View Full Version : 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.
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.
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-moss-money-secrets-for-2020/1FD2OGiZdbx3vwoI2TG0ZO/
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.
iris lilies
8-12-21, 9:43am
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-moss-money-secrets-for-2020/1FD2OGiZdbx3vwoI2TG0ZO/
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?
dado potato
8-12-21, 9:58am
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/strategies-to-consider-when-building-an-effective-retirement-income-plan
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/retirement/rmds-to-retirement-income-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.
dado potato
8-12-21, 10:37am
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/resources/qlac-qualified-longevity-annuity-contract
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.
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.
iris lilies
8-12-21, 11:48am
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.
Oh man, IL, I have to check my South Carolina teaching pension, which is miniscule--what if it is the same way??
iris lilies
8-12-21, 12:01pm
Oh man, IL, I have to check my South Carolina teaching pension, which is miniscule--what if it is the same way??
I serve as cautionary tale, at least there is some benefit from my screwup.
This is IPERS system, Iowa Public Employees Retirement System.
end-of-employement vacation days
I recall that my vacation monies were around $6200 when I retired and rolled them over into a TIAA account. They have since doubled but I consider it an emergency fund so I don't check it but once a year.
iris lilies
8-12-21, 2:22pm
I recall that my vacation monies were around $6200 when I retired and rolled them over into a TIAA account. They have since doubled but I consider it an emergency fund so I don't check it but once a year.
yes, my payout for accumulated vacation was a lot, it was for something like 5+ weeks, a lot of money. But there was a strategy I could have employed to be “on vacation “ for those 5 weeks which would have allowed me to continue to accumulate vacation days. It vaguely occurred to me since others did it, but mainly I just wanted to be done.
Teacher Terry
8-12-21, 3:05pm
We paid cash for the house 12 years ago. When I bought my condo interest rates were so low I took a 85k mortgage for 30 years and kept the money. Sorry IL you lost that money. Ouch!
I read YMOYL when I was ~36. ~22 years ago.
3 months after I read it, I "retired" and moved from Silicon Valley here to my island Brigadoon, with a ~2 year old child.
The male members in my family tend to live into their mid-to-late 90s.
So, I had to plan for my retirement resources to last 60+ years, and also ideally to leave something for my child.
I did a lot of research into modern portfolio theory, and post-modern portfolio theory, and came up with a scheme of my own. I have very strong mathematical skills, especially when it comes to modelling and statistical analysis. It was/is my main profession.
My goals/parameters were:
- survivability likelihood of the portfolio for the time period of concern
- the ability to rely upon it for modest living expenses of ~$60k/year or so
- a near-certainty that I'd always have a roof over my family's head
- a strong reduction in the variance of the returns, especially on the downside
- tolerance for reducing upside a bit, in exchange for larger reduction on the downside possibilities
- low day-to-day involvement in portfolio management opportunities
- flexibility to change if significant unforeseen circumstances should arise (deaths, divorce, civil unrest, economic collapse, pandemics, that sort of thing)
- simplicity - nothing tremendously complex that relies too much on governmental regulation, other entities performing, and so on.
The solution I came up with was basically a tripod:
- equities in fairly boring things that pay dividends, and/or a with a track record of boringly consistent dividend/profit growth
- real estate holdings in my local community, to generate income, potential capital gains upon sale, and to provide some measure of social good to the area I live in
- bonds and mortgages, again in my local community.
- and a wad of cash given to a Very Good Investment Management Firm to run, without my involvement, as an independent/control experiment.
I specifically ruled out any fancy-pants approaches(*) as "too complicated" and locking me into an uncertain future, when I still had so many decades of Life to intervene and change plans. So, no annuities or insurance things. (*)I did make use over the years of some charitable trust mechanisms to accomplish some purposes while retaining ultimate control over my capital.)
So far I have beaten my control-investment-group's results, even ignoring fees, almost every year over the past 20+. And I'm still afloat, and things are doing well, even in the face of some recent changes in my life.
frugal-one
8-12-21, 4:11pm
The one thing that stands out for me (other than what others have posted) is that when I was about a year from what I thought would be my retirement date ... I contacted a fee-based financial planner otherS has recommended. I probably should have done that sooner. I gave him all info for all aspects of our financial life. The things I did wrong (or made more difficult perhaps) was to have too many places where I parked our money. The first thing was to consolidate all investments to one or two sources (if possible) for ease of computations and found that I was totally underinsured. Since I have always studied and invested our money I wanted a professional opinion that I was realistic in my retirement plan. It was a relief to have him say I understood and did not need him (or anyone) to handle our investments because I had a good plan and asset allocation and that I knew what I was doing. He also confirmed that we COULD retire satisfactorily. Truthfully, I was quite SHOCKED he did not think more should be changed or that he did not try to get me to have him invest our money. Having someone else look over our plan to verify that we were right in our assessment was very liberating. I kept wondering if we were doing the right thing. Having someone else confirm it put our minds at ease. YLMV
My previous mega Corp employer had a financial planning division and one of the perks of working there was that once a quarter or so one of the people in that division would be available for free meetings for employees for a day. I wish we had that at my current job. It’s a little early for me to be putting any plans in action but like frugal one it would be nice to have them as a confidence check or even just to have a conversation with an expert on the topic.
frugal-one
8-13-21, 3:19pm
My previous mega Corp employer had a financial planning division and one of the perks of working there was that once a quarter or so one of the people in that division would be available for free meetings for employees for a day. I wish we had that at my current job. It’s a little early for me to be putting any plans in action but like frugal one it would be nice to have them as a confidence check or even just to have a conversation with an expert on the topic.
I don't know. I may be paranoid but would hesitate to hand over all my financial information to a company I work for. I would use them for a resource as to the best way to do things but wouldn't want them seeing my actual finances.
I'm curious to know how people select a good "fee-based planner"?
What qualifications do you look for? How do you examine their track record? Etc.
frugal-one
8-13-21, 4:29pm
I'm curious to know how people select a good "fee-based planner"?
What qualifications do you look for? How do you examine their track record? Etc.
It has been a while ago... I know I researched and found a list of things to ask. I don't know if I could find that same list today. Perhaps a google search of what to ask a fee-based planner such as this??
https://www.align.financial/17-questions-you-should-ask-any-financial-advisor-youre-interviewing/
I did get recommendations from people I knew and also asked questions of the advisor also.
