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Thread: Retirement income

  1. #1
    Senior Member jp1's Avatar
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    Retirement income

    So, I've been reading a book that Ldahl recommended called "money for life" by Steve Vernon. It's excellent. And it's the first time I've thought about how different financial planning for retirement is from financial planning while working. Thank you Ldahl. This has been an eye opener for me.

    The basic concept is that one needs to consider a few possible ways of receiving a steady income in retirement. It presented three main options. Income from investments (leaving the principal entirely intact), systematic withdrawals (taking income plus drawing down the principal), and buying an annuity are the three basic methods of generating income. The book discusses which to do (or what combination of the three) depending on ones circumstances both in terms of how much money one has to play with and what one's goals are for retirement. Each of the options results in different retirement incomes and different levels of failure or success depending on how long one (and their spouse) live.

    My workometer still has about nine years on it so this is the first step I've taken towards figuring out the next phase of my life. I'm curious to hear what others who are closer to the end of their workometer or past the end of their workometer did/have done to prepare for the "start spending that pile of cash" phase of their lives. Did you do a deep dive through a book like this? Are you just "winging it"? Did you find a financial advisor and just trust them? Something else? What would you do differently in hindsight, etc?

    I still have a fair amount of time where I'm focused on accruing assets, but I'd like to start putting in place my plans for the next phase of SO and my's life so I'm curious what others have done or wished they had done.

  2. #2
    Senior Member razz's Avatar
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    Very wise efforts.

    As I have a defined benefit pension (through my late DH's work) as well as the standard gov't pension (OAS )+ CPP to cover my expenses that govern what I spend aka my modest budget. My OAS is like the US Social Security and I paid into the 50/50 Canada Pension Plan or CPP which may not have a US equivalent.

    I have a paid for home; my financial investment assets are staggered in a variety of lower risk investments with attention to tax implications and under the supervision of a CFP of my credit union. Low interest rates at present really penalize those who have saved so the diversity of alternatives is helpful. Mandatory withdrawal of some sheltered investments has begun - is this similar to the US 401?

    Best advice I may offer after more than a decade of retirement?
    1. Get control of spending now so that you know what you need with a little extra for wants.
    2. Pay off your mortgage now making sure that your home is right-sized, not a burden in size, maintenance, access to needed present and future services.
    3. Plan daily activities now that you will continue when you retire.
    4. Keep physically active and stay involved in your community.

    You have asked about financial issues but I have found that beyond a basic budget and expenses, it is the planning for living a full life post-retirement that is the biggest challenge. Consider that aspect as well.
    Looking forward to others' thoughts on this important topic.
    As Cicero said, “Gratitude is not only the greatest of virtues, but the parent of all the others.”

  3. #3
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    I also got that book on Ldahl's recommendation and I agree, it is excellent. I am reading through it for the second time. I like the way he lays out the pros and cons of the different ways, thinks of things I had not, like creating an annuity for when you are over 80, the longevity insurance thing.

    My favorite book on this subject is Wes Moss's You Can Retire Earlier Than You Think. Between the two books, I am fashioning our early retirement plans--I am semi-retired from my full-time job, work part time and take social security. DH still working.

    Both books have so much to offer. I have not found a financial advisor and just trust them.

    Wes Moss did lots of statistical work and has guiding principles of what the happiest retirees have in common, much like Razz's list. Here is an article he wrote that summarizes what he found:

    https://www.ajc.com/business/wes-mos...bx3vwoI2TG0ZO/

    The Vernon book is great for the actual planning of incomes streams. The Moss book is better for me for an overview of leading up to full retirement, of figuring out how to be happy and secure before undertaking retirement, since that is his focus--what separates happy retirees from unhappy ones.

  4. #4
    Senior Member iris lilies's Avatar
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    Quote Originally Posted by Tybee View Post
    I also got that book on Ldahl's recommendation and I agree, it is excellent. I am reading through it for the second time. I like the way he lays out the pros and cons of the different ways, thinks of things I had not, like creating an annuity for when you are over 80, the longevity insurance thing.

    My favorite book on this subject is Wes Moss's You Can Retire Earlier Than You Think. Between the two books, I am fashioning our early retirement plans--I am semi-retired from my full-time job, work part time and take social security. DH still working.

    Both books have so much to offer. I have not found a financial advisor and just trust them.

    Wes Moss did lots of statistical work and has guiding principles of what the happiest retirees have in common, much like Razz's list. Here is an article he wrote that summarizes what he found:

    https://www.ajc.com/business/wes-mos...bx3vwoI2TG0ZO/

    The Vernon book is great for the actual planning of incomes streams. The Moss book is better for me for an overview of leading up to full retirement, of figuring out how to be happy and secure before undertaking retirement, since that is his focus--what separates happy retirees from unhappy ones.

    Why annuities for over 80? I mean, why over 80?

