Financial disasters while retired?

[parnass]

We all love ER success stories, but permit me to visit the dark side. I'm interested in hearing from those early retirees who planned and executed their retirement, then had to make changes during retirement or return to work due to unforseen circumstances which incurred significant expenses.

Here are extreme examples:

1) You or your spouse became ill or incurred an injury with significant medical expenses for which you were not able to be recompensed by insurance.

2) You are a pensioner but your former employer went bankrupt and the Pension Benefit Guarantee Corp which took over your pension cut it significantly.

3) You lost a large portion of your retirement nest egg because it was in the form of a risky investment which lost significant value.

 

[unclemick]

Had few 'minor' problems:

Got layed off in 1992 with insufficent assets to retire - maybe 300k including a 50k duplex.

Head-on car crash in mid 1994 caused the SO to 'retire' - luckily with no health insurance whatso ever - I got the airbag.

In 1995, a tornado took the roof off and it rained inside for two days wiping out pretty much everything - no house insurance on a fish camp. Luckily I'd took a temp job paying way more than I ever made on salary.

We've had 5 glancing hurricane hits since 1992 requiring various amounts of repair. I treat evacuations as opportunities for a mini vacation. Last year it was Ivan and off to Dallas.

Our ER would not fit neatly on a spreadsheet(that would be boring) - you make the best plan you can - and try to enjoy any excitement that comes your way.

 

[unclemick]

BTY - I'm by nature - a pesimist!

 

[parnass]

Head-on car crash in mid 1994 caused the SO to 'retire' - luckily with no health insurance whatso ever - I got the airbag. ...
..you make the best plan you can - and try to enjoy any excitement that comes your way.

Thanks for the comments, unclemick2. You've have more than your share of unexpected setbacks.

I see the swiftly rising cost of health care to be the biggest threat to early retirement. It's almost impossible to plan for medical and drug costs.

My former employer reneged on paying the health insurance for retiree's families, so costs for some retirees went from $0/month to $1000/month in just the last 3 years.

I'm hoping we'll make it through retirement without having to go back to work, but I'm getting nervous.

 

[Bob_Smith]

I see the swiftly rising cost of health care to be the biggest threat to early retirement.  It's almost impossible to plan for medical and drug costs.

Parnass, this is my biggest concern as well. I'm thinking that by the time it gets to the point where we can't afford it, maybe 2/3 of the population won't be able to afford it, and the existing system will collapse under its own weight. This can't go on indefinitely.

 

[retire@40]

...the existing system will collapse under its own weight. This can't go on indefinitely.

I've factored a 10% growth rate for health insurance into my ER plans. If it grows more than that over the next 3 decades I'm in trouble. But then again, everyone else may be in the same trouble too.

 

[RockMiner]

I also see this as the biggest chink in our ER plan. I think Bob_Smith has it right...even 10% annual growth doubles costs every seven years. This type of geometric increase would create a crisis bigger than the SS mess. I think this pretty much guarantees government intervention at some point. Either the health care/insurance industry will step up and offer a solution, or Uncle Sam will ram one down their throat.

A national health care system of some sort seems almost inevitable. Either that or us grey hairs will be rioting in washington

 

[unclemick]

Health issues and outliving your assets due to some disaster in the markets are perienial issues for any/every retiree - ER and otherwise. I don't stay up at night thinking about it. Now that I may/or may not be able to afford health insurance after 11 going on 12 years in ER - I may look into it/or continue to self insure - i.e. do without.

You take in as much information as you can, formulate a plan balancing the risks to the best of your ability - THEN GO.

There are no perfect plans - and life is life.

 

[John Galt]

Murphy was an optimist.

 

[AD]

Health issues and outliving your assets due to some disaster in the markets are perienial issues for any/every retiree - ER and otherwise. I don't stay up at night thinking about it. Now that I may/or may not be able to afford health insurance after 11 going on 12 years in ER - I may look into it/or continue to self insure - i.e. do without.

You take in as much information as you can, formulate a plan balancing the risks to the best of your ability - THEN GO.

There are no perfect plans - and life is life.

Or you could have my situation where I'm an insulin dependent diabetic, who is very healthy otherwise, but has high Rx costs and sees a specialist regularly.

This is the #1 hinderance I see to FIRE and I despise that condition every day. OTOH, there's nothing I can do about it except keep exercising and stay as healthy as possible.

