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Planning for Retirement

Started by polly_mer, July 05, 2019, 07:51:43 AM

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clean

Quotebut it is hard to think about how to manage prioritizing them, planning for our own retirement, and being ready for whatever comes with our own aging parents

Your retirement has to come before the other 2.  Remember the 'miracle of compounding'.  The sooner you contribute, the more time your investments have to double and double again.  You can not delay this.  The cost of delaying is multiples of what should be contributed. 

Planning for graduate school at the expense of your own retirement savings is incorrect.  We know that you will retire.  We dont know that you will be needed to fund graduate school either because the youngin can secure funding another way,  or even if they will actually go to graduate school.  It may be better for them financially to work first. Perhaps the employer will fund graduate school and the student will gain experience. 

Im not sure what to suggest about your aging parents, but I will reiterate the need to fund your own retirement.  Do you want your own children to have to worry what to do about you? IF you have enough resources, you can take care of yourself, and you will not be a burden to them. 

As much as I an loath to suggest borrowing, at least that is an option available to the potential graduate student. It is not an option for the retiree.  So, again, you must be saving for your own retirement.

Here is a phrase that may help. Only the strong can help the weak.  If you are not financially strong enough to support graduate school, then you can not do it. 
You (implicitly probably) promised to provide shelter for your kids when they were born.  That doesnt mean that you promised to  buy them a house when they turn 18 (or whenever).  AND even if you did, you can only fulfill that promise IF you have the money and the desire, but you can only do what you can do, and only with what is available after you have taken care of your own needs and expenses first.  Retirement savings is not a luxury.  Graduate school tuition for your children IS! 
"The Emperor is not as forgiving as I am"  Darth Vader

Kron3007

Unfortunately, we are banking pretty hard on my pension.  I really don't see how people manage to put away as much as they do.  We live pretty modestly and are finally starting to get ahead and save, but it has been a long road to get here and I don't see how we would be able to retire without the pension, which I am extremely grateful to have.

aside

Quote from: Tenured_Feminist on July 06, 2019, 11:58:44 AM
For those of you with offspring, how much and for how long do you intend to support/help them? We figure through college and maybe a bit in grad school, but it is hard to think about how to manage prioritizing them, planning for our own retirement, and being ready for whatever comes with our own aging parents. Right now, MIL could really use some respite care for FIL but it's prohibitively expensive. And I don't yet have a great plan for my own mother.

My intentions do not always match reality when it comes to supporting/helping my offspring.  My daughter has never needed a thing except for co-signing a car loan soon after her marriage.  My son, however, needed extensive dental work recently and could not afford it, and has had other financial crises in the past.  He has a relatively modest-paying job that he loves and is fine most of the time, yet has no cushion for when things go wrong.

Fortunately, my parents bought good long-term care insurance many years ago.  My father did not need it, passing relatively quickly, but my mother needed it for several years in order to remain at home.  Unfortunately, such policies are now much more expensive and do not provide the same level of benefits in many cases.  But long-term care insurance is increasingly important as people are living longer. 

spork

Only recently -- should have done it long ago -- have I been regularly contacting HR to ask "Given my current earnings, what's the percentage of my biweekly pay that has to be deducted for the remainder of the year for me to hit the annual legal maximum 403b contribution, and what will my take home pay be after that percentage is deducted?"

I am in year 7 of a 20 year mortgage at 3.375 percent. Maturity date is coincidentally when I hit 65 years of age. I hope to pay off the mortgage a few years early and put the $1,400 that I pay monthly in P&I into a Roth IRA and other investments instead.
It's terrible writing, used to obfuscate the fact that the authors actually have nothing to say.

bibliothecula

I've recently found that long-term care insurance is a huge PITA and often very limited. After countless problems with the plan my  grandmother had, my parents decided to put money into CDs and good old-fashioned savings accounts for when the time came, and that has proven a much better plan. YMMV, of course, but it's something to think about.

ciao_yall

Quote from: bibliothecula on July 06, 2019, 05:17:13 PM
I've recently found that long-term care insurance is a huge PITA and often very limited. After countless problems with the plan my  grandmother had, my parents decided to put money into CDs and good old-fashioned savings accounts for when the time came, and that has proven a much better plan. YMMV, of course, but it's something to think about.

Many companies stopped writing LTC because they were losing their shirts on it. Turned out people were living longer and rates of return were lower than expected.

