Calculating For Retirement [Archive]

Yppej

2-2-21, 7:36pm

I don't follow those retirement calculators which do not work for me. Here is my methodology. Let me know what you think.

I take my current spending for everything not paid through payroll deduction. I have tracked this for years and have an average monthly spending amount. I assume this will be what I will need in retirement. I will not have commuting and other work related expenses but I will pay more for medical premiums for Parts B, D or whatever alphabet soup Medicare has at that time. So I call it a wash.

Since I am a risk averse person and do not invest in the stock market I assume a zero rate of return on my retirement savings. You could say I should have a negative rate of return to allow for inflation but I figure Social Security COLAs will take care of that.

I then look at my Social Security projected benefits. Good news - I will not have to work forever. I can retire at 70 based strictly on the SS benefit without a penny in the bank.

Then I take my benefit amount at other ages like 62 or 67 and subtract it from my average monthly spending to come up with my monthly shortfall. I multiply this by 12 then by the number of years from that age to 90 to come up with the amount I would need to retire at that age. I figure if I am still alive at 90 I will be so frail or so out of it that I will be in a facility and if I'm impoverished Medicaid can pick up the slack, so I don't worry about anything beyond 90.

According to these calculations based on what I have saved now I can retire at 67.

The online calculators are often put out by investment companies that tell you that you need a million or more dollars and that you must invest aggressively in what they are selling. That is not me.

iris lilies

2-2-21, 11:53pm

I don’t understand paragraph 5, but I probably don’t need to.

It sounds like you can mostly live on your Social Security income at age 67.

So that is good news!

Teacher Terry

2-3-21, 12:07am

iris lilies

2-3-21, 12:46am

I think diversity in investments is good so besides some of your retirement savings being safe I would also put some in mutual funds especially if you have a 401k from work. Since I am now single I am living on half of what my income was while working and will be fine. My travel money will come from savings and investments. I know you don’t like to travel. Some expenses go down and some go up such as HI.

She doesn’t want to invest she said. Perhaps you think she will invest in mutual funds but not “stocks” as in “the stock market?”

jeppy?

Also I really wanna know if you can move away from the cold snowy expensive Northeast upon retirement.

Yppej

2-3-21, 5:06am

rosarugosa

2-3-21, 5:43am

Jeppy: Would you consider going into senior housing once you are old enough? That would be one way out of the headaches of old house ownership and maintenance, and maybe could be part of a plan to get DS living somewhere independently of you.

Yppej

2-3-21, 6:03am

RR I assume you are writing about government housing where a percent of your income goes to rent. The senior housing in my city is in a slummy area. It is nice in the town I grew up in but you have to be a resident to get in and there is a waiting list.

Not only is my house old but so is my car. Being somewhere walkable when I retire so I could ditch the car would be a help. In December it was oil change and alignment. In January it was tires. This month it will be rear brakes and given that the car has over 120,000 miles on it likely calipers also and once I am 6000 miles past the last alignment I have to get it checked again to keep the tire warranty active. With all the potholes, which are hard to see in the dark and obscured by snow, it is easy for the alignment to get thrown off. But places with good mass transit have expensive housing.

iris lilies

2-3-21, 9:33am

There is no reason I could not move upon retirement, but I am a little doubtful it would really be cheaper elsewhere. There are always costs associated with moving, my house value is below the average for all houses in the US including condos which have monthly fees, it is would require money to make it saleable. By staying put I also have certain legal protections such as homestead protection, which says I cannot be removed from my home due to debts I incur, not that I plan to run up debt, but with our messed up healthcare system you never know.

I do not have a homeowners association telling me what to do.

Previously I lived in South Florida and in Toronto and I found both areas more expensive as well as more congested and in the case of Florida more crime ridden.

There may not be places greatly cheaper, agreed. I dont know your housing costs and winter wear.

How much are your annual real estate taxes?

As for HOA’s they just arent a thing here. Not in places with older housing stock.

I wouldnt be surprised if we see repopulation of nicer small towns due to covid fleeing, resulting in them being more desirable places to live.

catherine

2-3-21, 9:47am

I wouldnt be surprised if we see repopulation of nicer small towns due to covid fleeing, resulting in them being more desirable places to live.

