Poor planner needs advice on living on a shoestring

[jprod]

Hi all
I am a 62 yo male who recently lost his job and has very small prospects of finding another, though I keep trying.
Ex divorced me over a dozen of years ago and "cleaned me up", so to speak.
I live alone. I have 2 children who are grown up and are OK on their own. I own no home (rent is about $1300/month). My current assets are about $50,000 in savings and about $250,000 in a 401k and another $35,000 in assorted IRA/403B plans.. I have no debts. I have just started collecting Unemployment Insurance, $600/week.
Social Security folks tell me that if I retire now, I will collect about $1273/month but that if I wait until I am 66 they will pay $1886/month. That was based on an estimated income of about $65,000/year which, of course, I no longer have.
I started Cobra this month and that presumably lasts for 18 months (Cobra cost is $640/month); after that, I am in trouble because I had a heart blockage (I have a stent) and high blood pressure. I don't expect to make it to 80 (will be happy if I make it to 70!).

I'd like to get opinions as to how to proceed:
I know I have to move to a lower rent district/State. Besides that:
- Should I collect unemployment until it runs out and supplement it with my savings? I'd like to hang onto the savings if possible, for a snowy day (these days are all rainy days).
- Should I withdraw money from my 401K and from my savings, and survive on that until I am 66, and then start to collect the extra $600/month that SS penalize me with for retiring early? If so, will they pay me less because my Income has been now drastically reduced?
- Should I start collecting SS and withdraw a certain amount (say 6%) of my 401K every year? - That would give me about $30,000/year while not dissipating greatly the 401K.
- I looked into buying annuities but it seems to me that they are a total steal for the insurance companies: the best quote I got would pay me $1400/month until I died if I invested the $250,000 401k with them. I would, of course, have to pay their set up fees.

Any advice you folks can provide would be greatly appreciated.

 

[haha]

Hi all
I am a 62 yo male who recently lost his job and has very small prospects of finding another, though I keep trying.
Ex divorced me over a dozen of years ago and "cleaned me up", so to speak.
I live alone. I have 2 children who are grown up and are OK on their own. I own no home (rent is about $1300/month). My current assets are about $50,000 in savings and about $250,000 in a 401k and another $35,000 in assorted IRA/403B plans.. I have no debts. I have just started collecting Unemployment Insurance, $600/week.
Social Security folks tell me that if I retire now, I will collect about $1273/month but that if I wait until I am 66 they will pay $1886/month. That was based on an estimated income of about $65,000/year which, of course, I no longer have.
I started Cobra this month and that presumably lasts for 18 months (Cobra cost is $640/month); after that, I am in trouble because I had a heart blockage (I have a stent) and high blood pressure. I don't expect to make it to 80 (will be happy if I make it to 70!).

I'd like to get opinions as to how to proceed:
I know I have to move to a lower rent district/State. Besides that:
- Should I collect unemployment until it runs out and supplement it with my savings? I'd like to hang onto the savings if possible, for a snowy day (these days are all rainy days).
- Should I withdraw money from my 401K and from my savings, and survive on that until I am 66, and then start to collect the extra $600/month that SS penalize me with for retiring early? If so, will they pay me less because my Income has been now drastically reduced?
- Should I start collecting SS and withdraw a certain amount (say 6%) of my 401K every year? - That would give me about $30,000/year while not dissipating greatly the 401K.
- I looked into buying annuities but it seems to me that they are a total steal for the insurance companies: the best quote I got would pay me $1400/month until I died if I invested the $250,000 401k with them. I would, of course, have to pay their set up fees.

Any advice you folks can provide would be greatly appreciated.

Your situation looks pretty tough. Sorry to hear about it.

You might take your unemployment, try to get a roomate or a cheaper flat, and keep your Cobra- the cost is horrible but not bad in your situation. If you do not get a job with coverage by the time it runs out you may be able to get something else, or we may have a better public system by then.

A radical but possibly effective approach is to get out of the US, and drop your US medical coverage. There are threads on this forum that deal with living in low cost countries where you could afford medial care, medicines, rent and food a lot easier than you can here.

It would take nerve, but it would allow you to live until 66 (or 65 if you wanted to come in out of the cold when you qualify for Medicare) without really badly depleting your stash.

