When Is It Enough? (Retirement Funds)

[dvcgirl]

I think that frequently location is factored in. That is why so many retirees have flooded the American Southwest. Sun City used to be a pretty cheap place to live. So was Florida. And its still cheaper than New Jersey. But the advice is for "Joe Average." And if Joe actually exists, I've never met him. If Joe is the exact center of a circle of the whole population, some people have a reality close to Joe and some people are way out on some edge. And it isn't even linear.

As DMRick said earlier in the thread what you think you'll do and what you actually do may be different. My parent had planned to live in Utah by now. But then grandchildren arrived. I never hear my parent talk about living out of state any longer - and they have gone from wanting to move into a smaller home to trying to figure out how long they can stay in the home they have - because its on a lake and my kids love the lake. My sister recently had some health/personal problems - she lives out of state - and some of their savings disappeared in helping her. That was unforseen.

In an ideal world, people would plan for a number of possibilities. They would figure out what they'd like to do ideally, and how they'd scrape by on a minimum. They'd say "what happens if my spouse gets ill and we spend every penny within two years of retirement on health care?" They'd say "how much would I need if my taxes went up and gas was $9 a gallon?" "What happens if my kids need me to be their daycare provider?" "What happens if my husband leaves me when I'm 60, and my next husband really does enjoy travel, even though I'd be content at home?" Because as much as we have a better perspective of what we will need in retirement than anyone else, none of us has a crystal ball that says our own assumptions about our lives in retirement will come true. AND, they'd do all of this while maintaining balance and enjoyment in their pre-retirement life. However, in that ideal world, we'd probably all need to be on anxiety drugs to manage the possibilities, so its probably better to avoid that Utopia.

All very good points. My parents are similar to your parents. They have a second home in the Florida Keys, but when the first grandchild came along, their dream of living there 6 months a year seemed to be far less important. They're now contemplating selling it. Flexibility on these types of issues is obviously important...nobody's future is set in stone.

And I agree, I think that location is a frequently discussed topic when it comes to retirement. People have been retiring to Florida for years and years. That brings up yet another point. The cost of housing has skyrocketed here. Perhaps it's still cheaper than the very hot spots...Northern NJ, Boston, DC area, California, but for many in the middle of this country, many, many places in Florida have become too expensive to live.

Your point about a spouse getting ill and wiping out your estate brings up another point. It's really, really important to carry excellent insurance and cover your negatives so you don't get wiped out in a catastrophic health situation. This is one of the reasons that my parents are going to start out paying $600 or more a month for very good supplemental medicare coverage. And that number is likely to increase each year. And guess what, we talk a lot about healthcare costs and that monthly premium replacing a mortgage payment....and some just believe that will never happen. Well, that $600 is much more than my parents mortgage payment because they bought their home 40 years ago. The healthcare spending down the road is another reason we're opening up a health savings account...money goes in tax free and is withdrawn tax free for healthcare costs. That's too big an advantage for us to pass up.

 

[takemetoo]

The OPs question is much on my mind lately. My answer is: I have no idea! There are just so many variables, I'm constantly second guessing myself. Now I think our biggest problem is just that it is too far in the future for us to guess with accuracy what we will want and need.

I try the on-line calculators and depending on if I put in 75% or 100% of our pre-retirement income, and which calculator I use, and whether I include SS (dh has a nice pension through the Catholic school where he works), they tell me I have to save anywhere from zero to $750,000 in order to retire when dh is 55 (and I'm 54), assuming we live into our 80s. This is definately possible based on our current saving rate. But I was surprised at how low it sounded, and I wonder how accurate it is. Then, what kind of retirement will that be? My strategy now is to fund to the match dh's 403b, then Roth IRAs for each of us as much as possible (hopefully to the max starting this year) in order to come out well ahead of $750,00 and to have the option of living past 88 if we take early retirement. I guess I want that crystal ball, too.

My mil lives on $500 a month in an assisted living facility. She is happy there, and it suits her. I'm sure she'd rather have a little house and a garden, but it was never an option for her. I hope we have lots of options at retirement, but I don't know what I want them to be yet. I suppose it'd be helpful to have a practical plan, and a shoot for the stars plan.

 

[DMRick]

I would suspect that someone retiring on 10K or 20K or 30K/year, earned a somewhat similar income pre-retirement. Someone who earned 50K while working would be a lot less likely to retire on 10K without making significant cutbacks to their lifestyle. .

Or they may not have planned on living on a lot less..but if we keep bringing up statistic's..well almost 60% of us won't be retiring with the person we did all that saving with. So each will have half of what they thought they would have..if that much is left after the arguing and court cases.

 

[C.Ann]

but if we keep bringing up statistic's..well almost 60% of us won't be retiring with the person we did all that saving with. So each will have half of what they thought they would have..if that much is left after the arguing and court cases.

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Isn't that the truth! I know of two people right now (both retirement age) that landed in that sinking boat..

