Calculating For Retirement

[Yppej]

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]

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]

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.

[iris lilies]

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]

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.

[rosarugosa]

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]

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]

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]

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]

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.