Retirement planning

[JimD]

How much retirement planning did you guys do and what was the most useful? I get a significant fixed pension from work (2 actually) that increases fairly quickly until I turn 60 and then more slowly after that. We have savings and reasonable sized 401Ks. I've started to track what we spend to get an idea what we need in retirement. All this is a fair bit of work. I have an investment advisor who wants to do a plan for me but I'm putting him off. He's going to want to know what we need in retirement and I don't feel like I know that, yet. My goal is for us to be able to cover all the day-to-day expenses from the pensions + SS (most of it will be pensions). The 401K money will be for vacations, emergencies, and helping the kids. If we don't spend more than we gained the previous year, we should be fine. If the market is terrible, we do cheap vacations until it picks up. The 401K income should be able to replace SS if something happens to that. Most of the pensions (2) is protected by the federal guarantee.

Tips, thoughts, or comments?

[wardprobst]

If you have an advisor, use him, he will give you another perspective.DP

[bigstick509]

We had a plan but a early retirement offer for my wife and my injuries have us both on SS and pension earlier then expected. If you can believe all the press about how much is needed for retirement enough is never enough. Fortunately we both grew up in working class families and have always lived within our means for the most part. Our 401B is a decent size and secure but with all the pension fund cuts locally,Michigan, even though they are protected by state law and the constant chatter about SS running out of money leaves planing a guessing game at best. Even the federal pension guarantee program is in trouble, at is best it only paid a percentage of what was owed. Ultimately, we adjust and are enjoying our retirement. It just takes some time to adjust.

[Neal]

I do a lot of retirement planning---for other people over the past19 years. And I'm not here trolling for business, but I do it for a living...

Some general thoughts....

1. Think about survivorship income. There will likely be a reduction in income at the first death. There may not be an equal reduction in monthly expenses. How would you account for the reduced income. For example. Many pensions offer different levels of survivorship income. Joint and 50% survivor benefit is common. Some plans will offer a Joint and 100% benefit. This will reduce the payment you get when the primary pension recipient is alive, but it will also lessen the impact of an income reduction on the survivor. Social Security will also adjust lower. The survivor gets to keep the greater of their own monthly amount or 3/4 of the spouses amount. In either instance, you will only get one SS check instead of two.

2. Don't be too conservative with your 401k and other investment accounts. You will need growth of principal over time to increase your purchasing power over time. If you invest too conservatively it will be difficult to do that, too aggressively and it creates other challenges from the temporary declines in investment markets.

3. Be aware of the costs of health insurance and health care. Most people I work with are almost "forced" to work until they are eligible for Medicare. The cost of insurance for people in their early sixties is ugly. Also as we get older there are going to be more expenses for health related things. It is how life works. Your out of pocket expenses for these things will only increase. Then there is that whole long term care thing. Insuring against that financial risk is expensive, and the premiums will most likely increase. There are fewer and fewer insurers offering that type of coverage as well.

4. Eliminate debt before you retire if you can. The debt service payments can eat into things quickly.

5. Practice living for a few months on the amounts of your Pension and SS income, and see where your shortfalls will be and how much they might be.

Helping kids financially is something we as parents want to do. However, I have personal experience with a few individuals who's financial assistance to their kids has either wiped out their retirement savings completely or will within in the next couple of years. In one of those instances, it has now been compounded by both parents needing 24-Hr care, one in a nursing home with Alzheimers, and one at home with numerous ailments. They have about 2 to 2 1/2 years left at their current spend rate, and they will be out of money. It is sad really. Providing financial assistance is a slippery slope, as it becomes very hard to say "no" when you have to for your own financial health.

Don't be afraid to ask for some professional help. Whether you need help managing the money, or just want to pay someone on a flat fee or hourly basis to review your situation and make recommendations, you may find value in doing so. There are many reputable financial professionals who will help you make sure you are heading in the right direction. They may help you avoid mistakes which are far more costly than what they charge for the work they do.

From a non-financial point of view: STAY BUSY. Find something to do to occupy your time. The people who do the best in retirement (health and sanity wise) are constantly busy doing things and being out of the house. There may come a time when you can't, but staying active physically and mentally will make you happier.