An easy way to check out an investment professional is to use the free search tool available on Investor.gov, which will direct you to the SEC's Investment Adviser Public Disclosure website (IAPD website). You can also visit the IAPD website directly, FINRA's BrokerCheck program, and/or your state securities regulator.
https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-0
https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/investor-0
frugal-one
8-14-21, 12:04pm
Found this interesting.
State tax guide for retirees:
https://www.kiplinger.com/kiplinger-tools/retirement/t055-s001-state-by-state-guide-to-taxes-on-retirees/index.php
In the book I mentioned earlier the advice the author gave on finding a financial advisor discussed the various professional designations that advisors can get and what the focus of each of those designations is. He also suggested talking to references they provide and obviously spending time discussing what they would potentially be recommending for you. For someone who has done some study on the subject they will hopefully have an idea already of what they want out of the advisor so they can reject advisors that seem to have plans that don’t mesh with the person’s goals. Depending on what one’s goals are and the amount of time they are willing to spend on research a financial advisor may not specifically be necessary but these are big decisions that will have an impact on the rest of the person’s life so it is probably wise for most people to use a planner even if it’s mainly for assistance avoiding tax mistakes and the like.
Personally I don’t envision a major role for a financial planner for this but I will likely use one because I’m a big believer that for most things an expert opinion is worthwhile.
I don't know. I may be paranoid but would hesitate to hand over all my financial information to a company I work for. I would use them for a resource as to the best way to do things but wouldn't want them seeing my actual finances.
The boat has sailed on that opportunity for assistance but if it were still available to me I wouldn’t go so far as to show a casual advisor like this the granular details. I would come prepared with overall account balances, projections of anticipated growth, current amounts invested annually and in what type of account and then have a general discussion about where I might want to tweak my current activities and also what options would be available to me at retirement. Or I might even be less specific about my current situation and actions and just tell them that I expect to have $x in my 401k and rollover IRA at retirement and $y in my standard brokerage account and $z elsewhere. And then have a discussion about what to consider doing at retirement. Or if I had been reading up on retirement income strategies I might even have just gone and spent my alloyed 45 minutes spitballing with them about the ideas suggested in whatever I had been reading.
But you’re probably right. I wouldn’t have walked into the room and handed them my various investment account statements and said ‘help me…’
I'm curious to know how people select a good "fee-based planner"?
What qualifications do you look for? How do you examine their track record? Etc.
Further to my other comment, personally I would get up and walk out of the office of anyone who told me they could beat market averages. But I doubt too many fee based planners are going to make that claim. I’m not interested in trying to develop my own strategy to beat the market (or implement someone else’s strategy myself) nor am I interested in paying someone else to try and do so with my money being the money that will either succeed or fail from the strategy.
Further to my other comment, personally I would get up and walk out of the office of anyone who told me they could beat market averages. But I doubt too many fee based planners are going to make that claim. I’m not interested in trying to develop my own strategy to beat the market (or implement someone else’s strategy myself) nor am I interested in paying someone else to try and do so with my money being the money that will either succeed or fail from the strategy.
After many years and many mistakes, I have come to the same conclusion. I don’t believe anyone can consistently beat the market, much less on an after-fee basis. That’s why I like cheap index funds. I’m happy to pay a little for administration and diversification, but anyone offering genius for sale is almost certainly not to be trusted. If you have the secret to beat the markets, why not simply get rich using it for yourself?
iris lilies
8-15-21, 12:27pm
I posted this on another thread but it really belongs here:
We would be fine without a publicly funded pension because we saved money, but WITH the pension we have what they call on the Mr. Money Mustache forums “Fat FIRE.”
Our income is:
My pension from the city of St. louis $28,000 annually
My pension from Ames, Iowa is $2,000 annually
My Social Security income is $28,000
DH’s Social Security is $22,000 annually
——————————————————————
$80,000 annual income for our household
We spend around $80,000 annually, not counting new cars, new real estate (we pay cash) or blow out vacations to Europe. These latter things come out of our stash.
If I die, a huge percentage of our household income dies with me and DH is left with Social Security income only. But we have significant assets so he would be fine, and I would not be surprised if he could mostly live on that SS number because he is very frugal and independant.
My income is also big enough to cover half of nursing home costs for me while pulling $50,000 from our stash each year for 10 years, which is do-able without leaving DH destitute.
That's a hella pension, IL, good for you!
With memory care, my mom is paying $10,300 per month. But folks tend to not need that for 10 years.
That's a hella pension, IL, good for you!
With memory care, my mom is paying $10,300 per month. But folks tend to not need that for 10 years.
:0! That is incredibly expensive!!!!
:0! That is incredibly expensive!!!!
yeah, the next step up, nursing home care, is 19,000 a month.
yeah, the next step up, nursing home care, is 19,000 a month.
Who can afford this? I will have to check with a friend to see what the comparable cost is here but I know it is way less than this.
iris lilies
8-16-21, 9:49am
yeah, the next step up, nursing home care, is 19,000 a month.
Here in flyover country full on nursing home care is still under $100,000 annually.And yes, it is very unusual to need the higher end care for 10 years but that is what I plan for.
iris lilies
8-16-21, 12:15pm
Who can afford this? I will have to check with a friend to see what the comparable cost is here but I know it is way less than this.
Lots of Americans can afford this. They spend down their assets, and then the American taxpayer takes over to cover their bill until they die.
Take a look at this: 100k a year on average for long-term care
https://www.statista.com/statistics/310446/annual-median-rate-of-long-term-care-services-in-the-us/
My thoughts, when I read this, is how likely are people tho have to spend down all their assets at this exorbitant rate? The answer is 25%.
https://www.elderneedslaw.com/blog/how-many-older-adults-will-wind-up-in-skilled-nursing-homes
When my farther needed full skilled nursing care while he was on hospice care the bill for a private room, self pay was just under $11,000/month. That was 7 years ago in Denver.
Take a look at this: 100k a year on average for long-term care
https://www.statista.com/statistics/310446/annual-median-rate-of-long-term-care-services-in-the-us/
My thoughts, when I read this, is how likely are people tho have to spend down all their assets at this exorbitant rate? The answer is 25%.
https://www.elderneedslaw.com/blog/how-many-older-adults-will-wind-up-in-skilled-nursing-homes
Not sure where you got the 25% about spending down all their assets.
