Retirement with little saved

[HMMY]

My parents retired at age 65 and 67 with nothing saved. My dad got $800/mo of SS and mom got $400/mo. I paid off their mortgage when they retired, so they had a paid off house. Before they retired, my mom told me how much they needed/wanted to supplement their income, which my siblings and I provided (not equally) until mom needed long term care at age 83. At that point, we cut them off to qualify her for Medicaid. When my mom moved out, my sister moved in to "care for dad" a/k/a free rent. They live in a LCOL area and people thought they were well off because they always gave nice cash gifts for their friends' kids' birthdays, graduations, marriages, etc.

 

[Koolau]

Widowed MIL had modest pension and SS, plus about $200K in combined her and late FIL savings. Company gave $250/mo to cost of her healthcare so basically 50/50 split. Thanks to two failed investments (with friends), most of their retirement savings were lost.

However, their home was in a desirable area and in great shape. Small second of $100K on it at low interest fixed rate. We urged her to sell - their old friends had almost all left the area already, due to death or moving into retirement facilities and communities.

We are in a HCOL area. We were concerned that she was house-rich and cash-poor. When she finally decided to sell, she cleared over $800K.

After living with us for seven years, we helped her move to a seniorcare facility, one of the top three in the state. Thanks to the house sale, the monthly cost of the facility - $4K/mo - was not a problem.

MIL had mild to moderate dementia. She died unexpectedly before it got worse, but at the time - 2015 - Memory Care was approx $8500/mo.

It's now in the $12-22K/mo. range, depending on what facility you select.

$12K/mo is almost 4 times what my mom spent for memory care in 2000. Very scary!

 

[livingalmostlarge]

My parents retired at age 65 and 67 with nothing saved. My dad got $800/mo of SS and mom got $400/mo. I paid off their mortgage when they retired, so they had a paid off house. Before they retired, my mom told me how much they needed/wanted to supplement their income, which my siblings and I provided (not equally) until mom needed long term care at age 83. At that point, we cut them off to qualify her for Medicaid. When my mom moved out, my sister moved in to "care for dad" a/k/a free rent. They live in a LCOL area and people thought they were well off because they always gave nice cash gifts for their friends' kids' birthdays, graduations, marriages, etc.

That is very kind and generous of you to support your parents. So what happened to dad and the house?

 

[Badger]

So my dad had $30k/year SS from age 70 forced draw, then his RMD were like say $20k to now $30k. They retired in 2007 with $200k IRA for her, and $200k IRA for him. They had a margain loan of $200k on a condo they bought in 2008 and their taxable savings now is $100k. When they retired they had a "portfolio" of retirement and taxable of $400k. My dad also had a part-time job paying say $45-50k./year until last year.

I'm missing something or I'm just not understanding this. But how do you get $20k or $30k for the RMD on a $200k IRA?


Cheers!

 

[HMMY]

That is very kind and generous of you to support your parents. So what happened to dad and the house?

Dad is still living at home with one of my sisters, who moved in with him for free rent when my mom left. He has mild cognitive decline but can care for himself. He no longer drives, so she takes him grocery shopping every week.

 

[Perryinva]

I wondered the same thing especially if all is converted to Roth. No RMDs.

 

[indiajust]

Retiring with 140k/yr is more like FAT/FIRE. Especially with so little spending.

I "retired" with around 130k in taxable, similar in IRA, roughly breakeven in house with mortgage. No pensions, not expecting to be able to pay rent with FICA. So personal savings, frugal living, and above average gains in stock market is how I afford retirement.

Your parents FICA and pension exceeds my peak working salary.

I've debated the merits of part time work. Have yet to find the right tradeoff. The pile of free benefits your parents got would definitely sway my judgement in high cost new england.

 

[Librarian]

Sort of our issue...

As 2 teachers with 3 very involved children who all went to college (with decent scholarships but not full) knowing we had an excellent pension, we didn't bother saving much. DH retired last year & I am about to now. Home paid off & no other debt. 3 year old & 10 year old car, both with low miles. Downsized to townhome 3 years ago. So monthly costs are minimal. Children out of the home. We will bring in about $90K/yr with pensions; around 75K for one of us when the other passes.

Our pensions are worth about $2M lifetime...but this is for US & not our children.
We also knew there would be some family money coming at some point. No idea if it would benefit us but we knew it would benefit the children, so again, no need to leave any for them.

A family partnership was dissolved, leaving around $400K, and the children each got about $200K each. At some point there will be more but since there is NO way to know when, we don't worry about it. The $400K is just invested, as our pension will cover our lifestyle, although if a special trip comes up or a big emergency, it is nice to know that it is there.

 

[livingalmostlarge]

My dad has $400k in traditional ira, $50k roth IRA, my mom $500k in roth IRA and $100k taxable account. It was around $350k when they retired in 2007 but the market gains have been good to them and they have been saving still.

Her pension is from the state so super generous and she took the max benefit. $1.5M plus medical benefits are outrageous probably worth $1m not $500k the medical. She gets reimbursed for medicare, dental, vision, and prescription are all covered, no supplement because the state BCBS is supplement. Then everything is covered 100% between medicare and state BCBS. Also she covers my dad 100%. So no medical costs are zero and this all started at age 55. She's lived off the state now for 15 years and she worked 32 years but 3 years sick leave converted for 35 years of service at 2% of high 3 so 70% of working salary for life. 15 years and going strong plus average lifespan in my family is about 100. She outstripped the lump sum for sure.

 

[FLSUnFIRE]

It certainly helps having friends with modest tastes, too.

