Some early retirees have second thoughts

[JustCurious]

Some early retirees have second thoughts - USATODAY.com

Does this apply to anyone here?

[ziggy29]

From the article (my emphasis added):

The Adamsons tried to buy individual health insurance policies but were rejected because both have high blood pressure and high cholesterol levels. They were able to get coverage through Adamson's former employer. But the premiums have risen each year, from $800 a month a few years ago to $1,300 a month now.


"We're paying close to 30% of my husband's pension" on health care, Rainee Adamson says. "It's a lot, and it goes up all the time."
--


(1300 / 30%) * 12 = 52,000.



Let me get this straight. I'm supposed to feel sorry for someone with a $52,000 pension?? I think not.

[JustCurious]

Quote:

Originally Posted by ziggy29 Let me get this straight. I'm supposed to feel sorry for someone with a $52,000 pension?? I think not.

Ziggy, I agree. Their pension alone gives them more income than the average American household. According to the census bureau, the median household income in the U.S. for 2007 is $50,233.

Income 2007

[2B]

Someone I w*rk with retired at the end of last year and then came back 3 months later. He was driven insane by the gyrating stock market. Before he retired, I know he had a 60/40 asset allocation and had a decent pension.

Just watching the market go sideways drove him back. I talked to him and he admitted that intellectually he could easily weather the drops but when he watched his portfolio drop he became unnerved by the whole process.

Just as well, somebody needs to pay for my SS.

[REWahoo]

Quote:

Originally Posted by 2B Someone I w*rk with retired at the end of last year and then came back 3 months later. He was driven insane by the gyrating stock market. Before he retired, I know he had a 60/40 asset allocation and had a decent pension. Just watching the market go sideways drove him back. I talked to him and he admitted that intellectually he could easily weather the drops but when he watched his portfolio drop he became unnerved by the whole process.

We had a single guy posting on here a few years back who retired with a couple million plus in his nest egg. It declined by a few thousand dollars and he couldn't stand it - panicked went looking for a job almost immediately.

"To supplement their retirement income, Frye has helped some of his clients find part-time jobs as teachers or expert witnesses."

Hey, if disaster strikes and I'm forced back to w*rk, that expert witness gig sounds great. I think I'd prefer to work for the defense: "Yes, he definitely needed killing."

[Dawg52]

Quote:

Originally Posted by 2B Someone I w*rk with retired at the end of last year and then came back 3 months later. He was driven insane by the gyrating stock market. Just as well, somebody needs to pay for my SS.

I bitch a lot about the market but it sure doesn't make me want to go back to work. I just like to bitch.

[REWahoo]

Quote:

Originally Posted by Dawg52 I bitch a lot about the market but it sure doesn't make me want to go back to work. I just like to bitch.

Really? Hadn't noticed...

[haha]

Quote:

Originally Posted by JustCurious Ziggy, I agree. Their pension alone gives them more income than the average American household. According to the census bureau, the median household income in the U.S. for 2007 is $50,233. Income 2007

What never gets mentioned in these discussions is how much uncounted income there is. For example, health insurance, life insurance and many other job benefits. Then on the low end, Medicaid, food stamps, etc.

As a self funded retiree you are going to get none of that stuff.

Ha

[Retire Soon]

Quote:

Originally Posted by haha What never gets mentioned in these discussions is how much uncounted income there is. For example, health insurance, life insurance and many other job benefits. Then on the low end, Medicaid, food stamps, etc. As a self funded retiree you are going to get none of that stuff. Ha

You've brought up a very valid point and one that is more often than not overlooked. Gifts/handouts/charity/w*rking under the table, and other unreported income fail to be reported on government statistics.

[friar1610]

Quote:

Originally Posted by haha What never gets mentioned in these discussions is how much uncounted income there is. For example, health insurance, life insurance and many other job benefits. Then on the low end, Medicaid, food stamps, etc. As a self funded retiree you are going to get none of that stuff. Ha

Good point; on the other side of the coin, there are expenses of working which are generally avoided by retirees:
- FICA
- Commuting costs
- Business clothes (depending, of course, on your job), dry cleaning, etc.
- Contributions when the hat is passed for a gift for Suzie's new baby
- Etc.

I'm not nearly smart enough to know whether what Ha mentioned balances out the things I mentioned.

[huusom]

[qoute]
Let me get this straight. I'm supposed to feel sorry for someone with a $52,000 pension?? I think not.[/quote]


No, but do you think the insurance company will charge less if you have a pension? I think we should all feel sorry for ourselves.

It's outrageous for any of us to have to pay that much for insurance period.

[dex]

Quote:

Originally Posted by huusom [qoute] Let me get this straight. I'm supposed to feel sorry for someone with a $52,000 pension?? I think not.

No, but do you think the insurance company will charge less if you have a pension? I think we should all feel sorry for ourselves.

It's outrageous for any of us to have to pay that much for insurance period.[/quote]

Before we feel sorry for ourselves we first should understand the numbers. For example,
1. What deductible do they have on that policy?
2 What would the premium be if they did not have a pre existing condition? To be used as a point of comparison.
3. Wouldn't a person with a pre existing condition use the benefits more than a person that doesn't? Shouldn't they pay more; similar to a person with a bad driving record?
4. Did lifestyle choices lead to their health problems?

Finally, what should they pay? And who or how do you suggest to fund the difference between the premium income and the overall cost incurred by the insurance company?

[gettingthere]

Quote:

Originally Posted by dex Finally, what should they pay? And who or how do you suggest to fund the difference between the premium income and the overall cost incurred by the insurance company?