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    Wade Pfau has written (and made videos) on retirement income planning. Pfau acknowledges that individual circumstances vary greatly, so there is no "one size that fits all". Pfau shines a spotlight on some of the critical decisions that would shape a person's plan.
    Legacy motives (Do you want to leave an estate, or to minimize the estate? Are you planning for a solo lifestyle, or for the longevity of the second-to-die -- widow/widower?)
    How to fund contingencies (spending shocks, such as Long Term Care).

    There are many articles in Pfau's blog... I will link to one.

    http://retirementresearcher.com/stra...nt-income-plan

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    Vernon describes this on pp. 71-72 and other places in the book--here is from p. 72:

    "Method#1: True longevity insurance. When you retire, you can use a portion of your saving to buy an annuity that's delayed and doesn't start until you attain a pre-determined advanced age. This type of annuity is commonly called 'longevity insurance'- insurance against the risk that you'll live too long! It may also be called a 'longevity annuity.' The portion of your retirement savings that you'd devote to buying longevity insurance can range from 15% to 33% of your retirement savings when you retire, depending on the age at which you start the annuity and whether the annuity has a death benefit."

    He recommends starting this at 80-85, but it's part of a bigger plan.

    He says Fidelity has this. Here is what I found on Fidelity:

    https://www.fidelity.com/viewpoints/...ncome-for-life

    You have to read the book to see how it fits together, it's complicated, and he gives you lots of models, and you pick your model based on different personal factors.

  7. #7
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    Quote Originally Posted by iris lilies View Post
    Why annuities for over 80? I mean, why over 80?
    Are we talking about a QLAC -- Qualified Longevity Annuity Contract -- with an insurance company?

    A QLAC enables the owner of a qualified retirement plan, such as a 401(k) or a Traditional IRA to defer the Required Minimum Distributions (RMD) beyond age 72 ... to as late as age 85. As the linked article explains, for someone who lives longer than age 93, there would be more total income with a QLAC than with the Traditional IRA taking the Required Minimum Distributions year by year.

    Iris Lilies, if we are talking about immediate, as opposed to deferred annuities, insurance companies may raise "suitability" questions about an applicant who is over 80. US males over 65 life expectancy is 83.1 years, according one source.

    http://www.blueprintincome.com/resou...nuity-contract

  8. #8
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    Quote Originally Posted by jp1 View Post
    So, I've been reading a book that Ldahl recommended called "money for life" by Steve Vernon. It's excellent. And it's the first time I've thought about how different financial planning for retirement is from financial planning while working. Thank you Ldahl. This has been an eye opener for me.

    The basic concept is that one needs to consider a few possible ways of receiving a steady income in retirement. It presented three main options. Income from investments (leaving the principal entirely intact), systematic withdrawals (taking income plus drawing down the principal), and buying an annuity are the three basic methods of generating income. The book discusses which to do (or what combination of the three) depending on ones circumstances both in terms of how much money one has to play with and what one's goals are for retirement. Each of the options results in different retirement incomes and different levels of failure or success depending on how long one (and their spouse) live.

    My workometer still has about nine years on it so this is the first step I've taken towards figuring out the next phase of my life. I'm curious to hear what others who are closer to the end of their workometer or past the end of their workometer did/have done to prepare for the "start spending that pile of cash" phase of their lives. Did you do a deep dive through a book like this? Are you just "winging it"? Did you find a financial advisor and just trust them? Something else? What would you do differently in hindsight, etc?

    I still have a fair amount of time where I'm focused on accruing assets, but I'd like to start putting in place my plans for the next phase of SO and my's life so I'm curious what others have done or wished they had done.
    I’ve been in the retirement phase a couple of years now. Like you, I got serious about planning for the switch from asset accumulation to income production several years out. I will admit I probably should have put more thought into some of the important ancillary issues. Social security claiming strategies, for instance, can be a little complicated if you’re married with a pre-18 kid. I also should probably have put more aside in a reserve for health care than I did in the vehicles that were available to me at the time. We moved to a lower cost of living area when I left work, and I greatly underestimated the benefit that resulted there for the basic overhead items. I probably should have consolidated some of the various retirement accounts earlier than I did.

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    Have you considered the longevity annuities? I wasn't aware of them until Vernon pointed out how they worked. It's an intriguing idea. He says to put no more than 30-ish percent in there, I think.

    I have not done anything like that, but I am transitioning to the taking out phase as well.

  10. #10
    Senior Member iris lilies's Avatar
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    Here is a retirement benefit I completely fked up: I left about $10,000 on the table. One of my pensions paid out about $2,000 per year at age 55. I didn’t claim it because I didnt read carefully and understand that yes, all I had to do was turn age 55. Then I get an income stream. All I had to do was claim it. Didn't have to be retired. It did not build up into my fund for later claims. It pays out in a stream and if I do not claim it I do not get it.

    ouch. Few here would be that clueless.

    I also did not manage my end-of-employement vacation days correctly to maximize payout from my employer, but I’m less concerned about that, that would have been only a couple thousand at most.

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