None is this qualifies as advice, I am not good at giving advice. More just mentioning a few of what are likely many possibilities.

The best of luck to you.

Ha

 

[jdw_fire]

Hi all
I am a 62 yo male who recently lost his job and has very small prospects of finding another, though I keep trying.
Ex divorced me over a dozen of years ago and "cleaned me up", so to speak.
I live alone. I have 2 children who are grown up and are OK on their own. I own no home (rent is about $1300/month). My current assets are about $50,000 in savings and about $250,000 in a 401k and another $35,000 in assorted IRA/403B plans.. I have no debts. I have just started collecting Unemployment Insurance, $600/week.
Social Security folks tell me that if I retire now, I will collect about $1273/month but that if I wait until I am 66 they will pay $1886/month. That was based on an estimated income of about $65,000/year which, of course, I no longer have.
I started Cobra this month and that presumably lasts for 18 months (Cobra cost is $640/month); after that, I am in trouble because I had a heart blockage (I have a stent) and high blood pressure. I don't expect to make it to 80 (will be happy if I make it to 70!).

I'd like to get opinions as to how to proceed:
I know I have to move to a lower rent district/State. Besides that:
- Should I collect unemployment until it runs out and supplement it with my savings? I'd like to hang onto the savings if possible, for a snowy day (these days are all rainy days).
- Should I withdraw money from my 401K and from my savings, and survive on that until I am 66, and then start to collect the extra $600/month that SS penalize me with for retiring early? If so, will they pay me less because my Income has been now drastically reduced?
- Should I start collecting SS and withdraw a certain amount (say 6%) of my 401K every year? - That would give me about $30,000/year while not dissipating greatly the 401K.
- I looked into buying annuities but it seems to me that they are a total steal for the insurance companies: the best quote I got would pay me $1400/month until I died if I invested the $250,000 401k with them. I would, of course, have to pay their set up fees.

Any advice you folks can provide would be greatly appreciated.

seems to me you should 1) collect as much unemployment ins as possible (without touching any of your assets till it is exhausted) and 2) cut your living expenses as much as possible (consider ha's advice re. a room mate). if you leave the US (maybe even your state) i would think you will be forfetting the unemployment ins payment (however i dont have any experience with this so i could be incorrect) which is large compared to what your assets and SS can comfortably produce.

 

[DesiGirl]

Seriously explore cheaper living cost countries (as suggested by Haha). Medical costs are lot cheaper (Indian experience). For example my Hubby's Mega-corp employer provides Health Insurance worth $16-17K so essentially u could self-insure urself in India for something like $20-40K. U could live a decent life for $1200 a month as a single person in India ($300 rent for an Apt). So u could live with 0-1% WR. U could copnsider Thailand, India and lot of middle & south American countries. I can provide more info on India if u want.

 

[brewer12345]

I think it is time to think creatively. First, as others have suggested, you need to slash your expenses as much as possible. Since you rent, you are a lot more mobile than an indebted homoaner. See if you can move somewhere much cheaper within your state so that you can leave the UI benefits intact.

Second, I think you will want to look at this as a two stage scenario. Stage 1 lasts as long as the UI and Cobra benefits run. When those run out, you should be ready for Stage 2. If you haven't found a job by then, it will be time for a radical lifestyle change to a lower cost area with better access to healthcare, at least until you reach Medicare eligibility. This can be a jaunt to another country (Mexico, India, etc.), or a permanent relocation. A possible Stage 3 is when you become eligible for Medicare. At that point, you will have the option of returning to a low cost area of the US if you want.

For most people, waiting to tap SS is the way to go. OTOH, if you think you have below average life expectancy, you may want to tap it sooner. Get out a spreadsheet and figure out how long you have to live to break even on waiting for SS.

While you continue looking for a job, I would start researching other locations as a place to live. If you google Fred on Everything, one of his recent columns talks about living as an expat in Mexico. Google Tioga George and you will read about his low cost nomadic lifestyle. DesiGirl can tell you about India. I believe Arif (member here) can tell you about Panama. Do you speak any languages besides English? That might help guide you to an alternate location.

 

[DayDreaming]

Definitely apply for unemployment - you lost your job, after all.

