Scott Burns nails it

[astromeria]

...for his middle class/upper middle class readers. I bet this is a common situation in suburbia today, and Scott gives excellent, compassionate advice. I hope his column is carried in newspapers besides the Dallas Morning News.

http://tinyurl.com/n6kg2

 

[Andre1969]

If you ever have trouble getting him on the Dallas Morning News, Scott Burns also shows up at http://www.uexpress.com/scottburns/

 

[Cut-Throat]

...for his middle class/upper middle class readers. I bet this is a common situation in suburbia today, and Scott gives excellent, compassionate advice. I hope his column is carried in newspapers besides the Dallas Morning News.

http://tinyurl.com/n6kg2

You wonder if people like this do the math at all. - But maybe they were projecting that they would get an average of 20% a year returns for life. They probably would be home free then.

 

[astromeria]

I suspect they never "did the math," didn't even know what "the math" was, and don't even know what their returns are. Just attempting to continue their lifestyle without thinking about it. Presumably they're ~3 years into retirement with a nearly 10% WR and just now noticing it might be a problem--better a little late than very late or never!

 

[Cut-Throat]

I suspect they never "did the math," didn't even know what "the math" was, and don't even know what their returns are. Just attempting to continue their lifestyle without thinking about it. Presumably they're ~3 years into retirement with a nearly 10% WR and just now noticing it might be a problem--better a little late than very late or never!

Yup, if I were in their shoes at this time, I'd be executing the 'Trout Bum in trailer park down by the river' Lifestyle! 8)

 

[Nords]

...for his middle class/upper middle class readers.

I bet he gets that question in a thousand e-mails/letters a week.

Kinda like this board's "Whaddya DO all day!?"

Apparently retirement is only for people who can do math. For everyone else, there's Social Security...

 

[JPatrick]

Actually, Scotty gave them the good news. (sometimes called hope)
The bad news is that if we should see a 25% market decline these folks are toast no matter what they do.  In fact, toast would be a treat compared to all that cat food.

I'm not forecasting a 25% decline, everyone knows that's impossible

 

[maddythebeagle]

I think he forgot a key solution (as used by some on this board)....to afford the Lexi/Mercury Mountaineers....send the spouse to work....

 

[Martha]

AARP needs more articles like this in their publications, instead of the goofy dreck they mostly publish.

 

[IHateCNBC]

$1,000 a month car payment. Ouch.

 

[Andre1969]

I think that $1000 per month is for the Mountaineer and the mortgage, not two car payments. At least that's the way I read it.

 

[Cut-Throat]

Actually, Scotty gave them the good news. (sometimes called hope)
The bad news is that if we should see a 25% market decline these folks are toast no matter what they do. In fact, toast would be a treat compared to all that cat food.

I'm not forecasting a 25% decline, everyone knows that's impossible

A 25% Market decline would not ruin them. A 4% WR has built into it a decline of probably greater than this.

What they have to do is get their spending under 4%, make sure their portfoilo is diversified (they never said how the $400K was invested other than Mutual Funds - Could be a Balanced one that contains Bonds)and they can weather market declines worse than this! - As long as they don't panic at the decline and put it into CDs.

 

[mickeyd]

You wonder if people like this do the math at all.

"Oh it's a math thing...now you tell us!"

 

[Scrooge]

Apparently retirement is only for people who can do math.

Math and history, I'd think. There were people in the late 1990s who could do the math, but knew little to no history and thought that double digit+ returns would continue forever.

 

[JPatrick]

A 25% Market decline would not ruin them. A 4% WR has built into it a decline of probably greater than this.

What they have to do is get their spending under 4%, make sure their portfoilo is diversified (they never said how the $400K was invested other than Mutual Funds - Could be a Balanced one that contains Bonds)and they can weather market declines worse than this! - As long as they don't  panic at the decline and put it into CDs.

Of course you're assuming a wave of the wand makes them model money managers overnight.  My point is, if they continue anywhere near their present course, a 25% drop would spell huge trouble and fast.  Sure you can always revert to the magic 4%,  so long as there is 1$ in the stash you can withdraw 4%.  I think I saw an open spot down under the bridge today.
Seen it more than a few times

 

[Glo]

In my wildest dreams, I can't image retiring with this kind of debt! DH is retired and I'll be retiring in 2-1/2 years (working only for health insurance), and we'll be living debt free on about $2,500/month and it won't be painful for us.

