What would happen if one ran out of $ later in life?

[NW-Bound]

"Assume you are in very good health but...could not work."

I call BS

I know some people who could but would not.

 

[NW-Bound]

I agree. When I read stories of people who "lost all their retirement savings in the last crash", it's usually because they consistently withdrew $X per year when $X was an unsustainable % of their portfolio...

More likely, they had a lot on a bubbly stock. Then, when it went down, they kept doubling their bets. Hello, dot coms. Hello meme stocks. To the moon!

 

[Andre1969]

I just pulled my latest SS statement, which estimates I'll get $2,045/mo if I take it at 62. Of course, that assumes I'm going to work until 62, which I hope NOT! I'm currently 53, and suffering a bit of One More Year (OMY) Syndrome.

Anyway, mortgage is currently $2552/mo. I just saw the new property tax bill and homeowner's insurance, so in a couple months it's going to jump to around $2700+/mo.

So, if I had to rely on SS alone, there's a good chance I'd be screwed. On the plus side, the mortgage is paid in full when I hit 80. So if I ran out of money then, it wouldn't be TOO bad. However, with the new increases, I'm looking at about $8500/yr just in property tax/insurance. So that would account for about 1/3 of my SS check. It would be tight, I'm sure.

However, it seems to me that running out of money late in life is sort of like watching a shipwreck in slow motion. You should see the disaster coming, well in advance, and be able to make somewhat small corrections to account for it. You may not be able to avert the disaster entirely, but perhaps you can still lessen the blow.

For instance, in the timeframe that I've been seriously investing, starting in 1998, my three worst timeframes were 2000-2002, 2008, and 2022.

2008 was really just a blip for me. I lost my biggest chunk in three months (Sept/Oct/Nov), but by November of 2009, I was pushing to new highs. If I was retired at that point, I definitely would have cut back on expenses where I could, and I did even though I was working. However, the recovery was so quick I probably could have just done nothing.

2022's downturn remains to be seen, and it wasn't nearly as bad as 2008's. I've gained a good chunk of it back so far in 2023. So again, I probably could have just done nothing, and would have been fine.

Now 2000-2002 is a bit of a different story. I think I lost about 5% in 2000, around 20-25% in 2001, and another 20-25% in 2002. That's the only time I've ever had more than one down year in a row. If I was retired, I probably would have blown off 2000 and not worried too much, as much of it was actually a good year. And, I was actually doing pretty well in early 2001. I peaked out in May, but started slipping in June. By the time the 9/11 tragedy hit, I was already down a pretty serious amount. So I have a feeling that summer of '01 is when I would have started thinking about economizing. And as the economy continued to stumble, I would have gotten more serious about it.

I forget when the official bottom was in 2002. I don't have a lot of data from that year, but the lowest point I show is in July. By the time the year ended, I had improved noticeably.

So, if I had like a 4% withdrawal rate, adjusting for inflation, I think 2000-2002 would have been one of those periods that would have set me on a course for failure, if I didn't make any adjustments. Especially, since 2003-2007 didn't give me enough time to recover in time for 2008.

Still, if I had a 2000-2002 type period when I'm around 79-80, or other similarly late in life timeframe, it still might not hurt me too badly. Unless I have some serious medical bills along the way, I doubt I'm going to have a whole lot in the way of major expenses. I doubt my burn rate would consistently be 4%, adjusted for inflation each year, either.

In the end though, if I woke up one morning at an old age and suddenly found everything gone, except SS, I guess at that point I could look into a reverse mortgage, assuming the house is paid off by then? Or downsize, at least.

 

[NW-Bound]

^^^ I used to think like the above when I was in my mid 50s.

But now, meh! I have so much more now, and I am that much older. On Medicare, and claiming SS whenever I want (not really as 70 is approaching). Me worry?

Yes, I worry about my health. Hopefully just enough to try to stay healthy. Can't forget to enjoy life, what's left of it.

