What If You Run Out of Money?

[Totoro]

In Belgium you basically end up on government support. You won't starve, you won't die, you'll have shelter but your freedom will be severely limited.

 

[athena53]

One can wake up one day, find one's spouse dead, and find that his pension has now disappeared, and your family social security benefits are now drastically cut.

It happened to my grandfather's second wife. When her first husband died, not only did SS reduce by 1/3, but she found that her late husband's pension had no Survivor benefits. Fortunately, a married person can no longer choose a higher monthly pension without a Survivor benefit (or with a very small Survivor benefit) without the spouse's notarized signature.

I don't think I'll run out of money- one fear that has always driven my planning and saving is the fear of being old and poor. I have a couple of non-COLA pensions and very healthy SS on my own record as well as a respectable investment portfolio. Unless I buy a yacht or make a disastrous marriage, I should be fine.

As for the general population- I've posted here before my concern that, as the population ages, the number of old people needing social safety nets such as subsidized housing and Medicaid nursing home beds is going to increase. It's going to get expensive for the taxpayers and criteria will tighten and the quality of what's provided will deteriorate. It won't be pretty.

 

[marko]

One can wake up one day, find one's spouse dead, and find that his pension has now disappeared, and your family social security benefits are now drastically cut.

Oh, and one can discover that one's spouse ran up huge bills without telling others, that your rent is 3 months overdue, and that money you thought you had in the bank is now completely gone.

Sadly, that is real life.

And therein is the sad reality of life.

Things like this do happen to people all the time. It may be real life for some but not likely for many people on this forum.

The world is full of people who just don't think about 'what if', look ahead or keep track of their money. Suddenly 'discovering' that a spouse's pension and SS is gone at death is amazing to me. Nobody saw that as even a remote possibility?

Then there are those who are vigilant about where the money goes and where it comes from.

I think the general mood of this thread addresses the latter but there is often little to be done to help the former.

Not trying to be cruel here but there will always be people who just can't manage their money for any number of reasons. And then there are those who can and do.

 

[CaptTom]

Is it worth taking a couple more years off THIS end of my life (by continuing to work, I mean) to make sure I have money at THAT end? (<--I know that's COMPLETELY subjective. But doesn't anyone else think about that?)

I think that's the right question to ask.

Think about your needs and abilities now, and your needs and abilities then.

As you age, your world shrinks. You don't want to go as far, as fast. And often can't.

My former next-door neighbor swore she'd never leave home, never allow anyone to put her in a nursing home.

When she finally got there, she loved it. They cooked, they cleaned; it was like having servants. There were people her age around all the time.

Maybe "worst case" isn't so bad after all.

 

[Alan]

One can wake up one day, find one's spouse dead, and find that his pension has now disappeared, and your family social security benefits are now drastically cut.

I'm far from an expert on SS but I thought the surviving spouse began receiving the SS of the deceased spouse. On the strength of that assumption I am planning to wait until 70 before claiming SS as a bit of extra insurance for my wife.

 

[REWahoo]

The world is full of people who just don't think about 'what if', look ahead or keep track of their money. Suddenly 'discovering' that a spouse's pension and SS is gone at death is amazing to me. Nobody saw that as even a remote possibility?

Then there are those who are vigilant about where the money goes and where it comes from.

Yet even the vigilant can get blindsided.

My SIL was in good shape financially when my brother died. Yes, her SS income was reduced, but she had spousal benefits from his pension, which also included Medicare supplemental insurance, plus some modest savings. They had planned for this possibility and her income as the surviving spouse was comfortably set.

Then the company (Kodak) declared bankruptcy, the insurance disappeared and the pension payments were reduced to only what the PBGC would cover. She went from comfortable to just getting by.

So even those who DO "...think about 'what if', look ahead or keep track of their money" can end up with money problems.

 

[Texas Proud]

But...one doesn't simply wake up one day and discover that all the money is completely gone!

In real life, you have the opportunity to watch your spending v income and look ahead 5, 10 years on how those two work out.

If you were to see that money is running low you should have years to respond to that by cutting back and adjusting. What kind of fool would keep his spending quo when he knows he'll be broke in 10 years? How many of us here RE'd unexpectedly and found ways to cut our expenses quickly and dramatically.

