Anyone else here forced to retire and scared to death?

[SumDay]

Since it sounds like you don't have family ties where you are, moving to a lower cost area sounds like a great first step:

Top 10 Cities With the Lowest Cost of Living in America 2015

Heck, have you thought about moving somewhere in South America or Mexico? There are large US retiree communities there, and I think we have a few on this board.

You may not be where you want to be financially, but it sounds like with a few tweaks you can make it work. And who knows, maybe you can get a job in your new locale.

Best of luck to you. Let us know how it turns out.

 

[Llep]

I'm in one of those low COL areas people are telling you about. I track my spending very closely. So far this year my monthly spending has been about $1900 per month and that includes 2 3500 mile trips I had to make for family reasons and 3 shorter interstate trips I made for fun, all five included hotels and one included a rental car. I do not feel deprived. My lowest month was $1423. I am new at this (14 months) so I am watching the spending closely and am in the under 2% WR club. I have my own apartment and a silver ACA healthcare plan. Get your housing and healthcare expenses under control and everything could fall into place. I live in an area of about 800,000 population so I imagine part-time work is available should I want it. Cut your cash burn and you should be fine. Read more here too. These guys and gals are smart!

 

[JoeWras]

We have a couple of extreme ER people who are much younger and are retiring on similar funds. So there is hope. Too bad, many of these people don't participate here much recently.

For housing, consider some of the senior housing options. I'm not talking assisted living, but rather regular apartments that the local government helps subsidize with. My area has a few organizations that specialize in affordable housing. This is not public housing either.

Consider your options.

 

[pb4uski]

I don't think 5% is too high if retiring at 60+. Of course it depends on your expected life span. I think it's very unlikely i'll see 80 so I would take 5% at 61 like the OP plans to do.

I disagree. 5% is very risky and if you live long you could end up being destitute. Firecalc agrees with me too.

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[Forced to Retire]

So many good and thoughtful answers, thanks.

I went to my landlord, at the large corporate owned apartment complex I live at, and they told me I could leave as soon as my lease is up. Or I could leave immediately if I paid off the entire lease term. With rent about $2500 a month I would have to pay them $15,000 to leave. (I have six months left on my lease.)

In the mean time my forced early retirement is quite expensive. After cutting my expenses to a bone I got my costs down to $4000 a month. (Rent and COBRA is about 80% of my fixed expenses.)

According to this website, I can make my money last with a five percent withdrawal and a three percent annual inflation increase for 30 years:

[mod edit]

So how could I move to a new apartment in a quiet small town setting where the cost of living is very low if I have no income? Everyplace I have ever lived has done a complete background investigation about my assets and income.

 

[ExFlyBoy5]

+1 This and moving to a lower cost area are probably great places to start planning. You can live pretty cheaply and happily if you want. Some folks live full time in an RV (me included, but I don't travel) and explore all parts of the country. Others find a low cost of living area and settle there. Some move to very low cost of living areas in other countries. When you start SS, you can earn up to $15,720 without penalty. If you move and earn something close to that, you should do fine and maybe you could cut back on withdrawals for a few years which would allow your stash to last several more years. So... What do you REALLY want to do??

Very good point on the RV idea. Had I retired from the AF *without* the income source of a rental property and some decent dividends to supplement it, then my path was going to be that of RV living. Often, you can get free camping if you are willing to do a little w*rk at the site. There are forums that speak to this quite extensively, so you can dig deeper if you are so inclined.

 

[Walt34]

+1 This and moving to a lower cost area are probably great places to start planning. You can live pretty cheaply and happily if you want. Some folks live full time in an RV (me included, but I don't travel) and explore all parts of the country.

Come to think of it there's an RV campground not far from where we live. I went in there once and it was pretty clear that some of those RVs had not moved in years. I saw a sign for the monthly rent and can't remember what it was but it was under $100/month.

 

[ivinsfan]

Interesting, you speak of layoffs and getting fired, so perhaps it's not your age that is making you look harder for jobs.

