WSJ article on delaying retirement

[mark500]

It tells of a couple in their mid 50's with "several million set aside". This couple "devoured books about retirement", and "calculated future cash flow needs with great precision". They had "spread sheets up the ying yang" and calculated they "needed a minimum of 3% annual return on assets to retire a few years early".
They quite their jobs.
After the stock market began heading south, the retirement "glow dimmed fast."
The man decided to look for a new job. His wife remains retired.

Somthing is missing here. Did they really look at the numbers closely? "Several million" is not enough? Or is it just insecurity with the market decline? I wonder if they used FIRECALC.

 

[twaddle]

Somthing is missing here.

You're right. Here's the missing link.

Americans Delay Retirement As Housing, Stocks Swoon - WSJ.com

So they have "several millions." Which could mean they saw the value of their portfolio drop by close to a million bucks. I could see how that might put a dent in their early retirement.

 

[REWahoo]

I really like this quote from the WSJ article - some good news!

"However, there is a potential upside. People who [don't retire] earn more as they age may rely less on Social Security, easing the burden on these programs -- including Medicare -- and keeping them solvent for longer."

As to the 'unfortunate' Mr & Mrs Mintner, who are spooked into returning to work after they retired in their mid-50's "With several millions set aside..." and after "We ran every kind of number through every kind of model. I figured, 'OK, we've got it all together.'", I really wonder if they were as oblivious to market volatility as it appears. Guess so based on this quote: "...the couple says that they have moved more of their portfolio into safer money-market funds." Buy high, sell low...

 

[W2R]

It tells of a couple in their mid 50's with "several million set aside". This couple "devoured books about retirement", and "calculated future cash flow needs with great precision". They had "spread sheets up the ying yang" and calculated they "needed a minimum of 3% annual return on assets to retire a few years early".
They quite their jobs.
After the stock market began heading south, the retirement "glow dimmed fast."
The man decided to look for a new job. His wife remains retired.

Somthing is missing here. Did they really look at the numbers closely? "Several million" is not enough? Or is it just insecurity with the market decline? I wonder if they used FIRECALC.

It could be that their income needs are unusually large.

On the other hand, 3% isn't an unrealistic withdrawal rate. Maybe nobody told them that they are allowed to withdraw even when the market isn't going up.

Oh well. Like REWahoo just said, they'll just contribute more to social security for the rest of us.

Edited to add: I just re-read the article (which was the topic of another thread earlier). It really sounds like the fellow expecting to withdraw at 3% was severely depressed, and that was why he went back to work. The market drop was something upon which he could blame his depression, but maybe he would have been depressed in any event.

 

[haha]

As to the 'unfortunate' Mr & Mrs Mintner, who are spooked into returning to work after they retired in their mid-50's "With several millions set aside..." and after "We ran every kind of number through every kind of model. I figured, 'OK, we've got it all together.'", I really wonder if they were as oblivious to market volatility as it appears. Guess so based on this quote: "...the couple says that they have moved more of their portfolio into safer money-market funds." Buy high, sell low...

Always hard to underestimate typical consumers. Put the bar so low that you would think an ant could jump it, and still some will be tripping themselves up.

Ha

 

[kumquat]

The Boices had counted on proceeds from the house sale to boost their retirement income.

Doesn't this say it all?

 

[clifp]

I can understand why spreadsheet guy went back to work. Say they have $3 million and need 90K. Their portfolio could easily be down 20% now they have 2.4 million, and 90K seems harder to withdraw when he is watching his portfolio drop $10K plus on many days.

I certainly had those thoughts when the bubble burst in 2000 after being retired for less than a year.

 

[Caroline]

It could be that their income needs are unusually large.

I'd say that's a really good guess, given that these folks live in Healdsburg, CA. This current real estate ad may be instructive. (I struggle with the underlying issue myself, even in my little blue-collar CA town -- work longer or retire elsewhere.)


$425,000

3 bedroom(s) 2 bathroom(s) 0 half bath(s)
1,100 Sq.Ft

Beautiful, new (2006) manufactured home in River View Estates. Own the space, low HOA currently $105/month. 3 bedrooms, 2 baths, kitchen appliances, laundry room, 2-car carport. Located across the street from the Russian River and close to the Downtown

 

[Notmuchlonger]

I'd say that's a really good guess, given that these folks live in Healdsburg, CA. This current real estate ad may be instructive. (I struggle with the underlying issue myself, even in my little blue-collar CA town -- work longer or retire elsewhere.)


$425,000

3 bedroom(s) 2 bathroom(s) 0 half bath(s)
1,100 Sq.Ft

Beautiful, new (2006) manufactured home in River View Estates. Own the space, low HOA currently $105/month. 3 bedrooms, 2 baths, kitchen appliances, laundry room, 2-car carport. Located across the street from the Russian River and close to the Downtown

That much for a house in rural Ohio would be a mansion. Funny how prices differ across the US.