Your thinking is much different than a lot out there.... I have seen and heard about extended family members who have received a windfall in one way or another blow through that dough and then be surprised there was none left... I had a BIL that kept playing games and was hoping it would all work out... sad to say that it took him passing for it to work out for my sister... if he were still alive today they would only be living off her pension and SS... but that still would be plenty of money to live off...

 

[The Cosmic Avenger]

I figure it this way.... if those of us with six or seven figure retirement portfolios run out of money, unless it is because we made some really bad financial moves, there will be a whole lot of others in a world of hurt. I can always sell the real estate and will still have SS. DW gardens, we have camped before.... we have kids that we can turn to.... we'll find a way.

Respectfully, it's not just a lack of foresight or planning, but a combination of bad luck and missing details like exclusions or caps on healthcare insurance can cost into the six or even seven figures, and bankrupt people who have otherwise saved and planned diligently.

I know we can and should try to plan for those things, but let's not pretend that everyone who runs out of money should have been able to foresee and forestall that outcome.

 

[Big_Hitter]

I'm wondering--what would happen to someone who literally ran out of money before they died?

.

we call that actuarial ruin

 

[MRG]

Yet even the vigilant can get blindsided.

My SIL was in good shape financially when my brother died. Yes, her SS income was reduced, but she had spousal benefits from his pension, which also included Medicare supplemental insurance, plus some modest savings. They had planned for this possibility and her income as the surviving spouse was comfortably set.

Then the company (Kodak) declared bankruptcy, the insurance disappeared and the pension payments were reduced to only what the PBGC would cover. She went from comfortable to just getting by.

So even those who DO "...think about 'what if', look ahead or keep track of their money" can end up with money problems.

A former co-w*rker was hit by the same organization. He's 70 yo trying to hustle.

 

[mountainsoft]

MS, won’t Medicaid kick in once she runs out of money?

If you're referring to me, then yes, mom should qualify for Medicaid once her personal assets are below $2000. I think they give her an "allowance" of around $70 for personal needs, but that won't even pay for her cable bill (all she does is watch TV).

Also, most assisted living homes in our area are NOT licensed to accept Medicaid. That was one of the things we looked for when we were trying to figure out where to move her. The ones that do take Medicaid require you to pay out of pocket for at least two years before they'll take Medicaid.

I don't know if Medicaid will pay any of her other expenses (utilities, etc.). I'm just planning that I'll have to pay those expenses (about $500-$600 per month) out of our own retirement budget. If Medicaid pays more it will be a pleasant surprise.

 

[bingybear]

Well, all these calculations we go through before retiring tell us when we'll "run out of money". That's what I'm referring to.

When I do my calculations using RIP, I typically look at the worst market they typically model the worst case they usually provide for individuals. I run what I expect is a good planning age and extend it a decade or so. Or I increase my spending.

If you're planning for an average market or a short retirement, then I would rethink your plan. If you are planning assuming a very negative market, you will likely end up with more $ as the end than the plan.

I know some people who did not plan for retirement, were low earners and retired on SS taken early. Life is tight. Their hospital visits get written down. I've paid for some of their major dental work. Medicaid I think helps those with really low SS in the end and charities will help too.

This is why people have margin in their plans.

 

[Mdlerth]

No plan survives contact with the enemy

There are good plans, bad plans, no-plans, etc., and then life happens.

My own parents retired in 1992 with zero debt, one COLA federal pension and one SS, some AT savings plus several hundred large in an IRA. They moved to an LCOL and their expenses were about one third of their income. Should be golden, right?

They had so much surplus $$ they gifted tons to my sisters for many years and it still piled up. They enjoyed a very long time in a well-planned retirement.

But even a solid plan can be derailed if it encounters a heavy enough burden. Memory care costs the earth, and if they live another 4 years it will exhaust their savings. It's strange that the most expensive period of their lives comes with the worst quality of life.

 

[mountainsoft]

I would speak to an elder-care attorney about this.

My understanding is that any expenses you pay for your mother would be considered gift income and would reduce her medicaid for long term care dollar by dollar, assuming that you don't submit fraudulent paperwork when you re-qualify each year.