COVID-fleeing is definitely a real thing impacting many towns. My house in NJ has appreciated rather significantly and I know coastal Connecticut is blowing up. Even my house in VT is appreciating. Praise the Lord if I can somehow finally benefit from my real estate purchases!

Jeppy, I do my retirement calculations like you. Figure out what I NEED to live on, and see how it matches SS. Lately I have been seriously considering pulling from SS this year as opposed to 70. I lose $275 a month forever, but I put the SS towards retirement prep (debt elimination/savings) while I'm still working, and since I plan to work until clients stop calling me, I think this might be the best plan, because by working for 2-3-4 more years, I'll make up that $275 shortfall.

I have work to do before my expenses are lower than my SS income, but I'm working on it. When I sell my NJ house, I plan on putting the proceeds in a conservative fund for emergencies. Or possibly paying off my Vermont house. I have to think about that.

Teacher Terry

2-3-21, 10:21am

IL, is she stays completely out of the market she isn’t even staying in line with inflation hence my suggestion. I wouldn’t buy individual stocks but was invested through my employer and yes I gained and lost money but it didn’t matter. I was better off in the long run. Moving somewhere cheap can also be a recipe for unhappiness. Money isn’t everything and you have to think about your support system especially if you are single and the things you enjoy doing. I have known a few people who did this and really regretted it. Sometimes you can’t afford to go back if you sold your house.

LDAHL

2-3-21, 10:34am

I think diversity in investments is good so besides some of your retirement savings being safe I would also put some in mutual funds especially if you have a 401k from work. Since I am now single I am living on half of what my income was while working and will be fine. My travel money will come from savings and investments. I know you don’t like to travel. Some expenses go down and some go up such as HI.

This is excellent advice. Even if someone is shy of equities, I think maintaining some level of liquid reserves in bonds or cash is important. Not only for emergencies, but for those expenses that don’t come at you in regular, fairly uniform increments. The return will be small, but the safety and stabilization factor is important.

I also think you’re smart to have a separate set of assets for discretionary “fun” expenditures. It gives you a good idea of how much fun you can afford.

GeorgeParker

2-3-21, 11:39am

The best advice, and the hardest for most people to follow, is live on 50%-75% of your current income and invest the rest.

I firmly believe the stock market will at least stay even with inflation over the long haul, and regular savings instruments absolutely won't.

For people who have no interest in choosing individual investments and no interest in learning how to do so (99.44% of the people I've met) I always recommend going to this web page https://www.bogleheads.org/wiki/Lazy_portfolios and picking any of the lazy portfolios listed there, because they let you add or remove small amounts of money easily and they all consist of well-known mutual funds with low management fees, which imho is the best way for most people to invest.

SteveinMN

2-3-21, 11:47am

I'll second GeorgeParker's recommendation of Bogleheads lazy portfolios. Bogleheads are not a particularly speculative lot but they understand that at least some of your money has to keep up with inflation or you'll just get poorer. The lazy portfolios reflect the concern older people have in preserving capital.

The rest of it sounds like a plan. Yppej, you have solid reasons for wanting to stay where you are and to not even consider moving to a LCOL area; you might keep an eye out for a place that might be more walkable than what you have now, or smaller or whatever you think you can go without, if the payoff to moving arrives fairly quickly. It doesn't have to be a hobby; just an ear to the ground. Such a place might give you the break you need to let your son try to fly on his own, too.

Yppej

2-3-21, 12:12pm

My real estate taxes are about $3600 a year and I do get good services - free curbside trash, recycling and yard waste pickup, an excellent library, decent plowing, good water and sewer rates, a senior center with many programs that I am not eligible for yet. I am not looking to send my son elsewhere, but do wish we could get along better, and he were not so anxious and depressed. I think apartment living would make that worse not better for him. He doesn't like a neighbor's house in close vicinity, so common walls would be even worse. An in-law apartment would be ideal.

What do you all pay for RET?

Alan

2-3-21, 12:23pm

What do you all pay for RET?A timely question as I just received my real estate tax bill yesterday. Ours just increased by nearly $1000 per year to $6000 annually. Property taxes are now our largest monthly budget item @ $500 per.