 

[karen1972]

I grew up in a mobile home and was poor, I can manage. Most of my extended family don't have more than $20k saved away so I already am well aware of the US safety net.

For many in my family senior medicaid, section 8 senior living is really better than their working years. 3 meals prepared for them per day, laundry and cleaning done for them, the temperature is set to a rational level (and for some its first time they had A/C), they often get health care they didn't before because of co-pays go away, and all senior living has some entertainment so there is more options to do something other than sit in front a TV.

Perspective is vastly different. Usually the biggest complaint is they will seize all assets and your SS check so sometimes its hard to even get a haircut and some basic hygiene products.

 

[rothlev]

I grew up in a mobile home and was poor, I can manage. Most of my extended family don't have more than $20k saved away so I already am well aware of the US safety net.

For many in my family senior medicaid, section 8 senior living is really better than their working years. 3 meals prepared for them per day, laundry and cleaning done for them, the temperature is set to a rational level (and for some its first time they had A/C), they often get health care they didn't before because of co-pays go away, and all senior living has some entertainment so there is more options to do something other than sit in front a TV.

Perspective is vastly different. Usually the biggest complaint is they will seize all assets and your SS check so sometimes it's hard to even get a haircut and some basic hygiene products.

section 8 takes 30% of income, assisted living when covered by medicaid takes your whole check. ( you get a small allowance monthly_). but the folks I have knowledge of are reasonably comfortable as you stated.

 

[GenXguy]

medicare and medicaid combine when your income is low, and medicaid picks up what Medicare doesn't cover. ( this applies obviously to folks over 65 ) there are asset limitations on this help. You have to spend down your assets before you qualify.

He was specifically responding about the Medicaid expansion under the ACA, not the existing senior Medicaid. There was no asset test for the Medicaid expansion, but it didn't apply to people over 65. I responded to that much earlier in the thread. In my state, there are both very restrictive income and asset limits for senior Medicaid. Not only are there income (and sometimes asset) limitations on so much of these senior assistance programs, but there are waiting lists (like years for section 8 housing) and limited resources, and it could result in you being stuck in a small room (vs. an actual apartment) or dangerous trailer park, or even on the street. Not everyone has kids they can move in with, and sometimes it's not an option even if they do.

 

[GenXguy]

Remember, in addition to the FIRECALC comment and running out of money later in life, the OP had this question as well:

Also, we read so many articles on line about the "crisis" of Americans do not have enough to retire. Where are all those people who do not have $1000 to their name?

 

[GenXguy]

The thread by ivinsfan is here: https://www.early-retirement.org/fo...-time-friend-with-spending-issues-110220.html

Ambien effects aside, it is a very interesting real-life story on how a person descends into a financial abyss, which is the subject of this thread.

Thanks. I was actually able to search and find that thread last evening and looked it over quickly. I hadn't seen it before.

The OP also asked about those Americans who didn't have $1000 to their name to retire.

 

[rothlev]

He was specifically responding about the Medicaid expansion under the ACA, not the existing senior Medicaid. There was no asset test for the Medicaid expansion, but it didn't apply to people over 65. I responded to that much earlier in the thread. In my state, there are both very restrictive income and asset limits for senior Medicaid. Not only are there income (and sometimes asset) limitations on so much of these senior assistance programs, but there are waiting lists (like years for section 8 housing) and limited resources, and it could result in you being stuck in a small room (vs. an actual apartment) or dangerous trailer park, or even on the street. Not everyone has kids they can move in with, and sometimes it's not an option even if they do.

True: there is a waiting list for section 8 and you have to be selective.
True: medicaid requires spending down your assets before you qualify. but if you have assets logically you should spend your own money first before the government takes care of you.

In Florida , there are senior mobile home parks only for those 55 and up, that are filled with a combination of snow birds with 2 homes, one up north, and lower income seniors living mostly on SSA. Lifestyle in those parks is great, clubhouse, activities, pool, friends, etc... very reasonable. ( and safe ). in the same neighborhoods as expensive housing. I don't know about every state thou.

