Hi From Philadelphia

[macher]

Hi everyone great to be here. We are originally from Philly, moved to SJ. Now that the kids are grown we moved back to Philadelphia into a house we have owned. Recently completely gutted it and renovated it so it’s pretty future proof.

I’m 53 and my wife is 56. We both plan to retire when we are 67.

We don’t have much saved but we will both get pensions. My pension is a hybrid co-operative defined contribution pension and my wife’s pension is a defined benefit.

Pensions when @ 67 No COLA both 100% joint survivor
Me $26k a year
Wife $21k a year
Total : $47,000 no COLA

Estimated Social Security @ 67
Me $26,100 ($27,792 - $1632)
Wife $16,800 ($18,432 - $1632)
Total : $42,900

Savings
Current $10k
Future $13,000 a year until retirement

Lot / Land empty
$50,000

Home will be paid off August 2029

Expenses if we were to retire today
Housing $34,200
Medical(employer) $4500
Discretionary? Not sure
Total $38,700

When we retire we will stay in current house we are in since it was recently completely gutted and renovated. We would like to develop the empty lot that we own but it would take about $250,000. We would prefer to rent it out if we can versus flipping it.

Thanks and it’s good to be here!

How we looking?

 

[38Chevy454]

Thanks and it’s good to be here!

How we looking?

Welcome to the forum. Good that you both have pension and SS.


Now on your question, I think you are correct that you both need to work until 67 at least. You don't have anything close to enough retirement savings to quit before 67. Even 14 years x $13K = $182K plus growth; so if generous rate of return of 7.2% and using the rule of 72, takes 10 years to double, so make it $400K for discussion. Even though your budget now in current $ is missing many items (such as utilities, food, vehicles buy and maintenance, insurance, prop taxes, to name a few non-discretionary items) it seems that you may still cover expenses with pensions and SS together, you really don't have much safety margin IMHO. Probably can make it if all your assumptions come through. Although a wildly different number, in general the avg for retirees on here seems to be around $70-100k/year for budget. That includes all expenses including discretionary. It seems your pension and SS will be around that amount.



I would sell that lot property and put that towards savings. Empty lot is just an expense around your neck now. To make it income producing requires money you don't have. Just sell it and get out from that expense. Continue paying your near $3000/mo mortgage which I assume also includes prop tax and house insurance? In 9 years that is gone and you can put all of that less taxes and insurance towards savings. Maybe look into refinancing your current mortgage to a lower rate? You can check and see, it does not have to be a 15 or 30 year. You can do less length term. Rates are low right now, potential savings.


There just seems a lot missing in your info to be able to make a good guess. Biggest one is to really understand your budget needs now, and for once retired. There is substantial need to increase your savings. What if one of you has medical or other issue where no longer working and bringing in income? That could really mess up your assumptions.

 

[macher]

Welcome to the forum. Good that you both have pension and SS.


Now on your question, I think you are correct that you both need to work until 67 at least. You don't have anything close to enough retirement savings to quit before 67. Even 14 years x $13K = $182K plus growth; so if generous rate of return of 7.2% and using the rule of 72, takes 10 years to double, so make it $400K for discussion. Even though your budget now in current $ is missing many items (such as utilities, food, vehicles buy and maintenance, insurance, prop taxes, to name a few non-discretionary items) it seems that you may still cover expenses with pensions and SS together, you really don't have much safety margin IMHO. Probably can make it if all your assumptions come through. Although a wildly different number, in general the avg for retirees on here seems to be around $70-100k/year for budget. That includes all expenses including discretionary. It seems your pension and SS will be around that amount.



I would sell that lot property and put that towards savings. Empty lot is just an expense around your neck now. To make it income producing requires money you don't have. Just sell it and get out from that expense. Continue paying your near $3000/mo mortgage which I assume also includes prop tax and house insurance? In 9 years that is gone and you can put all of that less taxes and insurance towards savings. Maybe look into refinancing your current mortgage to a lower rate? You can check and see, it does not have to be a 15 or 30 year. You can do less length term. Rates are low right now, potential savings.


There just seems a lot missing in your info to be able to make a good guess. Biggest one is to really understand your budget needs now, and for once retired. There is substantial need to increase your savings. What if one of you has medical or other issue where no longer working and bringing in income? That could really mess up your assumptions.

