in your shoes, I'd probably make the I-Bonds the last of my non-tax-favored investments that I sold. Though inflation is low now, it could very well accelerate as our goverment pulls out all the stops to stimulate the economy, then has to increase the money supply to pay back those who loaned the US money. The I-Bonds will provide some protection from inflation. Also, regarding your IRA and 401K money: You may be tempted to get out of the turbulent stock market as your own financial situation is in flux, but I'd resist this impulse. That money has to grow faster than inflation over the long term, and has to last for the rest of your lives. Stocks have the best long-term record of accomplishing this. Yes, you should also have a lot of bonds, but don't flee equities entirely.

Sorry for the long post. Spend some time playing around with FIREcalc and your spreadsheets until you are comfortable with things. Sure, this wasn't what you'd planned on , but you guys are going to be fine. You are in a good position because you have put aside some money and are already living modestly.

 

[JPatrick]

I'm happy to see that you have taken a look at the 401K damage.
We have all sustained major declines in our equity accounts and it is tempting and perhaps less stressful to ignore it with the thought that it will heal itself. In fact, the coming rally may well be a story of a rising tide lifts all boats, but they have never been lifted equally.
You owe it to yourself to review every holding you have to ensure the damage has not left you completely out of balance and provide fixes where needed.
FWIW, over the last 5 months I have totaled our holdings only once--year end. However, during that time I have looked at individual holdings and made fairly major changes. I have a dow/S&P 500 figure on the wall. Not until the markets reach those targets will I start talking totals.again.
Much less stressful.

 

[REWahoo]

I have a dow/S&P 500 figure on the wall. Not until the markets reach those targets will I start talking totals.again.

Wuss.

 

[JPatrick]

Wuss.

Geez, glad I didn't mention my blankie...

 

[haha]

Health insurance will be high for ten year but after that dirt cheap.

If you are referring to Medicare +Medigap+ Plan D, I would definitley not describe this as dirt cheap. The above for two people would make up a large hunk of the budgets published by many forum members. Quite a bit more than food, for example.

Ha

 

[thefed]

well, i first must say that i wish your wife luck on her battle with cancer. i am a firm believer that attitude is 50% of that battle...keep her positive

secondly, i think you are fine right now...just like others have stated. you could liquidate everything and put it into cd's or money market, spend the same as you have been, and your money will outlast you

would you consider a downsize....housing wise? something to put some $$ in hand and lower taxes....thus lengthening the staying power of your portfolio?

with your wife's health, in your position, i'd probably say f$@! it all right now and start enjoying life....retire....spend time together....enjoy life! SS will be a few extra bucks in the bank in 10 yrs which helps too

just think...someone out there is feeling the same as you right now but doesnt have over 1mm in assets....the motto i try to live by when i am 'down' is "an attitude of gratitude...."

 

[2B]

If you are referring to Medicare +Medigap+ Plan D, I would definitley not describe this as dirt cheap. The above for two people would make up a large hunk of the budgets published by many forum members. Quite a bit more than food, for example.

Ha

I'm curious about how much it costs. I've been using $5,000 per year in my cost of living estimates but it was really just a guess.

 

[OAG]

Medicare for 2 is currently $2,313.60 plus co-pays and deductibles, for two. Co-pays and deductibles are dependent on the Medigap insurance policy you pay for to cover them (and the other things Medicare does not cover). Medicare part D is another cost if not covered by the Medigap policy. Also Medicare base costs are scaled to your income and have not been increased since 1/1/2008 (how long do you think that will continue?). $5,000 (2B) seems reasonable to me for TODAY.

 

[TargaDave]

Tom,
Our situation is not all that different from yours (we're 50 and 49, a bit more savings as well as slightly higher annual expense than you, just semi-retired to much lower incomes in a new location, no debt, blah blah. DW recently delt with cancer creating a challenge in getting individual insurance). I don't know anybody that has entirely escaped the stress of the current climate including that painful look at investment totals or the shouda-coulda-woulda's. A few comments I'll add:

Individ insurance: we read all the info here (including Martha's post) but we still had a real challenge due to DW's cancer. Lesson learned was that plans can vary significantly between states and numerous insurers simply won't touch anyone with the C word. No quick fix. We went from PA to NC and BCBS of NC has a much better policy towards recovering cancer patients than PA (at least in our case). DW just got past the 5 yr clean-bill-of-health point and that also made a difference. We have a high deduct HSA plan and figure about $15-18k per year in total med expense. So far so good.

