Big mistakes in retirement

[Amethyst]

You're correct. Exhibit 1: the COLA'd government pension called Social Security. (Which I do not qualify for).

Robust entitlements are way better than private wealth that might produce similar income. What is more reliable and less volatile?
Ha

 

[Options]

My eyebrows raised as well by the suggestion of your "advisor" that you need a $3M nest egg. Given that 50% of American's make less than $50K annually, that even if you were in the top 1% of wage earners this year (which is all of a few hundred people, incidentally), but quite possibly be unemployed the next, that $3M figure looks suspect given that it is suggested by only one source.

It you read the statistics put out this past week by the conference of mayors you will find that only the top 5%--at most--could have $3m to retire. That study also showed how wealth inequality has increased in the past several years, will continue to increase, perhaps dramatically, by city, by US region. Studies by the CIA, the British equivalent of the CIA and the OECD all say the same thing. Then there's the Fed's release this week showing that 40% of Americans are in some type of financial trouble, that most couldn't come up with $400 if an emergency arose, and that the average retirement savings is miniscule.

This thread is testament to the fact that success/happiness amounts to successfully navigating a series of constant life events. Life events do have a tendency to impact our financial lives (i.e., divorce, job loss, serious health issue). Setting unreasonably high retirement savings goals only compounds these issues, and the disappointment/psychological dislocation that can ensue. Boglehead polls show the majority don't have anywhere near $3M in savings when they retire. If you don't think this is true, just ask

It is far easier to reduce spending/cut costs than to save. In fact, it's been repeatedly shown that only those able to delay gratification by having a healthy relationship with materialism are able to retire, and stay retired, successfully. A rather startling example is John McAfee, of McAfee anti-virus, whose net worth fell from $200M to just $4M, due to overspending in real estate (among other mistakes).

Your Money or Your Life by Dominguez is a good place to start thinking differently about all this.

 

[rodi]

My plan has a sinking fund to pay pseudo SS and Medicare benefits to me and DW until I reach 70 (SS) and each of us reach 65 (Medicare). DW starts SS at 64 (half of mine). With a $3MM portfolio, that would result in me having a 5% variable spending rate starting at $200,000/yr in year 1. My pensions and our SS adequately cover our basic living expenses so the variable spending plan makes perfect sense to me. I can certainly cut lifestyle if the market tanks.

I agree with your comment about being too young to plan on SS in the near future.

I thought the spouse had to be FRA to get spousal benefits. AFAIK, FRA is a range between 65 and 67, depending on the year of birth. How does it work at age 64? Wouldn't that still be a reduced benefit - and lock her into a reduced benefit? Does she have SS on her own record that she's holding off till 70?

I'll admit I still get confused by some of the spousal options.

 

[Lsbcal]

Read through much of this thread and now going to bed. Hopefully will not have nightmares .

 

[Telly]

Read through much of this thread and now going to bed. Hopefully will not have nightmares .

It's good you went to bed an hour ago...

Here's a nightmare story - Some years ago an A/C-Heating guy I knew had a new helper. This helper was an "old guy" that didn't look like he should be working anymore. He had an unusual and sad story. He had worked for many years at a small manufacturing business, mainly mechanical stuff. He had socked away a lot in his 401k, as did some others. He planned to retire in the next year.

But the owners of the company wanted to sell it and retire themselves. So they sold the company to a businessman who had recently bought up a couple other companies just like theirs. At first, it seemed all was OK. Then trouble. The Mr. businessman had bought the companies, sold off all their stock and machinery, everything, on the sly. They were all suddenly out of work. Then they found out that their 401k s had been liquidated and stolen by Mr. b. And Mr. b disappeared.

The Mr. businessman was finally caught, and while out on bail, put a revolver to his head, and pulled. Nothing was recovered for the ex-employees. So he was old, out of a job, 401k $$$ all gone. And the perpetrator was dead. The end. Back into the job market to try to find anything that would pay a few $. No hope. Day after day after day...

 

[samclem]

Here's a nightmare story.

Ohhh, that is sad. Maybe it was some sort of company DB plan? Could a business somehow convince the custodian to liquidate the 401Ks of employees and sign the dough over to the company?