There are so many "unknowns" - many of which even the best of planning simply can't erase.. I knew for 10 years that my DH would not be alive to share in our retirement - where someone else might have a DH today and he's gone tomorrow - either through accident, illness, or divorce.. It may be another thing to consider when planning on how much you will need to retire.. Assume you may only have half (or less) of what you have now.. Sad, but not a totally unrealistic approach..

 

[C.Ann]

. You will need less if you have been living in Manhattan but are retiring to a shack in Tennessee..

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LOL.. There are areas in Tennessee where you could purchase a very luxurious "shack" for what people are paying for homes in some areas of NY, Boston, California, etc.. My son-in-law's cousin (a lawyer) lives and works in Manhattan and he thinks the most expensive homes up here are "giveaways" compared to what he pays to live in the city..

 

[disneysteve]

Assume you may only have half (or less) of what you have now.

That makes saving the maximum you can even more important, doesn't it. If you might only end up with half, you want that half to be as large as it possibly can be.

As for losing your partner to illness, that also makes saving very important. My dad died almost 14 years ago. Had he and my mom not been good savers, my mom could have been in bad shape or been stuck having to get a job late in life. Instead, she's living just fine on SS and savings and has time to do volunteer work, travel some, and indulge her only granddaughter.

 

[DiznEeyore]

DMRick this is just an addition to your comment: Also one maybe saving but hit a road block (like the tech field did in 2000) and one needs to halt continuing savings to just make it thru the hard times. One can then start again and try to make up for the lost time. But eating today, while unemployed, or saving for retirement may not be possible at times during a career.

Not everybody has full employment every year of their lives.

THANK YOU for pointing that out! My dh is one of those in the tech field and we saw our income DECREASE annually from 2000 'til last year when his company laid off half their workforce, leaving virtually no one for my dh (the network manager) to support. He's not had full-time employment for over a year, though we're staying afloat through many part-time (and temporary full-time) jobs. We have several friends in the same boat -- one hasn't had a steady job in 3 years! The LAST thing they or we can worry about right now is retirement 30 years from now. We need to make sure things are taken care of in the here and now. And we're thankful that they are!

 

[C.Ann]

That makes saving the maximum you can even more important, doesn't it. If you might only end up with half, you want that half to be as large as it possibly can be.

As for losing your partner to illness, that also makes saving very important. My dad died almost 14 years ago. Had he and my mom not been good savers, my mom could have been in bad shape or been stuck having to get a job late in life. Instead, she's living just fine on SS and savings and has time to do volunteer work, travel some, and indulge her only granddaughter.

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I totally agree - but I think many here are banking on "joint" savings and not considering what would happen if that were not possible for any number of reasons.. It really changes the whole "How much did I need to have" picture..

Yes - losing a partner to illness certainly makes saving very important - but - there are circumstances that can (and have) occured that will wipe out that savings and more.. I know - because we lived it.. We had the savings - we had the pension - and we had the healthy IRA.. Along with that we had a very unusual set of circumstances and a number of costly illnesses (in addition to the cancer) that lasted for 10 years.. On the flip side, my Dad was diagnosed with colon cancer and died within 3 months.. My Mom is in great shape financially.. Had my Dad's illness been a very prolonged one, who knows what kind of shape she would be in..

All of us can plan and save and plan and save until the cows come home - and we will never be able to cover every possible scenario.. So I say save what you can, live while you can and plan your retirement around what you hope it will be..

 

[disneysteve]

On the flip side, my Dad was diagnosed with colon cancer and died within 3 months.. My Mom is in great shape financially.. Had my Dad's illness been a very prolonged one, who knows what kind of shape she would be in..

Just to be clear, my dad wasn't ill. He died very suddenly while he and my mom were standing in line for lunch at one of the casinos in Atlantic City. So there was no prolonged illness or medical bills to be dealt with. Certainly, that changes the whole picture.

 

[DiznEeyore]

All of us can plan and save and plan and save until the cows come home - and we will never be able to cover every possible scenario.. So I say save what you can, live while you can and plan your retirement around what you hope it will be..

Very well said.

 

[arminnie]

On another note...
I'm interested..what will be "enough" for you?

I'm assuming that question was geared to me - as I was off pontificating on credit history in general.

I am retired so whatever I have is going to have to be enough. Actually I get job offers all of the time so I guess I could work if I wanted to. I do a lot of volunteer work - some of it quite challenging like helping with the restructure of my college after Katrina.

I really didn't plan to retire - I was out with medical problems that got very complicated. I live with my dad in a house that is paid for although I pay all of the bills - including giving him his spending money. He's not broke by any means but hates to spend "his" money.

Again - it's location, location, location. I'm in a very inexpensive area - Arkansas. Property taxes on a very nice 4/3 (3000 square foot) house in a great neighborhood are about $150 a month.

Don't underestimate the "spending culture" that you live in. Even if you are not trying to "keep up with the Joneses" you can be subliminally affected by the spending patterns of your environment.

I probably can live as frugally as C.Ann - again minimal housing expenses. I really don't make decisions on what to spend based on my earnings. I try to look at whether I need it or if it is something that I really want and that I can afford out of my savings.

