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Old 04-24-2018, 06:31 AM   #21
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All those times We've spoken with advisors. #6, life expectancy is the only thing I remember them speaking about. They all tried to push the fact that you need at least 80% of current income and expected loans for cars, home, etc for the rest of your lives. Not once did they ever talk about individuals having every thing paid for in retirement.
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Originally Posted by Red Badger View Post
+1.
Until I learned better, I was scared to death about the 80% rule (seemed pervasive on all FA sites, WSJ, AARP, etc). But once I started tracking our situation, I realized that we were living year in-year out on substantially less than 50% of earnings.

80%might be needed for some, but for us, pure hogwash.
It never made sense to me, since I and most folks I knew who were keen to retire ASAP were LBYM types. Obviously if you are making a certain amount, and stashing away a significant portion of it for retirement funds, and living on a smaller portion of it, what you EARN is not the issue. It's what you SPEND that determines what you need.

But statements like that are good because they help identify quickly, the voices you should mute.
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Old 04-24-2018, 07:01 AM   #22
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Wow, tough crowd. Not news here but...

Though most, not all (folks here have missed some of them), here have accounted for those expense/issues, this is by no means a mainstream crowd. I’ll bet many non-LBYMers have failed to account for several of those considerations.
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Old 04-24-2018, 07:13 AM   #23
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I would be curious on how much people actually spend on helping family.
We spent over $70k over the past 6 years helping our daughter-in-law pay off student loans.

We spent about $40k helping our sons with their house downpayments.

The big expenses are seemingly behind us now. We continue to fund 529s for our grandchildren.

Only one remaining parent between us and he is financially fine.
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Old 04-24-2018, 07:28 AM   #24
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Seems about right.

1. Helping family. Was worried about my parents but with my dad working to 80, they are sufficiently set now. Nieces/Nephews have a set amount set aside and the rest will get whatever is left in the will.
2. Big-ticket periodic items These are mostly known.. did HOA Reserve budget so just used that strategy for my own.. just need to understand # of useful years of life and cost and budget accordingly.
3. Entertainment This one to me makes no sense.. its completely discretionary, figure it out.
4. Health care I took a starting $18K ( premium+Out of Pocket Max) and then factored in 11% YoY inflation. Any remaining goes into a "not covered" bucket.
5/6. Long-term care/ Living a long life Honestly I think 4/5/6 kind of blur as if your really sick your not likely to life long, if you need LTC, you won't last that long either. Worst case scenario you need all 3, but I didn't plan for it... if at 90 I'm broke, I'm ok with that.
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Old 04-24-2018, 07:31 AM   #25
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As others have pointed out, most of us have considered these, but I agree that the average person who thinks they can retire at 62 and get by on SS alone is in for a shock.

[*]Helping family

Thank heaven, not an issue. Mom and Dad were savers and my 4 siblings and I learned well. Dad is 87 and widowed and last I heard still had about $500K left and is living in an Independent Living facility. DS and DDIL are very responsible and haven't asked me for a dime but I am funding the granddaughters' 529s. After DH died I started sending his poor-as-a-church-mouse brother and SIL $1,000 a month for 24 months. Just wrote the 18th check yesterday. Not required in the will, but I wanted to do something and that's what DH and I agreed on before he died. It's rescued them from some bad situations including emergency car repairs and a dead refrigerator.

[*]Big-ticket periodic items

Travel is my passion but I have few other extravagances. Can dial back if necessary and I have funds for the occasional "oh, crap" expenses such as home repair and the rare car purchase.
[*]Entertainment

Not much even if you count the seminary classes I'm taking right now.
[*]Health care

This turned out to be far more expensive than I anticipated when I retired 4 years ago at age 61. Premiums last year were $9K/month with crappy coverage. Medicare kicked in on 1/1. Thank heaven I never had any substantial OOP expenses during those years- partly good genes and healthy living, partly luck and the grace of God.

[*]Long-term care

Should be OK- don't have insurance but since I'll no longer be traveling, will have no home/car expenses, can cut back charity to zero, etc. I should be fine.

