Worrying about money lasting?

[traineeinvestor]

If we die before our children become independent adults then I hope there will be a large pot of assets left to support them - the worry would be if we die and do not leave enough to get them through to financial self sufficiency (they will be 9 and 7 when I FIRE).

After the children become self sufficient, I would worry more about out living my money than leaving a legacy - leaving the money to adult children is an acceptable form of spending.

[TromboneAl]

I find it comforting that if DW and I wait until age 70 to collect, our SS income will be $10,000 more than our current annual spending. Even with a 0% return our assets will last us until then.

[TromboneAl]

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Originally Posted by grumpy For me the answer is definitely that having a pension equals no worries about money in retirement. I have a fully COLA'd federal pension and good health insurance. DW has a state pension with COLA capped at 3% per year. DW also gets a modest social security payment. These three combined cover all of our regular living expenses. In addition we have a 7 figure investment portfolio. If the stock market went down to zero we would have to be a bit more careful about discretionary spending but that's about the only impact.

Then you need to ask yourself: why are you grumpy?

[H2ODude]

Probably offend someone here, but what's the point of retirement income? Is it to have absolutely the most possible to spend each year, hopefully well beyond what you may have spent before retirement (in other words God forbid you die with more the $5 in your pocket)(then annuities it all)? Or is it to be sure you have enough to do all the things you want to do and live comfortably; and if the pile seems to be not evaporating as fast as you thought as you age is that just hunky dory, you can pass on to heirs or charity and have lived out your life the way you wanted? I'd like to think I'm in the second category. I can see being pissed off that you died young and missed the chance to do the things you wanted with your stash. I can't see being pissed that markets were better than you expected toward the end and your grumpy because you could have had that new Porsche ten years ago after all. That's not to say I don't have some screwy ideas about money security myself, just a thought.

[Finance Dave]

Quote:

Originally Posted by traineeinvestor If we die before our children become independent adults then I hope there will be a large pot of assets left to support them - the worry would be if we die and do not leave enough to get them through to financial self sufficiency (they will be 9 and 7 when I FIRE). After the children become self sufficient, I would worry more about out living my money than leaving a legacy - leaving the money to adult children is an acceptable form of spending.

Do you not have term life insurance for that purpose?

[Finance Dave]

Quote:

Originally Posted by H2ODude Probably offend someone here, but what's the point of retirement income? Is it to have absolutely the most possible to spend each year, hopefully well beyond what you may have spent before retirement (in other words God forbid you die with more the $5 in your pocket)(then annuities it all)? Or is it to be sure you have enough to do all the things you want to do and live comfortably; and if the pile seems to be not evaporating as fast as you thought as you age is that just hunky dory, you can pass on to heirs or charity and have lived out your life the way you wanted? I'd like to think I'm in the second category. I can see being pissed off that you died young and missed the chance to do the things you wanted with your stash. I can't see being pissed that markets were better than you expected toward the end and your grumpy because you could have had that new Porsche ten years ago after all. That's not to say I don't have some screwy ideas about money security myself, just a thought.

Not offended here.

For me, I plan to spend more in FIRE, but not because I want nicer things...more because I'll have more time to spend it. For example, we currently only go on one vacation per year...not due to money constraints, but vacation time at w*rk constraints. In FIRE, that constraint will be removed. I am a car hobbyist...and I'll be able to go to more car shows.

I plan to spend more because of the additional number of fun activities we'll be able to do. Wine train tours, cruises, woodworking hobbies, car shows, growing a garden, plays, concerts, ice sculpture contests in Colorado, the Albequerque hot air balloon festival...the list goes on and on. In FIRE we'll be hitting things like that all the time...whereas today we don't have time.

[Independent]

I vaguely remember a survey (not on this board) that concluded that retirees with meaningful pensions reported less financial worry. No surprise there.