I understood that 25% of the older adults will require some care in a nursing home by 2030. It could be for short-term or long-term care duration depending on the reasons for accessing. Still very significant. The balance of needs of older adults in the population of 2030 will be served by family or various home care services as required.
Have to watch for similar stats as I am a member of a long-term care advocacy group in Ontario.
Not sure where you got the 25% about spending down all their assets.
Clumsy wording. That second article says what you said--that 25% of people will require long-term care at some point.
Well that's so heartening, in that 75% of people don't require long-term care! Trying hard to be in that 75%.
But to answer Razz's question, it's like IL says, here you spend down your own money, and then become eligible for Medicaid and they pay for the facility. Many facilities start people self-pay, and then switch over when they run out of money. So it's a good idea to find a place that will take self-pay, then switch over. My parents had to show that they had 200000k to be accepted into the facility where my dad died. They would have kept them there on Medicaid, although probably not as nice an apartment.
It's harder to find a place if you have no money and are already on Medicaid.
I looked briefly into long term care insurance, but the cost seemed pretty prohibitive, and they reserved the right to raise premiums at any time.
iris lilies
8-17-21, 9:43am
Well that's so heartening, in that 75% of people don't require long-term care! Trying hard to be in that 75%.
But to answer Razz's question, it's like IL says, here you spend down your own money, and then become eligible for Medicaid and they pay for the facility. Many facilities start people self-pay, and then switch over when they run out of money. So it's a good idea to find a place that will take self-pay, then switch over. My parents had to show that they had 200000k to be accepted into the facility where my dad died. They would have kept them there on Medicaid, although probably not as nice an apartment.
It's harder to find a place if you have no money and are already on Medicaid.
and that 25% covers, I assume, people who have a short stay or two in a nursing home while recovering from injury or illness. Medicare pays for some number of days in situations where recovery and improvement is taking place. When the improvement stops, Medicare stops paying for the nursing home care.
I think MIL pays around $6500 a month for a run of the mill (some assistance) Brookdale place. Services like laundry or bringing meals to rooms are additional charges. If she goes to memory care, it will double. She is using savings/annuity funds until they run out.
iris lilies
8-17-21, 10:01am
…I did a lot of research into modern portfolio theory, and post-modern portfolio theory, and came up with a scheme of my own. I have very strong mathematical skills, especially when it comes to modelling and statistical analysis. It was/is my main profession.
Conversely, I have little aptitude for mathematics. I threw money into savings and investment vehicles not especially well thought-out and ignored that stash for decades. Thanks to living in America where no one confiscates the stash, and thanks to the magic of compounding interest, this “leave it and forget it” method worked.
We are awesome at saving money, are not very good at investing it, and are stupid about draw-down methodology.
My goals/parameters were:.
My goals were save some money.
flowerseverywhere
8-17-21, 10:29am
Jp1, in our thirties we developed a strategy based on Your Money or your life. Our goals:
no debt at all. Paid for house and vehicles. No credit card interest ever.
a financial advisor through DH work has about 25% of our retirement money. We have 30% in a long term CD which we could never get the rate of now. The rest we manage in very low fee mutual funds and consistently match the financial advisor. Also, we keep track of the stock/fixed percentage and rebalance to about 65/40 once a year. That has enabled us to gain when the market has been high. We have been extremely fortunate the past twelve years with overall stock market performance.
we have positioned ourselves so we could live on SS alone, but honestly we don’t want to. Our home is one floor with a wheelchair accessible shower, garage you could roll out to, and other handicap features so we will be able to stay in the house as long as possible.
we recently cleaned out our file cabinet. I have records from the mid seventies tracking our net worth, income and so on. I also have many years of tracking where our money went. Probably the best use of my time to ensure a safe retirement.
now we have a 2008 and 2012 cars, both we bought used years ago and have under 100,000 miles. We have money ready if we have to replace them, probably with used Hondas or Toyotas. Eating out, spending money on clothes and entertainment are not our priorities. We play games, exercise, read and have simple fun with friends. Our Medicare supplement pays for a gym, which we utilize and I do bone builders, line dancing, walking, pool exercise and swimming to maintain my strength and balance. We also try to eat as healthy as possible.
So my advice is to save, track your money so you know how much you will need, and figure out what you are going to do all day. Pay attention to your financial, physical, mental and spiritual health. Many people move to a lower COL area, pay attention to how handicapped friendly their home is and so on to prepare as well as the money aspect.
Healthcare is normally a worry, but we were very lucky that DH company allowed him to cover us on their group plan, but we had to pay premiums. They were way lower than anything we could have found ourselves.
we are getting close to Required Minimum Distributions which we figured out will be less than what we are used to taking out now.
make a list of what your goals are. Travel? Eating out regularly? Traveling in an RV? Moving or staying pit? Health care (the biggie).
There is no one size fits all, but do your best to plan ahead without being obsessed.
iris lilies
8-17-21, 10:55am
The best investment advice for the average person is: Dollar cost average into a couple of index funds and forget about it. In 30 years you’ll have a nice stash.
iris lilies
8-17-21, 11:00am
Draw-down methodology is not plaguing me this year since we are pulling out lots of cash to renovate our Hermann house. I do not have to nag DH about spending the stash because the stash is being spent at quite a fast clip. Ouch. Last year I told our bulldog rescue coordinator “here take some money now because next year I’m going to feel poor” and yes that is now true.
I’m back to doing the work myself to recover the daybed I bought last year. I was going to drop it off at an upholsterer but it is so easy to do I will do it myself. I’m still going to pay a professional to paint the walls in the bedroom of my condo because I have done a little bit of faux finishing and my work sucks. This is all because I am feeling squeezed at the moment.
I pay little attention to tax avoidance strategies. It is what it is, we’re going to pay what we pay. This year we paid $18,000 in federal taxes and that seems like a pretty big tax bill.
The saving money part of it is easy. I've got that down, and have for years. I save about $50k per year between 401k, employer ESOP plan and other investments. Company match on the first two adds another $15k to that. All of that money winds up in low cost index funds, even the ESOP money which I can withdraw once per year. Barring market catastrophe before my workometer runs out the boat to hold the boatload of money will be decent sized, the house will be mostly, if not entirely, paid off, and hopefully my then 30 year old car will still be functional.