 

[foxfirev5]

There seems to be some serious ER portfolio inflation around here. When I first noticed this site the $1 million figure was thrown around quite a bit, then $2, and now $3 million. No wonder many people give up on the idea.
However, I don't plan on worrying about everybody else. Just keep the expenses under control and stay on course with the investments. And no, I don't plan to have $3 m at ER.

 

[JoeWras]

They were all suddenly out of work. Then they found out that their 401k s had been liquidated and stolen by Mr. b. And Mr. b disappeared.

Yikes! How does that happen? I thought 401ks had to have a third party custodian? I guess I don't know all the rules. I just did a search and found out the custodian can be in the company, as long as they hold up fiduciary responsibility. Uh oh. That's scary! The lesson here is if you have a 401k managed by the company, roll that thing out somewhere else!

When I was working for microcorp, they started a 401k and used a local bank that was trying to get into the 401k custodian business. The bank made a lot of mistakes and kept sending us corrected statements. It was a bit scary, but was on the up and up. They were just "learning." When microcorp failed, the custodian shut the 401k and helped us rollover to an IRA of our choice and trustee company. No money lost, although I think the bank management fees were a bit chunky.

There seems to be some serious ER portfolio inflation around here. When I first noticed this site the $1 million figure was thrown around quite a bit, then $2, and now $3 million. No wonder many people give up on the idea.
However, I don't plan on worrying about everybody else. Just keep the expenses under control and stay on course with the investments. And no, I don't plan to have $3 m at ER.

Was that before the 2008 crash or after? We're in a probable bubble. I'm assuming a 25% reduction of my portfolio, so $1M won't cut it. Sorry. I don't have any pension and I'm going to pay for health insurance. Might be different if I had those.

 

[Walt34]

Back into the job market to try to find anything that would pay a few $. No hope. Day after day after day...

My last job I regularly saw a woman with a similar story. The trucking company she worked for with a pension plan went under and with it everyone's pensions one year before she was due to retire.

Back to work she went for the foreseeable future.

 

[Lsbcal]

It's good you went to bed an hour ago...

Here's a nightmare story - Some years ago an A/C-Heating guy I knew had a new helper. ...
...
The Mr. businessman was finally caught, and while out on bail, put a revolver to his head, and pulled. Nothing was recovered for the ex-employees. So he was old, out of a job, 401k $$$ all gone. And the perpetrator was dead. The end. Back into the job market to try to find anything that would pay a few $. No hope. Day after day after day...

Well I'm up at again an hour ahead of time. The sleep was not as restful as it usually was. Sheesh, I don't know how you guys can live with these stories.

Luckily I've long ago rolled over my 401k and retirement fund from megacorp to Vanguard. Our portfolio has recovered nicely from 2008-2009 and things are good. Waiting for the hammer to drop now.

DW did relate a story about a friend of a friend. She worked for an airline as an attendant and was married. They flew about the world, but of course the costs were high even with the low flying cost deals. They dipped into the house equity to finance stuff (pre-2008 thinking). She got a lot of insomnia probably from flying issues related to her job and then economic worries. Eventually they had to sell the house and got divorced. Last heard, she was hoping to hold on to her job for around 2 years to get the retirement benefits.

 

[prudent_one]

Ohhh, that is sad. Maybe it was some sort of company DB plan? Could a business somehow convince the custodian to liquidate the 401Ks of employees and sign the dough over to the company?

I don't know how a business could pull 401k funds out once they reach the custodian. My wife once worked for a sleazy company and as they slid towards bankruptcy I know they would have siphoned 401k money if they could - but it didn't happen.

They did stop paying for employee health insurance (without telling anyone) and didn't kept some withheld employee 401k contributions before they folded - but what was already in the custodian's hands wasn't touched. Those 401k contributions were lost - no assets to recover in bankruptcy.

The health insurance company had mercy on an employee who had open heart surgery without knowing his insurance had been cancelled for non-payment, and covered the 6-figure cost anyway.

 

[ERD50]

... Here's a nightmare story - ... they found out that their 401k s had been liquidated and stolen by Mr. b. And Mr. b disappeared. ...

