Retirement on $x a year

[JonnyM]

Two "Don't" live as cheaply as one, OTOH one survivor isn't going to appreciate and income shortage, when their lifestyle is based on Xdollars coming in. I've watched my Mom half to deal with the recent death of my Father. There income was 2/3 based on two SS checks of about a Grand a piece. She is finding that loss difficult to deal with, her expenses have NOT lessened significantly after his passing. Admittedly I find myself somewhat unhappy after receiving the revelations of "where their money came from" this late in the game, but they had never seemed particularly interested in sharing, and I didn't pry. I don't know that I could have fixed much, without knowledge 10 years back, and even then, it's their lives, I would only have been able to suggest. I find out now that they had been chewing up their small nestegg, the part of their income that was NOT fixed per say, rather than using the 4 percent rule or some other sustainable method.

My point is I find myself resenting that my father didn't provide for an exit strategy for his wife. Moemg points out that her hubby planned well at 55% survivorship. I would like to see that figure at 100% for those about to retire and still in the planning stage with that choice not yet committed. When we had the discussion with our Pension Admin's we had various choices of percentages and chose 100 percent, and in the end made that choice for each of us for the other, as we are one of those rare and fortunate couples that met and married under the same retirement system, and are about the same age. Needless to say we were very surprised at the very tiny hit this choice entails. The difference between 100% survivor for life vs 50% was only about 5-6% loss in monthly payout. Those of you in systems with such choices, FIND OUT YOUR OPTIONS! Obviously those of you with self-funded systems are already covered, if one of you checks out your obviously much larger nesteggs don't change. Your withdrawal rate doesn't have to change either.

It really hit home for me how couples living Primarily on two SS checks see their budgets gutted when one of them dies. This doesn't have to occur in retirement systems that give survivor options in exchange for actuary based reductions in lifetime payout. They just figure you'll both live about the same amount of time, which may or not be true, hence in my mind a total insured solution.

[52andout]

JohnnyM, great post. We saw the same thing when FIL died last year. She had a pension and they had two social securities. Her pension has no survivor clause, he would have had a lot of trouble had she died first. At death the smaller social security goes away. Her cost of living increases from the pension and ss are eaten up by increase in Medicare premiums, not to mention taxes and increased gas and heating costs. Luckily with no bills, paid for house and a small nestegg she is doing OK. We are fortunate to be able to supply her with a lot of extras she would go normally without. SIL also helps with extra's for her, so she is very fortunate.

Back to the original question. How much you need depends on the lifestyle you want. You can rarely drive your old clunker, never eat out, have lots of rice and beans, have no cable or internet and wear clothes until they are threadbare. Some people forgo air conditioning and keep their house a lot colder in winter than I would . This can go all the way up to multiple residences, nice cars, fancy restaurants, fine wines, nice wardrobe,lavish gifts for your kids and comfortable vacations. Everyone has to decide what lifestyle they want, and I think most choose between these two extremes if they have a choice.

I for one am most comfortable in the mid 40's (after taxes) for my income as we like to travel and live in a nice house, but could cut down to 30 if I had to. I think it could be even lower if we sold the house and lived in a more rural area. I stuck it out longer to achieve my goal and not have any worries.

[UncleHoney]

This brings up an interesting question about the surviving spouse.

After all the saving, planning and investing will your spouse be able to manage the investments if you're not there? Do they even know where the money is?

I remember back in the 50's when my grandfather died, my grandmother was in way over her head managing the household finances. But in time she learned and lived another 38 years and never had to work. She spent a lot of time and energy managing her funds and knew where every cent was. When she died at age 97 her estate was worth about $500k. People with less energy and money savvy may not have faired as well.

[W2R]

Quote:

Originally Posted by UncleHoney This brings up an interesting question about the surviving spouse. After all the saving, planning and investing will your spouse be able to manage the investments if you're not there? Do they even know where the money is? I remember back in the 50's when my grandfather died, my grandmother was in way over her head managing the household finances. But in time she learned and lived another 38 years and never had to work. She spent a lot of time and energy managing her funds and knew where every cent was. When she died at age 97 her estate was worth about $500k. People with less energy and money savvy may not have faired as well.

When my father found out he had cancer, he made a notebook for my mother. He wrote down everything he knew about managing money, repairing things in the house, insurance, taxes, and similar concerns that had been his domain during the marriage. That was a wonderful gift for her that helped her a lot after he passed away. She learned quickly, too.

[youbet]

Quote:

Originally Posted by UncleHoney After all the saving, planning and investing will your spouse be able to manage the investments if you're not there?

Nope, not even close. It's a problem I've gotta get solved. Simplify....Simplify...... Plan..... Plan....

In some of the threads, folks express money management styles involving a lot of compartmentalizing of funds. You know..... keep cash for the next few years separately from the investment stash, use so-called "buckets" and so on and so forth. Frankly, I've never needed to use those types of crutches to get the same results. (Example: I can keep a high cash allocation right in my borkerage account without needing the crutch of moving it to a separate location.) But, it's dawning on me that the "one giant spreadsheet" approach won't work for DW.

It's similar on taxes. I do 'em myself. Maybe it would be better to use a CPA that would then have a history of our taxes, etc. right there and could give her specific instructions on what he/she needs to do 'em.

It's not a matter of DW having income after I croak. It appears she'd be just fine in that regard. It's managing it where the pain would start. The way I have things now, an instruction sheet would look like the great American novel. Too many idiosyncracies and "wierdisms" in the way I do things.

Hmmmmm.... much interesting food for thought!

[gandalf42]

Quote:

Originally Posted by UncleHoney After all the saving, planning and investing will your spouse be able to manage the investments if you're not there? Do they even know where the money is?