So are you are handy type person at all, perhaps you could find a super( I mean be around to troubleshoot for owners and renters) type apartment complex and work part time for some free rent.Are you qualified to be an Uber driver? How about a few hours a weekend doing samples at Costco. Even a few bucks in income would make your stash last longer. Otherwise I agree with those that say you need to relocate..Have you look around for any senior subsided low income housing? They might have a waiting list, but it wouldn't hurt to check that out. I see a couple of us have mentioned this. You are probably going to need some extra income to be comfortable so the sooner you find something you like the easier things could be.

 

[Droo]

I'm not a social security expert, but would using the $300k to float expenses now in order to delay taking SS until full retirement age (or later) be a useful thing for the OP to do? I see people talk about how valuable that is to do, and the option exists to live off the $300k exclusively for 5-10 years in order to get a bigger social security check.

 

[ERD50]

It is the real world for those who were able to achieve it. Though I doubt there are many (or any?) here who retired with portfolio large enough to provide a comfortable early retirement with some extras at a conservative withdraw rate and also experienced "Lots of layoffs and firings during my career due to my outspoken eccentric personality and long periods of unemployment." Unless they won the lottery, or had a large inheritance, etc. But regardless their career salary, the successful ones lived below their means, saved and invested.

Your VTI/BND looks good.

...
Right now I am burning through cash but when I get Social Security at age 62 next year I will have an income of $2500 a month with about $1250 in Social Security and $1250 in 5% annual withdrawals. A figure almost impossible to live on in very expensive Fairfax VA.

Then you have some adjustments to make. While most would agree that a 2% WR is very conservative, I also think most would think that 5% is pretty aggressive for a 62 YO.

If you really think you are not going to earn income, I'd suggest you look at a 3.5%-4% WR, and find a way to live on that budget. Health care? That's gonna take a bite out of your SS, though I'm not familiar with the current numbers.

You might investigate delaying SS. Yes, that means drawing down your portfolio, but you are effectively buying an increase in a COLA annuity. You aren't looking to save anything for heirs, so drawing it down in favor of the SS annuity might be the right thing to do? Run the numbers.

-ERD50

 

[SomedaySoon]

You mention COBRA being another part of your fixed expense. With only SS income next year you may be on Medicaid. If you are pulling money from IRA/401K resources then you may be able to get a very decent ACA subsidy. Look into changing over now to ACA as I know from personal experience that COBRA was way more expensive !

 

[bmcgonig]

Two things. Get off cobra and on to ACA. That will save u a bundle. No reason that you can't get health care for a few hundred, if not free on medicaid. Secondly, move. I have friends who moved to Tucson, bought a decent mobile home for 70k with only 100$/Mo HOA. It's in a nice over 55 park where they actually own the land under the mobile home. It has a huge swimming pool and a golf course. I'm sure there are lots of other places like that around the country. Finally don't risk going 5℅. Get ur expenses down to where u can live on 4℅.

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[OneDay]

A lot of us are in good financial shape because we have seen people who just didn't prepare for retirement or seen scenarios like yours play out. You are in better shape than most people at your age, I know many people who didn't have anything including a close family member with no savings who gets $550 a month SS, they keep foster children to help with their income. With 300k and SS, you can make it and be just fine but you can't do it in your area, Florida is cheap, your money will go much further down there, I have a fried who makes about 25K a year, lives just fine in Daytona. Best wishes.

 

[bmcgonig]

Also, try to arrange it so that you own something like a good mobile home rather than renting. If you ever end up in a nursing home Medicaid can grab your assets to pay for it, except for your home and car.

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[pb4uski]

Does your lease allow you to sublet your apartment? It might be worth talking to a lawyer to see if there's a way to get out of your lease.

http://real-estate-law.freeadvice.c...ase-agreement-when-you-cannot-afford-rent.htm

 

[mamadogmamacat]

Suggest the OP check out what services are available at the closet senior citizen center. It really seems like some onsite help is what the OP needs at least in the short term to see what options are available due to hardship or whatever to get out of that lease without forking over $15k May just be wise to up and leave and go buy that RV for cash in AZ like bmcgonig suggested, but just having someone local to talk to will help in of itself.