It's figuring out how to best position that money once the saving part of my life is over that I'm in the process of figuring out. I've now read just one book on that topic and even though at it's core the book recommended just three basic strategies or some combination thereof, deciding on that combination will have potentially significant effects in terms of how much money I will have to spend each year, how long the money will last, whether there will be money left over to be given away when I die and whether I will have resources available should I need expensive care in my final years. You can't really maximize all of those so you have to pick and choose how important each of those four objectives are.
dado potato
8-17-21, 12:21pm
Also, we keep track of the stock/fixed percentage and rebalance to about 65/40 once a year. That has enabled us to gain when the market has been high. We have been extremely fortunate the past twelve years with overall stock market performance.
So my advice is to save, track your money so you know how much you will need, and figure out what you are going to do all day. Pay attention to your financial, physical, mental and spiritual health. Many people move to a lower COL area, pay attention to how handicapped friendly their home is and so on to prepare as well as the money aspect.
Healthcare is normally a worry, but we were very lucky that DH company allowed him to cover us on their group plan, but we had to pay premiums. They were way lower than anything we could have found ourselves.
we are getting close to Required Minimum Distributions which we figured out will be less than what we are used to taking out now.
make a list of what your goals are. Travel? Eating out regularly? Traveling in an RV? Moving or staying pit? Health care (the biggie).
There is no one size fits all, but do your best to plan ahead without being obsessed.
Thanks for your insights from your life experience, flowerseverywhere.
Is your constant portfolio allocation 60% equity and 40% fixed income? I assume 65/40 was a typo.
I totally agree that there is no one size that fits all. At age 72 (spouse and I both), our target allocation is 58% Fixed Income, 42% Equities.
Personally, I have no legacy goals... I would prefer the second to die (between my spouse and I) to die broke... with minimal assets going through probate. So there is a point (around age 74 in my plan) when about half of our bonds and CDs will mature. and I can use the proceeds to purchase a Single Premium Immediate Annuity. That move would reduce the assets in the portfolio, and significantly increase the %age allocated to equity versus fixed income. By swapping assets for lifetime income at age 74, I would hope to reduce the risk of losses that possibly could occur due to cognitive decline. (Another biggie!)
In my plan there is also a second point (around age 80, assuming at least one of us is still in good health) when I would sell the equities and remaining fixed income (except for Treasury I Bonds) and purchase another SPIA from another insurance company. As a hedge against dementia, I would in effect "hang up my hockey skates", and be asset-light from then on. Sometime between age 75 and 80 I would sell the big house with stairs and chores and buy another SPIA from another insurance company. The 3 streams of annuity payments (initiated during the "riper years" ) should produce enough monthly income to pay for independent living in an apartment, with a substantial amount left over, which we can give away (or spend on Assisted Living in a Green House, if needed.)
Hardly a day goes by without receiving telemarketing calls (yesterday Jamaica called to tell me I won a prize and they wanted to ship it to me!) and e-mail spoofs (Paypal imposters for example). noli illegitimi carborundum <wink> Post-80, with assets decumulated in favor of lifetime monthly income, I likely would hire a consierge bill-paying service for a monthly fee. Included in their services, they will issue checks on a third-party bank for gifts of cash that we specifically authorize, payable to the order of someone we name.
Thanks for your insights from your life experience, flowerseverywhere.
Is your constant portfolio allocation 60% equity and 40% fixed income? I assume 65/40 was a typo.
I totally agree that there is no one size that fits all. At age 72 (spouse and I both), our target allocation is 58% Fixed Income, 42% Equities.
Personally, I have no legacy goals... I would prefer the second to die (between my spouse and I) to die broke... with minimal assets going through probate. So there is a point (around age 74 in my plan) when about half of our bonds and CDs will mature. and I can use the proceeds to purchase a Single Premium Immediate Annuity. That move would reduce the assets in the portfolio, and significantly increase the %age allocated to equity versus fixed income. By swapping assets for lifetime income income at age 74, I would hope to reduce the risk of losses that possibly could occur due to cognitive decline. (Another biggie!)
In my plan there is also a second point (around age 80, assuming at least one of us is still in good health) when I would sell the equities and remaining fixed income (except for Treasury I Bonds) and purchase another SPIA from another insurance company. As a hedge against dementia, I would in effect "hang up my hockey skates", and be asset-light from then on. Sometime between age 75 and 80 I would sell the big house with stairs and chores and buy another SPIA from another insurance company. The 3 streams of annuity payments (initiated during the "riper years" ) should produce enough monthly income to pay for independent living in an apartment, with a substantial amount left over, which we can give away (or spend on Assisted Living in a Green House, if needed.)
Hardly a day goes by without receiving telemarketing calls (yesterday Jamaica called to tell me I won a prize and they wanted to ship it to me!) and e-mail spoofs (Paypal imposters for example). noli illegitimi carborundum <wink> Post-80, with assets decumulated in favor of lifetime monthly income, I likely would hire a consierge bill-paying service for a monthly fee. Included in their services, they will issue checks on a third-party bank for gifts of cash that we specifically authorize, payable to the order of someone we name.
Dado, you've raised some interesting issues that suddenly seem relevant to me. The die broke thing is probably going to happen no matter what, but you made me realize that if by chance I had to depend on the State for long-term care, I could lose my house, right? I love this house, my kids all love this house and it is a home that could be used for generations as a get-away. So I want to protect it.
Any advice from anyone out there? Put it in a trust? Give it outright to the kids now? What are my options?
ApatheticNoMore
8-17-21, 1:34pm
I'm not so sure you would lose the house. What do I know about any of it? VERY LITTLE. Except I've talked about the issue with mom's estate (that is her will) lawyer. A house isn't so easy lost to end of life costs I have been told, and trusts aren't about that and don't seem to have any effect. Trusts are about avoiding probate, mostly. HOWEVER this may depend on the state and it may be different in other states, this was CA.
Is mom's house going to be worth a lot? Nah it's falling apart, so nah. But I will claim any inheritance I get, but I by no means count on inheritance to pay my bills or my retirement, even working till 70 is a more realistic plan than that. Boomers have a lot of wealth, silents like my mom less. So some people out there are going to be made rich by inheritance, but probably not me.
iris lilies
8-17-21, 1:40pm
Dado, you've raised some interesting issues that suddenly seem relevant to me. The die broke thing is probably going to happen no matter what, but you made me realize that if by chance I had to depend on the State for long-term care, I could lose my house, right? I love this house, my kids all love this house and it is a home that could be used for generations as a get-away. So I want to protect it.
