Serious question: if you didnt save enough or run out of retirement money...

[tvguy]

As it happens, that simply cannot be a factor in the decisions we make about our finances. Not that we set out to deprive them, but it will take all our wherewithal to provide for ourselves indefinitely without worrying about how to leave an "estate".

It may be for some. Nothing wrong with making informed decisions.
I was amused when doing estate planning with our Financial Adviser, and later with our CPA that the Estate Planning software they both used, by different companies, includes the question "How much money to do want to leave your heirs?" And the DEFAULT amount is $1,000,000! For both!

 

[shoney]

It may be for some. Nothing wrong with making informed decisions.
I was amused when doing estate planning with our Financial Adviser, and later with our CPA that the Estate Planning software they both used, by different companies, includes the question "How much money to do want to leave your heirs?" And the DEFAULT amount is $1,000,000! For both!

Both of my parents received nothing but a bill when their parents died.

My parents have a lot more money but I expect them to use and enjoy it They earned it!!! My inheritance should never factor in.

BottoM line to this thread is if u run out of money at any stage in life u r $&@@"d

 

[Colleen27]

It's very hard to do when you are, say, 75 and lived your whole life in one country...maybe never even traveled outside the country. My MIL has traveled only to Mexico, and then only border towns to buy meds. There is simply no way she's picking up and moving to another country! DH and I have considered it (for reasons other than financial as we have the economic means to continue living here) but then we think about what it REALLY means. My husband's sister and her husband have moved to New Zealand, and they get home once ever 2-3 years to see friends and relatives. I don't want to see my kids "only once or twice" a year or less! So, realistically, it's not happening. For people who have no family, I can see why it would be more possible, but even then, they probably have friends they would like to see.

Yeah, I think there are two keys to doing this - moving while still young enough and active enough to build a social network in the new location, and choosing a place with an expat community of others of similar circumstances.

For us, being near family isn't a big concern because our kids will likely be quite scattered by that time anyway. One wants to move to Canada, and is currently learning a trade that will qualify him for fast-track immigration there. Another intends to go into research biology and spend her time in the field, on research vessels and such, and is studying Japanese with an eye towards working there. It is too soon to tell with the youngest, but even if she stays put (Unlikely, IMO - the job situation in our area is terrible for women. Either start a business, teach, or work retail/food service.) that'll only be 1 of 3 here. And we don't really have extended family that we'd stay for - my only sibling died a couple months ago with no spouse/children and DH's siblings don't live close now. So once our parents are gone we don't foresee having a strong connection to any specific place.

 

[lisaviolet]

My MIL willed herself to die.

Sadly, that is the literal truth. She owned her home free and clear, and took advantage of our state's Senior homestead property tax break, but she started having TIA episodes and got to the point where she wasn't safe to live alone. Her health was otherwise actually quite good, but she got into falls and all kinds of accidents due to the little blackouts. (At one point she blacked out while eating breakfast and broke her collarbone by falling out of a kitchen chair.) Her doctor told DH she needed to move in with us, but our home is tiny and built like a tower (the bedrooms and bathroom are not on the same floor), and there literally was no safe place to put her, so she had to move into assisted living. It was an affordable place just a few doors down from our home, but she hated it there, and it cost ~$4K per month. By the time she had been there 7 months she had been taken to the ER by ambulance 5 times because of falls in the night, and the bills that Medicare and her Federal retiree insurance did not cover were devouring her savings. We put her home on the market but it wasn't selling fast enough, so we had to subsidize her rent to stretch her funds, and the value of the house was only going to carry her for about 2 yrs. Once she became aware of that situation she largely stopped eating and drinking and started doing things that she knew were dangerous for her, in the obvious hope of having a fatal accident. Her kidneys started to fail and she deliberately did not take her medications for it. She spent the final 6 weeks in in-place hospice, and died in her sleep just under a year after moving out of her home.

She could have moved to a Medicaid AL facility once her funds ran out, but all of those here are set up like dorms, with shared bedrooms and hall bath situations. She was agoraphobic, and the fear of having to live in a truly communal situation like that terrified her. She preferred death over what she saw as a living hell.

Becoming disabled can torpedo even the most careful retirement savings. Many older folks now who saved carefully all their lives (but were never more than the middle of the middle class) rely on a plan that was based on living mortgage-free in their own homes. When that no longer becomes possible and they need to pay rent on a place in a staffed facility, the whole foundation crumbles for most of them.

I am so sorry. Heartbreaking to read.

 

[Pacolovestacos]

This is an interesting thread because it's a question I think about often. Do I spend what I have now while I still can and deal with the future in the future, or do I sacrifice (to some extent) the present in the hopes of having a comfortable future. The danger with sacrificing the present for the future is that the future isn't guaranteed. I hear it all the time about folks who pass shortly after retiring. That's really, really sad, and I'd truly hate for that to happen to me.