semi-retirement: DW maintains a parttime contract with old employer that covers half our expense but that could always end at any time. I am counting on earning enough to cover the rest of our current expense, which means going from running a 12 person hi-tech biz to a basic resort-area seasonal job. Definitely a "mental adjustment" but the slowdown makes it easier in a way (just having a job feels good and I never was the antiwork type). I thought I wanted to buy or start a mom&pop biz here but I prefer to see what else crops up first given the shaky times and our desire to preserve cash

health-fun: already said by others but we put a big priority on time for health which doubles as fun. For me Y membership, road biking, kayaking, kiting, sailing, windsurfing (one advantage of living on the water). I'll even be teaching kiteboarding this summer and making a few bucks at it. We were gonna pick up a cruising sailboat but decided to wait. OPB for now

Anyway, good luck in your transition and your wife's recovery. I'm sure you'll both come out of this just fine.

 

[FANOFJESUS]

If you are referring to Medicare +Medigap+ Plan D, I would definitley not describe this as dirt cheap. The above for two people would make up a large hunk of the budgets published by many forum members. Quite a bit more than food, for example.

Ha

My rough numbers are $116 a month.

 

[REWahoo]

Medicare for 2 is currently $2,313.60 plus co-pays and deductibles, for two.

Ron, does that include your Medigap and Part D premiums?

 

[OAG]

No, that is for basic MEDICARE ($96.40 per month for TWO). Medigap plus Part D, if needed, is extra. This is usually a deduction from your SS benefits BUT they start at age 65. So you will pay "out of pocket" if you delay taking SS benefits beyond age 65.

 

[FIRE'd@51]

As OAG says, the $96.40 per month is the Medicare Part B premium for one person. This still leaves you with signifcant exposure (roughly 20%) on doctors' fees (including surgeons) and outpatient services, as well as significant hospital deductibles. A good Medigap policy (I'm told plan F is the most popular) will pick up all of these. The average part D (drugs) premium nationwide is about $30 per month. In my area, these three premiums (part B + plan F + part D) total about $235 per month per person at age 65. This will give you essentially 100% coverage (no deductibles or co-pays) for all Medicare-covered expenses, except for drugs.

AARP has a calculator which will give Medigap premiums for their policies (underwritten by United HealthCare) in your locality at age 65. To use it, you must "fake" your date of birth, so the calculator thinks you are 65.

AARP Medicare Supplement Quote

Other insurance companies may have similar calculators on their websites. Note that all Medigap policies with the same letter (e.g. plan F) provide the same coverage anywhere in the US, so you can do an "apples-to-apples" comparison when shopping for a policy from different carriers. Also, these policies are guaranteed-issue with no pre-existing condition exclusions or waiting periods, and no health questions to answer, if you purchase one within 6 months of turning 65.

 

[Bestwifeever]

I'm thinking another factor in OP's decision re relocating is the health care his wife is able to receive from their present location. Small towns may offer great housing prices but may not be close to the level of health care his wife may need.

Just something else we all might have to consider as we plan (and God laughs).

 

[haha]

Medicare for 2 is currently $2,313.60 plus co-pays and deductibles, for two.

This is true only if you qualify by income for the lowest premium. Starting with this month I am paying something like $188/mo. If my income goes back below their cutoffs, the monthly premium should once gain go down to base in future years.

So for one, my Medicare is $22xx/yr. Plan D (the cheapest plan I could find) is $37.50/mo, and my Medigap is $175/mo. Also, there are uncovered services, for which unless you can negotiate the price down you will be paying the Doc's top level uncut price.

So from my experience, $5000 for one person is closer. It varies by geography, type of Medigap, etc.

But no way is is dirt cheap, especially from the standpoint of couples who sometimes report living on $24,000 per year. And it goes up, devil mind the recession.

Ha

 

[2B]

This thread has been successfully hijacked into a Medicare discussion.

For us non-senior citizens, it appears that SS - lite is about $100/month/person. F will add about $200/month/person. Then there's Part D which I didn't get a price for. It looks like you can get up to $8-10,000 pretty quick.

If you went with just the basic SS, what's the annual, maximum out of pocket? Does F cover everything at 100%? What's the going price for Part D?

As for the original thread -- Houston generally sucks as a place to live unless you have cancer. This is the place to be if you need serious medical attention.