Hmm... I hadn't considered that aspect. Thankfully we still have several years before we have to worry about it. I'll probably check with an elder-care attorney when the time gets closer. If she doesn't live to 80+ she won't outlive her funds. Last year I didn't think she would last another year or two. Today she's doing better, so she could very well make it past 80 (though most members of our family died in their 60's and 70's).

 

[gwraigty]

I'm far from an expert on SS but I thought the surviving spouse began receiving the SS of the deceased spouse. On the strength of that assumption I am planning to wait until 70 before claiming SS as a bit of extra insurance for my wife.

That is true, but with both spouses alive, the spousal benefit does increase the total household SS income.

 

[NW-Bound]

Yet even the vigilant can get blindsided.

...

So even those who DO "...think about 'what if', look ahead or keep track of their money" can end up with money problems.

Hmmm....

I guess I should not be blowing more dough, and just keep my WR at the current 2.4%, which will get even lower when we draw SS.

 

[PatrickA5]

My 59 YO SIL lives on $1,100/mth SS Disability and Medicare. She makes another $100 a month or so dog sitting. That's it. No savings.

There is a huge amount of retirees out there that live on their SS. While we all worry about our 6 and 7 digit retirement savings running out 30 years from now, the fact is there are many who are retired with basically nothing. No, they don't live extravagant lives, but they get by. My DF lived 32 years of retirement on a very small pension and SS. He spent very little from age 75 - 97. He was lucky in one respect in that he was healthy enough to live in his house until the very end.

I think for the most part people adjust their spending to their means - especially when they don't have savings.

 

[CRLLS]

No, not yet! If you run out of money (and SS is not adequate to pay the bills), and you own a house, but can't pay the property taxes, you may lose the house. Medicaid could step in and help with your medical care, but unless you qualify medically, would not pay for long time care.

Are you asking because you haven't saved anything, or don't want to save anything?

FYI, in Illinois, seniors can defer their real estate taxes:

Senior Citizens Real Estate Tax Deferral Program
This program allows persons 65 years of age and older to defer all or part of the real estate taxes and special assessments (up to a maximum of $5,000) on their principal residences. The deferral is similar to a loan against the property's market value. A lien is filed on the property in order to ensure repayment of the deferral. The state pays the property taxes and then recovers the money, plus 6 percent annual interest, when the property is sold or transferred. The deferral must be repaid within one year of the taxpayer’s death or 90 days after the property ceases to qualify for this program. The maximum amount that can be deferred, including interest and lien fees, is 80 percent of the taxpayer’s equity interest in the property

 

[imoldernu]

I guess I was the last person to know about:

TANF
Supplemental Security Income
Earned Income Tax Credit
Housing Assistance

... and that while the Federal Government funds these benefits, the states administer the programs, with some states going beyond the government benefits.

https://www.thebalance.com/welfare-programs-definition-and-list-3305759

Now that I understand what each of these programs offers, and the qualification rules, I feel safer about the possibilities that some day, we'd have to live in a tent. Better to know now, than when something happens.

 

[athena53]

That is true, but with both spouses alive, the spousal benefit does increase the total household SS income.

Right- if the household SS is 150% of the larger wage earner's primary amount (100% for the wage earner plus 50% Spousal benefit), after the death of either partner, SS goes down to 100% of the primary amount, so a 1/3 decrease. (This is for the case where the spouse is not entitled to higher benefits on his/her own record.) The Survivor Benefit from a pension can decrease, too- even without the Spouse's signature it's usually possible to elect SOME decreased Survivor benefit in return for a higher amount while the wage earner is alive- I think with mine I could elect a 75% Survivor benefit without DH signing off on it.

And yes you'd hope that couples would discuss "what-ifs" and talk about these decisions but it doesn't always happen.

 

[gauss]

I guess I was the last person to know about:

TANF
Supplemental Security Income
Earned Income Tax Credit
Housing Assistance

... and that while the Federal Government funds these benefits, the states administer the programs, with some states going beyond the government benefits.

Now that I understand what each of these programs offers, and the qualification rules, I feel safer about the possibilities that some day, we'd have to live in a tent. Better to know now, than when something happens.

Good. I was hoping to relieve some of the anxiety that may be stirred up by this thread by making my post.