And  they thought people wouldn't go into LTC until the last possible moment. In fact, people were choosing to go into LTC earlier than they medically "needed" to.

aside

Quote from: ciao_yall on July 06, 2019, 05:41:01 PM
Quote from: bibliothecula on July 06, 2019, 05:17:13 PM
I've recently found that long-term care insurance is a huge PITA and often very limited. After countless problems with the plan my  grandmother had, my parents decided to put money into CDs and good old-fashioned savings accounts for when the time came, and that has proven a much better plan. YMMV, of course, but it's something to think about.

Many companies stopped writing LTC because they were losing their shirts on it. Turned out people were living longer and rates of return were lower than expected.

And  they thought people wouldn't go into LTC until the last possible moment. In fact, people were choosing to go into LTC earlier than they medically "needed" to.

It's true that long-term care insurance is not what it used to be, and many financial advisors advise against it for those capable of self-insuring.

Vkw10

At age 50, I started planning to be able to retire at 62, after realizing how many people I knew were struggling to continue working into their late 60s and early 70s because they couldn't afford to retire. My retirement strategy:

Current Employer Pension: 45% of current gross salary if I stop work at age 62.
Previous Employer Pension: 17% of current gross salary beginning at age 65
Social Security: 35% of current gross salary beginning at age 67
403b and 457: $200,000 now, contributing 22% of gross monthly salary

Since the second pension and social security both would be substantially reduced if I start them earlier, I plan to use the 403b/457 to maintain standard of living from age 62 to 67. I should have about $200k left when I reach 70.5 and have to start taking RMDs.  Both pensions are in well-funded state systems, but neither has a guaranteed COLA, so I'll may need those RMDs to keep up with inflation in my 70s. As long as I resist the urge to increase my standard of living, I should be comfortable. Health costs are my major concern, as long-term care is likely to exceed my monthly income.
Enthusiasm is not a skill set. (MH)

monarda

#23
Quote from: Vkw10 on July 06, 2019, 09:28:46 PM
At age 50, I started planning to be able to retire at 62, after realizing how many people I knew were struggling to continue working into their late 60s and early 70s because they couldn't afford to retire. My retirement strategy:

Current Employer Pension: 45% of current gross salary if I stop work at age 62.
Previous Employer Pension: 17% of current gross salary beginning at age 65
Social Security: 35% of current gross salary beginning at age 67
403b and 457: $200,000 now, contributing 22% of gross monthly salary

Since the second pension and social security both would be substantially reduced if I start them earlier, I plan to use the 403b/457 to maintain standard of living from age 62 to 67. I should have about $200k left when I reach 70.5 and have to start taking RMDs.  Both pensions are in well-funded state systems, but neither has a guaranteed COLA, so I'll may need those RMDs to keep up with inflation in my 70s. As long as I resist the urge to increase my standard of living, I should be comfortable. Health costs are my major concern, as long-term care is likely to exceed my monthly income.

Ooh, I really like the way you have laid this out, Vkw10! Thanks. My retirement spreadsheet is organized in grand totals, but your way of looking at it is better, because I'm having a hard time translating the grand totals to what is sufficient.

Current employer pension (not been eligible for very long):     14% of current salary if I stop at 65, 11% if I retire tomorrow
Social Security:     38% of current gross salary at 67, 50% of current gross salary if I start at 70   
403b, 457b, and IRAs for me and partner combined:    $330,000 now, ~half Roth and half traditional (plan to convert some traditional to Roth early in retirement). Currently, I'm deciding how much longer to continue to contribute as aggressively as I am now.

We also have rental property equity and rental income - where most of our investments lie. We need to figure out how much longer we wish to keep these. At some point we can sell properties and invest instead in an annuity, for example (which we figure is pretty much like receiving rent but with no tenants, mortgages, property taxes, or maintenance).  Our net rental income (with today's rents, after mortgages and taxes, but not counting other expenses or principal payment part of the mortgage) is about 60% of my current employer salary.  And I, too, am most concerned with health care costs.

monarda

#24
Quote from: spork on July 06, 2019, 05:14:10 PM
I been regularly contacting HR to ask "Given my current earnings, what's the percentage of my biweekly pay that has to be deducted for the remainder of the year for me to hit the annual legal maximum 403b contribution, and what will my take home pay be after that percentage is deducted?"


