What If You Run Out of Money?

[NYEXPAT]

Get yourself a young Wife while you still can!

 

[daylatedollarshort]

In our area low income seniors are vulnerable to homelessness. It is a big problem.

 

[Al18]

The free/low cost services for the low income elderly vary quite a bit, depending on what state you live in. It's not something I worry about - I came into this life penniless.

 

[Hyper]

3/4 or more of my extended family never had or has any money to run out of when/if they ever do get to retire. Very depressed area that I'm from. Some CHOOSE to live very very unsanitary even in their younger years when they could have worked more but chose not to better their conditions. Great Lord forbid we ever run out, what I've seen is somewhat of a deterrent.

 

[mountainsoft]

what would happen to someone who literally ran out of money before they died?

My mom is facing this situation in the coming years. Living at home she received a disability SS income, had a decent savings, and could probably have lived the rest of her life comfortably.

Then last year she had a stroke. She had to move to an assisted living home, we sold her house, her car, and the majority of her personal belongings. She now has about 240K in savings and receives about $1700 per month disability income. Unfortunately, her assisted living costs about $3600 per month, and she still has medical insurance, prescription drug plans, cable, telephone, internet, groceries and other personal items. At her current spending rate, she has about eight years before her personal funds run out and she'll basically be penniless. She'll still receive the $1700 disability income, but that will barely pay half of her assisted living, let alone any of her other expenses.

She's 72 now. Assuming she lives past 80, the only real option she'll have is Medicaid from the state, and I (her only child) will have to pay for her remaining personal expenses (which threw a wrench into our own retirement plans).

 

[Teacher Terry]

Seriously my mom had a small pension and Ss. She spent her money traveling and pre-paid her funeral. By mid 80’s stopped traveling, paid her rent on decent apartment and lived a good life. We were glad she enjoyed her money. She told us when she died to sell her car and buy everyone lunch that came to her funeral which we did. COL was reasonable so didn’t need to depend on any services to fund her life.

 

[Teacher Terry]

MS, won’t Medicaid kick in once she runs out of money?

 

[gauss]

I do volunteer taxes for seniors so I actually see parts of this scenario. For now, the social safety net seems to be somewhat intact at the Federal level.

#1) SSI is available to low income seniors and will supplement any other cash income upwards to a maximum of ~ $750/month

#2) Section 8 housing, when/where available, would limit out-of-pocket costs to 30% of income (ie $225/month)

#3) SNAP aka food stamps would also be available. SNAP expects you to contribute ~30% out-of-pocket towards food. The average benefit amount is $134 for a single adult.

#4) Medicaid health insurance would be available with little out of pocket costs to the senior for premiums or copays.

#5) Medicaid LTC may be available to pay nursing home, or in home care, for those who have little income/assets but medically qualify.

and so on.

Note most of these programs have asset/income tests.
These programs are all subject to change under the law.
Individuals who have not been legally in the country for at least 5 years may have limited eligibility for some of these programs.
My understanding is that seniors would qualify for these programs if they meet the other tests, but younger able-bodied adults would be excluded from eligibility.


Note also that traditional Social Security never "runs out" under current law. This is one of the reasons that I often advocate waiting to draw SS until age 70. My motivation is not to try to maximize spending power, but rather to limit my downside standard of living if all else fails.

-gauss

 

[gauss]

My mom is facing this situation in the coming years. Living at home she received a disability SS income, had a decent savings, and could probably have lived the rest of her life comfortably.

Then last year she had a stroke. She had to move to an assisted living home, we sold her house, her car, and the majority of her personal belongings. She now has about 240K in savings and receives about $1700 per month disability income. Unfortunately, her assisted living costs about $3600 per month, and she still has medical insurance, prescription drug plans, cable, telephone, internet, groceries and other personal items. At her current spending rate, she has about eight years before her personal funds run out and she'll basically be penniless. She'll still receive the $1700 disability income, but that will barely pay half of her assisted living, let alone any of her other expenses.

She's 72 now. Assuming she lives past 80, the only real option she'll have is Medicaid from the state, and I (her only child) will have to pay for her remaining personal expenses (which threw a wrench into our own retirement plans).

I would speak to an elder-care attorney about this.