 

[pacergal]

OP here. Thanks for all who take your time to write.

After reading all these posts, I myself finally understand what I was asking. Is there a safety net provided by government and/or society for people who outlives their money.

It sounds like there are.

OP--Glad you got your question answered.

Yes, there are safety nets around for low income folks. How many, how much, and how available often depends on where you live in the US.

 

[GenXguy]

True: medicaid requires spending down your assets before you qualify. but if you have assets logically you should spend your own money first before the government takes care of you.

But again, the Medicare expansion has no asset test, along with various other types of assistance. So, there's a contradiction in what you're calling logical when it comes to senior Medicaid. The asset test is around $8,000 in my state. And again, no asset test for Medicare expansion (that's for those under 65.) So the seniors aren't getting a fair shake in comparison.

 

[rothlev]

But again, the Medicare expansion has no asset test, along with various other types of assistance. So, there's a contradiction in what you're calling logical when it comes to senior Medicaid. The asset test is around $8,000 in my state. And again, no asset test for Medicare expansion (that's for those under 65.) So the seniors aren't getting a fair shake in comparison.

you are comparing the affordable care act and medicare. Normally seniors receive health insurance thru medicare, and if their income is low enough medicaid pays all the premiums and co pays. affordable care act is primarily designed for folks who are not on medicare. There are co pays. , and premium is based on income. my experience with those on the affordable care act silver plans is that they are not the greatest. not sure how comparable that is to medicare/ medicaid that covers everything. Most of my younger retiree clients who use affordable care act insurance to cover until they are 65, cannot wait until medicare kicks in.

 

[Andre1969]

Thinking back, my ex-wife's mother died broke. But, she was in her early 50's, so it wasn't like she blew through a vast fortune, and had to live on SS in later years.

From what I remember, the downward spiral started in the late 1990's, when she got laid off from her job. Well, rather than try and find another job, she decided to go into business for herself. Customer service training, or something like that. Only problem is, she never made it profitable, and blew through all savings/401k/etc she had. Her father made one payment on the townhouse for her, but when she asked for him to do it again the second time, he refused, feeling he was just throwing good money in after bad at this point. So, she got foreclosed on. And ended up moving in with him.

I felt kinda bad for the old man, because when the ex-wife and I split, that was where she had moved. So suddenly, he was housing not only his granddaughter, but his daughter, as well.

 

[GenXguy]

you are comparing the affordable care act and medicare. Normally seniors receive health insurance thru medicare, and if their income is low enough medicaid pays all the premiums and co pays. affordable care act is primarily designed for folks who are not on medicare. There are co pays. , and premium is based on income. my experience with those on the affordable care act silver plans is that they are not the greatest. not sure how comparable that is to medicare/ medicaid that covers everything.

No, I'm specifically comparing only the Medicaid expansion through ACA vs. senior Medicaid, not Medicare or ACA Marketplace.

Senior Medicaid has an asset test, ACA Expanded Medicaid doesn't - in response to your "logical" comment. This has nothing to do with the market place plans, silver plans, co-pays, and premiums for those. You're going off on a tangent. Again, seniors have to deal with an asset test for Medicaid while those under 65 do not have any asset test for Medicaid expansion under the ACA. That's why I said they aren't getting a fair shake and that your logical comment doesn't fit if it's not applied in both situations.

Normally seniors receive health insurance thru medicare, and if their income is low enough medicaid pays all the premiums and co pays.

That's is actually false for the reasons I have given repeatedly. There is an asset test as well, which is very low in most states, regardless of income. And the income needs to be VERY low as well, not just a little low.

Most of my younger retiree clients who use affordable care act insurance to cover until they are 65, cannot wait until medicare kicks in.

I'm one of them who will do this since I'm nowhere close to 65. But it's not relevant to what I was stating. And I am in no rush for Medicare. My costs will go up on Medicare (with necessary parts, supplemental) vs. ACA marketplace. If your income is high enough that you don't get much for subsidies, that can make a difference. Again, that's another discussion.