 

[eta2020]

I currently rent with six months left on the lease. I am single and don't have any friends or family I can depend on.

Well look at positive things. You are not bound to any place. You should consider moving into cheaper and nicer area where you could live well on 2k and have better quality of life. I would withdraw 750 a month from your portfolio plus take 1250 SS. That is total 2k.

Like
Guanajuato Mexico
Olomouc Czech Republic
South Western France

I would not remain in your high cost of living area any longer.

 

[Mulligan]

We have a couple of extreme ER people who are much younger and are retiring on similar funds. So there is hope. Too bad, many of these people don't participate here much recently.

For housing, consider some of the senior housing options. I'm not talking assisted living, but rather regular apartments that the local government helps subsidize with. My area has a few organizations that specialize in affordable housing. This is not public housing either.

Consider your options.

Yes, it is my indirect experience especially in small rural MO towns that I have lived in there was subsidized senior duplex style apartments available. Heck, when I was young and fresh out of college I lived in one...They did not have enough seniors to rent them out. When "The Feds" came to audit they gave me warning to disappear for the day. I have had my 2 grandmas live in them in other towns, also.
My daughter lives on $9.25 an hour on her own, in her own apartment even making a small monthly car payment. Has never asked for a penny in the year she has been on her own and has managed to save over $1000 somehow. She got on the ACA also.....


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[FI by 2024]

I don't believe this is normal, but...

I have a relative that was forced out of work at 58. She also has, one might say, an eccentric outspoken personality that led to a lot of firings and difficulty getting a new job. At 58 she had $80K in savings. She spent from then until 62 looking for and failing to find work, then at 62 took SS and called herself retired.

With $80K, she managed to rent an apartment, maintain an old car, entertain herself during the day, eat decently enough, and make it through. She is now almost 70 and she has frugal living down PAT. She spends about $950 each month, with $560 going to rent on a small apartment (water-sewer-trash included) and the rest going to bare necessities. Her healthcare is nearly free due to lack of income, she knows every free event within walking distance of her place and goes to all of them, and she does things like turning in aluminum cans and cardboard for pocket money. I believe she gets ~$700/mo in SS and draws the rest from her savings, which is currently around $45K. She lived with a roommate for several years from 58-66, so her expenses at one point were something like ~$6000/year.

Definitely not a normal lifestyle, but if she can do it others can do it too. There also used to be a woman who blogged extensively about living on $1000 a month. Does anybody remember that website? That'd be a great resource for OP.

 

[pb4uski]

Housing in the south is quite affordable. Our condo in Florida will cost us about $7k a year (HOA fees, property taxes, insurance, power, etc.) and it would be even lower for a resident as property taxes would be homesteaded. Also, while we are in a modest area (ours was in the mid-to-high 100's for a 2 bedroom with a den) since the OP is single he could probably get a decent one or two bedroom for the low 100s and I suspect that annual costs would be lower.

So let's say he buys a $100k condo and puts down 20%... at 4% a 30 year mortgage would be $482/month or $4,600 a year. Add in other ownership costs and you're talking less than $1k a month to own.

If he can't get out of his lease and stays in VA for 6 months then he'll drain his $300k down to say, $279k. The down payment will ding it down to $259k and at 4% that will provide $10k a year, so $25k a year with his SS. Deduct $10k a year for housing and that leaves $15k a year for food, etc. Not a king's ransom but perhaps doable if one is frugal. Plus, he may be able to supplement it with some part time work.

Firecalc gives 100% success rate to withdrawals of $21k a year on $260k 60/40 portfolio over 30 years with $15k a year fo SS starting in 2017 and $4,600 of off chart spending starting in 2016 and ending in 2046 (the 30 year mortgage). Add another $1k a year of withdrawals and the success rate declines to 95%.