Any advice from anyone out there? Put it in a trust? Give it outright to the kids now? What are my options?
catherine, while this will sound harsh, you can take it babe:
Why must you “protect” your assets and make the taxpayers pay for your end of life care?
Who are YOU, and why are YOU and YOUR real estate and your children so very special!????
That said, yes give it away now. Deed it over to them. Ignore all of the potential SHXT that could seriously hit the fan with that move.
catherine, while this will sound harsh, you can take it babe:
Why must you “protect” your assets and make the taxpayers pay for your end of life care?
Who are YOU, and why are YOU and YOUR real estate and your children so very special!????
That said, yes give it away now. Deed it over to them. Ignore all of the potential SHXT that could seriously hit the fan with that move.
Yes, I can take it. ;)
a) I've been a high-earning taxpayer and spent a lot of money paying for the common good.
b) Using loopholes to hold on to what's mine in case I run out of cash is not illegal, as the Donald always says.
c) As stupid as this makes me sound, dado's post was the first time the bell went off in my head that I can't take it for granted that we will be able to pass along our house to future generations. This has set my hair on fire, as MMM might way.
d) I always want to do what's right, regardless of the legal loopholes, and this is seriously depressing to me. It makes me think I will probably never retire. Maybe that's good for my cognition and will keep me out of the nursing home.
Catherine, have your kids expressed a desire to keep the house after you and DH are gone? And do they have the resources to afford to do so?
Catherine, have your kids expressed a desire to keep the house after you and DH are gone? And do they have the resources to afford to do so?
Yes, at least 3 out of 4, especially my unmarried son who spends every chance he gets up here. The house is not expensive. We paid $164,000 for it and taxes are very reasonable for lakefront property. I would prefer for us to pass it on and then they can decide if and when all or 3, or 2 or 1 keeps it up and/or sells it. I don't want to lose the house because I wasn't smart enough to prepare financially to keep it.
This is deja vu. When my beloved aunt died, she left the cottage to her sister, which was logical at one point, but the sister (my grandmother) was in a nursing home at that time. Aunt F had asked my mother several times to take her to the lawyer so she could change the will and you know how that goes. My mother was busy... never got around to it.
So lo and behold once the cottage went through probate, we get a bill from the State for reimbursement for those years my grandmother had spent in the nursing home, and that's how my mother came to selling the cottage that represented my childhood Utopia.
That is not a legacy I want to repeat.
ApatheticNoMore
8-17-21, 2:05pm
Obviously you need to talk to an actual estate lawyer. But it may not be as bad as you think.
Teacher Terry
8-17-21, 2:28pm
Giving your house to your kids while still needing it has a million ways to go bad and I know about a few. I am friends with someone in Texas that went to a lawyer and legally got Medicaid to pay most of his wife’s nursing home care and he was able to protect his money which got left to his kids. I don’t feel that’s right so agree with IL. But rich people get away with that crap all the time so it’s Catherine’s choice if she goes that route.
Well, IL has expressed a lot of my thoughts. May I add a few more?
Why are you treating your children as cripples who cannot provide their own unique getaway? They have their own dreams to fulfill and will do so just as you have done yours. Why must their future be your house and your plans? Until you bought it, no one envisioned it as part of their future, did they? Do they even now envision this or simply see it as your dream satisfied?
Have you asked your kids what their longterm dreams really have been and are today, and, how they are planning to achieve them standing on their own capable two feet?
Isn't it time for you to consider your wellbeing and financial future? Have you discussed your financial wellbeing and future with your kids?
I am asking these questions because my farm was my dream as a 10 year old and when we met, my DH supported my dream. When he passed, my dream changed with the new reality and I sold our beloved farm. If and when it is appropriate, I will sell my present cute little house. My kids are living their lives and their choices, not mine.
When I am gone, everything that remains will be sold, if necessary, and split between them.
My legacy was giving each support as they grew up, exposing them to all possibilities permitted by my $$ limits, giving them space to be themselves according to their choices. I am done with any other legacy. They know my financial situation and where everything is kept. Transparency is key for me.
You will do what eventually makes sense to you as always. It doesn't need to make sense to anyone else.
ApatheticNoMore
8-17-21, 3:32pm
Why are you treating your children as cripples who cannot provide their own unique getaway?
middle class people don't generally have getaways. Maybe they could buy a tent and go camping? :) But if catherine wants to keep the house in the family, she can talk to an estate lawyer and see what may be possible. Plenty of people do it, talk to a lawyer who specializes in wills. Trusts can be setup but in my experiences that's just to bypass probate, nothing more at least not at any level of $ I could talk about. I also don't think one can base anything on the law years ago (on end of life care etc.), much has changed in term of laws etc..
dado potato
8-17-21, 3:44pm
Just tossing another facet into the mix, I have been reading Sam Sugar's Guardianships and the Elderly: The Perfect Crime
Basically Sugar outlines equity courts and guardianship in the USA... and warns of abusive guardianships. His first tactic for preventing a guardianship is to anticipate and constructively "resolve all family disputes before they escalate into a tragic guardianship situation". Mind you, it is not only your family members who can initiate involuntary commitment and an incapacity hearing about you. Sugar describes guardianships initiated by: a neighbor, medical institution, local law enforcement, and a bank/credit union.
In the US, how does one partner pay for nursing home needed for the other? Pay down the assets?
Different women have told me of their gratitude for their partner's final demise as they were in danger of losing their paid for home as the extra costs for the nursing home care for the partner, their personal expenses and home maintenance costs were necessitating the sale of their home.
There are so many scenarios that could arise that making a commitment to keep the island cottage for the kids' legacy a cause for serious concern. Talk honestly and openly with all your kids 'now' about your current $ situation 'now' before making commitments. If not now, when?
It is time for me to shut up now and step back as others will be better informed on the US laws.
iris lilies
8-17-21, 4:15pm
In the US, how does one partner pay for nursing home needed for the other? Pay down the assets?
Different women have told me of their gratitude for their partner's final demise as they were in danger of losing their paid for home as the extra costs for the nursing home care for the partner, their personal expenses and home maintenance costs were necessitating the sale of their home.