Thanks. The expenses I posted included every expense that is needed to keep a roof over our heads. Property tax, home owners insurance, car insurance, gas electric water, cable internet, cell phones, food, gas for car, personal care, house maintenance, car maintenance. The only debt we have right now is our mortgage. Without the mortgage these expenses = $34,200 which will be the same expenses when we retire. The employee sponsored retirement health care is what it would be if we retired today $4500 for my wife and I. The history of that healthcare increases have been pretty good 2-3% a year since I’ve been working there for the last 25 years. Last year there wasn’t an increase from what other retirees told me.

We have a 10 year mortgage right now. The house was already paid off we got a mortgage to gut and totally renovate the house from top to bottom and side to side.

 

[Dtail]

I assume your 1632 number in the SS formula is for Part B premiums. If so and if you are counting it as a net SS number, then there should be a cost of living increase built into that number.

 

[macher]

I assume your 1632 number in the SS formula is for Part B premiums. If so and if you are counting it as a net SS number, then there should be a cost of living increase built into that number.

Yes it’s for part B premiums. I wanted to do a net SS benefit. For instance my mom SS is $2000 a month but she really gets $2000 - $136 = $1864.

Are you saying that what my SS benefit is on my SS right now will be higher in around 14 years because of COLA?

 

[Dtail]

Yes it’s for part B premiums. I wanted to do a net SS benefit. For instance my mom SS is $2000 a month but she really gets $2000 - $136 = $1864.

Okay, so what I am alluding to is that since you are using a net number and the gross portion of that number, I assume you received from the SS site, then you have to gross up the 1632 part b expense by an inflationary amount (some folks use 5% increases) in order to calculate a more reasonable net number at the time of retirement.
At 67 y.o., the part b premium will not still be 1632 yearly.

 

[Dash man]

Welcome to the board! I live just west of Philly in Montgomery County.
I have to agree that you need to sell the land and add it to your investments. Trying to develop land is expensive and it’s easy to overrun costs. You just don’t have the money. Those two pensions with no COLA will be worth a lot less twenty years down the road. So by selling the land now and adding it to you investments will give it some time to grow.
You also don’t know if you both will be able to work until 67. Things happen. I’m 63 and retired seven years ago because of spinal issues. I manage it, but couldn’t work at a desk anymore.
You should consider finding ways to increase your savings rate if you can.
Best wishes!

 

[macher]

Welcome to the board! I live just west of Philly in Montgomery County.
I have to agree that you need to sell the land and add it to your investments. Trying to develop land is expensive and it’s easy to overrun costs. You just don’t have the money. Those two pensions with no COLA will be worth a lot less twenty years down the road. So by selling the land now and adding it to you investments will give it some time to grow.
You also don’t know if you both will be able to work until 67. Things happen. I’m 63 and retired seven years ago because of spinal issues. I manage it, but couldn’t work at a desk anymore.
You should consider finding ways to increase your savings rate if you can.
Best wishes!

Thanks! We started to increase our savings rate. Putting almost $1100 a month into a taxable ETF account. I figure about $250k @ 5% returns when we reach 67.

Reason we have held onto the land is because the taxes on it are only $250 a year and there’s no other up keep. I figured to hold onto to it maybe something will come up. Or we would sell our house for $300k’ish and build something brand new on the land. I already have gotten estimates on developing the land.

 

[Dash man]

Thanks! We started to increase our savings rate. Putting almost $1100 a month into a taxable ETF account. I figure about $250k @ 5% returns when we reach 67.

Reason we have held onto the land is because the taxes on it are only $250 a year and there’s no other up keep. I figured to hold onto to it maybe something will come up. Or we would sell our house for $300k’ish and build something brand new on the land. I already have gotten estimates on developing the land.

Building on undeveloped land with $300k likely won’t let you build much in the Philadelphia area. You’ll likely need a mortgage that will still be around in retirement. And that will be after the construction loan you’ll need to build the home.
I’m just throwing these out there for you to consider.

 

[macher]

Building on undeveloped land with $300k likely won’t let you build much in the Philadelphia area. You’ll likely need a mortgage that will still be around in retirement. And that will be after the construction loan you’ll need to build the home.
I’m just throwing these out there for you to consider.

The lot is 14x51 small lot in the up and coming Point Breeze / Grays Ferry neighborhood.

 

[macher]

Welcome to the forum. Good that you both have pension and SS.