I don't mean to sound like a martyr by any means. I've traveled to London, Budapest, Prague, France, Costa Rica, Puerta Vallarta, Disney (lots) and some U.S. travel in the past five years. I also bought a condo in New Orleans (10 days pre-K) just because I wanted to, and I could easily afford it. I also donate fairly large amounts of money to charity.

I've done the chef's table at Victoria and Albert (twice) which is quite expensive, but the rest of the year I may go out to dinner once or twice a month for about $15 a meal (often less).

I owned the St. John, Chanel, Ferragamo, etc designer stuff. I'm truly just as happy now in my Wal*Mart jeans and tshirts (and much more comfortable).

I'm kind of traveled out at present. I like spending time in New Orleans plus I'm doing some post Katrina work at Newcomb/Tulane. I'm also going to be very involved in a group called Unity in the Community which promotes racial harmony with respect to Central High School (where Governor Faubus called out the troops to keep blacks out).

 

[DMRick]

You sound like the people I hang with. Anyone of them could have written what you just wrote. (I only quoted part, so you would know I was "talking" to you..I'm actually talking about the entire letter). Thanks.

I probably can live as frugally as C.Ann - again minimal housing expenses. I really don't make decisions on what to spend based on my earnings. I try to look at whether I need it or if it is something that I really want and that I can afford out of my savings.

 

[disneysteve]

I really don't make decisions on what to spend based on my earnings. I try to look at whether I need it or if it is something that I really want and that I can afford out of my savings.

What a novel concept! It's amazing how many folks just can't comprehend that.

 

[C.Ann]

What a novel concept! It's amazing how many folks just can't comprehend that.

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Does "throwaway society" ring a bell? It's no wonder people can't/don't/won't save when they throw out perfectly good items just because they want a different "color"; there's a newer "model"; they don't feel like cleaning an item when it gets dirty; "Suzy" wants a "new" bike - not the one she got last year or the year before; - and the one I like best, "Well, Mary and Joe got new furniture! I think it's about time we got something new too!!"

It's amazing how quickly money can pile up when people resist the urge to spend "just because they can"...

 

[disneysteve]

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Does "throwaway society" ring a bell? It's no wonder people can't/don't/won't save when they throw out perfectly good items just because they want a different "color"; there's a newer "model"; they don't feel like cleaning an item when it gets dirty; "Suzy" wants a "new" bike - not the one she got last year or the year before; - and the one I like best, "Well, Mary and Joe got new furniture! I think it's about time we got something new too!!"

It's amazing how quickly money can pile up when people resist the urge to spend "just because they can"...

So true. I must say I was quite impressed the other day. I was driving down the street and one of the neighbor's teenage son was out on the front lawn spray painting his bike frame. Not something we see much of any more. Don't like the color of your bike. Go buy a new one. That's the much more common route.

As for throwing things out, I'm sure most of us here have done our share of curbside shopping on trash day. I certainly have. And the next best thing - yard sales. People sell perfectly good items, sometimes even brand new stuff with the tags still on, for about 10% of original value or less. The best thing about buying used like that is the items don't depreciate. We bought a lot of DD's baby things at yard sales and 2 or 3 years later resold them at our own yard sale for as much or even more than we originally paid.

 

[imsayin]

Quote:
Originally Posted by arminnie
I really don't make decisions on what to spend based on my earnings. I try to look at whether I need it or if it is something that I really want and that I can afford out of my savings.


What a novel concept! It's amazing how many folks just can't comprehend that.

Ring tones anyone? I can't remember the number, but the ring tone industry is HUGE! My cell phone rings just fine with the additional cost.

 

[disneysteve]

Ring tones anyone? I can't remember the number, but the ring tone industry is HUGE! My cell phone rings just fine with the additional cost.

In 2004 worldwide, people spent $4 BILLION on ring tones!

 

[imsayin]

Another interesting article/poll on retirement and Americans not being ready for it.

Tough Retirement Years.....

Also, it links to this site, that covers a variety of financial topics, from the AICPA (American Institute of CPAs).

Financial Literacy

 

[dvcgirl]

Another interesting article/poll on retirement and Americans not being ready for it.

Tough Retirement Years.....

Also, it links to this site, that covers a variety of financial topics, from the AICPA (American Institute of CPAs).

Financial Literacy

I know that some around here don't put too much stock in all of these polls, but they all say the same thing....Americans are underestimating their needs. I for one, believe them. All you have to do is look around at our society, and the insanity with respect to spending.

The Federal Reserve recently released a study that said the same thing. And we've been discussing the Employee Benefits Reserch Institutes findings....same thing.

Fidelity reported last month that the cost of retiree health care is up 5.3% for a couple living 20 years in retirement without any employee retirement benefits (which is definitely the direction we're all heading in....). Up from $190,000 to $200,000. It's easy to see how hard these costs would impact someone who had just saved $500,000, which is what the other study said that many believe they'll need. I wonder if they've figured on 200K of that going to healthcare? Likely not. And we can all expect that figure to keep on heading higher and higher.

 

[C.Ann]

and the insanity with respect to spending..

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I will agree that people "spend" far too much - just because they can.. Curb the frivilous spending and you're already miles ahead of the game..