My understanding is that any expenses you pay for your mother would be considered gift income and would reduce her medicaid for long term care dollar by dollar, assuming that you don't submit fraudulent paperwork when you re-qualify each year.

Medicaid long term care would allow her a small amount each month to be used for personal expenses (ie $50 or so).

I may be mistaken on this, but this was my conclusion after briefly researching, on my own, if any Medicaid planning would benefit the individual (as opposed to their heirs).

If anyone know more about this I would be interested as we have possibly two mothers in my family who may be also on a trajectory to deplete funds down the road.

-gauss

 

[marko]

But...one doesn't simply wake up one day and discover that all the money is completely gone!

In real life, you have the opportunity to watch your spending v income and look ahead 5, 10 years on how those two work out.

If you were to see that money is running low you should have years to respond to that by cutting back and adjusting. What kind of fool would keep his spending quo when he knows he'll be broke in 10 years? How many of us here RE'd unexpectedly and found ways to cut our expenses quickly and dramatically.

 

[gauss]

If you were to see that money is running low you should have years to respond to that by cutting back and adjusting. What kind of fool would keep his spending quo when he knows he'll be broke in 10 years? How many of us here RE'd unexpectedly and found ways to cut our expenses quickly and dramatically.

Some believe they will be dead by then.

 

[pjigar]

Some retirees know how to adapt. Quite a few cut the cost of living by moving into an RV, and also doing part-time work at a campground or RV park for additional income. RV life can be cheap if you do not drive the 6-to-8-mpg monster around the country, and pay monthly space rental instead of the daily fee.

Recently, there was a thread about a woman who did the above and got some media coverage. She passed away some time later due to an illness.

We got a quite a few RV parks around my rural property. These are permanent monthly kinds where people rent monthly ($300 per month) all utilities including internet paid. So you can REALLY cut back on expense if you move at one of these places. You can get by with less than $1000 a month for a couple.

Beyond that, you never really run out of money because you will adopt along the way as your income and assets go down. You won't even notice! I look back on my childhood days and realize that we were dirt poor but I never felt that way growing up. Every species is very resilient and always finds a way.

Personal experience: I rented my 3 BR SF house to an elderly couple in their 60's. Semi-retired. They sold their house and moved in to my SF rental. They moved out from SF rental to an apartment few years later as their income went down when they fully retired. I don't know what happened to that couple down the road but they adopted in way they felt appropriate at the time.

 

[Maenad]

DH has informed his parents that they should vote for politicians that advocate for a strong social safety net. It sounds cold, but not everyone has a good childhood with loving parents that they'll support through thick and thin.

FIL is facing the consequences of a life of profligate spending and poor planning. He's living in a trailer and has rented out his 2nd bedroom to make ends meet.

MIL and her husband are selling off their vacation home, etc. since they managed to severely draw down their funds in the last decade. Considering the stock market boom we've had during that time, I'm impressed.

The real answer is: keep your eyes open and watch your finances. You can see destitution coming a long way off, and minor course corrections can prevent it if you don't bury your head in the sand. There was an article published a couple years ago about a writer who retired early with a chunk of money, blew through it without watching what he was doing, and was now living in poverty. So it does happen, but it requires deliberately maintaining ignorance.

 

[joeea]

Does anybody actually know anybody who ran out of money after they retired because they didn't save enough?

Yes.

She ran out of money mostly because her husband made a series of poor choices with his tiny pension, social security, and their nest egg before he died. She was left a poor widow.

Their family contributed as much as they could. The remainder came from a variety of social programs.

This wasn't the way she wanted to live. It wasn't a happy end of life at all.

 

[imoldernu]

Unless I missed it, the term "Welfare" doesn't appear in the thread, though most parts of it were discussed.

For an overview of Welfare, try this thread. As always, in the process of change, but the basics are here.

https://www.thebalance.com/welfare-programs-definition-and-list-3305759

 

[joeea]

Most communities have subsidized elderly housing.

Don't expect housing to be available once you need it.

In my community, the waiting list is several years long. The person I know who applied waited just under 3 years.