 

[packrat44]

"However, there is a potential upside. People who [don't retire] earn more as they age may rely less on Social Security, easing the burden on these programs -- including Medicare -- and keeping them solvent for longer."

...

How are people "easing the burden" on SS and Medicare by working longer? When they finally start drawing SS at a later date the monthly amount will be larger and if they die at that magic "average" age, their draw will be the same as if they started their draw earlier. Also, the additional SS tax they pay while continue to work will establish larger monthly payments. The people will be entitled to Medicare at 65 whether they are retired or continue to work. Maybe the author from the WSJ figured the people would work until they died and would be generous to other taxpayers and not draw their benefits.

 

[kombat]

How are people "easing the burden" on SS and Medicare by working longer? When they finally start drawing SS at a later date the monthly amount will be larger and if they die at that magic "average" age, their draw will be the same as if they started their draw earlier.

Yes, but during those intervening years, not only are they not drawing the reduced Social Security, they're still paying into the system.

 

[UncleHoney]

Yes, but during those intervening years, not only are they not drawing the reduced Social Security, they're still paying into the system.

Plus if you keep working after 65 you can usually keep your company healthcare and not start Medicare.

 

[REWahoo]

How are people "easing the burden" on SS and Medicare by working longer? When they finally start drawing SS at a later date the monthly amount will be larger and if they die at that magic "average" age, their draw will be the same as if they started their draw earlier.

It would seem to me that even if the draw is the same in terms of average payout over a lifetime, continued payments into the system by those delaying retirement does increase SS funding.

For example, say the total SS draw over the lifetime of someone who retires at 62 and dies at age 75 is $250,000. Their contribution to SS during this time is $0. If that same person worked to age 67 at a job paying $100k and died at age 75, they would receive the same $250,000 in benefits under our assumption. But by working 5 more years they (and their employer) would have contributed approximately $75,000 to SS. The net cost to the SS system for the later retiree is $175k vs $250k for the earlier retiree.

I think the same principle would apply to Medicare funds as well.

Of course if you believe that by working longer someone will live longer, this example doesn't hold water. Personally, I'm not from that school of thinking.

 

[growing_older]

Plus only the top 35 years count towards setting benefits. With 35 years already in contributions, the extra years are costing them contributions but may be making little or no difference in future benefits unless their latest year working salary bests on of the previous inflation adjusted years - and then only by the difference.

 

[JustCurious]

Yes, but during those intervening years, not only are they not drawing the reduced Social Security, they're still paying into the system.

And, there is a reasonable chance that they will die before collecting any benefits.

 

[A854321]

Risk tolerance is much better tested in this bear market, isn't it?
If there's any good coming out of current economic problems, it's a much better asessment of my risk tolerance, and the benefits of diversification, low fees, and living below your means. Hmmm... wonder who's advice this is?

Reading between the lines on the Minter/Bartman couple, I'll bet they bought a nice new wine country house and are making payments and staring at those taxes. I'll bet their expenses are fairly high for retirees, just as expected with the newly-early-retired. They actually haven't lost anything, have they? He just feels uncomfortable. She just worries more when she paints. Perhaps they can't go to Italy this year. I just don't feel any sympathy for these folks.

 

[Independent]

"However, there is a potential upside. People who [don't retire] earn more as they age may rely less on Social Security, easing the burden on these programs -- including Medicare -- and keeping them solvent for longer."

I agree with packrat that this overstates the case.

"easing the burden" suggests lower lifetime benefits. That isn't true since the adjustment factors provide rough actuarial equivalence.

I have no idea of what "rely less" is supposed to mean, at least in terms of "easing the burden".

growing_older is correct in that many people don't add much to their benefit by working into their 60's because they already have 35 years of "high" indexed earnings. If the WSJ author understood this, he should have said "help SS funding by paying taxes longer without significant benefit increases".

I don't get the medicare reference. Many of the people in the article are in their 50's. If they defer retirement for 5 years, that will have no impact on medicare.

(I'm not sure about deferring retirement beyond 65. I thought you could file for Medicare at 65 if you were "eligible for SS", even if you are still working. You would probably have a higher Part B premium. But I'm not sure of the details.)

 

[REWahoo]

"easing the burden" suggests lower lifetime benefits. That isn't true since the adjustment factors provide rough actuarial equivalence.

Although I do think the "easing the burden" statement is poorly worded, I don't interpret it as only meaning lowering lifetime benefits. As I said with the examples in my post above, by working longer and contributing more to SS the net effect will reduce the strain on SS funding. I define that as also "easing the burden".

I'm open to seeing the error of my thinking, so what's wrong with my example?

 

[TickTock]

Risk tolerance is much better tested in this bear market, isn't it?

Yeah. Don't rembember where I read it, but the quote was something like "everyone's risk-tolerant during a bull market".

 

[Jarhead*]

I really like this quote from the WSJ article - some good news!

"However, there is a potential upside. People who [don't retire] earn more as they age may rely less on Social Security, easing the burden on these programs -- including Medicare -- and keeping them solvent for longer."