I don't think the insurance companies price their policies strictly on the basis of risk or cost to them. There's all that negotiated rate stuff going on between the larger employers and the insurance companies that individuals can't benefit from.

Group coverage can cost significantly less than the equivalent coverage in an individual policy - even though that group probably includes a significant number of older people and people with health conditions that would increase the cost of an individual policy. For my employee health coverage, the entire group pays the same rate for the same type of coverage - regardless of age or pre-existing conditions of the group member. The only difference being between individual vs. family vs. individual + spouse coverage pricing.

My employer kicks in about 65% of my total premium, but I've priced a comparable individual policy at about 60% more than the total premium (employer's share plus my share) for my group policy.

As long as I'm still covered by that group policy, I'm not complaining about paying less, but I would not be happy being on the other side.

When I leave the job after age 55, I am able to continue the group policy by paying 100 % of the cost, but that benefit could be dropped at any time.

It looks to me like the person with the individual policy is subsidizing the group members' coverage.

[ziggy29]

Quote:

Originally Posted by huusom No, but do you think the insurance company will charge less if you have a pension? I think we should all feel sorry for ourselves. It's outrageous for any of us to have to pay that much for insurance period.

I agree -- but it is a separate issue. The bottom line is that these two are, even after deducting their health insurance costs, getting a hell of a lot better deal with the pension than private sector folks my age and younger could realistically hope for. So it's still hard for me to muster up much sympathy.

I'll gladly pay that much for health insurance if you give me a $52,000 pension.

[Marquette]

Quote:

Originally Posted by ziggy29 I'll gladly pay that much for health insurance if you give me a $52,000 pension.

The question, then, and I don't know the answer, is do positions that offer DBs pay less over one's working career? In other words, is it a wash? The person that doesn't have a DB was able to make enough through salary and company match in their 401(k) that it comes out the same.

My biggest salary bumps have been from switching employers. My current job, at 4 years, is the longest I've been anywhere... I'm guessing I'd have next to nothing coming from pensions with all of that job-hopping.

[ziggy29]

Quote:

Originally Posted by Marquette The question, then, and I don't know the answer, is do positions that offer DBs pay less over one's working career?

The answer may be yes, but not to the degree that someone can safely -- and assuming no market risk -- collect $52,000 a year for life before the age of 60.

I've done pretty well with salary, come close to maxing out the 401K and Roth limits most years, have been fortunate to have generous company matches on the 401Ks, and even if I can get 4% real return on about a 75/25 investment mix until the age of 60 -- assuming considerable risk -- I don't think I can safely get out more than about $38,000 a year in today's dollars at age 60. And I suspect I've done better than 90-95% of the people who are increasingly counting on 401Ks and IRAs as their primary retirement vehicle.

[Marquette]

Quote:

Originally Posted by ziggy29 The answer may be yes, but not to the degree that someone can safely -- and assuming no market risk -- collect $52,000 a year for life before the age of 60.

But, at least for a non-federal pension plan, they are taking on some amount of risk. I agree, though, $52k a year after 20 or 30 in is a pretty sweet deal.

Quote:

Originally Posted by ziggy29 I've done pretty well with salary, come close to maxing out the 401K and Roth limits most years, have been fortunate to have generous company matches on the 401Ks, and even if I can get 4% real return on about a 75/25 investment mix until the age of 60 -- assuming considerable risk -- I don't think I can safely get out more than about $38,000 a year in today's dollars at age 60. And I suspect I've done better than 90-95% of the people who are increasingly counting on 401Ks and IRAs as their primary retirement vehicle.

I'll need to see if I can find the article, I think it was in one of the last NAVA pubs, there's some discussion about offering guaranteed income riders on a worker's 401(k) balance. I can't see it being a good deal, but that would give someone a DB-like plan... then again, so would any ol' annuity...

[unclemick]

1993 dollars - you could party til you puked on 1000k/mo total retirement. Especially homebrew.

No stinking health insurance for 12 years. American Passport. Bad attitude - get well or die or go abroad for elective medical.

Pssst Wellesley - it's the dividends stupid. When in doubt cut expenses!

Whiny ass punks!

There now - I feel better. I love selective hindsight.

By all means get back to work and pay into my SS and Medicare now that I've made to 65.

heh heh heh - Is talk cheap or what?

[Midpack]

Quote:

Originally Posted by huusom It's outrageous for any of us to have to pay that much ($13K/yr) for insurance period.

If the couple has a high deductible, that's not out of line with what it costs on average in the US. What do you think it should cost, and on what basis?

[chinaco]

Quote:

Originally Posted by ziggy29 (1300 / 30%) * 12 = 52,000. Let me get this straight. I'm supposed to feel sorry for someone with a $52,000 pension?? I think not.

I caught the sarcastic humor...

But there is an important message in the article.

Its not about them... its about planning... Or perhaps lack of contingency planning and (considering all of the risks). In this case the affects of inflation on purchasing power and the decrease in the value of their assets. They are less well off than when they retired, and looking forward to another 30 years or so of trying to manage it... they are concerned that their basic lifestyle may be in jeopardy.

Think about it from the perspective of someone who retired before the market collapse and sub-prime collapse occurred. Your pension a little over a year later is fixed and it purchases 10% less than it did a year ago. You just lost 15% of the value on your home. Your portfolio is worth 15 to 20% less. And the news is full o speculation about further inflation.

It is enough to make anyone nervous.