 

[pb4uski]

I figure it this way.... if those of us with six or seven figure retirement portfolios run out of money, unless it is because we made some really bad financial moves, there will be a whole lot of others in a world of hurt. I can always sell the real estate and will still have SS. DW gardens, we have camped before.... we have kids that we can turn to.... we'll find a way.

 

[joeea]

But...one doesn't simply wake up one day and discover that all the money is completely gone!

One can wake up one day, find one's spouse dead, and find that his pension has now disappeared, and your family social security benefits are now drastically cut.

Oh, and one can discover that one's spouse ran up huge bills without telling others, that your rent is 3 months overdue, and that money you thought you had in the bank is now completely gone.

Sadly, that is real life.

 

[gauss]

Don't expect housing to be available once you need it.

In my community, the waiting list is several years long. The person I know who applied waited just under 3 years.

As an amateur landlord, I am intrigued by the concept. The government portion of the rent comes in like clockwork and the tenants are often very happy to live in a nice place where they only pay a small fraction of the market rent, based on their ability to pay (ie 30% of income). Many younger disabled folks would also qualify.

I wonder if there is community resistance to expanding the pool of privately owned Section 8 qualified housing where you are.

A more likely explanation is probably that Federal funding for the program may force "qualified" applicants to wait.

-gauss

 

[misanman]

I wonder if there is community resistance to expanding the pool of privately owned Section 8 qualified housing where you are.

I think there is sometimes community resistance but I'm not sure how effective it is. DS and DIL and their 4 kids live next door to a section 8 house. The section 8 resident caused serious financial and emotional harm to his neighbors but there was little they (or the owner of the house) could do to get him out, even after he started a fire in the garage that nearly burned down the neighborhood.

 

[audreyh1]

MS, won’t Medicaid kick in once she runs out of money?

She’s in assisted living, not a nursing home.

 

[gauss]

Below is a potentially useful link to a government database of Nursing Facilities that are approved by Medicare and/or Medicaid.

https://www.medicare.gov/nursinghomecompare/search.html

Nursing Home Compare has detailed information about every Medicare and Medicaid - certified nursing home in the country. A nursing home is a place for people who can’t be cared for at home and need 24-hour nursing care.

 

[Alan]

.
.
So if we wouldn't die if we ran out of money when we were, say, 87 (which is what FireCalc is currently showing for me, for example), why do we worry so much about those last few years? Is it worth taking a couple more years off THIS end of my life (by continuing to work, I mean) to make sure I have money at THAT end? (<--I know that's COMPLETELY subjective. But doesn't anyone else think about that?)

It depends how old and healthy you are when you retire. With us we could have retired at age 53 according to FIRECALC and Fidelity RIP but I did worry about the money not lasting if the conditions were worse case scenario. We were both very healthy and decided to keep working 2 extra years so that I could start my reduced pension at age 55 instead of a more reduced pension at age 62, plus I would have access to my company retiree health insurance rather than rely on getting insurance in the private market. (This was before the ACA).

Those 2 extra years working seemed to take forever but were well worth it in our case.

 

[Car-Guy]

Going broke, is a concern most of us have considered at some point in our retirement planning. It's one of things that keeps many folks working longer and/or adjusting their withdraw rates to reduce the likelihood of that happening. If that does happen, there's still welfare here in the US to help you out, to some degree. (Somewhat under our individual control but it could and does still happen to many)

BUT, what if the entire economic system collapsed in the US or even the world? Money could become worthless, social services all fail, etc... (Not under our individual control, and it could happen too) Think Venezuela, Greece, Turkey, etc.

I guess that's why some people buy gold, guns and bunkers.

Have a nice day.

 

[bobandsherry]

Well, all these calculations we go through before retiring tell us when we'll "run out of money". That's what I'm referring to.

Well, if one continues to run forward and not make any adjustments to their spending then perhaps. But if that person has any pension, social security, annuities they are never really penniless, just overspending.

And the "run out of money" ignores other assets one may have such cars, jewelry, collections, money stored under a mattress, etc, etc, etc. And it also ignores the biggest asset one may have, their homes. One could get a reverse mortgage to claim the equity and help fund their living expenses.

But let's be honest, you don't need to use an example of 80 something who "runs out of money", there are many today who are essentially "penniless". It should then be obvious as to what social programs are available for those who do not have the means to live a minimum lifestyle.