I see that you live in NJ. Me too. NJ has always had guaranteed health insurance coverage, you can't be denied for pre-existing conditions. That's probably one of the reasons insurance costs are high here, but there is one advantage: the way I understand it, if you ever need to, you can switch to a policy with better coverage within 1 month, and you can't be denied. Oddly, you can't upgrade to a better policy with the same health insurance provider, but you can switch to a different provider and they have to take you. You should probably talk to a health insurance broker, who could explain what your options are in NJ with your current health condition. You might find something cheaper than the $640/month COBRA.

Just fyi, I'm covered by Horizon BCBS for $248/month - it's not a very comprehensive policy but I'm in good health and if that ever changes, I'll upgrade to a better policy.

 

[travelover]

............. If so, will they pay me less because my Income has been now drastically reduced?
.............

Welcome jprod. Sorry to hear of your struggles.

I didn't see this question (above) addressed. If you go to the SS site, you can put in your yearly salaries and enter zero for now until age 66 to see how much your benefits drop. The good news is that they don't drop a great deal.

 

[walkinwood]

Welcome. I am sorry to hear about your situation.

Good suggestions above, but I'd like to reiterate the health insurance option you have.

As JoeDreaming says, you cannot be denied health insurance in NJ nor can you be charged more for pre-existing conditions. Check out ehealthinsurance.com. I have a HMO/with a high deductible & copay from Horizon BC/BS that is less than what you're paying for COBRA. Look into it using a spreadsheet & your past medical bills.

Car? Do you need one? If not, rent near a bus-stop & save all that maintenance & insurance. Rent or borrow one when you absolutely need it.

Same with cable, wireless data plans & other monthly subscriptions.

We all have a lot of stuff that finds a good market on eBay & Craigslist.

Your survival will depend on making drastic & decisive cuts in spending today.

Why do you feel you have 'small prospects' of finding another job?

I apologize if all this sounds too strident. But, I have a friend who was too slow to make changes & he has not lost his home and a most of his savings. It didn't have to be that way.

 

[jprod]

Thanks for all the advice!!!

Wow!!
Thanks to all of you that provided advice, I am taking all of it under consideration.
The possibility of moving to another country was something in the back of my head. I speak Spanish fluently and have some family in Peru. Going there temporarily or permanently is a possibility. I have to investigate Health Insurance costs there as well as cost of medicines (two of them, Lipitor and Plavix add to a monthly cost, without insurance, of nearly $300/month). Are there language problems living in India (or Thailand)? I will check the suggested websites for other retirement places outside of the US. I also thought of perhaps moving to the South. For now I am giving myself about 3 to 4 months before making a decision on moving out of Jersey).
I neglected to say that I do have a part time job: For the past 10 years or so, I have taught 2 or 3 courses, 2 semesters per year, at a local College. Each semester I have to wait until the last day of registration to see if I have or not work but so far my luck has held. Were I to continue teaching, that would give me an extra $10,000 to 15,000 year; this could be a strong factor against my moving too far away.
I do have a car (a 1999 Corolla) which in his last legs but still works.
I said in my initial post that I see small prospects for employment for the following reason: I seem to do well with my Resumes and I do get telephone interviews , sometimes even 2 phone interviews (with a head hunter and with a Company Exec) for a given job. When I get to the personal interview, though, things are a little different: I look at least 10 years older than my age and I see a look of surprise in the people that interview me when I meet them (I assure you I have just 2 ears, 2 eyes and no horns; could they think I will drop dead on the first day of work?). Things usually end there.

 

[jIMOh]

For jobs, try contracting or sales- most of those positions would not care about age... if there is an Adecco or office team office close by, see what they can do for you- even if wage is $12/hr, it might beat unemployment.

I agree you should see this as 2-3 phases
phase 1 is unemployment/cobra
phase 2 is when that runs out until you can collect SS
phase 3 is when you start tapping investments

I would tap SS early and then if you find work pay it back (there are threads here on this).
I would try to let investments grow as long as possible
I would cut expenses- look for rural areas with decent infrastructure (infrastructure=hospitals and groceries). For example in Ohio I live in a place where a 1000 sq ft apt is about $1000/mo and Ohio has around the 7th highest tax burden in whole country. If I move about 50 miles east it get rural real fast, and that rent drops in half to $500/mo and there is a community or two which has medical care available.