I can't remember the last time we went to a pricey restaurant with people. We tend to meet at local inexpensive places for "wing night" or something similar. I think the last time we went out we had 2 drinks and a dozen wings each and the bill was about $30. I just met my golf foursome last week for lunch, my bill was $18.

We take turns with one couple having each other over for supper. A home cooked meal and a couple drinks is pretty inexpensive. And I just bought a pizza oven and am looking forward to making pizza for a small group. We can probably make 8 - 10 individual pizzas for $30 or so. What a fun way to spend an evening on the deck with friends.

Wing night? You must be rich! Most places here have "market price" on the menu for wings and those that don't are close to $1.50/wing.



It was less than 2 years ago that I was bartending and we'd do 15¢ to 50¢ wings (10 each order)... This was at the height of COVID when there was a glut of wings due to so much of the country being shut down and before the food delivery ramped up. IIRC, the owner told me at the time that at 30¢ one beer with the order would pay for the food itself... was still eating overhead and operating costs but most customers would order more than one.

 

[pb4uski]

... We tend to meet at local inexpensive places for "wing night" or something similar. I think the last time we went out we had 2 drinks and a dozen wings each and the bill was about $30. ...

We had an older couple who lived down the road from us who we were friends with. They were very frugal. I remember our last visit with them while he was alive. He was convinced that anyone who paid more than $3,000 for a car was a fool.

We were both snowbirds and they lived about an hour away from us in Florida. One time we visited them an we went to this hole-in-the-wall biker bar and had a couple of pitchers of beer and a number of orders of 25c wings. The bill came and I offered to pick it up. It was about $20!

Good times .. unfortunately they are both gone now.

 

[old medic]

Curiousity has me asking did anyone retire or have parents who retired with very little saved but because of SS and Pensions they managed well?...

My parents, grandparents and great grandparents all seemed to have managed well, but don't know the exact details of who had what. They all were pretty frugal. Only ones surviving are Mother, SS and small pension, Stepmother just SS, both have paid for homes.

"Without a big portfolio." Thats in itself is a good question... What IS a Big portfolio?
We only have about $160K put away and to us, thats HUGE. I'm drawing a pension, and take home more than when I was working (due to 401 contributions). DW will have about the same pension amount as I in 5 years, and adding 30% to her 401. We both will have SS, earliest would be 7 years for me, 9 for her.
We won't be jet setting the world, but feel confident in enjoying our future.

 

[Amethyst]

One problem with a pension is that it's taxed as regular income.

A $10,000 a month pension may be "equivalent" to $2.5 million in savings, but the person with the $2.5M in equities can sell them bit by bit, and only pay capital gains taxes, which is less than the regular income tax.

 

[TheWizard]

One problem with a pension is that it's taxed as regular income.

A $10,000 a month pension may be "equivalent" to $2.5 million in savings, but the person with the $2.5M in equities can sell them bit by bit, and only pay capital gains taxes, which is less than the regular income tax.

That depends on where those equities are, of course: taxable account, Roth account, or tax-deferred account...

 

[ncbill]

One problem with a pension is that it's taxed as regular income.

A $10,000 a month pension may be "equivalent" to $2.5 million in savings, but the person with the $2.5M in equities can sell them bit by bit, and only pay capital gains taxes, which is less than the regular income tax.

Or if that portfolio is in a taxable account they can borrow against it at ~1.5% (negotiated margin rate) to ~3% ("pledged asset" line of credit) through their brokerage, accrue the interest (no regular payments required) & just let their estate settle up.

Such an approach works better the higher your portfolio, of course.

 

[Mulligan]

One problem with a pension is that it's taxed as regular income.



A $10,000 a month pension may be "equivalent" to $2.5 million in savings, but the person with the $2.5M in equities can sell them bit by bit, and only pay capital gains taxes, which is less than the regular income tax.

Its kind of a feel good equivalency, but yes you are correct their are differences. Some good, some bad. Overall, I think the good outweighs the bad, especially knowing I have a COLA with it. But also one can lose out on freebees such as pandemic handouts. Many people with multi million portfolios were getting checks, while pensions that sent went one over income thresholds missed out. Plus one can manage income for health insurance subsidies if they desire, and a pension could inhibit that.
Actually a few thousand yearly of my pension is tax free. I bought some years with after tax dollars and that part of my pension will remain tax free.

 

[Music Lover]

Wing night? You must be rich! Most places here have "market price" on the menu for wings and those that don't are close to $1.50/wing.



It was less than 2 years ago that I was bartending and we'd do 15¢ to 50¢ wings (10 each order)... This was at the height of COVID when there was a glut of wings due to so much of the country being shut down and before the food delivery ramped up. IIRC, the owner told me at the time that at 30¢ one beer with the order would pay for the food itself... was still eating overhead and operating costs but most customers would order more than one.

That was one place. There are other places where it's $15 for a pound of wings and drinks are $6.00. We tend to frequent the less expensive place because the food and drinks are basically the same as more expensive places, but also because it's centrally located and a couple blocks from where we used to work. A few of the group still work so it's convenient for every one.

 

[old medic]

Plus one can manage income for health insurance subsidies if they desire, and a pension could inhibit that.

You haven't seen my Pension... LOL...

 

[GravitySucks]

Market price on wings here too. WTH they're not lobsters! My buddy bought an order of 20 wings last week and it cost $40! I love buffalo wings but not at that price. We found a place with happy hour $1 oysters and $5 pints. The crowds much younger than us, but they think DGF and I are a cute old couple and they treat us well.

Back in 1982 when first married the place on the way home from work had Friday happy hour 10 cent wings and $2 pitchers of PBR. Those were the good old days.

Now get off my lawn!