[*]Living a long life

Happens a lot in my family so I need to anticipate it. Currently collecting SS Survivor benefits and planning on waiting to take my own till age 70 and that will be a nice bump. Keeping average W/D rate under 4%. Had an expensive downsizing in 2015 but withdrew only 3% in 2016 and 2017.
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Old 04-24-2018, 07:34 AM   #26
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if you need LTC, you won't last that long either. Worst case scenario you need all 3, but I didn't plan for it... if at 90 I'm broke, I'm ok with that.
That scares me.

My sister in law is 69 and in an assisted living facility with a dementia wing. It's expensive. She'll also need long-term care soon, and I expect it to last a while since she is otherwise in good health.

I've been young and broke. I never want to be old and broke.
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Old 04-24-2018, 07:49 AM   #27
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15 years into retirement, we are handling all these items without incident. Health care is getting up there at $14k a year. LTC will be self-insured. Our financial plan will see us through to well over 100 before we get better at Blowing That Dough. The buoyant stock markets have made our forecast better than it was 15 years ago when we retired, and the budget has been improved by our low COL in Mexico.

I feel like Alfred E. Newman.
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Old 04-24-2018, 07:51 AM   #28
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Wow, tough crowd. Not news here but...

Though most, not all (folks here have missed some of them), here have accounted for those expense/issues, this is by no means a mainstream crowd. Ill bet many non-LBYMers have failed to account for several of those considerations.

Yes. We are a tough crowd, and perhaps a bit smug about this sort of thing.

During my 40 years practicing dentistry, the lesson was brought home many times, as retired people felt they could not afford to maintain their teeth because they didn't have enough money. Of course, sometimes it was BS. They did have "enough" money, they just didn't want to spend it on teeth, but often they fell into the category of:

1. Didn't plan on life's little misadventures (broken tooth, broken furnace, etc etc)

2. Miscalculated or didn't calculate at all, the effects of inflation. (I took over a practice that was started by my grandfather in 1926. I would occasionally come across an old patient card with numbers like "cleaning $1.00" or "filling $2.00". Another good lesson on the effects of inflation).

Sometimes these would be folks who had survived 30 years or more of retirement and, face it, it was just a different world from what they might have imagined. However, more than once it was someone who FIREd, maybe even younger than I, crying the blues because they couldn't afford the dentistry they needed. I found it hard to summon much sympathy for those folks.

And their teeth are just one part of it. What if their car breaks down, or any of the other many things that can go wrong, do go wrong?

So, yeah, we scoff at these articles because we think we have it knocked, but you are correct. There are many folks out there who need this information. They probably won't heed the advice, but they need the information.
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Old 04-24-2018, 08:34 AM   #29
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During my 40 years practicing dentistry, the lesson was brought home many times, as retired people felt they could not afford to maintain their teeth because they didn't have enough money. Of course, sometimes it was BS. They did have "enough" money, they just didn't want to spend it on teeth, but often they fell into the category of:

<snip>Sometimes these would be folks who had survived 30 years or more of retirement and, face it, it was just a different world from what they might have imagined. However, more than once it was someone who FIREd, maybe even younger than I, crying the blues because they couldn't afford the dentistry they needed. I found it hard to summon much sympathy for those folks.

And their teeth are just one part of it. What if their car breaks down, or any of the other many things that can go wrong, do go wrong?
I agree- my FB feed includes many "Suggested Posts" that are actually a link to a Yahoo search on "Affordable Dental Plans" and I can't tell you how many whiny posts complain that dental care should be included in Medicare. Well, it could be, but the premiums would jump and I'm sure that's not what the posters really intend. Dental emergencies are one more "oh, crap" expense that people don't have money for if they make the decision to retire based only on whether or not SS will cover their typical monthly expenses.

The pain I had one night when an abscess flared up after a transatlantic flight was some of the worst I've ever experienced (and I've been though childbirth). I'm fortunate- I can get whatever emergency dental care I need from providers I trust without worrying about how to pay for it.

"I hope it won't happen to me" is not a plan.
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Old 04-24-2018, 09:47 AM   #30
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Originally Posted by Red Badger View Post
+1.
Until I learned better, I was scared to death about the 80% rule (seemed pervasive on all FA sites, WSJ, AARP, etc). But once I started tracking our situation, I realized that we were living year in-year out on substantially less than 50% of earnings.