There are so many scenarios that could arise that making a commitment to keep the island cottage for the kids' legacy a cause for serious concern. Talk honestly and openly with all your kids 'now' about your current $ situation 'now' before making commitments. If not now, when?
It is time for me to shut up now and step back as others will be better informed on the US laws.
here is how the partner thing works:
The partner who is not in the nursing home gets to keep all investment vehicles in their own name PLUS the family home PLUS an amount from jointly owned assets set by the state. Last time I checked, that amount was $80,000 in my state.
At least, that is my general idea. I am not sure if Nanny G can come after the family home after the nursing home partner and the other partner dies.
flowerseverywhere
8-17-21, 6:02pm
Thanks for your insights from your life experience, flowerseverywhere.
Is your constant portfolio allocation 60% equity and 40% fixed income? I assume 65/40 was a typo.
I totally agree that there is no one size that fits all. At age 72 (spouse and I both), our target allocation is 58% Fixed Income, 42% Equities.
Personally, I have no legacy goals... I would prefer the second to die (between my spouse and I) to die broke... with minimal assets going through probate. So there is a point (around age 74 in my plan) when about half of our bonds and CDs will mature. and I can use the proceeds to purchase a Single Premium Immediate Annuity. That move would reduce the assets in the portfolio, and significantly increase the %age allocated to equity versus fixed income. By swapping assets for lifetime income income at age 74, I would hope to reduce the risk of losses that possibly could occur due to cognitive decline. (Another biggie!)
In my plan there is also a second point (around age 80, assuming at least one of us is still in good health) when I would sell the equities and remaining fixed income (except for Treasury I Bonds) and purchase another SPIA from another insurance company. As a hedge against dementia, I would in effect "hang up my hockey skates", and be asset-light from then on. Sometime between age 75 and 80 I would sell the big house with stairs and chores and buy another SPIA from another insurance company. The 3 streams of annuity payments (initiated during the "riper years" ) should produce enough monthly income to pay for independent living in an apartment, with a substantial amount left over, which we can give away (or spend on Assisted Living in a Green House, if needed.)
Hardly a day goes by without receiving telemarketing calls (yesterday Jamaica called to tell me I won a prize and they wanted to ship it to me!) and e-mail spoofs (Paypal imposters for example). noli illegitimi carborundum <wink> Post-80, with assets decumulated in favor of lifetime monthly income, I likely would hire a consierge bill-paying service for a monthly fee. Included in their services, they will issue checks on a third-party bank for gifts of cash that we specifically authorize, payable to the order of someone we name.
yes 60/40. I can add numbers up to a hundred usually😀
Catherine, I think whether you can pass your house down to a family member or put it in a trust for all of them to use, will depend on several unknowns, some of which are as follows:
Will either of you even need nursing home type care?
Who needs it first?
Will there be other sources of funds for the partner who needs to be in care-- i.e., what does the rest of your saving situation look like?
How long are you likely to need care, and again, what other resources are there to pay for it?
But I think you have other complicated issues at work because you have more than one child, and they probably all want access to the house. If you had a lot of other resources and could make sure that the ones not getting the house got the same thing in monetary terms, that would be one thing.
Lots of people deed the house to one child and perhaps that child moves in an takes over maintenance as you age, pays bills, etc. That's one way to do it.
You have to be aware of the five-year look back for Medicaid, so if you gave a child the house within the past 5 years, then they will come after the child for the money represented by the house.
I have also looked at estate houses where they did not have to sell until after the death of the parent, then they had to pay money to Medicaid from the sale of the house, to repay what Medicaid in effect fronted.
I don't know how well it works to deed one child the house now--the option you mention--King Lear comes to mind, but maybe it would work out better in your family?
You should definitely go see an estate lawyer and make sure it is one with cottage law experience--they had a lot of them up in Michigan where we lived because there were tons of inherited family cottages.
Could the son who wants it buy it from you with a mortgage but give you a life estate?
This sort of generational wealth passed down to descendants is why we have a huge racial wealth gap in this country.
For example, in Boston the median net worth of a white family is $247,000. The median net worth of a black family is $8.
To Catherine, are you thinking of leaving an inheritance because you received one? And your parents received one? Trace it back.
Where did that property come from? It was stolen from Native Americans. Where did the non property assets come from? In many cases from the slave labor of Black Americans. The North also benefited from slavery, as their industries had Southern customers, Southern investments, etc.
What did the slaves have to pass down? They didn't even get their 40 acres and a mule. That's how their descendants landed up with $8.
And when you're in that nursing home and your kids are in the vacation house guess who will be taking care of you? The majority of frontline nursing home workers, who are underpaid and on the front lines of covid, are people of color left out of the American dream. They'll be wiping your behind - do you really need to s*** on them another way too by not paying your fair share of Medicare costs to help the Feds have the funds to support the social safety net programs they rely on given their low wages?
Well, you did ask for advice and options. This is probably not the response you wanted.
ApatheticNoMore
8-17-21, 6:58pm
Without inheritance young people will not have it even as good as their parents though, rising college costs, astronomical housing costs, lack of pensions, job security etc..
But inheritance is just a small part anyway, the game of middle class inter-generational wealth is more like this: send the kid to private school or buy a house in a good school district (nearly every middle class person with kids plays this game IME), save for college and help pay for their college (that's not universal), maybe give them a downpayment for a house later (I think it's a large part of why anyone can buy a house before age 40 at this point, but of course many people can't buy a house) etc.. Most of this is way before the will kicks in.
Catherine, if your husband is a veteran, the VA has benefits for veterans. My fil ended up at a veterans home but then passed shortly after--I believe he spent maybe 45 days in a home? That's not a very long time. I have read average time in care is 18 months, but I don't remember where I got that.
iris lilies
8-17-21, 7:12pm
Catherine, I believe your husband is a veteran, and the VA has benefits for veterans. My fil ended up at a veterans home but then passed shortly after--I believe he spent maybe 45 days in a home? That's not a very long time. I just read average time in care for a man is 2.2 years a a woman is 3.7, although I have also read the figure 18 months, so don't know what to think there.
The option if a vetera’s home is a good idea. Often though, veterans homes are shitholes AND they are geographically far from family members. Some states have only one. Many have waiting lists. And finally, veteran’s homes are not free.