 

[jollystomper]

What the OP's actual question points out to me is that even if I FIRECalc gives me 100%, that is not the end of my analysis or planning. I really should consider what will happen if our portfolio goes to zero.

From that perspective, one of my criteria for retiring was having three sources of income - pension, investments, and SS - so that we could lose any one of the three and still be comfortable.

Having all three gives us an extravagant retirement.

Any 2 of the three gives us a very comfortable retirement.

Having only 1 of the three would cover the basics of food, shelter, and local travel, but certainly put restrictions on how we would spend our leisure time and what "toys" we would by. Even that would not be the end of the world, as DW and I both grew up in that type of environment and still had a good time.

I understand many do not have pensions, I am stating only our situation. On the other hand, many here have property/rental income, which we do not have.

Odds of losing any one of the three are very low; losing 2 of the three probably means end-of-days anarchy reigning in the world, giving us other things to worry about .

 

[LateToFIRE]

You did you part and the fire calculator gives you 100% chance of success. But something unexpected happened. In some cultures, the kids are obligated to take care of their elderly. That is not the case in US.

Assume you are in very good health but old and could not work. But only have the SS as the source of income which is not enough to cover the basics.

What happens then?

Also, we read so many articles on line about the "crisis" of Americans do not have enough to retire. Where are all those people who do not have $1000 to their name?

I think your question (and the many subsequent answers) highlights just how important social security benefits are to most of the U.S. population, even those with considerable retirement assets.

 

[NW-Bound]

No pension, but fortunately, the 4% SWR from the stash is several times our SS.

And that's why I look at my nest egg daily, and pamper it.

Here's a video clip about the "Nest Egg Principle".

 

[FindingForward]

$7,000 plus for this one. Mom had enough for a couple years, I had her backed up after that.

They treated her like a Queen and she died 3 weeks later. I would have paid more. I'd like to add, they treated everyone there like Royalty no matter who was paying the bill. I respect them more than any corporate executive(except 1) I've ever worked with.

End of life workers are angels on earth and much underpaid. I love all of them. Can't pay them enough.

Would you mind telling me if the facility your mom was in was a for-profit or non-profit operation? I'm told to be leery of splashy, for-profit ALFs, as they often have a lot of marketing polish on the surface, but behind the scenes cut corners and staffing to the bone, endangering residents, just to generate bigger profit for execs and shareholders.

 

[LateToFIRE]

...End of life workers are angels on earth and much underpaid. I love all of them. Can't pay them enough.

+1 This is so utterly, absolutely, resoundingly true. They are truly angels on Earth.

 

[Surewhitey]

Would you mind telling me if the facility your mom was in was a for-profit or non-profit operation? I'm told to be leery of splashy, for-profit ALFs, as they often have a lot of marketing polish on the surface, but behind the scenes cut corners and staffing to the bone, endangering residents, just to generate bigger profit for execs and shareholders.

We had to move MIL to TX as North AL didn't have much for assisted living.

We just put MIL in a 4-5 person, for profit, home. She has dementia @ 81 & needs medium assistance. They have 1 person there 24/7 to assist, clean, cook meals and she apparently plays games with her (she's the best off compared to the others). All women (but not guaranteed). DW negotiated no increases for 3 years and it costs appx $3200/month in Garland, TX. We interviewed 6-8 homes before choosing. I have a feeling it's not a super long term thing, but they say many stay until they pass away.

It's close enough for DW to visit often & she's thinking of bringing her home once a week to give her "more"...

Her pension & SS pay for $2600 & the 3 sisters set up an account for the other $600 & will pre-fund a couple of years worth. It seems to be a good option for everyone.

 

[FindingForward]

No pension, but fortunately, the 4% SWR from the stash is several times our SS.

And that's why I look at my nest egg daily, and pamper it.

Here's a video clip about the "Nest Egg Principle".

One of my favorite flicks He was way ahead of his time making that one.