80%might be needed for some, but for us, pure hogwash.
Been FIREd for 2.5 years and our retirement income comes in at a little less than the National average household income and right at 40 percent of my final working income. It was that high working income that allowed me to FIRE at our current retirement income. Those who earn the average American household income probably do need to replace close to 80 percent of pre-retirement income in retirement. 80 percent of the National average household income is just about where my retirement budget resides.
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Old 04-24-2018, 10:09 AM   #31
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2. Miscalculated or didn't calculate at all, the effects of inflation. (I took over a practice that was started by my grandfather in 1926. I would occasionally come across an old patient card with numbers like "cleaning $1.00" or "filling $2.00". Another good lesson on the effects of inflation).
Of course a lot more than inflation is shown here.
Otherwise you would be charging $15 - $30 for a cleaning or filling.
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Old 04-24-2018, 01:46 PM   #32
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I agree- my FB feed includes many "Suggested Posts" that are actually a link to a Yahoo search on "Affordable Dental Plans" and I can't tell you how many whiny posts complain that dental care should be included in Medicare. Well, it could be, but the premiums would jump and I'm sure that's not what the posters really intend. Dental emergencies are one more "oh, crap" expense that people don't have money for if they make the decision to retire based only on whether or not SS will cover their typical monthly expenses.

The pain I had one night when an abscess flared up after a transatlantic flight was some of the worst I've ever experienced (and I've been though childbirth). I'm fortunate- I can get whatever emergency dental care I need from providers I trust without worrying about how to pay for it.

"I hope it won't happen to me" is not a plan.
Yep... just as useful as "It ain't hurting today, so why mess with it?"
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Old 04-24-2018, 03:23 PM   #33
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I sometimes wonder about the people at a former employer, a Prudential sub, who accepted early retirement packages in the 1990s when I was there. The ones I knew were clerical types who started there right out of HS so they had 20 or 30 years in, and still had a long life span ahead of them. Many said they were just going to travel and enjoy their grandkids. Pru's pension doesn't have COLA. I wonder how the ones who are still alive are doing after 20 years of inflation.
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Old 04-24-2018, 05:16 PM   #34
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That's my one question quiz for any FA I meet. As soon as they start spouting % of income needed in retirement I'm done listening.
Amen to this. What I made in annual income is interesting, but not necessarily relevant to what I need in retirement. If I was living paycheck-to-paycheck, perhaps this is true. But if that were the case, I wouldn't be RE...
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Old 04-24-2018, 05:28 PM   #35
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Suspect this is related to the other problem everyone on the forum swears they won't have, which is being bored and looking for things to do after retiring.

People feel at loose ends and then see their retired friends having fun, so they get sucked into tours, resorts, eating out a lot, etc. and suddenly it all adds up.

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Seems about right.

3. Entertainment This one to me makes no sense.. its completely discretionary, figure it out.
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Old 04-24-2018, 06:01 PM   #36
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I have been retired 17 years. The OP list makes a bit of sense to me, from seeing other retirees and what they do.

Personally I stay well within my budget.
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Old 04-24-2018, 07:25 PM   #37
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I always found that 80-percent-of-income requirement to be BS. Back in the early 1990s, when I was still working (full-time), HR gave out a binder with a floppy diskette (yes, one of those!) and a guide where we could enter data to project our retirement budget. I remember thinking how ridiculous that 80% assumption was even then. I still have the binder, I use it to lift the stand on my floor fan, that's all it is good for.


And the 80% figure never made sense to me once I switched to working part-time back in 2001 and I cut my pay by nearly 50%. And 6 years later, I cut it again. So, I ask the obvious question, 80% of WHAT?


One unbreakable condition for my being able to ER was that I could maintain my day-to-day lifestyle without making any changes. I already live rather frugally, but if I need to send a little bit more now and then on something, I know I can do it without worrying about busting my budget.


As for the 6 items highlighted in this thread, I can say the following:


Helping Family - My dad is 87 and has been retired since 1994, a year before his wife (my mom) passed away. He is not wealthy but has always lived a LBYM lifestyle. He has some savings to supplement his SS and a small pension. A FA he has had since 1996 helps him out for a fee. I am not crazy about that, but I have reviewed his portfolio with her and am okay with it. An annuity he has is not subject to the 1% AUM fee, at least. I do not want the burden or responsibility of maintaining his portfolio, but I do monitor it from time to time.