 

[Hikergirl]

This is an interesting thread because it's a question I think about often. Do I spend what I have now while I still can and deal with the future in the future, or do I sacrifice (to some extent) the present in the hopes of having a comfortable future. The danger with sacrificing the present for the future is that the future isn't guaranteed. I hear it all the time about folks who pass shortly after retiring. That's really, really sad, and I'd truly hate for that to happen to me.

My dh was very much a prepare for the future person until last year he had a health scare. This year we have put off some saving in order to enjoy the present. We will get back to saving and at the same time not look back at this past year's spending with any regrets.
If you are able, its good to have a balance.

 

[Colleen27]

You can read the article on the Marketwatch website. I'm not sure I agree with their definition of luxuries but I do know that many low income people today are considerably better off than those of a century ago. We have more safety nets today and that helps. I also know people that have always been in that low income category and they never learned to manage what little money they had. For example, they charged large amounts for holiday gifts but sometimes couldn't pay the oil bill. The needs versus wants lesson is a hard one to learn but it should be taught at an early age and serves people well even when they have more resources.

So I looked up the article, and found this about the methodology: "It’s worth noting that by the specialized nomenclature of the dismal science, even eating at McDonald’s is a luxury — that is, we do it more as our incomes rise — while smoking and lottery-ticket buying are categorized as necessities. For its part, the Deutsche Bank report explicitly defined luxuries as goods or services consumed in greater proportions as a person’s income increases and necessities as those goods or services that make up a smaller proportion of spending as a person’s income increases." That's not an understanding any layperson would have of the distinction between necessity and luxury.

As far as comparisons to a century ago, that's really hard to do because of technological change. I see these studies that talk about the percentage of households with two cars or air conditioning or some other arbitrary representation of "the good life" and they never seem to take into account social changes that led to these things becoming essentially ubiquitous... like the fact that most rentals have a/c in much of the country, or that holding a job without a car isn't nearly as viable for most Americans today as it was a century ago.

And then there's the declining cost of certain luxury goods. I've been helping my mom clean out her house for sale and came across a folder of old bills that was good for some laughs. When I was in HS, my pager bill was almost as much ($20 vs $25) as I now pay for my cell phone's unlimited plan. And the home phone bill was higher ($42 plus per-minute long distance). If you account for inflation, we were paying quite a bit more for phone communication in 1997 than we are in 2017. But a lot of people still say that having a cell phone, at $25-30/mo on a discount carrier, is a luxury just because they're clinging to perceptions formed before the dramatic drop in cell phone prices and plan rates.

 

[AustinMommyofThree]

Well, just as your circle of friends has a "norm", so does mine. I have never known anyone on welfare. We live in a city with a pretty high median wage though ($90k). Most people I know, us included, would take a HUGE tax hit with a second income, which is why so many have only one earner in the household. If I earn more than $15k per year, all of a sudden we will owe like $30k more in taxes. Me not working saves us all that money that would otherwise go straight to the tax man. I do part time scoring of standardized tests every spring. I earn like $6k, which pays for our yearly vacation, most years. I don't have the earning power to make a six figure income on my own, which is the only way me going back to work would pay off, so for now, I stay home. Plus, my kids are both special needs, and they need me home when they are.

How? Income tax brackets are marginal, so each higher rate only applies to the income above that level and not to every dollar earned. So even if working pushed you up a bracket, it would never cost you more than you earn.

 

[Colleen27]

How? Income tax brackets are marginal, so each higher rate only applies to the income above that level and not to every dollar earned. So even if working pushed you up a bracket, it would never cost you more than you earn.

Unless you're at the point where you start losing deductions or credits because of the total household income. That complicates things and to be honest I haven't kept up with changes on that front because it doesn't apply to us, but I know there are/were points at which you lose the child tax credit and some itemized deductions begin to phase out. I'm not sure it is ever as dramatic as the previous poster's example, but from what I understand there are some credits that drop pretty sharply at cutoff points, so an additional dollar of income can trigger the loss of a thousand-dollar tax credit.

 

[AustinMommyofThree]

Unless you're at the point where you start losing deductions or credits because of the total household income. That complicates things and to be honest I haven't kept up with changes on that front because it doesn't apply to us, but I know there are/were points at which you lose the child tax credit and some itemized deductions begin to phase out. I'm not sure it is ever as dramatic as the previous poster's example, but from what I understand there are some credits that drop pretty sharply at cutoff points, so an additional dollar of income can trigger the loss of a thousand-dollar tax credit.

Possible, but I don't think anything could literally consume twice as much in taxes as is earned. The child tax credit drops by $50 for every $1,000 over the threshold, and most of the other common ones phase out similarly slowly. Itemized deductions start to phase out at around $311,000 and completely phases out at $433,000. It could definitely be that working would cost the family that much in child care, but the phrasing just confused me.

