Frugal Couple who Doesn't like Debt Article

[shotgunner]

As I read this I continued to think to myself, are you kidding me!!! Described as a frugal couple in mid to late 50's they have a paltry $3300 in an emergency fund with joint income between $79,000 and $98,000 a year. They have $85,000 in a 403B retirement account and he might have a modest pension with a $19,000 contribution to it.

Home valued at $250K but this debt averse couple has a $169,000 mortgage, $10,000 home loan and $3000 in credit card debt.

Finally their financial planner has set a target retirement spending of 55 to 69% of their current annual income.

These are not the details I expected from such a title, in my world frugal debt averse people can retire in their late 50's, don't see it happening for 10 years at least for this couple.

Frugal couple wonder if retirement is but a dream | The Seattle Times

 

[pullmyfinger]

I read that article in today's paper and the big thing I wondered about was the competence of the "financial planner". His suggestion that they start a savings vehicle invested in stocks and bonds as part of their emergency fund? Also the way they described his retirement savings did not make sense to me. He works at UWMC (as did I) which puts him in the state retirement system. If he works there at least 5 years he will have a state pension. The number quoted as his retirement savings wasn't specified if it was his contributions to the optional unmatched 403b program, or if it was his plus the employers contributions to the PERS program. If it is the latter it really doesn't matter what the amount is, the value is in the pension itself. I wondered if the financial planner knew the difference.

 

[mickeyd]

They "hate debt", yet they have $3000 in CC debt.

 

[Nemo2]

They "hate debt", yet they have $3000 in CC debt.

Yeah...and boy do they hate it.

 

[Ready]

I would not want to be in their situation. It looks like they are in for a struggle, in spite of their positive outlook. They need to either make more money or spend less of it.

 

[HadEnuff]

Yeah...and boy do they hate it.

They "hate debt", yet they have $3000 in CC debt.

I found that the more debt I carried, the more I hated it.

 

[LOL!]

The article doesn't say if the CC is paid in full monthly, but it could be. We have a 5-figure amount owed on our credit cards at this moment, but that's just this month's charges and will be paid in full without interest soon. One could say we have a 5-figure debt or one could say we pay off our CC bills in full every month. Both of these are true.

I thought the use of the IRAs as an emergency fund was good advice. They are old enough that there will be no early withdrawal penalties if an emergency withdrawal is needed.

And yes, this couple will be fine as long as they work until they [-]die[/-] are much older.

 

[Walt34]

I would not want to be in their situation. It looks like they are in for a struggle, in spite of their positive outlook. They need to either make more money or spend less of it.

That's the way I see it too. A positive outlook doesn't pay the grocery bill but I guess it'll make the cat food taste better.

The article doesn't say what the pension income will be. Maybe that's why the FA is optimistic?

 

[Running_Man]

I would not want to be in their situation. It looks like they are in for a struggle, in spite of their positive outlook. They need to either make more money or spend less of it.

I do not see a problem for them if my assumptions, which need to be made if you try to make sense of this article. They will be eligible for Social Security, which at age 65 for each of them appears they will likely be around 20-25 thousand dollars or 40-50 thousand dollars total. They have Sid’s pension which if he works 10 more years to age 65 would be more than 20 percent of his final salary, as the plan they are in pay 2 percent of final average salary for each year you work in the job, depending on how many years he has contributed so another 10K, could be as much as 15K so they will have 50-65K before they start withdrawing from their retirement savings which they have 10 more years to build. I project at least 200K from today’s 85K that adds another 7K to the total giving a total income in today’s money of 57-72K on a target of expenses of 55K per year.

Will it require rigor to stick to a budget? Yes, is it poverty or even near poverty? No they are in reasonably good shape, but need 10 good years of work. If pensions and or social security are cut, then their retirement is in trouble and that is their risk.

It seems they have just finished with their children and are now in the final 10 years looking for their retirement. They had a big celebratory vacation or maybe even a final vacation with the children it is hard to know and now are ready to get to the work of retirement. They are ahead of most Americans their age, while being far behind the average poster on this site. The advice is decent and will allow them to get to retirement without panicking in the meantime.

The writeup of this is somewhat subpar and seems hastily done. Not the best plan in the world but far better than not having a plan. 13K in non mortgage debt is a trifle, many people have 2-3 times this amount in car loans alone.