 

[Delawaredave]

I like Scott Burns columns.

I do "understand the math" but I gotta admit, when I first read the basic data of their situation - I thought "they are not in too bad shape".

I saw 68 years, 400 grand, modest house numbers - my "gut" figured they'd run out of time before  they run out of money.

Numbers say the opposite.   Numbers trump "gut".

The "joint life expectancy" creates the disconnect - I would never guess that 2 people at 68 need to  plan financially on 25 years.

As I typed that, I still can't believe it.

Facts trump "gut"......

 

[Andre1969]

Aren't the people in this situation at least far out enough to see the trainwreck happening, and hopefully be able to avoid it? At this point they're still about $400K away from depleting their nest egg, and have at least caught it. What I can't understand is the people who would keep depleting it until there was nothing left and THEN cry for help.

Seems to me that unless you were practically gambling your money away, or making really stupid purchases, that these kind of "train wrecks" should be fairly easy to avert, as the warning signs are often years away, if you pay attention to them.

 

[dumpster56]

Aren't the people in this situation at least far out enough to see the trainwreck happening, and hopefully be able to avoid it? At this point they're still about $400K away from depleting their nest egg, and have at least caught it. What I can't understand is the people who would keep depleting it until there was nothing left and THEN cry for help.

Seems to me that unless you were practically gambling your money away, or making really stupid purchases, that these kind of "train wrecks" should be fairly easy to avert, as the warning signs are often years away, if you pay attention to them.

Part time job? Walmart Greeter? McDonalds lunch worker?
Part time librarian? Even newspaper delivery in the mornings?

 

[Scrooge]

I saw 68 years, 400 grand, modest house numbers - my "gut" figured they'd run out of time before  they run out of money.

Their house numbers are fairly modest, but they apparently spend a lot of money on, um, well, I am not sure what it is that they spend it on. But when you add up their SS ($21.6k/y), their regular monthly withdrawals ($24k/y) and their additional withdrawals ($15k/y), they are spending over $60K/y! That's a pretty extravagant lifestyle for a couple with a modest SS pension and $400k in savings.

 

[audreyh1]

Scott Burns did a good job with that one.  I'm eternally grateful for Scott Burns - he turned me on to the Trinity Study along with a very good history/overview of it's origins.  His financial advice is truly written for the layman.

Downsizing the home and car was VERY VERY good advice.  I hope they take it.

Audrey

 

[IBWino]

This couple's situation is very similar to what my parent's situation would be if they were to retire today.  But fortunately, they are both still working, mostly because they enjoy it.  In five years, they may be unable to work.  I cannot imagine them being able to have a reasonably comfortable retirement unless they sell their home and move to a mobile home park or out of state, and they will be very unhappy having to do either.

 

[spideyrdpd]

Must be the new math
I know people like this living in expensive homes in south florida. One has the husband that has gone back to work full time. The wife now works part time. If you discuss money its all because of the stock market decline. No mention of the leased camry in the driveway.The fees for there expensive home in a place with the golf course and the 5 star dining. Which I dont even thing they use or care about
             One of the things Suze Orman says about financial problems is it often starts with a lie. Or is it just plan denial ?

 

[LOL!]

The idea that these folks did not do the math or really think about the numbers made me think of the couple in the Frontline report on retirement last year. That couple simply cashed in their 401(k) and moved it somewhere else. They actually withdrew the whole thing, paid lots of income tax on it and (I think) invested it in a not-so-good way. The husband had to go back to work to make end meet. Was this the fault of the plan at EDS (his orginal employer) or his own fault for unwise decisions?

Every day, folks leave companies and take their 401(k) money and give it to a financial advisor who immediately skims off 5.75% and a percent or two every year thereafter.

That's life.

 

[mickeyd]

Every day, folks leave companies and take their 401(k) money and give it to a financial advisor who immediately skims off 5.75% and a percent or two every year thereafter.

Good point LOL. Of course that is after thay have already paid fees, commissions etc when it went into the 401(k). Fees on top of fees, on top of fees,eon top...