Decreasing Spending Model?

[stil190]

I agree the interest rate has change my thoughts on retirement!
Increased rates drive my lump sum DOWN i am 55 and turn 56 end of year but if interest rates keep going up I may have to bale !!


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The way my lump sum is calculated, interest rates are set for the upcoming quarter. Turns out that my LS was reduced by the amount of my salary from 1Q to 2Q. So working the entire 2nd quarter for a net 0. Unfortunately this was not clear until it was too late to submit my paperwork. Bummer. Watching the interest rates for 3Q. If a similar reduction occurs for 3Q, 1June will be my date. If not such a big reduction, 1Sept looks like the plan.

 

[USGrant1962]

Thanks for the suggestion on how to cheat Firecalc. Great idea.

I've explored this two ways in FIRECalc. The first is to take 10 years off your "current age" (not your retirement date) in the Spending Models tab under Bernicke. This causes the decline in spending to start at 66, which I think is more realistic if you are healthy and active.

The other is to enter one or more "off chart spending reduction" on the Other Income/Spending tab. So for example you can deduct $XXK/yr at 75 and another $YYK/yr at 85 years old.

I use the second approach for my models so my final old age spending is not as low as the Bernicke model.

 

[Midpack]

While I can believe inflation adjusted spending will decline with age and declining mobility, unfortunately health care spending at the end could spike up for years (though we hope it doesn't end that way). Something to factor in.

 

[imoldernu]

Well, I'm planning on blowing big bucks on a CCRC when my traveling starts to self-limit due to age. So I don't see my spending going down. It will just reorganize. I expect we'll be paying a big chunk up front for the CCRC - some of which should eventually go to our heirs, but won't be available for our use while we are alive.

The CCRC endowment decision is not applicable to all CCRC.s, but a matter of choice during selection. In our case the only requirement for living in CCRC apartments is a one month deposit.

In general, I think many folks see CCRC's as condo's or nursing homes. There are many, like ours, that have multiple choice and sequential options...
Regular stick built homes (where we currently live), rehab units, assisted living units, nursing home units, and memory care units.

I mention this, only because of two cases with which I'm familiar, where people we knew were directed into endowment type quarters, which upfront costs depleted their savings. Endowment in this case meaning about $200K, which ensured continued care. Yes, when the the person passes away, there is a return of unspent monies to the estate, but that's a matter of the choice.

There are a number of online search websites that offer information and contacts to CCRC's. Our CCRC and two other local is not listed, so I wonder about how complete the search would be.

The devil is in the details. Many of our ER members have discovered that locating the right place for their relatives is not a simple operation, and doing it right takes time and major effort.

 

[audreyh1]

A very nice CCRC I looked at online had a pretty hefty up front pay in. I want to consider such a facility in my long-term financial planning, and have a lump sum available.

I was assuming initial independent living in a standalone house, townhouse, or condo, with some housekeeping available, then various other living arrangements as needed.

 

[youbet]

A very nice CCRC I looked at online had a pretty hefty up front pay in. I want to consider such a facility in my long-term financial planning, and have a lump sum available.

I was assuming initial independent living in a standalone house, townhouse, or condo, with some housekeeping available, then various other living arrangements as needed.

Are you looking at a type A, B or C contract?

 

[Winemaker]

The way my lump sum is calculated, interest rates are set for the upcoming quarter. Turns out that my LS was reduced by the amount of my salary from 1Q to 2Q. So working the entire 2nd quarter for a net 0. Unfortunately this was not clear until it was too late to submit my paperwork. Bummer. Watching the interest rates for 3Q. If a similar reduction occurs for 3Q, 1June will be my date. If not such a big reduction, 1Sept looks like the plan.

Most LS are based on PBGC rates that are published monthly. Retirees in May just got a bump.


https://www.pbgc.gov/prac/interest/vls.html

 

[audreyh1]

Are you looking at a type A, B or C contract?

I don't know yet.

 

[daylatedollarshort]

We have quite a few elderly neighbors. Some are starting to have serious health issues and need long term care or in house help. I'd rather plan on spending more like some of them are likely doing now and not have to worry about running out of money when I'm old, disabled and not able to go back to work any longer.