 

[aaronc879]

So let's say he buys a $100k condo and puts down 20%... at 4% a 30 year mortgage would be $482/month or $4,600 a year. Add in other ownership costs and you're talking less than $1k a month to own.

Is a mortgage an option for someone like him with low SS income, very low investment income and no earned income? He may have to settle for renting a place that doesn't do an income test. My current apartment only required a credit score of over 600, no income check at all.

 

[tennisplyr]

Hang in and enjoy your life, you deserve it. Obviously cutting costs is very important, much of that you can control. I have far less than $1 million but am watching what I spend and am presently downsizing to a lesser costly area. Life is not always easy but usually doable....stay positive.

 

[pb4uski]

I wouldn't see why not... SS counts as income and there is a new way that they count income from retirement savings.

Social Security income and pension income are always counted. The lender can gross-up the income by 25% (give you credit for 25% more income) if you don’t pay taxes on it. The best way to document Social Security or pension income is to have the funds deposited directly into your bank account. Otherwise, provide copies of the award letters from Social Security or the pension plan.

Job stability, even part-time, can help you qualify. But most lenders will not consider part-time employment unless you’ve had the same part-time job for at least two years.

Income from retirement accounts is a gray area. The way lenders view it varies widely. Arm yourself with two years of statements showing consistent annual dividends and the income will be more likely to be well received and considered in your favor. If you don’t receive monthly income from your retirement accounts, you might find a lender who is willing to qualify you through asset depletion – amortizing a portion of your assets and applying it as income.

In any case, you’ll need to show enough retirement income to meet the debt-to-income (DTI) ratio requirements of the lender. That means that the total amount of money you are obligated to pay each month toward debt (including the mortgage you’re applying for) cannot exceed a certain percentage of your total monthly income. For example, if the lender’s DTI limit is 40 percent and your income is $2,500 per month, the lender will want to see that you spend no more than $1,000 on all of your debt, combined, including any auto loans, credit cards, student loan payments and other debt.

Furthermore, your mortgage payment alone (including taxes and insurance) cannot exceed a separate, lower percentage, generally around 28 percent of your income.

And the above was written before other rules on counting retirement savings went into effect which allow lenders to count 70% of retirement assets divided by 360 months.

So for underwriting the loan the lender would look at the $1,250/month of SS (and perhaps gross it up to $1,666 if it is not taxed) and $505/month (based on $260k*70%/360) so say $2,150/month and PITI would be probably $632/month ($482 mortgage payment + $150 for property taxes and insurance) and that would be 29% of gross income. Not a slam dunk, but possible I suspect.

But you make a good point that the OP may need to rent until his SS has started and he can qualify for a 30 year mortgage based on income.

 

[OneDay]

So many good and thoughtful answers, thanks.

I went to my landlord, at the large corporate owned apartment complex I live at, and they told me I could leave as soon as my lease is up. Or I could leave immediately if I paid off the entire lease term. With rent about $2500 a month I would have to pay them $15,000 to leave. (I have six months left on my lease.)

In the mean time my forced early retirement is quite expensive. After cutting my expenses to a bone I got my costs down to $4000 a month. (Rent and COBRA is about 80% of my fixed expenses.)

According to this website, I can make my money last with a five percent withdrawal and a three percent annual inflation increase for 30 years:

[mod edit]

So how could I move to a new apartment in a quiet small town setting where the cost of living is very low if I have no income? Everyplace I have ever lived has done a complete background investigation about my assets and income.

There's always the option of buying a place.

http://m.trulia.com/property/3042510233-219-S-Atlantic-Ave-208-Daytona-Beach-FL-32118

 

[Ready]

$2,500/month rent is way too expensive for the OP's budget. It sounds like he got a typical response from a big corporation citing the terms of the lease, rather than a concerned person understanding the individual's situation and working with them. I would get some local advice on how to break your lease. Don't let a big corporation push you around and force you to spend money you can't afford. There has got to be a way to break your lease without giving them six months rent. That's just ridiculous.