Also don't be afraid to spend a little of what you have accumulated. Do something special, take a trip, build a nice shop, enjoy what you have saved. You did save it to have a good lifestyle in retirement. It is great to leave money to your kids or grandkids, but they also have plenty of opportunities to save and accumulate wealth on their own.

Again I'm not soliciting business here, and these are meant for generalities and such. I would never try to provide specific advise on a public platform. If you have some specific general questions, PM me, I'll be happy to answer them privately.

[capncarl]

I unofficially helped a lot of the people I worked with calculate their retirement benefits because I had already "cracked the code". I created and kept up a household budget, down to the last dime, including the projected repair/replacemet cost of roof, car, septic tank, stove, ac etc. That way I knew where we were financially at all times. Most people do not really know what it cost them to actually live, they think, well maybe $20k. That was my guess at first but I was wrong, it was closer to $50k. Back to the retirement benefits, when I first started helping calculate friends benefits they would be real happy and say I can live off that! I think they were wrong because they did not really know their household budget. Because of that I created a spreadsheet with all the retirement info in it and the users household budget info. was required. My new spreadsheet calculations also had an inflation factor built in so their retirement costs were more realistic.

The real kicker to retirement disaster is unexpected costs. Shortly after I retired from that job we had to put my father in an assisted living home at a cost to me of about $10k per yr. He had a small pension and SS but I still had to kick in that much. 7 years later he is still hanging on and my cost has risen about 3% per yr. That was a shock to my budget! But the fudge factor I had built in helped cover it. My new job, the "double dipping" job like I had encouraged my younger friends to do, took up the slack. This unknown could equate to most people in the early retirement age whether it is aging parents, children or even a spouse.

JimD, I see a lots of people retiring early that have no idea what they are getting into, no idea of their actual expenses, unknown medical insurance costs, uncertain kids futures and surely with the lifestyle they were living no real savings. And with no thought of what bills will come their way because of aging parents.
capncarl

[JR]

As others have said, getting your hands around your budget is mandatory. I use Quicken to track my expenses which makes getting a budget report a snap. It does require that I log my checks when I write them, but I've gotten used to it.

If you have an account at Fidelity you can find an excellent retirement planning tool on their web site. I've tried tools at a number of other sites and haven't found anything nearly as good. It's as good as anything an advisor will have, but without the professional advice.

[Pappy]

My intent was to work until October when my house would be paid off. We were going to live on my salary and pay odd all the remaining bills with my SS check. The wife has a few bills of her own that she is paying off with her SS. recent health issues have forced me to retire early. What I have in a Thrift Savings Plan through the post office will take care of the remaining bills and leave about $3,500. That will go to a starting fund to finally get my shop built.

I will live on my SS and postal retirement until October when the house is paid off. The mortgage comes out of my Marine Corps retirement and my VA disability goes to a separate account for house taxes and emergency savings. The taxes dropped about $500 this year and are frozen since I am over 65. Between Medicare and Tricare medical is not a problem for us. After October I will have a little over $4,000 a month coming in, which is about what we are used to as a 'disposable' income. It may be a bit of a struggle until then, but I think we will survive.

[durango dude]

Save, Save, and save.

I visited with several financial planners before I started into my own plan. Since I work at a college, I have a decent financial planner with VALIC.
Even then, I think I'd take most of their worksheets with a grain of salt.

There's a ton of assumptions. You need to figure out which assumptions are the most vulnerable. I try to make conservative assumptions about ROI. Want to see someone seduce you with spreadsheets? Visit with a whole life agent!

I finally settled on a target of about a half million dollars by the time I'm 60 (a little more than a decade away).

When I did my homework, I found that an alarming proportion of Americans can not even handle a $1000 emergency with cash (car repair, medical bill, etc).

Basic advice -
Never leave money on the table. If your employer has a retirement matching program - use it, and max it out - even if it hurts. Durango Diva works for a private employer ---- and we have amassed thousands of dollars in supplemental savings just by using the matching funds.