Regarding your planning, there's the issue of how you invest money that you plan to spend during the "bridge" years between when you quit work and when you start SS or a pension. I started a survey on this board a couple years ago on that topic. IIRC, about half the people left that money in their regular AA. The other half had designated assets, presumably with less short term market risk.

I'm in the second group. We had a CD and I-bond ladder to provide bridge income.

[Nords]

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Originally Posted by 2moreyears Is the worry factor related to guaranteed income or it is related to emotions/personality (as in, yes I tend to be a worrywart ) ?

Yes.

If the guaranteed income helps you worry less then you should buy an annuity. Spouse and I take comfort in having a good understanding of asset allocation and how we'll rebalance.

Quote:

Originally Posted by H2ODude Probably offend someone here, but what's the point of retirement income? Is it to have absolutely the most possible to spend each year, hopefully well beyond what you may have spent before retirement (in other words God forbid you die with more the $5 in your pocket)(then annuities it all)? Or is it to be sure you have enough to do all the things you want to do and live comfortably; and if the pile seems to be not evaporating as fast as you thought as you age is that just hunky dory, you can pass on to heirs or charity and have lived out your life the way you wanted? I'd like to think I'm in the second category. I can see being pissed off that you died young and missed the chance to do the things you wanted with your stash. I can't see being pissed that markets were better than you expected toward the end and your grumpy because you could have had that new Porsche ten years ago after all. That's not to say I don't have some screwy ideas about money security myself, just a thought.

I think the point of retirement income is to be able to quit work the moment you have enough. I'd be pissed off if I worked "just one more year" longer than I had to and then watched my assets keep growing in ER.

[flyfishnevada]

Man, these thread grow so fast! What? Are you all retired with nothing better to do than post on forums?

Anyway, I have a pension and I still worry but it's probably slightly irrational. My state pension system is in good shape and has been for many years. Still I worry one day they will run short and I'll be left without a livable income. They have 22 billion in assets and I live in Nevada where retirees are measure in thousands, not hundreds of thousands or even tens.

I am also young and drawing a pension for 50 years (a possibility) makes me wonder what might happen several decades from now. On the other hand, SS had been around for like 80 years and my pension system has been around since the 50s or 60s.

Now health insurance, that I'm worried about. Retired less than two years and already went from a pretty normal insurance situation (copays, prescription coverage, low deductibles) to basically high deductible catastrophic with higher even premiums. I feel like I'm uninsured. I hope when the economy and out state's unstable tax base gets better so will my insurance.

[Ally]

The knowledge that my husband is eligible for a pension, that will also continue for me if he should die before me, is a huge factor. However, if we hadn't had that, I know we would have saved even more, plus he would have probably earned a higher salary in a private sector job.

[Chuckanut]

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Originally Posted by Nords If the guaranteed income helps you worry less then you should buy an annuity. Spouse and I take comfort in having a good understanding of asset allocation and how we'll rebalance.

I tend to lean in this direction, also. While I appreciate my small, partially COLA'd pension and SS, I think there is always the possiblity that they could be reduced. Just a few weeks ago, some of my state representatives wanted to skip a payment to the pension fund to help balance the state budget (Note: employees have no option to skip their paymens to the fund when things are tight for them!). Thankfully, that failed and it will save the taxpayers anywhere from 400 to 800 million dollars down the road (to make up for the payment and its earnings.) But, that also could have been used as an excuse to say "Poor pension fund. It is underfunded. We need to cut your benefit". Who would remember that they skipped payments 15-20 years ago

So, I figure the money in my control is my best bet against living in poverty in my last years. But, I won't totally bet this way. I will spend some of it to delay SS and get it at 66 or a bit older. It's not wise to put all our eggs in one basket, even one's own.

[Midpack]

Quote:

Originally Posted by H2ODude Probably offend someone here, but what's the point of retirement income? Option A: Is it to have absolutely the most possible to spend each year, hopefully well beyond what you may have spent before retirement (in other words God forbid you die with more the $5 in your pocket)(then annuities it all)? Option B: Or is it to be sure you have enough to do all the things you want to do and live comfortably; and if the pile seems to be not evaporating as fast as you thought as you age is that just hunky dory, you can pass on to heirs or charity and have lived out your life the way you wanted. I'd like to think I'm in the second category.