 

[gayl]

I'm starting to see a trend of threads started by the OP:



Are you taking care your elderly parent(s)?



when is the best time to tell your boss that you are retiring?



Want to retire now but with concerns



In the latter thread you say you said







Spending $10K/month is way way more than anyone's definition of "the basics". Don't just retire and stop looking at your finances. Instead of blinding spending what some tool told you was safe, take a look every year to see how you are doing and make adjustments.



I think a few people here take 5% of their investment assets at the start of the year for that year's spending. If investments do poorly, that 5% is lower and you will have to make downward adjustments. Do it.



VPW is another plan that looks at your balance every year and allocates a slowly growing % to spend each year.

Is he writing a book and wants to use these responses as research or background material? IMHO if he's got 10k a month to spend in retirement then he can't possibly be in danger of running out of cash himself (admittedly did not read all posts). And he only has 22 posts so come on back OP & clarify

 

[Slacker]

Often, it's not. You shouldn't assume "your basics" or that everyone has at least average SS income or waited until FRA. That's definitely not the case.

You're making a big assumption that the people who have no other income/savings are making the average SS income and waited to age 66. These lower income people are more likely to have started taking SS benefits earlier, like 62 where the average income SS payment is closer to $1200, but for so many people, it's much less than that, maybe $500 to $800/mo, many even less due to lower incomes and years worked, and Medicare and supplemental/medication/out of pocket medical will suck up a lot of that. They can't afford $600/mo for an apartment. Although, I live in one of the lowest COLA as far as rent, and I haven't seen any apartments that low since pre-pandemic. Maybe there's some shack in a dangerous neighborhood for that. Plus you would still have moving costs, utilities, renters insurance, groceries, etc. And you really need a car in those areas to get around - it's not like the urban city with plenty of public transportation.

SS simply isn't enough for a lot of people to live on, and seniors get excluded from some benefits like Medicaid expansion, which would have been very helpful to some seniors that I know. And if they can get free internet, big deal, that's not going to make up the difference what they need.

Then there are people who didn't work enough years to even earn social security benefits, and didn't work enough to get free Medicare part A, struggling to get by, but don't qualify for Medicaid either due to the very low income and asset limits. So they have no income at all yet have total Medicare (plus out of pocket) costs over $1000/mo. I know some affected by that.

I'm not sure why a trip to Europe was even mentioned vs. taking a trip to any other country or any expensive trips across the US if you are just scraping by. How about suggesting no paid rides on any space shuttles, as well? Ridiculous.

There are so many people out there that simply do not have the resources that most of the people on this forum have and won't get nearly as much of a monthly SS benefit (if any) as various forum members here who made high incomes over a long career and waited until FRA or age 70 to take benefits while also having a huge stash.

Exactly what I was thinking.Well said

 

[Koolau]

If you retired with 100% chance of success in FIRECALC I don't see how one could get down to less than $1000 unless they let their spending far exceed their plan combined with poor investing. You would not be one of the people written about not having enough to retire. If you were, you blew by obvious warning signs without doing anything.

Ignoring your first paragraph and assuming someone was too old to work anymore but didn't have any money, I would advise them to redefine what their basics are. Pick up your meager belongings and move to a different area. Get roommates, share an apartment or rent a room in someone else's home, with kitchen privileges.

Can't even do that? Well, have you read the many articles on line about homeless people? I see estimates that over half a million people in the US are homeless, and around half of those are over age 50. I wouldn't expect that your "very good health" would last that long being homeless.

There are, of course, some homeless people who even w*rk. They may have a car. We have an encampment of such folks in Hawaii. We call them the w*rking poor. But, far and away, the most homeless are the folks with substance abuse and mental illness issues. These are not (by and large) folks whose FIRE dreams turned to nightmares.

Almost by definition, one would have to "break the spending rules" OR there would be a 30 year period that did NOT match all the other 30 year periods on average.

IOW - If your FIRE results were 100%, you'll make it unless there are some extreme situations intervening (aka Black Swans.) YMMV