Be sure to perform your own due diligence on these safety net programs and understand that availability may vary by location/state, government funding level, and changes in law.

-gauss

 

[happy2bretired]

Social Security, Medicare, Medicaid (if your income is low enough), meals on wheels.

Most communities have subsidized elderly housing. We have possibility just a half mile from our current house, I believe the rent is capped at 30% of income.

I don't expect that I'd be starving, homeless, or dying of an easily treatable illness.

That's all fine until I need a nursing home. I'm not thrilled about ending my days in a Medicaid-only facility.

My aunt lived in a small town subsidized housing apartment. She had SS and Medicare but not Medicaid.

I served as her executor. She gave me permission sell her car right after she went into a nursing home. That money was added to her bank account. I paid all of her bills.

I spoke with someone about when should I begin worrying about signing up for Medicaid. She asked how much money was left and I told her and she laughed. She told me not to be concerned until about $10k was left.

My aunt was in the nursing home probably a year or two. She was in the hospital a few times while living in the nursing home. Every time she was dismissed from the hospital she required skilled nursing care and that was covered by Medicare for 90 days. So that saved 90 days of her money from being spent from her bank account every time she was dismissed from the hospital.

By the time she died, she still had $100,000. I have no idea if the Medicare rules about 90 day coverage is still the same today but probably is.

 

[Mr._Graybeard]

This thread reminds me of a story in the Milwaukee Journal Sentinel a number of years ago about a 100-year-old woman who was working as a greeter at Walmart. Unfortunately, she had some 70-year-old ideas about racial relations that got her and a customer into an altercation that brought in the law.

Hope you all can connect to this link -- it's an archived story.

Thwarting theft part of job for Wal-Mart greeter, 100

 

[SecondCor521]

I wonder about people who might not have the mental acuity (or family members willing to help out and who have mental acuity) to manage and coordinate the social safety net pieces which do exist.

My Dad is 82 now and either can't or doesn't want to understand his taxes (granted, they're complicated) and has put all of his payments and income on auto-pilot so he doesn't forget. I've even given up on trying to unsubscribe him from Amazon Prime, because he buys stuff there and accidentally keeps resubscribing (granted, Amazon makes it easy to make this mistake). I'm not sure how he'd do if he didn't have me looking over his shoulder. To be clear, he has asked me to do so and appreciates my help.

 

[athena53]

My aunt was in the nursing home probably a year or two. She was in the hospital a few times while living in the nursing home. Every time she was dismissed from the hospital she required skilled nursing care and that was covered by Medicare for 90 days. So that saved 90 days of her money from being spent from her bank account every time she was dismissed from the hospital.

By the time she died, she still had $100,000. I have no idea if the Medicare rules about 90 day coverage is still the same today but probably is.

Yes, Medicare does still pay for "rehab" after you're discharged from a hospital. There are horror stories here too, though. Apparently it's possible for a hospital to admit you "for observation", even if you stay there for a couple of nights. In that case, you were never admitted, so Medicare doesn't cover rehab. The other is Medicaid patients being sent to the hospital from the nursing home and then they find when they're discharged that their bed has been occupied by another Medicaid patient and they have nowhere to go. In your Aunt's case, she was self-pay so that was less of a risk.

I'm a bit wary of the whole business of nursing homes and Medicaid. My Uncle developed Alzheimer's and my Aunt, after years of heroically trying to keep him at home, got him into a nursing home. They had enough money that he'd be able to self-pay for a couple of years but of course he went into a Medicaid bed (basically a room for two with a curtain between) immediately.

As my Aunt was getting to the point that their savings had dwindled down to the point that he'd qualify for Medicaid (and my Aunt was losing sleep over her own financial future), the nursing home suddenly jacked up the rates- like 30%. She put him in another nursing home and shortly after that she was told that there was not much else they could do for him and they were giving him palliative care only. He died about a month later. I'd visited him 6 months before and even then he was out of it most of the time.

Did nursing home #1 increase the rates to get Uncle out before they had to accept significantly-lower Medicaid reimbursements? Did nursing home #2 decide it was time for palliative care only because Uncle was close to relying on Medicaid?

Just because you're paranoid doesn't mean they're not out to get you.