1) Definitely not 2) Probably not

Its an issue I'm working on. Step one is consolidating the accounts under one firm. Step 2 will be explaining, verbally and in writing, investment philosophy and where the money used comes from. Step 3 will be to leave names and contacts of recommended FAs and CPAs to use. (in place of my cheap frugal DIY approach)

[ERD50]

Spouses and finances. I guess I'm not alone in this.

It took months and months of me asking my wife to sit down with me so I could go over the finances. I promised to make it painless, and I did. I finally got her in front of the computer. I had her access each account she would need to get to, and I drew a little diagram of which ones you could pull money from. I didn't get into any detail, just the basics. I tried to keep it small.

I gave her one paper with the internet addresses, and another that could be aligned with it, that had the logons and passwords. She put each in separate note books.

Next step is to show her how to simply just divvy this up between an ETF or index fund and a bond index fund, but that will take six months of prodding I'm sure.


My Mom did the books for my Dad's business, so she was pretty well set on all that when my Dad passed. We just had to convince my Mom that she really did have enough money to spend on herself.

-ERD50

[Moemg]

The best thing you can do for a spouse or other survivor is to first discuss your wishes before it is too late and secondly write a detailed list including investments ,checking accounts ,insurance ,mortgage info.,deeds ,passwords ,keys to safety deposit boxes ,burial plots ,wills ,power of attorney ,living will and discuss where you would like special things to go .I was left with a huge collection of circus memorabilia to dispose of .

[happy2bretired]

My husband and I had quite a few different investments scattered all around and also an account with a major brokerage firm. In December of 2006 we sat down with our financial advisor from the brokerage firm, hoping that we could simplify things prior to my retirement, planned for the following year. My husband was in the process of consolidating all of our investments funds under the brokerage account when he died late in January. After his death, I had no idea where we were with the transfers. But, since I had always filed the monthly/quarterly statements I pretty much knew what we had but it was a big puzzle figuring out what had already been done and what still needed to be completed. Needless to say, I was under a little bit of stress but I was able to get everything done.

Husbands please think about your wives....they will really love you for it.

[PoconoMike]

1. Develop a post retirement budget.
2. Estimate your tax rate and figure a gross income required based on the aforementioned budget.
3. Make a list of your financial assets and income from all sources.
4. Calculate withrawals from your assets ans match the withdrawals and income with your budget.
5. To what remains of your assets add your expected investment returns to get your next years starting point.
6. Increase your budget annually by what you expect the inflation rate to be.
7. You can calculate the withdrawal rate if you want.

Good starting points: 6% returns on investment, 4% inflation rate.

Like somebody said, do an expected case and worst and best case scenarios.

This is really simplified but can all be done on an excel spreadsheet. You can make as simple or as complex as you want.

[Corporateburnout]

Quote:

Originally Posted by Moemg The best thing you can do for a spouse or other survivor is to first discuss your wishes before it is too late and secondly write a detailed list including investments ,checking accounts ,insurance ,mortgage info.,deeds ,passwords ,keys to safety deposit boxes ,burial plots ,wills ,power of attorney ,living will and discuss where you would like special things to go .I was left with a huge collection of circus memorabilia to dispose of .

I have done exactly that. I have a detailed list of all our investment accounts, bank accounts, wills, trusts, life insurance policies, agents phone numbers including work related policies with double indemnity and accidental death benefits information along with all website addresses and passwords in a hard copy and a soft copy (CD) with specific instructions. I update this every 90 days or so.

[kjpliny]

Retirement expenses, aside from increased medical and travel, should be much more manageable than while working due to the lower tax bracket and the fact that you will not be setting aside a lot of pre-tax money for 401k/IRA plans. Assuming you are planning to have the house paid off prior to retirement, things should be quite a bit easier.

For example, take a couple in their 50s making $75k/year each, paying down a $200k mortgage, and each contributing $20k to their retirement accounts. In retirement, with the mortgage paid off and IRA contributions stopped, that's about $55k/year they won't have to put aside. The increased travel and healthcare costs in retirement surely won't be that much (but who really knows). This couple could most likely retire comfortably with about $600k each in their IRAs and $15k each coming in from SS at age 62. Some downsizing in lifestyle may still be required to live off of ~$80k/year, but income taxes would be lower as well.

[Moemg]

Quote:

Originally Posted by Corporateburnout I have done exactly that. I have a detailed list of all our investment accounts, bank accounts, wills, trusts, life insurance policies, agents phone numbers including work related policies with double indemnity and accidental death benefits information along with all website addresses and passwords in a hard copy and a soft copy (CD) with specific instructions. I update this every 90 days or so.

Good Job ! The only other thing I learned from experience is if moving in retirement take a long look at the location and see if you would want to be there by yourself .

[old woman]

Mom was widowed after 47 years of not looking at finances, but dad took care of her. His final years he gave her money to put in her credit union until she had it all in her name. He told her how to buy CDs and not to worry when the amount was over 100K since the credit union wasn't going out of business. He bought a single level house and had landscapers make the yard low maint. Mom has her own little pension and got part of one of dad's and 4K worth of SS since her pension was postal. But her first month or two as a widow she didn't know if she had enough money. She kept a notebook of every cent she spent and determined she spent less than she had coming in so quit thinking about it. Now after being a widow 14-15 years she has more money than she had when he died all safely tucked into credit unions or banks. She is 81 now and living the way she wants to live in the same house dad bought her in 1975. She won't invest at all or talk about investing. If she runs out of money I will give her some.

[OAG]

OW-Great story. Your Dad was a fine partner for Mom. Great roll model for a lot of guys both old and young.