Now on your question, I think you are correct that you both need to work until 67 at least. You don't have anything close to enough retirement savings to quit before 67. Even 14 years x $13K = $182K plus growth; so if generous rate of return of 7.2% and using the rule of 72, takes 10 years to double, so make it $400K for discussion. Even though your budget now in current $ is missing many items (such as utilities, food, vehicles buy and maintenance, insurance, prop taxes, to name a few non-discretionary items) it seems that you may still cover expenses with pensions and SS together, you really don't have much safety margin IMHO. Probably can make it if all your assumptions come through. Although a wildly different number, in general the avg for retirees on here seems to be around $70-100k/year for budget. That includes all expenses including discretionary. It seems your pension and SS will be around that amount.



I would sell that lot property and put that towards savings. Empty lot is just an expense around your neck now. To make it income producing requires money you don't have. Just sell it and get out from that expense. Continue paying your near $3000/mo mortgage which I assume also includes prop tax and house insurance? In 9 years that is gone and you can put all of that less taxes and insurance towards savings. Maybe look into refinancing your current mortgage to a lower rate? You can check and see, it does not have to be a 15 or 30 year. You can do less length term. Rates are low right now, potential savings.


There just seems a lot missing in your info to be able to make a good guess. Biggest one is to really understand your budget needs now, and for once retired. There is substantial need to increase your savings. What if one of you has medical or other issue where no longer working and bringing in income? That could really mess up your assumptions.

Ok I did this all by hand. I figured out what our expenses + healthcare would be in 2031 - 2052 inflating @ 3%. Then I figured out what our SS would be 2031 - 2052. I actually didn’t include my wife’s SS as a buffer if she survives me. I didn’t include discretionary expenses.

Hypothetically if I died let’s say at age 67 my wife would have plenty to cover expenses + healthcare. In fact year 2031 there’s $18k extra she could use for discretionary spending. The ‘extra’ of course goes down about $1k a year. Year 2045 there’s $2 ‘extra’ when she’ll be 81 years old. My wife and I aren’t big discretionary spenders. Yea we like to take 1 or 2 vacations a year, go to the shore, eat out once a week etc.

The project savings @ $13k a year in 14 years would be $250k’ish. My wife wouldn’t need to touch that money until around year 2040. So couldn’t that money continue to grow until then? $400k? She’ll be 76 and she can add $16k a year to income for 24 years if she lives until 100. If we sold the land let’s say for $40k she’ll have $500k year 2040.

Am I off here?

 

[HI Bill]

Welcome! I agree with others...with spendable assets of only $10K, you should sell the land, expand your emergency fund to at least 6 months expenses, and invest as much as possible in 401(k) or IRA. Unfortunately, at this point, there is no emergency fund, and this trumps all. If one of you gets sick, the house or car needs a major repair....

Good luck!

 

[Dash man]

One other thing we all need to consider is the possibility of the social security haircut that is looming in the future.

 

[rodi]

Welcome to the forum.

I used to live just outside Philly in Glenside. Husband was born in South Philly but grew up in the NorthEast. I still have a lot of friends in the area - including a friend who lived at 23rd and Fitzwater for years (A bit north of your area). Good to hear that area is now 'up and coming'... It was pretty sketchy in the late 90's when she lived there. I assume the lot is in a row-home neighborhood?

I would sell the lot at some point - developing it would involve a lot of financial risk - which you don't really have the cash reserves to risk....

 

[macher]

Welcome to the forum.

I used to live just outside Philly in Glenside. Husband was born in South Philly but grew up in the NorthEast. I still have a lot of friends in the area - including a friend who lived at 23rd and Fitzwater for years (A bit north of your area). Good to hear that area is now 'up and coming'... It was pretty sketchy in the late 90's when she lived there. I assume the lot is in a row-home neighborhood?

I would sell the lot at some point - developing it would involve a lot of financial risk - which you don't really have the cash reserves to risk....

23 and Fitzwater is totally gentrified. Point Breeze is too. Grays Ferry where we live is starting to be gentrified. Yea the lot is in a row home neighborhood.

We are originally from Philly. I’m from Overbrook Park and my wife is from Grays Ferry.

 

[rodi]

Good to hear that the neighborhood has improved, my friend's mom still lives there. (My friend moved to Chestnut Hill years ago).

 

[macher]

Good to hear that the neighborhood has improved, my friend's mom still lives there. (My friend moved to Chestnut Hill years ago).

Lot of those houses on Fitzwater I would say are worth $500k+.