Reduce obligations and enhance assets. I've paid off every loan except a mortgage on a rental property.

Join a credit union. I find the best paying savings accounts and the lowest fee credit comes from a credit union. I'm a member of Navy Federal Credit Union.

Don't try to pick individual stocks. I found the investment advisor that I was using is great at recommending buys, and horrible at calling the top. I ended up buying stocks that turn out to be good for a few weeks or months ---- and then fall apart. I do much better with a mutual fund, where I let an investment analyst figure out the buys and sells. Mutual funds now represent the bulk of my holdings.

[leehljp]

The free time of retirement EATS UP lots of money! No kidding! With LOML, it was go here, do that, I need this, I need that. Retirement is here, it is time to enjoy life. Dang, it costs!

Now if you are a home body, that is another story. Where a second and major problem arises is this: Most husband and wife teams love each other (or tolerate each other ) later in life and to retirement. But at retirement where both are home together 24/7, clashes happen. Don't think that your basement or outside shop will be enough distance! People who have loved each other since marriage began - their lives began with them being apart for 8 to 10 hours a day. And it has been that way for 40 years. Suddenly when the husband is home 24/7, the dynamics change!

And with that change, finance needs change more so than before retirement! IF you are aware of this and prepare for this, then you are OK.

CapnCarl gave some great advice, as well as the others!

[bigstick509]

Save, Save, and save.


Basic advice -
Never leave money on the table. If your employer has a retirement matching program - use it, and max it out - even if it hurts. Durango Diva works for a private employer ---- and we have amassed thousands of dollars in supplemental savings just by using the matching funds.

Its 6 below this morning but your Durango Dive line warmed me up. Very funny

[lrr]

Don't forget that drawing on your retirement account and Social Security means paying taxes on those. Sure, you are in a lower tax bracket than when working, but it isn't all free and clear. I've heard people say "I'll be getting X dollars a month" but fail to factor in taxes.

Hopefully you can find a good financial planner that can manage your funds and grow them over time to help offset the tax and inflation hits.

[capncarl]

To be perfectly honest, if my shop was any smaller (800 sf) I would not have retired. My wife and I have had 43 wonderful years together....... But we both need our own space. We both enjoy MY shop and she knows she is welcome any time, she has her Hobbys there, but it is still my shop. We can't be underneath each other's feet all the time.

I think that everyone has to have something to do, they can't just retire and sit at home watching tv. One of the biggest mistakes I've seen some of my friends make was to retire and think they could fish or golf all the time. That didn't last long and now most of them have found another job. Another mistake is thinking you will travel and see the country. That's fine but what happens during the hot or cold months? Or when you run out of money? Or get tired of traveling? One friend of mine retired thinking he could make cheap wooden kids toys and sell at craft shows and flea markets. That didn't last long so now he volunteers several days a week at an eye clinic just to have something to do. Nice thing to do but not what he planned to do at retirement, he says he should have worked several more years and increased his pension.

At my retirement I started a table building experiment to see if I could make any money building small tables to sell and still have family time left. I didn't want to start a company or have another full time job, just something I could look forward to doing when I wanted to do something else, and maybe pick up a few $$$$$ mad money.
I have a to-do list a mile long that I've put a lot of though into and am planning the todo jobs around the weather, my garden (which is a great time killer and a lot of personal satisfaction for a retiree), build projects, house painting and on and on.
You must have a hobby if you are serious about retirement.
capncarl

[dbhost]

We have no pension, and Social Security isn't likely to be worth a hill of beans to me 20 years from now... So I have been pumping into 401K and IRAs, I also have been struggling to get a small business off the ground.

At the rate things are going though, I think my best option is to invest in Lotto tickets... (Just kidding, although I do play for fun, I sure as snot am not doing lotto for retirement planning!)

[LCHIEN]

If your hobby is shopping then you can't afford to retire.

[durango dude]

Its 6 below this morning but your Durango Diva line warmed me up. Very funny

Well my kids are Durango Dunce (son) and Durango Ditz (daughter)

Not entirely true, mind you --- just when they're being the teens they are.