Renting for you is an advantage
can you collect on your ex wife's SS? Might be worth using her benefit at age 62, letting your benefit grow, then tapping your benefit at age 66 or 69 for a larger benefit for you... but I am not sure how that works, as I am half your age (more or less).

 

[RonBoyd]

I said in my initial post that I see small prospects for employment for the following reason: I seem to do well with my Resumes and I do get telephone interviews , sometimes even 2 phone interviews (with a head hunter and with a Company Exec) for a given job. When I get to the personal interview, though, things are a little different: I look at least 10 years older than my age and I see a look of surprise in the people that interview me when I meet them (I assure you I have just 2 ears, 2 eyes and no horns; could they think I will drop dead on the first day of work?). Things usually end there.

Interesting comments by the Editor of AARP Bulletin:

Farewell to a Dreadful Decade

After working for the newspaper for over 30 years, I was suddenly on the street with more than 50 other reporters and editors. That was nearly six years ago when I found myself over 60 and jobless.

It was the beginning of a six-month nightmare that had me doubting my skills, questioning my confidence and wondering if I would ever work again.

I wandered the streets, fired off dozens of letters and job applications, all greeted by silence. Age, for all of its benefits, was the enemy. Friends colored their hair, doctored their résumés and discovered a whole new language for dealing with health insurance.

What I really discovered during my nightmare, though, was the importance of friendship. My friend Bill's call came at the perfect moment. He had been caught up himself in the wild swings of the New England computer industry, so he knew my anxiety. His suggestion, borrowed from another friend: "Stay positive. Consider that you're 'between assignments.' "

So, don't let the b*st*rds wear you down... and lean on your friends here.

 

[Ed_The_Gypsy]

I speak Spanish fluently and have some family in Peru.

There you go! You have more options all of a sudden than most of us.

A warning: With limited assets, you have to be very careful about taking a big step such as moving to another country. Do as much research as you can first. You can't make too many mistakes or you are in bad shape.

Be aware that in many Latin American countries, private and maybe public health insurance becomes unavailable when you turn 65 (although if you have it by then, you can keep it--for a while; depends).

 

[deserat]

How about teaching ESL? Having two languages on board can really help - or for an adventure use the ESL to get to the Far East....caveat - I haven't done this, but have friends and relatives who have.....interesting experiences and usually in lower cost of living areas.

 

[Ed_The_Gypsy]

Chile is said to be a good place to teach English, if you have the credentials and if you find a good employer (watch out about this! Do your homework!).

 

[W2R]

I don't know much about living in Peru, and it does sound like the best choice. If you decide that that option won't work for some reason, here are my ideas on what I would do if I was in your position.

I know I have to move to a lower rent district/State. Besides that:
- Should I collect unemployment until it runs out and supplement it with my savings? I'd like to hang onto the savings if possible, for a snowy day (these days are all rainy days).
- Should I withdraw money from my 401K and from my savings, and survive on that until I am 66, and then start to collect the extra $600/month that SS penalize me with for retiring early? If so, will they pay me less because my Income has been now drastically reduced?
- Should I start collecting SS and withdraw a certain amount (say 6%) of my 401K every year? - That would give me about $30,000/year while not dissipating greatly the 401K.
- I looked into buying annuities but it seems to me that they are a total steal for the insurance companies: the best quote I got would pay me $1400/month until I died if I invested the $250,000 401k with them. I would, of course, have to pay their set up fees.

First, I believe your area has a very high cost of living and if so, then I agree with your plan to move to an area that is cheap. There are many communities with low costs of living in the midwest and south. Does one of your kids live in a place like that? If so, move there. Until you can figure out where you want to move and get it done, you need a roommate right now. You will probably need to move yourself, with a rental truck if necessary.

I'd begin by living on your unemployment and a reasonable percentage from your 401K (5%? 6%? check FIRECalc, link at the bottom of each page) plus possibly a little from savings (but try to keep this as low as you can). By the time your unemployment runs out, hopefully you will have already moved. So at that point, I'd take Social Security and stop taking money from savings if possible, except for the same percentage from your 401K. If your SS would be $1273 now, it would be sbout $1697 at age 66 if you don't work any more. So maybe if you can wait until your unemployment runs out to take it, you might get a little more. However, given your life expectancy it seems to me that there is no point in waiting to age 66. I agree that annuities are not a good choice for you right now due to the low interest rates.