JaneV2.0

2-3-21, 12:42pm

Mine went from $6000 to $8000 last year. More incentive to flee.
Looking at Zillow and their "zestimate" just makes me laugh.

catherine

2-3-21, 12:43pm

Our VT taxes for 2020: 3427
Our NJ taxes for 2020: 9494

Jeppy, I agree that an in-law suite would be perfect. Maybe contact a real estate agent to keep their eyes out for you. Or even sign up with one of the online real estate sites and have them notify you when certain parameters are met, like price requirements + in-law apartment.

GeorgeParker

2-3-21, 1:16pm

Our VT taxes for 2020: 3427
Our NJ taxes for 2020: 9494Where I live (Tarrant County Texas) the valuation of your primary residence used for calculating property tax is frozen when you reach age 65, but you have to apply for it, just like you apply for the homestead exemption. Freezing the valuation basically freezes your property tax, but your tax bill will still go up if they increase the tax rate.

GeorgeParker

2-3-21, 1:29pm

The online retirement calculators are often put out by investment companies that tell you that you need a million or more dollars and that you must invest aggressively in what they are selling. That is not me.Retirement calculators usually assume you'll keep living the same lifestyle and having the same yearly expenses after you retire, and they often add an inflation factor to that yearly cost-of-living estimate. Combine that with the statistic that the median household income in the US in 2019 was $68,703 and the assumption that you expect to live to 100, and the result is crazy numbers like $1,000,000 for people like me whose gross yearly income was only $20,000-$25,000.

beckyliz

2-3-21, 1:51pm

I think our real estate taxes are about $2500 a year.

Teacher Terry

2-3-21, 1:59pm

In my condo I will pay 1200year. The date the property was built affects it. So our house worth much more is only 700/year. Native Nevadans complain about property taxes which is silly.

pinkytoe

2-3-21, 2:34pm

One of the reasons we moved to Colorado from TX as new retirees was the vast difference in property taxes. Going from $10,000K per year to $1200 per yr has allowed us to bank the difference every year. If we go back, we will have to redirect the savings to taxes once again. Perhaps live in a small town vs the big city. Living in Austin as we did continues to drive ordinary people out as valuations climb monthly. Anyway...property taxes where jeppy lives sound reasonable by comparison.

iris lilies

2-3-21, 3:17pm

Our city real estate taxes for a 1900 sq ft house is $3125.

our 1400 sq ft house in Hermann is $1,100 in taxes.

In one place I cannot send my children to public schools if I had children. There, I can expect a robbery, a gun in my face or some kind of crime on my Block regularly. In the same place rioters and protesters burn down important Historic structures I pay money to support and put in my will.

That’s the expensive place. I’m not sure it makes much sense any more to live there. I do love the garbage service the city provides, so there’s that.

In Herman the public school is supported by the entire town. Graduation and college bound rate is high. Very low crime. They have historic structures and they take care of them.

jp1

2-3-21, 3:44pm

Ours are 1% of the purchase price we paid plus about $1600 in ‘special’ county additions so this year about $8900. They will go up 2%/ year for as long as we own the place.

I could see us leaving CA in retirement to move somewhere with lower taxes although it would be difficult for me to picture us liking somewhere else as much as we like it here.

Oddball

2-3-21, 4:23pm

Check out this retirement calc:

https://www.firecalc.com/

If you tab through the pages in the menu across the top, you can tailor all your numbers in great detail. You can choose zero portfolio growth if you want. You can choose your investments, if any (or none). You can input when and how much SS or pension income you expect. You can also input any lump sums you expect to receive or spend and when. Very handy, and I don't think there's any corporate sponsor behind it.

bae

2-3-21, 5:04pm

Property tax on my home is $7100/year. On the other house I own which my mother lives in, I'm on the hook for $6600/year. Combined, this is my biggest budget item.

rosarugosa

2-3-21, 5:06pm

Our house is about 920 SF and we converted it into a 1 bedroom. Our lot is about 6500 SF. Our property taxes are just about $4000 per year.

SteveinMN

2-3-21, 5:51pm

$3900/yr for our 1700 square foot house valued around $270,000 and $2600/yr for my mom's 850 square foot house valued around $145,000. I've included the fees for required trash collection, sewer charge, and street maintenance, all of which are billed separately.