I don't know how a business could pull 401k funds out once they reach the custodian. My wife once worked for a sleazy company and as they slid towards bankruptcy I know they would have siphoned 401k money if they could - but it didn't happen.

They did stop paying for employee health insurance (without telling anyone) and didn't kept some withheld employee 401k contributions before they folded - but what was already in the custodian's hands wasn't touched. Those 401k contributions were lost - no assets to recover in bankruptcy. ...

I agree with prudent_one here - from what I thought and from what I could find, the company can't get to the 401K, though they may illegally divert the funds before they get invested. But once they are in the custodian's hand (check your accounts!), they are untouchable.

... The trucking company she worked for with a pension plan went under and with it everyone's pensions one year before she was due to retire.

Back to work she went for the foreseeable future.

This doesn't make sense either. Private pensions are insured/guaranteed by the PBGC - the only thing she could lose would be the amount above the cap, and you need to be a high earner for that to happen.

There seems to be some serious ER portfolio inflation around here. When I first noticed this site the $1 million figure was thrown around quite a bit, then $2, and now $3 million. No wonder many people give up on the idea.
However, I don't plan on worrying about everybody else. Just keep the expenses under control and stay on course with the investments. And no, I don't plan to have $3 m at ER.

I think $1M is often used to make the math easy for reference, rather than representing an actual amount - just shift the decimal to go from $ to % (that's what I do). But a few posters may chose to use actual $ amounts. I don't think you can infer much from it. And the market is higher than it was a few years ago, so that has an effect.

I also get a little 'ticked' at all these comments about what some other poster 'needs' in retirement. Who cares what the average person lives on - maybe the poster wants to enjoy a more lavish lifestyle? It's their call, I don't think they are suggesting that you should not retire until you've saved more - it's a personal choice!

BTW, the median world-wide annual income is $850. So I guess that is all anyone really 'needs'.

-ERD50

 

[calmloki]

....

We're also in the midst of dealing with her need for more "stuff." She has at least 30 huge boxes of "stuff" lined up against her garage wall, boxes of "stuff" crammed into the closets of her apartment, and it's still not enough. .....

.

Catching up with this thread and was just amused by this user name and comment. No offense please, but the comment on the mother's habits and the user's name just struck me funny.

 

[Amethyst]

My toys are your trash, and vice versa. Very common among human beings!

A.

Catching up with this thread and was just amused by this user name and comment. No offense please, but the comment on the mother's habits and the user's name just struck me funny.

 

[BuysToys]

Catching up with this thread and was just amused by this user name and comment. No offense please, but the comment on the mother's habits and the user's name just struck me funny.

The handle is a nod to my previous job as a purchasing manager for a company that sold toys. That was a good catch, though!

ETA: Actually, the company sold toys and "stuff." I'm still clearing my home of "stuff" that made it here when I packed up my office.

 

[Meadbh]

The handle is a nod to my previous job as a purchasing manager for a company that sold toys. That was a good catch, though!

ETA: Actually, the company sold toys and "stuff." I'm still clearing my home of "stuff" that made it here when I packed up my office.

I actively avoid gift shops. If I never see another scented candle/distressed piece of furniture/decorative pen holder again it will be too soon.

 

[JoeWras]

I actively avoid gift shops. If I never see another scented candle/distressed piece of furniture/decorative pen holder again it will be too soon.

I don't know why, but that had me ROFLing. Talk about wasted junk.

 

[calmloki]

The handle is a nod to my previous job as a purchasing manager for a company that sold toys. That was a good catch, though!

ETA: Actually, the company sold toys and "stuff." I'm still clearing my home of "stuff" that made it here when I packed up my office.

I'm waiting for SO to roll out of bed so we can go yard sale hunting - this though we have way too much stuff. The lure of the hunt for something we didn't know we needed is strong in this one. Why, last weekend we found an ex-college 3D plastic topo map of the US 43"x65" for $3. How can you pass something like that up? Now where it will end up is a problem, but if we go shopping we won't have to work on that till some undefined future time....