Very interesting thoughts from Tybee and Jeppy.
Tybee first:I think you are right that I need to see an estate lawyer. Also, yes, DH and I might be in the lucky 75% who won't need long-term care. I would love to be able to pass the house down, but OTOH, I think it potentially gets complicated when vested interests in shared property differ and cause disagreement. The downside of going through all this hassle about keeping the house in the family is that it could all go south and instead of being a pleasure it becomes a curse with family squabbles, etc. I don't want that either.
Jeppy: My "inheritance" from my mother was three 20-dollar bills she took from under her hospital sheet and handed to me on her deathbed. It was money I had actually given to her 3 weeks prior. So, while I do have roots that go back to the Boston blue bloods, those roots are dried up and dead from a wealth perspective. I don't think inheritances are a given. I never expect to get one, and my kids most certainly won't get one--but the one exception I'd like to see is the chance for them to have this house if they want it.
I'm not quite with you on feeling my kids don't deserve an inheritance because other people don't get them. I guess you feel that there's something inherently wrong with inheritances. I have some caveats but as a general rule, I don't find anything wrong with them, except that many people actually don't know how to handle them once they get them.
I'll admit, hiding assets to keep them does seem unethical to me, and that's the dilemma because if I do wind up in nursing home and I do want to pass the house along to the kids, that means I have to be able to amass the wealth to keep the house and pay for LTC. My current "portfolio" is a little bit short. Hence my insight that if that's to be the case I have to resign to working until I can't and hope that the funds amassed by that time fill the bill.
Thanks for the thoughts.
ETA: re razz's question that I'm treating my children like cripples. I don't see it that way. It seems more as if razz and Jeppy are on the same page with regard to the whole idea of wanting to offer the house to the kids. To me it's simple--it's nice to keep a house in the family. Maybe it goes back to my own feelings about homes, feelings that you all may not share. I have special feelings about them; I think they help cement a sense of place in our lives, they come with stories and histories, and they are so symbolic of so much more than lumber and glass. At least to me. So maybe that's where this all comes from. I've seen the movie The House of Sand and Fog a million times. I identify with the themes in that movie. If you've seen the movie you'll know what I mean. I get it when Scarlett has to go back to Tara.
My children are fully functioning adults and not cripples. They ARE living out their own hopes and dreams in their own unique ways. They are not asking for crutches or anything else. It's all my idea, and it's one I would like to see carried out if it's meant to be.
iris lilies
8-17-21, 8:55pm
Catherine I remember when your husband, not that long ago, was hell bent on leaving your NJ home to his kids. Look how quickly he was able to move off that dime with a new piece of real estate in Vermont.
It’s just real estate, property that comes with all of the responsibility and baggage of maintenance and family relationships. Blech.
The Family Lake House is a common topic on Mr. Money Mustache. A variety of opinions are voiced here as one example:
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-don't-understand-cabin-ownership/
Catherine I remember when your husband, not that long ago, was hell bent on leaving your NJ home to his kids. Look how quickly he was able to move off that dime with a new piece of real estate in Vermont.
It’s just real estate, property that comes with all of the responsibility and baggage of maintenance and family relationships. Blech.
The Family Lake House is a common topic on Mr. Money Mustache. A variety of opinions are voiced here as one example:
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-don't-understand-cabin-ownership/
I'm sure you're right about real estate just being responsibility and baggage.
But, emotions drive desire, mores than reason. DH and I both had childhood "happy places"--me in CT and he in Rockaway, NY (where a dozen Scottish relatives crammed themselves into a tiny bungalow that the family shared)-- and this drives our pure joy when our kids find peace and respite here.
The MMM thread is interesting. I didn't know family camps were a Scandinavian thing.
ApatheticNoMore
8-17-21, 9:33pm
If nothing else inheriting a home, maybe means one won't have homelessness to worry about. But homelessness was so likely otherwise? Well likely perhaps not but.
iris lilies
8-17-21, 10:16pm
We had two “family lake house” experiences.
One with rented cabins each year, sometimes with the cousins coming, sometimes just with our nuclear family. Fun place, loved it. That was when I was under 10 years old.
Later, The second place was a country lake house belonging to my uncle where extended family would meet up and stay, with several people camping. Then they built a new house with two kitchens snd lots of bedrooms for people to stay. That went on for years. It was great fun in the early years but got boring after 8-10 years. My parents bought a place a block away and enjoyed it for some years but by then I wasn’t going there, too old, had my own life. My mother offered the place to my brother because she was in the same state of euphoria as catherine. Feeling that she was unfair to me, she offered to buy land for me there.
ugh, no mom! Thanks but no thanks was my answer. I wanted to GET AWAY from that kind of nowheresville NOT embrace it.
Not surprisingly, just a few years later my parents sold their little lake house and .I think gave some money to my brother for it so he never really owned it. By then they had become tired of driving there to do chores and take care of it.
I love my extended family and cousins. Had tons of fun with them. Have no desire to own property with them.
I also have a ‘lake house’ experience from childhood. Probably not as magical as Catherine but I enjoyed it at the time. My uncle owned a summer cabin in west central Kansas at the peak of a hill facing an irrigation reservoir. At that time it had running water that wasn’t drinkable so we had to bring big coolers of water for drinking and cooking and it didn’t even have septic systems so they had an outhouse. My other aunt/uncle from my mom’s home town also owned a 1/6 share in another cabin nearby. Apparently now they all have septic so the bathroom now includes a toilet! We went probably five/six times during my childhood. Swam, boated, water skied, etc. Stopped going around the time I hit puberty and my sister was graduating high school.
My memories are fond. But that’s probably because we were there with all of my very favorite relatives. There was really nothing especially lovely about Cedar Bluffs Reservoir in Kansas.
I’m sure if I went today I’d think it was pretty dreadful. My uncle (the last surviving member of his generation) still owns that cabin after all these years. Going there now would maybe be fun for one night while I remembered all those childhood visits but any longer would seem pointless.
Teacher Terry
8-18-21, 1:44am
IL, once the last spouse dies yes the house is sold to pay back Medicaid.
I am reading the MMM lakehouse thread, interesting.
But Catherine's house (sorry for the third person) is not a lakehouse per se, but her primary home which happens to be on the lake, which is a much smarter thing to do from a financial standpoint than a second vacation home. So it's not really apples to apples.