Gardnr

2-3-21, 6:05pm

Our TOTAL cost of owning 2 homes was $1864/month in 2020. Total means: insurance/taxes/utilities, improvements/replacements, truly all-in. Snow-removal at the cabin we consider a utility.

We think this is very reasonable for a city home and a mountain home a few hours away in the Northwest.

We have designated savings for big ticket items estimated for the duration of reaching age 90: major appliances, heating systems, 1 more roof for city home. We made sure everything was in good working order prior to my retirement in 2019.

herbgeek

2-3-21, 6:56pm

I pay just under 6k for taxes for my 1600 square foot house. I clearly need to move to somewhere cheaper after seeing y'alls taxes. My town does not provide trash pickup.

Rachel

2-15-21, 8:46am

I calculated fairly generously for retirement expenses, hoping to do a lot of travel and subscribe to some cultural events with good seats. Covid hit, cancelling travel and cultural events -- but a close family member got very sick and we've been providing significant support for this person. In general, if you can try to build in an extra cushion without too much suffering in terms of having to half-kill yourself at your job, it's a good idea. You sound like you have a good understanding of how to analyze your money flow, Yppj.

Tybee

2-15-21, 8:58am

Yes, our retirement has been completely blindsided by family "obligations", unfortunately. I think this is a good thing to try to plan for-- perhaps just how to be more hard-hearted.

Teacher Terry

2-15-21, 9:33am

When my mom was terminally ill the last 3 years people at work asked me if I was going to move back to care for her. I never even considered it and she didn’t expect it. I did use all my vacation and sick leave to help. As I have mentioned before I did help care for my dad when we lived there and my siblings didn’t help. They were retired and did help my mom. They both lived driving distance. Even if I had been a only child I wouldn’t have sacrificed my retirement for a parent. I loved them both very much but I don’t think it’s fair to impoverish yourself and then expect help from your children. Careers take people away from their families and everyone needs to make their own decisions on how much to sacrifice. I found the right balance for myself.

beckyliz

2-18-21, 2:04pm

I am planning in retiring in about 5.5 years. There are lot of stars that need to align: 1. I maintain employment where I am now and can continue to contribute to my 401(k) and take advantage of my employer match. 2. My 401(k) continues to grow at an 8-10% rate. 3. Social Security estimates remain stable. 4. I don't have to quit early to take care of my DH or pay a lot out of pocket for in-home care (this is the big unknown).

Honestly, I'm not too worried. I'll survive one way or another - just depends on how comfortably.

Yppej

2-18-21, 5:33pm

Beckyliz does your husband have medical problems?

beckyliz

2-19-21, 1:46pm

Beckyliz does your husband have medical problems? Dementia, probably Alzheimer's. I think he's about Stage 4. Still very independent at this point (I did sell his car in December). However, I know where this is going - the only unknown is the actual timing.

Gardnr

2-19-21, 2:50pm

Dementia, probably Alzheimer's. I think he's about Stage 4. Still very independent at this point (I did sell his car in December). However, I know where this is going - the only unknown is the actual timing.

If he's still quite independent he is far from stage 4. I urge you to get him to a Doc and diagnose. There are great meds for Alzheimer's and if that's it, her deserves the treatment.

iris lilies

2-19-21, 3:14pm

If he's still quite independent he is far from stage 4. I urge you to get him to a Doc and diagnose. There are great meds for Alzheimer's and if that's it, her deserves the treatment.
Doesn't that depend on which Stage Chart of dementia you are using?

A quick Google search showed a 4 stage chart and a 7 stage chart.

Gardnr

2-19-21, 3:40pm

Doesn't that depend on which Stage Chart of dementia you are using?

A quick Google search showed a 4 stage chart and a 7 stage chart.

She said Alzheimer's and it's 7 stage.

iris lilies

2-19-21, 4:09pm

She said Alzheimer's and it's 7 stage.

Far be it for me to be a science denier, but the Alzheimer’s Association shows four stages on their home page:

https://www.alz.org/alzheimers-dementia/stages

For all I know it’s broken down further into more stages within this grouping, I didn’t check. I do think that people who speak of Alzheimer’s in four stages are not wrong, stupid, disrespectful of scientists, or denying any science.