They are both legitimate goals, so I don't know why anyone would be offended. Are you offended by those with no heirs who lean toward Option A? Regardless which goal any of us are trying to achieve, most likely we'll land somewhere in between when we go poof...

[obgyn65]

IMO an SPIA should be bought later in life - 70s, early 80s. However a deferred annuity should be bought much earlier (40s, 50s) to take full advantage of huge compoundings.

Quote:

Originally Posted by Finance Dave IMO the more important question is when to buy the SPIA. If you FIRE at 50...do you really want to buy it then? Or should you instead wait until 70 when payments are much higher due to shorter remaining lifespan?

[sheehs1]

Don't have a pension but do have K1 from a family business and monthly board fees, that if they continue, function like 3 or more pensions. However, since it is not a guarantee, it is not worry free. So...we will continue to save K1 income, investment income and his SEP contributions until we are 65/66 which will be 7 more years after I officially retire (2013) and before he says he will retire. During those years, if I get nervous or business doesn't do well, I'll take a portion and route to an SPIA, although that depends on interest rates at the time. Collecting SSN will be a year by year call.
I don't think I will worry too much in the beginning. The real test for me will be what the situation is 5 to 10 years into retirement and how things are going.

[Animorph]

Quote:

Originally Posted by obgyn65 IMO an SPIA should be bought later in life - 70s, early 80s. However a deferred annuity should be bought much earlier (40s, 50s) to take full advantage of huge compoundings.

SPIAs are still a bond vehicle, so the compounding woun't be super, particularly with current low interest rates. Given 20-30 years of deferral, I'd rather be in equities for those years, and buy the SPIA later.

[haha]

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Originally Posted by obgyn65 My answer is "absolutely". I have a very small pension and no SS, plus I am a very conservative investor (e.g. 0% stock). Therefore I need to build a significant financial cushion.

What is the nature of your employment and pay that you live and work in the US, but presumably do not pay SS tax or gain a claim on SS? Some kind of religious exemption? IF so, don't they provide a pension? Do you pay Medicare taxes?

[Gotadimple]

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Originally Posted by haha What is the nature of your employment and pay that you live and work in the US, but presumably do not pay SS tax or gain a claim on SS? Some kind of religious exemption? IF so, don't they provide a pension? Do you pay Medicare taxes?

Ha,
He lives in Canada.

[haha]

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Originally Posted by Gotadimple Ha, He lives in Canada.

Ah, thank you Rita. But presumably he then qualifies of Canadian retirement schemes, and of course their health system which as I remember is "no pay at point of contact".

[Alan]

Quote:

Originally Posted by haha What is the nature of your employment and pay that you live and work in the US, but presumably do not pay SS tax or gain a claim on SS? Some kind of religious exemption? IF so, don't they provide a pension? Do you pay Medicare taxes?

Quote:

Originally Posted by Gotadimple Ha, He lives in Canada.

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Originally Posted by haha Ah, thank you Rita. But presumably he then qualifies of Canadian retirement schemes, and of course their health system which as I remember is "no pay at point of contact".

Good questions. (His location is listed as Mid-west so I'd also missed that he lived in Canada).

[W2R]

Quote:

Originally Posted by Alan Good questions. (His location is listed as Mid-west so I'd also missed that he lived in Canada).

A while back he posted

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Originally Posted by obgyn65 I have one home in the US and one place in Europe.

From his public profile and what he has chosen to tell us in his public posts on the forum, it seems possible that he lives in Canada also, though. Wherever he lives, he has mentioned that he spends much time away from home working on his charitable health missions. Personally I consider our mysterious obgyn65 to be a citizen of the world, and leave it at that.