As to the 'unfortunate' Mr & Mrs Mintner, who are spooked into returning to work after they retired in their mid-50's "With several millions set aside..." and after "We ran every kind of number through every kind of model. I figured, 'OK, we've got it all together.'", I really wonder if they were as oblivious to market volatility as it appears. Guess so based on this quote: "...the couple says that they have moved more of their portfolio into safer money-market funds." Buy high, sell low...

In 1990, (big problem with S&L,s) I had been retired for 3 years at that point, I was getting ready after a rain-delay to play golf. Killing some time, I glanced at the WSG, and there was an/.article.about an individual that was had lost his job/. He was 57 at the time. (No children).

Long story short, his wife was working full time, providing him with health ins. and cash flow. His net worth at that time was twice what ours was. He was almost having a break-down panicked about finding a job.

My wife (who was a homemaker), and I had no defined benefit retirement, were on our own for health ins., and never had, or would ever have an inheritance. (We also had our last child at home, a l6 year old

I shrugged my shoulders, threw my clubs in the trunk, and headed for the course.

That was the last article I ever read in the wsg.

Sports Illustrated, Fly-Fishing the West Coast, Golf Digest, yes, wsg, no

Staying away from CNBC is also a good idea.

 

[Independent]

Although I do think the "easing the burden" statement is poorly worded, I don't interpret it as only meaning lowering lifetime benefits. As I said with the examples in my post above, by working longer and contributing more to SS the net effect will reduce the strain on SS funding. I define that as also "easing the burden".

I'm open to seeing the error of my thinking, so what's wrong with my example?

I think we agree that the wording is poor. I took it to mean "gets less benefit over time", you took it to mean "gets the same benefit but pays less taxes". Your interpretation makes it reasonably correct. I'm guessing that a lot of people reading the article think that starting SS after 62 reduces their expected lifetime benefit, so I inferred that interpretation. I suggested better wording.

In your example, you have the individual dying at 75, and a benefit that seems to be either $19,231 for 13 years or $31,250 for 8 years.
I didn't see where the numbers came from and didn't want to get bogged down in the assumptions because I thought that growing_older made the key point without an example.

I still think that the Medicare reference is weak for most of the people in the story. An the "rely less" phrase is really strange.

 

[Running_Man]

It would seem to me that even if the draw is the same in terms of average payout over a lifetime, continued payments into the system by those delaying retirement does increase SS funding.

For example, say the total SS draw over the lifetime of someone who retires at 62 and dies at age 75 is $250,000. Their contribution to SS during this time is $0. If that same person worked to age 67 at a job paying $100k and died at age 75, they would receive the same $250,000 in benefits under our assumption. But by working 5 more years they (and their employer) would have contributed approximately $75,000 to SS. The net cost to the SS system for the later retiree is $175k vs $250k for the earlier retiree.

I think the same principle would apply to Medicare funds as well.

Of course if you believe that by working longer someone will live longer, this example doesn't hold water. Personally, I'm not from that school of thinking.

The assumption inherent here is that an extra job is created merely by wanting to work which I don't think is a valid assumption. By retiring early one could equally argue that the early retiree is helping aid state unemployement insurance payments by allowing a job to be filled by someone seeking work presently unemployed.

 

[bots2019]

I don't get the medicare reference. Many of the people in the article are in their 50's. If they defer retirement for 5 years, that will have no impact on medicare.

I think the point here is that deferring retirement, regardless of age, will have them continuing to pay Medicare taxes into the system. This doesn't ease benefit payouts, but does increase program revenues.

 

[haha]

I'm open to seeing the error of my thinking, so what's wrong with my example?

Nothing. You are correct. But you would have more authority if you took off that funny helmet.

Ha

 

[A854321]

After re-reading the WSJ article, I think the author missed a couple of big points by a couple of miles:

Minter/Barman couple ( spreadsheet guy) is just not psychologically ready for retirement. Doesn't mention that he had any particular goals or activites that weren't fulfilled. It sounds as if his retirement activities became sitting in front of CNBC or the computer watching his money drain away. Not well advised for anyone, far less a prior 6-figure earner with time on his hands.

He didn't really have activities planned. It sounds like he is having major adjustment problems, the kind that go with changing from a high-earning SF guy to a guy wandering around Healdsburg. It sounds like he is truly depressed, and this could easily have been predicted. Retirement is as much a stress as unanticipated job loss or family death. He may have had a great spreadsheet, but he really needed a counselor. All the number tweaking in the world won't help if you don't really understand what motivates you in life, and how that is going to work when you suddenly don't have that successful working guy image of yourself. He also need to get a library card and start reading Bernstein, Bogle, and Ferraris books on low-cost investing and asset allocation.

She, on the other hand, seems to have something satisfactory to replace her Chanel suit- convertible Lexus life.

I'd also like to point out that these people are not in financial trouble because of their early retirement. They may not have all the perks their spreadsheet gave them, but they are not in financial trouble.