Now, back to our regularly schedule program about retirement.

Becky, it sounds like you are on top of your husband’s health. Hang in there. Does he have family members near you guys?

beckyliz

2-19-21, 4:15pm

If he's still quite independent he is far from stage 4. I urge you to get him to a Doc and diagnose. There are great meds for Alzheimer's and if that's it, her deserves the treatment.

Gardnr, To clarify - the neurologist's diagnosis is "Dementia, probably Alzheimer's." I tried to get him into a drug study right after the DX, but the PET scan he had to have to see if he was eligible showed he had too much tau plaque. That tells me it's Alzheimer's. When I say stage 4 - I'm referring to stage 4 of the 7 stages of Alzheimer's developed by a Dr. Reisberg. Stage 4 is Moderate Decline. He is taking memantine (Namenda) and donepezil (Aricept).

https://www.alzheimers.net/stages-of-alzheimers-disease/

Teacher Terry

2-19-21, 4:22pm

Becky, Alzheimer’s is difficult anytime but especially sad when someone isn’t that old. The journey with my friend was heartbreaking. She had a long period of time where she could drive, do some errands, only talk about the past (which gets tiring) but the stage after that was awful. Nothing so sad as not being able to talk and not knowing who someone is. I was relieved when her cancer came back. Interestingly my other friend had a dad with it whose experience was different. He never got grumpy and unhappy. My friend on the other hand was always happy before and miserable later. I hope your husband has as easy a journey as possible and is slow to get worse.

frugal-one

2-19-21, 4:27pm

beckyliz

2-19-21, 4:28pm

Thank you, Teacher Terry. Yes, everyone's journey is different. Alzheimer's is just one type of dementia, which just adds to the different ways it affects people.

I'm certainly learning lessons about appreciating where we are now, patience and choosing my battles.

Didn't mean to high-jack the thread - but I appreciate everyone's support.

iris lilies

2-19-21, 5:02pm

Teacher Terry

2-19-21, 5:23pm

Frugal, she was miserable, non-verbal in diapers and having to be fed. It wasn’t living. She was on pain medication and kept comfortable. She fought ovarian cancer stage 4 for 20 years and recovered 7 times. I didn’t treat her cancer the last time. They think all the chemo that saved her life over and over caused her dementia. Plus her husband and I made the decision before he died. She had no family left. He said she didn’t want to live like that.

Gardnr

2-19-21, 8:56pm

Gardnr, To clarify - the neurologist's diagnosis is "Dementia, probably Alzheimer's." I tried to get him into a drug study right after the DX, but the PET scan he had to have to see if he was eligible showed he had too much tau plaque. That tells me it's Alzheimer's. When I say stage 4 - I'm referring to stage 4 of the 7 stages of Alzheimer's developed by a Dr. Reisberg. Stage 4 is Moderate Decline. He is taking memantine (Namenda) and donepezil (Aricept).

https://www.alzheimers.net/stages-of-alzheimers-disease/

I'm glad to hear he is being treated for it. Many people garner several quality years with it before further demise through the stages.

Yppej

2-28-21, 12:57pm

February is the 81st month I have tracked my spending excluding payroll deductions. While I went over my aggressive budgeting goal for the month my average monthly spending went down by $2.00. The frugality forum helps keep me focused. My average is above EOY 2015 and 2020 but below EOYs for 2017, 2018, and 2019. I lost the 2016 EOY figure along the way.

I use a notebook and calculator. When a page fills up I transfer over EOY and current year data and start a new page. Big expenses like roofing jobs account for the zigzagging up and down.

Based on my figures I can retire at 70 assuming Medicare parts B, D, etc don't kill me.

Rachel

3-4-21, 8:31am

Yes, our retirement has been completely blindsided by family "obligations", unfortunately. I think this is a good thing to try to plan for-- perhaps just how to be more hard-hearted.

--- There are definitely obligations that are not real, true obligations -- more like expectations that may or may not be realistic or reasonable.

---In our case, this is a true obligation of the heart and soul.

Everyone has to think about these distinctions carefully, so I'm glad you wrote in Tybee, it's an important side to the question.