 

[Running_Man]

In 1990 I had a friend who decided to retire early in his 50's and live off of the dividends of 20,000 shares of stock worth about 800K at the time and about a 5% dividend payer. I pleaded with him that his plan was unsafe and he needed to diversify, he refused to listen until around 2001 after a 600% gain in his stock, he sold 1/3 of his stake. At that point Social Security had set in and he moved to a million dollar house in California on a golf course. Joined a country club at 65 on an exclusive golf course and golfed and enjoyed every day until he died of lung cancer in 2012.

That stock today trades about 10 times what it did in 1990 and his dividend income would now be 240K a year in and if he had kept to his plan the stock value would be 8 million today, although by following my advice in 1990 the estate is about 1.5 million lower than it would have been.

Sometimes very risky ideas work out very well.

 

[NW-Bound]

In 1990 I had a friend who decided to retire early in his 50's and live off of the dividends of 20,000 shares of stock worth about 800K at the time and about a 5% dividend payer...

...if he had kept to his plan the stock value would be 8 million today...

Sometimes very risky ideas work out very well.

If your friend had invested in Vanguard S&P 500 MF, VFINX, his $800K in 1990 would also grow to $8M today, albeit with all dividends re-invested. It's not as good as that single stock, but with much lower risk due to diversification.

So, one must ask himself, "Do you feel lucky, punk?".

 

[travelover]

................
Sometimes very risky ideas work out very well.

Reminds me of CFB's expression that just because someone puts a bag over their head and runs across an expressway and lives doesn't make it a good idea.

 

[Culture]

Was that before the 2008 crash or after? We're in a probable bubble. I'm assuming a 25% reduction of my portfolio, so $1M won't cut it. Sorry. I don't have any pension and I'm going to pay for health insurance. Might be different if I had those.

I agree, but am assuming 30%. I hope the worst is a 40% drop in equities, which is 24% drop in the portfolio (60/40). However, if inflation hits the bonds at the same time, I figure I might get a 30% drop in the portfolio (wag).

 

[AllDone]

My first job out of college was with a small company whose BOD had sold themselves the pension fund assets for 25 cents on the dollar. The employees were suing. That is when I learned the importance of LBYM and saving for retirement. I also found a better employer.

In 2007, when the economy started to contract, my parents' neighbor's kids moved home to mom and parked their trucks and ATVs all over the cul-de-sac. At the same time my sister and her husband decided to "retire" to my parents' fantasy retirement destination. The 'rents looked around at the ATVs and decided to pack up and move at the top of the housing bubble, but didn't get the old house on the market until the slide started. It was a nice, nearly new house, if you didn't mind a mess of trucks and ATVs, but they lost quite a bit on it. They got to the fantasy destination and discovered that the weather when the visited in the summer was not the same as the weather in the rest of the year. My mom was miserable and lonely because there were no women to play golf with and you can't play golf easily in the snow. They looked briefly at houses in our area (near the house with the ATVs), decided they were too expensive, and bought a house 8 hours from my sister and 6 hours from me, and lost money selling the fantasy house. They're in their 80s and healthy, but still.... The moral is that you should visit a potential retirement city at theworst time of the year as well as the best before you make a decision (especially if you live in San Diego).

 

[robnplunder]

There seems to be some serious ER portfolio inflation around here. When I first noticed this site the $1 million figure was thrown around quite a bit, then $2, and now $3 million.

+10. It seems like this board is taken over by financially conservative lot .

For those folks who are lurking, if you got more than $2M, SS/pension to come, $60k yearly expense, and living in paid off house, you can retire! No need to post here for seeking RE advice. You can probably GIVE advice on how you pile up the wealth.

 

[2B]

I thought the spouse had to be FRA to get spousal benefits. AFAIK, FRA is a range between 65 and 67, depending on the year of birth. How does it work at age 64? Wouldn't that still be a reduced benefit - and lock her into a reduced benefit? Does she have SS on her own record that she's holding off till 70?

I'll admit I still get confused by some of the spousal options.

According to my readings on the SSA website, I must be at or above FRA but DW can collect any time after age 62. She'll be 64 when I reach FRA age. She'll get 42% of my FRA benefit. If she waits until her FRA, she would get 50%.

She does have a trivial personal benefit. My limited understanding of the rules makes me think there is no point in her claiming this benefit.