 

[Colleen27]

Possible, but I don't think anything could literally consume twice as much in taxes as is earned. The child tax credit drops by $50 for every $1,000 over the threshold, and most of the other common ones phase out similarly slowly. Itemized deductions start to phase out at around $311,000 and completely phases out at $433,000. It could definitely be that working would cost the family that much in child care, but the phrasing just confused me.

It is one of the education tax credits, I think, that has the big cliff I was describing. It goes from 4K to 2K at a specific income, and then from 2K to 0 at another cutoff point. I'm not sure how many others (if any) are like that, but I know there are circumstances where the tax hit from a second income is greater than just the marginal increase of the higher bracket.

 

[DLgal]

How? Income tax brackets are marginal, so each higher rate only applies to the income above that level and not to every dollar earned. So even if working pushed you up a bracket, it would never cost you more than you earn.

Sorry...those were the figures when I was thinking about our finances after DH retires from the military. At that point, we would move from the 15% bracket to the 28% one, and this takes into account state taxes as well (California).

Right now, about 1/3 of our income is tax free military allowances, so we are sort of super tax advantaged by being in a low tax bracket despite a take home pay of well over $100k.

If I make over $10k now, we move from 15 to 25% bracket, which is also a jump of several thousands when you combine federal and state taxes. I would lose almost the entire $10k to taxes.

We file married, jointly, have 2 kids, and take the standard deduction. Pretty straightforward.

Also, you are not super up to speed on how the brackets work. At the 15% bracket, taxes due are $1865 plus 15% of the amount over $18650. At 25%, taxes due jump to $10452.50 plus 25% of the amount over $75900. At 28%, you owe $29752.50 plus 28% of the amount over $153100. Again, these are the married filing jointly figures.

That jump in the base amount due between the 15% and 28% bracket is the killer.

I have worked the numbers. I do our taxes every year. It will not pay for me to you get a job that pays $30k. Especially not now. I have to keep my earnings low enough to stay in the 15% bracket. Once DH retires, we will definitely jump up one bracket, and will have to be very careful not to jump up another due to some part time job I take.

 

[DaisyJ]

In my own family, the non-planners have become a burden on their children. And it's not like they were "poor" during their working years. They failed to plan for retirement, and then refused to change their lifestyle once they retired. It has really created animosity between those family members who have to deal with the financial mess.

Having watched my dad struggle to deal with my uncompromising grandmother, I know he would never burden me like this. I have little sympathy for someone who made poor financial choices and now expects everyone else to deal with their consequences.

I wish I could like this more than once. My mother is a prime example. I am not jeopordizing our retirement to help her and I don't feel an ounce of guilt about it. Her poor planning and financial lack of sense isn't my problem. We've given her tens of thousands of dollars to pay off crushing debt, and we're done, especially when she didn't make a single effort to change her spending habits. I have told DH firmly that the bank is now closed to her, forever.

Lack of planning on her part does not constitute an emergency on mine.

 

[DaisyJ]

In my circle of family and friends, I do not know anyone who can afford to stay at home with only one parent working, unless they are on welfare, or the working parent has a very decent wage, or special circumstance, where they don't pay rent/mortgage because the family has money. Sorry, I just don't think your situation is the norm anymore.

Oh, some families could do it, they just choose not to. It is the norm where I live.

 

[SirDuff]

Also, you are not super up to speed on how the brackets work. At the 15% bracket, taxes due are $1865 plus 15% of the amount over $18650. At 25%, taxes due jump to $10452.50 plus 25% of the amount over $75900. At 28%, you owe $29752.50 plus 28% of the amount over $153100. Again, these are the married filing jointly figures.

That jump in the base amount due between the 15% and 28% bracket is the killer.

It appears that you are not super up to speed on how brackets work. That's not a "jump". It is just $1,865 plus 15% of $75,900-$18,650. Someone making $75,900 owes $10,452.50 while someone making $75,899 owes $10,452.35. A whopping 15 cent difference. There is no jump in the base amount. The amount of taxes paid on the first $75,899 doesn't change no matter how much over $75,900 you go.

It is written that way to save someone making $100,000 from having to do: $1,865 + 0.15($75,900-$18,650)+0.25($100,000-$75,900). It just lumps the first two pieces together, since once you make more than $75,900, those first two values are constant.

 

[ThistleMae]

This is an interesting thread because it's a question I think about often. Do I spend what I have now while I still can and deal with the future in the future, or do I sacrifice (to some extent) the present in the hopes of having a comfortable future. The danger with sacrificing the present for the future is that the future isn't guaranteed. I hear it all the time about folks who pass shortly after retiring. That's really, really sad, and I'd truly hate for that to happen to me.

