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- Apr 14, 2006
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I'm sure there is some connection to early retirement here, although it is not evident to me.
Where I work we don't talk specifics but based on the behavior I see in my co-workers, I'd say that most of our over 40s range from well-prepared to very well-prepared. Our engineers tend to be from a middle-class upbringing and are moderately high in earnings, conservative in nature, and low on spending.
That's the thing. I've seen plenty of people living quite happily on very little, especially as they get old enough that travel and other spending seems more like work than fun.
The adjustment may be hard for some of these people, but they aren't going to starve. Is downsizing into a little apartment when you're too old to work really a disaster?
One of the things that struck me is that Social Security does provide a pretty respectable living if you wait until 66/7 to take it.
They also plan to stop smoking, drinking and start losing weight at the same time.
To the OP: what should they do? They should start LBYM right now and pay down those debts and try to save what they can. Now is not the time to buy a car every 2 years. You have to start somewhere. Having something besides just SS helps. Maybe that extra will allow you to keep a house and pay for gas.
But what if they don't pay down debts and have no savings? Well, that's what SS is for. I've seen plenty of people live only on SS. It is pretty spartan, but doable. Don't plan on travel or luxuries. You may not be able to live in your house because you can't maintain it. But there is subsidized senior housing available.
Then you have one of my BILs. He has intentionally avoided taxes of all kinds. Always doing jobs for cash. Now he begs and will have to try to live on SSI. (Something I learned on this board... even if you totally blew it and don't even have SS, you can get SSI.) I suspect he'll be bugging us for cash too.
I hate to be a downer, but I suspect some Congress in the next 20 years or so will institute some wealth tax (asset tax) to "help" these folks.
Sorry Doc. It doesn't always work that way. I have an 85 yo neighbor that smells of booze sometimes when he walks his dog in the morning. He frequently compains about his hangovers. He told one neighbor who found him stumbling and smelling like bourbon that he thinks he might drink a little too much.If they had a drug or alcohol problem they wouldn't have survived long enough to collect SS, at least for very long.
If they had a drug or alcohol problem they wouldn't have survived long enough to collect SS, at least for very long.
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But I honestly think the doom and gloom of retirement is overblown. Looking at the SS facts, the average married couple is collecting $31K in SS benefits. For about 1/2 of couple like my sister it is more than 1/2 their income but that hardly means poverty.
Uncle Sam will come and take from the savers again, something else you need to plan for
I'll also add this. For those I've seen living on SS alone, they consistently do NOT have a drug, alcohol or gambling habit. Have one of those, and you are sunk.
They will do it the way they have always done it. They will change the tax code. Look at SS. We pay tax on it when it is deducted from our pay. It goes into the "trust fund" that pays benefits. At first the benefits were tax free. Then to make it "fair" the people with very large incomes had to pay income taxes on up to 80% of their SS benefit. This only impacted a very small percentage of recipients. Fast forward to today, a very high percentage of SS recipients have it added to their taxable income and in a few years it will probably be everyone.Hard to discuss this without getting into politics but how do you see them accomplishing this? I mean, ignoring Constitutional issues, how would you take this wealth without causing massive disruption that would exceed the financial gain to the government?
If they take savings accounts, the banks no longer have the assets they lent out as mortgages and loans. If they take stocks, do they sell these off or do we become a socialist country? Real estate and bonds are similar. In the end, other than somehow confiscating the cash that banks keep on hand, where do they confiscate? What happened in Cyprus where they locked the banks and took a percentage? I think it mainly hit large cash accounts.
This could happen, but I think it is more likely that the "Tax free Roth" promise will be kept in a technical sense, but not really. For example, Roth withdrawals perhaps won't be taxed, but will be counted as taxable income in order to determine what tax rate your other income is subjected to. Or the Roth withdrawals reduce deductions at some ratio. Or they increase the amount of SS income subject to taxation. Etc.I can easily see Roth's taxed at a small amount for withdrawls exceeding a rather large amount which grows larger with every passing year. I can see inherited Roth's losing their tax free status entirely.
I don't worry about such people … they are healthy adults and responsible for their own decisions, and there is nothing I can - or should - do to protect them from their choices.The folks who intrigue me are the wider circle of acquaintences/friends or even family members at middle age.
As of September, 60 percent of workers age 65 and older had full-time jobs, up from about 55 percent in September of 2007, according to the Bureau of Labor Statistics. Over that time, the share of workers with part-time jobs fell to 40 percent from about 45 percent.