Spork, at our university, you don't have to worry. Once you hit the legal max for the year, our system won't let us contribute any more, automatically.  For example, I round off the 403b contributions to $2100 per month. In December, that value adjusts to whatever amount is left to reach the $25,000 total. I don't need to do anything.  I'd be surprised if most places don't do it this way (there might be a legal requirement to do it this way), but I suppose HR offices are full of surprises.

spork

Coincidentally this video on risk management has been posted on YouTube, something I remember seeing when it was first broadcast nearly twenty-five years ago: https://www.youtube.com/watch?v=g4Gh_IcK8UM.
It's terrible writing, used to obfuscate the fact that the authors actually have nothing to say.

spork

Quote from: monarda on July 07, 2019, 08:52:46 AM
Quote from: spork on July 06, 2019, 05:14:10 PM
I been regularly contacting HR to ask "Given my current earnings, what's the percentage of my biweekly pay that has to be deducted for the remainder of the year for me to hit the annual legal maximum 403b contribution, and what will my take home pay be after that percentage is deducted?"


Spork, at our university, you don't have to worry. Once you hit the legal max for the year, our system won't let us contribute any more, automatically.  For example, I round off the 403b contributions to $2100 per month. In December, that value adjusts to whatever amount is left to reach the $25,000 total. I don't need to do anything.  I'd be surprised if most places don't do it this way (there might be a legal requirement to do it this way), but I suppose HR offices are full of surprises.

Probably my university's payroll system has some kind of deduction cut-off that automatically kicks in, but my income varies month to month because, for example, we don't get paid for fall overloads until the spring semester, summer courses might not make minimum enrollment, etc. Base salary I can count on, but everything else fluctuates, which affects how much I can divert to my 403b and still have enough to pay day-to-day expenses.
It's terrible writing, used to obfuscate the fact that the authors actually have nothing to say.

clean

Quotebut my income varies month to month

I wonder if this is common.  My checks are pretty consistent from Jan- May.  But until recently, the June check was different because the software would take out insurance payments for the summer out of that check (rather than evenly over the 9 scheduled checks). 
Summer pay is different (from 0) to something higher, depending on if or how many of your classes made. 
October might be different from May if there are any pay raises, or if the benefit costs changed.
In November, I usually beat either the part of the Social Security income cap (depending on how many summer classes made) or part of the retirement contribution cap.  December would see the final caps met.

As for the Robot Insurance Spork posted... I had a problem with the retirement contribution deduction last summer and HR was unhelpful (blaming ME for it!!)
When I signed up sixteen years ago for retirement contributions, I specified that it would only come out of the 9 regular checks, not summer.  For 15 years, it worked as it was supposed to work.  But they changed the software vendor last year and the new software could not handle stopping the distribution automatically.  When I complained to HR about this, they said that I was supposed to complete the paperwork to have it stopped, if that was my desire. They argued that the new system worked just the same as the old system.
They didnt seem to believe me that it was supposed to be automatic, so I made them produce my original paperwork and asked when THEY informed ME that THEY were not longer living up to the contract they designed.  This was escalated to the System VP in charge of HR and she was satisfied that the new system worked as designed (no mistake had been made), even though no one informed the faculty that the process had changed. 

This year, the system did send a message to faculty that IF we didnt want retirement deducted from our paychecks, we would have to file additional paperwork (and remember to file again so that we restart it in October1)
Idiots!! With all of the behavioral finance showing that participation is so much higher when it is automatic, having faculty remember to stop and restart their contributions is just stupid and Im sure will bite some faculty in the ass.

So while Spork may distrust the Robots, I take a "Trust but Verify" approach with the humans in HR. 

"The Emperor is not as forgiving as I am"  Darth Vader

Juvenal

As always, YMMV.

Lived below my income for my entire career, the surplus going to "portfolio."  Made significant additions to my supplemental retirement account.  Waited/worked to seventy for collecting maximum SS.

And now?  M.O.L. retired?  Well, the future is never clear, but more comes in than goes out.  But to what end?  Do my worthless relatives [nephews/great nephews] deserve to be in the will?  Do the friends and organizations presently in it merit largess?  What's the point of leaving an estate, really, if there is no direct posterity?
Cranky septuagenarian

clean

Quotethe future is never clear
Quoteif there is no direct posterity

Juvenal,
If you are male, it may not be too late to obtain a 'posterity' or 2
(Mick Jagger 73, Steve Martin 67, George Lucas 69, James Doohan 80!!, Charlie Chaplin 73, Anthony Quin 81!!!, )
There are a few stories online about the deaths of 'confederate widows' who died in their 90s. Most married at about 18 to former soldiers who were then in their 80s! Times are different, but as you said, The future is never clear!

Regardless of whether one is male or female, I am certain that adoption is available!  And Im not limiting this to children!  Im sure that there are some 50 year olds that would consider being adopted! 
"The Emperor is not as forgiving as I am"  Darth Vader