Yes, this is a tough decision. I'm retired, at 60, and am now 63. I'm still active but since retiring have had breast cancer, knee replacement and now struggling with Achilles tendonitis. I'm still vacationing but have had to make modifications, like using an ECV at Disney, which saved my trip for sure. It's an entirely different situation if you start losing mental capacity. I can't say I did much while my kids were growing up, but we did camping and drive-in movies and had fun at home, as much as we could living paycheck to paycheck. Now is the time I can go on vacation, so while I may have some limitations, I'm still enjoying life and was able to put money away once my kids left the nest. Am I worried about medicare costs an coverages and social security, sure....just like everyone on a fixed income does...so I understand how hard it is to decide. We all do the best we can and hopefully have a positive attitude no matter how dire the situation is. After all, it isn't about how much money you have to go on vacation, isn't it about the quality time you spend with family even if it's a simple cook out in the back yard.

 

[ThistleMae]

I

Sorry...those were the figures when I was thinking about our finances after DH retires from the military. At that point, we would move from the 15% bracket to the 28% one, and this takes into account state taxes as well (California).

Right now, about 1/3 of our income is tax free military allowances, so we are sort of super tax advantaged by being in a low tax bracket despite a take home pay of well over $100k.

If I make over $10k now, we move from 15 to 25% bracket, which is also a jump of several thousands when you combine federal and state taxes. I would lose almost the entire $10k to taxes.

We file married, jointly, have 2 kids, and take the standard deduction. Pretty straightforward.

Also, you are not super up to speed on how the brackets work. At the 15% bracket, taxes due are $1865 plus 15% of the amount over $18650. At 25%, taxes due jump to $10452.50 plus 25% of the amount over $75900. At 28%, you owe $29752.50 plus 28% of the amount over $153100. Again, these are the married filing jointly figures.

That jump in the base amount due between the 15% and 28% bracket is the killer.

I have worked the numbers. I do our taxes every year. It will not pay for me to you get a job that pays $30k. Especially not now. I have to keep my earnings low enough to stay in the 15% bracket. Once DH retires, we will definitely jump up one bracket, and will have to be very careful not to jump up another due to some part time job I take.

I definitely understand how the tax bracket impacts income, and making decisions about how much you should earn to stay in the lower bracket can be confusing for many people. This also impacts what % you are taxed on your Social Security and comes into play when deciding how you should start taking any deferred tax $ you may have. I know the president is looking at revamping the current tax structure and I hope they make changes that benefit middle income folks. I know many young people that don't have any health coverage. I know families that are paying child care and health care, and this is a huge part of their budget. The article about what is considered luxuries, and how we spend is very interesting. I do know that folks who have little money to spend will spend on lottery tickets, cigarettes and beer. And I've seen the scenario where someone can't make a car payment but buys $ 50.00 a week on the lottery tickets. It's really hard to debate how folks value their money, and whether or not they are penny wise or pound foolish but....I do know many hard working folks who struggle.

 

[DLgal]

It appears that you are not super up to speed on how brackets work. That's not a "jump". It is just $1,865 plus 15% of $75,900-$18,650. Someone making $75,900 owes $10,452.50 while someone making $75,899 owes $10,452.35. A whopping 15 cent difference. There is no jump in the base amount. The amount of taxes paid on the first $75,899 doesn't change no matter how much over $75,900 you go.

It is written that way to save someone making $100,000 from having to do: $1,865 + 0.15($75,900-$18,650)+0.25($100,000-$75,900). It just lumps the first two pieces together, since once you make more than $75,900, those first two values are constant.

Well, that makes sense but when I use various tax calculators online, our "taxes due" jump dramatically when I increase our AGI above the threshold for each bracket.

Maybe credits get phased out, I don't know.

Interestingly, we never actually end up paying as much as the calculators "say" we should. I can't begin to understand all the nuances of our tax code.

 

[longboard55]

Well, that makes sense but when I use various tax calculators online, our "taxes due" jump dramatically when I increase our AGI above the threshold for each bracket.

Maybe credits get phased out, I don't know.

Interestingly, we never actually end up paying as much as the calculators "say" we should. I can't begin to understand all the nuances of our tax code.

And California tax is a little misleading, there are a lot of deductions, so for just a middle class family with kids its not much, no where close to what I read

 

[amberpi]

This is an interesting thread because it's a question I think about often. Do I spend what I have now while I still can and deal with the future in the future, or do I sacrifice (to some extent) the present in the hopes of having a comfortable future. The danger with sacrificing the present for the future is that the future isn't guaranteed. I hear it all the time about folks who pass shortly after retiring. That's really, really sad, and I'd truly hate for that to happen to me.

I feel like I'm playing with house money at this point already. I have a fully funded retirement and no heirs, not sure I'll be quite so fiscally conservative any more at all.