Even a part time job at minimum wage, such as a fast food job, would help. There are earning limitations while collecting Social Security but you can earn more than a thousand a month before they kick in.

Look into food stamps, and contact the senior center at your new community to get information on what help is available locally for seniors and also to make new friends.

I am not sure about what your medical options will be, but in 3 years you will qualify for Medicare so that should help.

 

[rob1221]

out of the box

Hi I am married (to a Filipina) If you can I would move to the Philippines English is widely spoken there and Americans are well liked. You could live like a king even on a early age 62 social security income middle class income there is about $400 a month salary for an engineer, accountant etc. you could even have a driver and a housekeeper if you wanted to go to $600 a month a condo near Manila or Cebu would run you about $30 k but you could easily rent. The weather is 80s and 90s year around. Its a great place but off the beaten path

 

[Aiming_4_55]

Hi I am married (to a Filipina) If you can I would move to the Philippines English is widely spoken there and Americans are well liked. You could live like a king even on a early age 62 social security income middle class income there is about $400 a month salary for an engineer, accountant etc. you could even have a driver and a housekeeper if you wanted to go to $600 a month a condo near Manila or Cebu would run you about $30 k but you could easily rent. The weather is 80s and 90s year around. Its a great place but off the beaten path

I was in the Phillippines eariler this year and agree, one can rent a condotel for a very reasonable price per month with discounts for long term leases, ie 6 months. The local food is very inexpensive and cab rides were generally 1 - 2 USD so one doesn't have to buy a car. As a non-Phillippines citizen, I'm not sure you can "own" property. I would recommend against it. Some of the long term residents lived extremely well on $1250 - $1500 per month from SS.

 

[rob1221]

they recently changed the law you can own property now if you are willing to ride in a tricycle or multicab you can travel for less than 2 bucks

 

[Aiming_4_55]

they recently changed the law you can own property now if you are willing to ride in a tricycle or multicab you can travel for less than 2 bucks

I wasn't aware of the law change... but the family stories I hear about corruption and deeds being forged, I would shy away from buying. Jeepney can be less than a buck US also, but you run the risk of getting pickpocket. Tricycle is less than a buck, but slower. In the heat, I prefer an aircon taxi. =)

Rob - will u be retiring to the PI?

 

[johnoh]

A couple things to note - you can get 700sf for $500/month in Texas, you can sell your 99 corolla for an 03/04 corolla (note that down here the weather is kinder to cars) for maybe $3k out of pocket and the 03/04 will last forever, unlike the 99 which consumes oil increasingly with age. If you live in a big city like Dallas or Austin there are a ton of northerners. First thing I would do in your shoes is dial down your expenses. And decide what makes you feel alive - if work does - that's cool, but if it doesn't, screw it and retire on the cheap,

 

[Martha]

I'll try to touch on some points not discussed much by others.

I would explore different areas to live. Health insurance will be a big issue, but under federal HIPAA law (forgetting anything about health care reform) after you use up your COBRA each state has to provide at least one option for you to buy insurance, even if you are otherwise unisurable. NJ is expensive. I have no idea if they have subsidies for low income people and if they do, what they count as income. Look around at other states as the cost varies a lot. You might read our FAQ on buying private health insurance. http://www.early-retirement.org/forums/f47/faq-archive-buying-private-health-insurance-30756.html
What is not covered in that FAQ is that some states are subsidizing health insurance for those who are uninsurable, if you meet certain income requirements. I don't know if you might qualify for a subsidy, but be sure to look at that possibility as you look at state options. Don't trust what you find on the internet regarding subsidies as there have been many changes in the past months. For example, some have mentioned Texas as a low cost of living state. Texas has an insurance risk pool you can join as you come off of COBRA. Texas may have a subsidy. http://www.tahp.org/documents/HRI/PCIP final.pdf One problem in figuring this stuff out is that with health care reform there often are two risk pools operating in a state. You are only eligible for the federal pool if you have been unisured for six months.

As you can see, this is confusing. As you poke around you might want to post any questions here. Also, you might consider talking to agents who work in states where you might want to live to see what is available. However, some agents are not very up on the HIPAA and risk pool options and subsidies.

Make a list of places you might be interested in and then see what is available for housing, insurance, etc.

You can move while on UE, but I believe that you will have to file in the new state.

See my signature.