Ah, how life happens, even to the best of us... :

 

[Martha]

The only reason I haven't retired yet and continue to work part time is my worry about health insurance costs for the long term. Once my employer insurance is gone, it is the risk market for us. Fortunately, Minnesota has the best and lowest cost insurance on the risk market of any state. My worry is that with our conservative govenor, this option will disappear or be severely restricted.

 

[JOhn Galt]

Whoever said "Life is what happens to you while you are making other plans." was exactly right. I have had my share of troubles in ER, but no disasters (yet). I am trying hard not to wait around for them to appear.

JG

 

[Martha]

We all love ER success stories, but permit me to visit the dark side. I'm interested in hearing from those early retirees who planned and executed their retirement, then had to make changes during retirement or return to work due to unforseen circumstances which incurred significant expenses.

Another example would be a divorce. I imagine a retirement could easily be derailed if a former spouse leaves with half the assets.

 

[John Galt]

Hello Martha and all. Martha, I divorced in 1998 and
FULLY retired almost immediately. True, my spouse left
me with half the assets, but she was doing well over her half of the spending. Truly, my divorce enabled me to retire.

This is a segue into a related issue, i.e what you use for a safety net in case financial disaster strikes (of course
there are some problems no amount of money will solve). I have posted before that if I lost my entire
portfolio, I would still not need to go back to work. We
would sell or lease one home, reverse mortgage the other
and collect our SS benefits. Other possibilities that might bail us out would be a small inheritance at some point, a resurgence in the income from my small holding
company investments which have been trending down lately, but................Probably our biggest advantage
is being able to cut back our lifestyle even further, and
remember, we live now on about 25K (gross) per year.
Preferring to live way out in the sticks helps a lot. This
leaves us with another way to raise cash relatively painlessly.

JG

 

[Martha]

BTW, welcome back John. Some thought that when you had posted that you had "gone to Texas" that this was a euphemism for something much more ominous than a vacation.

 

[Martha]

John mentioned safety nets for when disaster strikes. I think the reverse mortgage idea is a great safety net. It doesn't work so well if you need it in your 40s or 50s though.

The one safety net I am mulling over pending full retirement is to whether to keep up my license to practice law. The cost primarily is in keeping up with continuing legal education. Lex or any other retired lawyers out there, have you taken the ultimate step and let your license go?

 

[JOhn Galt]

Well, thank you Martha! Actually, when I wrote that
("Gone to Texas") it crossed my mind that someone
might interpret it as you did. Anyway, I use that line a lot, partly because I am going to Texas a lot, and partly because I just like the sound of it. It think there was a
book with that title, also.

I told DW just this morning that this was my last winter
up north. Next year snowbirding starts in earnest.
She opined that I said that last year. This time I am
quite serious. The numbers are crunched and the planets aligned. Figuring to leave right after Christmas
2005,
and stay south for about 3 months. This gives my realtor 9 months to keep the condo rented, which is
still enough to get me positive annual cash flow.

JG

 

[curious-jean]

We were at the in-laws for my FIL's 80th birthday, and he announced that he had outlived his pension (all of us went into a brief moment of shock).

He retired from working for the city at age 60 and took the 20-year pension rather than the lifelong option, figuring he wouldn't live to see 80. Both he and my MIL are healthy and will probably live into their 90s. Luckily they have SS to fall back on and can always take a reverse mortgage if they have to.

 

[JOhn Galt]

Outliving your pension! Ouch..........................My folks
are quite comfortable on 2 SS checks and my Dad's
pension, which all together probably total 95% of their
income. My Dad's pension is for life (he is 87). He has
told me several times that they could "make it" without
the pension but it would be "tough".

JG

 

[curious-jean]

Yeah, the other shocking thing was that he told us he didn't opt for the survivor (spousal) benefit because that would have reduced his pension by 30% (so he thought; the standard reduction is more like 10-15%). Not that it matters now that he outlived his pension!!

My MIL was a homemaker all her life and has no pension... I guess she's been lucky it's worked out so far.

 

[John Galt]

Slightly off topic. Up until recently I have ignored my
wife's SS (she has no assets of consequence but no
significant debt either). Now, I'm starting to pay attention
because I realized she will begin to draw (at 62) only
4.5 years after I begin. She never made big money, but she has worked her entire life and so the (projected)
SS benefits are nothing to sneeze at. In fact, they will be huge to us.

JG