My brother is wealthier than I am, so if my dad ends up needing us to support him, it won't be a problem.


Big Ticket Periodic Items - I happened to buy a new car in 2007, 18 months before I ERed in late 2008. I drive very little, around 3,000 miles per year, and my car is kept in a heated, indoor garage. My plan is to be able to keep the car for at least 16 years because that is when the first of my "reinforcements" arrive. (I have a slush fund, or an expanded EF, which I can use to buy a new car should the need arise.) Right now, I am living only on the taxable part of my portfolio. But starting at age ~59.5, I can begin tapping into my rollover IRA in an unfettered manner. A few years later, I will be able to take SS and bein collecting my frozen company pension. That is why my financial picture only improves as I get older. The years between when I ERed (2008) and 2022 (when I turn 59.5) are the more challenging ones.


Entertainment - I spend very little on that, as I don't like to travel any more. All those years of commuting burnt me out from wanting to travel much any more.


Health Care - this has been by far the most volatile expense since I ERed. Prior to the ACA, I saw big increases in my HI premiums in 2010 and 2011. I made myself underinsured for a few years before the ACA exchanges were created in 2014. Premiums rose again but at only the level they were in 2011. But I also got sick in 2015 and was diagnosed with Diabetes. It has added some to my medical expenses but not a lot. I am still 10 years away from Medicare, so these costs may still rise a lot in those years.


Long-Term Care - I don't have any insurance for this. I'll self-insure.


Living a Long Life - I wonder if Diabetes will reduce my life span. The men in my immediate family have always lived into their 80s or longer and outlive the women. With my financial picture only getting better as I get older (I ran Fidelity's RIP program) , especially after age ~59.5, I am not worried about outliving my money.
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Old 04-25-2018, 07:47 AM   #38
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We have to constantly help DW's father every time there is an unexpected expenditure. He lives alone in a 3 bedroom house and does not want to move. He also insists on spending $200pm on Smokes and $100pm on Lottery tickets. What makes it worse is he is 4000 miles away.
Is it time for an intervention??
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Old 04-25-2018, 08:40 AM   #39
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In truth, no one really knows how these things will impact retirement because no one has a crystal ball. One calculate the odds and can see whether or not they are in ones favor. So folks choose retirement based on the odds that these items will have minimal impact.

So for me, I; just look at the odds:

  1. Helping family - low odds of impact. My parents are deceased. DW's mother is still alive but is very well off. Most of our siblings and nieces and nephews are fiercely independent and does not like asking for help. We have budgeted gifts to our kids and to nieces/nephews so that aspect has been taking into account.
  2. Big-ticket periodic items - Low odds of impact. . We have budgeted for major repairs, and some (like roof and room renovations) we have completed in the last few years and should not come up again in our lifetime. We look at cars for function and not glamour, so nothing extravagant there. We will do more traveling but can control and dial back if needed.
  3. Entertainment - low odds of impact. DW and I are cheap dates <grin>. Much of the things we enjoy are free or very cheap.
  4. Health care - medium odds. The premiums are down from high to low odds now that I am getting severance which cuts the premiums before Medicare in half. Neither of us have any chronic health conditions are are active, but that can change suddenly.
  5. Long-term care - medium to high odds. We do not have a LTC policy and have planned to self-insure. Our pension and SS income will be high enough to give us very low a SWR, and we think we have put aside enough if either of us should encounter that. Neither of our families have any history of Dementia. But this is an area we will continue to evaluate now.
  6. Living a long life - Who knows. My Dad lived to 72, my Mom to 86. I am healthier at 60 than my Dad was, so maybe I'll outlive him. My Mom was very healthy until about 80, was less healthy but still very active until around 84, then her health slowly declined. DW's Dad lived to 70, her Mom is 88 and still active. So we just do not know.
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Old 04-25-2018, 11:41 AM   #40
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We are spending more on entertainment then we thought we would because we have the time and energy. We intend to have fun while we can. I am surprised people are talking about helping nieces/nephews and sibs. I would only help a sib if they had a disability etc and extreme circumstances. We helped our kids when they were young and poor and needed it. I can see helping parents if they are in dire straits. I guess it also depends on the level of wealth one has as to how generous you can afford to be. However, I would not put my own retirement at jeopardy for anyone.
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