The problem I foresee is that all the adult offspring would want the house, as it is so desirable. So you have a problem of inheritance when you have one unique thing. It's worse when that thing is a house.
We have a similar issue right now with my parents' house, but it is being sold, mostly because one heir wants the money very badly.
iris lilies
8-18-21, 9:13am
middle class people don't generally have getaways. Maybe they could buy a tent and go camping? :) But if catherine wants to keep the house in the family, she can talk to an estate lawyer and see what may be possible. Plenty of people do it, talk to a lawyer who specializes in wills. Trusts can be setup but in my experiences that's just to bypass probate, nothing more at least not at any level of $ I could talk about. I also don't think one can base anything on the law years ago (on end of life care etc.), much has changed in term of laws etc..
It is very common for middle class and lesser class to have cabins in flyover country. Casual cabin Real estate isn’t that big a deal.
iris lilies
8-18-21, 9:15am
I am reading the MMM lakehouse thread, interesting.
But Catherine's house (sorry for the third person) is not a lakehouse per se, but her primary home which happens to be on the lake, which is a much smarter thing to do from a financial standpoint than a second vacation home. So it's not really apples to apples.
The problem I foresee is that all the adult offspring would want the house, as it is so desirable. So you have a problem of inheritance when you have one unique thing. It's worse when that thing is a house.
We have a similar issue right now with my parents' house, but it is being sold, mostly because one heir wants the money very badly.
But what logical thing would you be doing with their property if your sibling didn’t want the money?
iris lilies
8-18-21, 9:19am
IL, once the last spouse dies yes the house is sold to pay back Medicaid.
How does Medicare accomplish that? Do they place a lien on the property?That seems to be the only way to track that.
But what logical thing would you be doing with their property if your sibling didn’t want the money?
Farming it.
Teacher Terry
8-18-21, 1:01pm
Yes they put a lien on the house.
frugal-one
8-18-21, 5:29pm
Yes, at least 3 out of 4, especially my unmarried son who spends every chance he gets up here. The house is not expensive. We paid $164,000 for it and taxes are very reasonable for lakefront property. I would prefer for us to pass it on and then they can decide if and when all or 3, or 2 or 1 keeps it up and/or sells it. I don't want to lose the house because I wasn't smart enough to prepare financially to keep it.
This is deja vu. When my beloved aunt died, she left the cottage to her sister, which was logical at one point, but the sister (my grandmother) was in a nursing home at that time. Aunt F had asked my mother several times to take her to the lawyer so she could change the will and you know how that goes. My mother was busy... never got around to it.
So lo and behold once the cottage went through probate, we get a bill from the State for reimbursement for those years my grandmother had spent in the nursing home, and that's how my mother came to selling the cottage that represented my childhood Utopia.
That is not a legacy I want to repeat.
Don't know what the laws are in your state but here in WI an heir can be listed on the deed (transfer on death). I went to the register of deeds in my county and paid $30 to have this done (may be more now since that was a while ago). Transfer on Death (TOD) is not included in probate. The house will go directly to whom I specified tax free. If I decide to change this at any time, I only need to change the info on the deed. YLMV
frugal-one
8-18-21, 5:37pm
Just tossing another facet into the mix, I have been reading Sam Sugar's Guardianships and the Elderly: The Perfect Crime
Basically Sugar outlines equity courts and guardianship in the USA... and warns of abusive guardianships. His first tactic for preventing a guardianship is to anticipate and constructively "resolve all family disputes before they escalate into a tragic guardianship situation". Mind you, it is not only your family members who can initiate involuntary commitment and an incapacity hearing about you. Sugar describes guardianships initiated by: a neighbor, medical institution, local law enforcement, and a bank/credit union.
Thanks for posting this. I ordered the book from the library. I see myself in this situation. My only heir is not someone to be trusted, sadly. I have to figure out what to do.
iris lilies
8-18-21, 7:29pm
Don't know what the laws are in your state but here in WI an heir can be listed on the deed (transfer on death). I went to the register of deeds in my county and paid $30 to have this done (may be more now since that was a while ago). Transfer on Death (TOD) is not included in probate. The house will go directly to whom I specified tax free. If I decide to change this at any time, I only need to change the info on the deed. YLMV
but a transfer of deed wont go through with a lien against it.
iris lilies
8-18-21, 8:18pm
Catherine, Just think about this. Please just think about it. Think about it because it ties into your emotional way of spending money. And of course this is none of my business but you know me.
You are doing your New Jersey son a favor by renting him a house that you’re losing money on. I don’t know why he hasn’t purchased from you yet. Why haven’t you closed that deal? So, he’s benefiting, you’re losing money because of him renting, and you negotiated a price that was lower than what you could get on the open market.
From my point of view I think one or the other is fine. He’s your kid. Give him a financial break because he’s your kid. But I did not realize you were giving him two financial breaks. Really, two? And now you give him a Lakehouse in an action that could, depending on how you structure, it work against you financially.
This is not sensible money management. Please be sensible.
It’s lovely to give your children a lake house and you could do it easily if you had several million dollars but you don’t have that money. And let’s be real, $165,000 house it’s not a big deal, it just isnt. Why cant they buy their own $165,000 house? You don’t have to answer I just think if they want that they need to buy it for themselves Because it’s not a big deal for them at the stage in life where they have much earning power. You don’t have that earning power anymore.
I won’t even talk about the problems of all of your children owning a piece of property. I won’t talk about it cause it’s all speculation and I’m sure you think it will all work hunky-dory and they will all get along in sharing that lake house. They love it now because you guys take care of it. All they have to do is go up to Vermont and hang out. Once they start having the responsibility of a Lake house in a harsh winter setting where stuff actually has to be maintained, well that’s a whole ‘ nother Kettle of fish.
I remember my uncles working at the lake house owned their brother, my uncle. My uncles were men who can do things. Every one of them was nearly as handy as my DH. So, that was a crew that my uncle who owned the lake house liked to see visit because his brothers would work for half a day on some major project and complete it. They built stuff. They repaired stuff. They mowed down stuff. They tore down old stuff.
I doubt that your kids have the skills or the inclination to take care of a place. But I don’t really know them so who knows.
IL, I love your honesty and your consideration for my future.
I have been giving all this some thought, and it is true that I am an emotional spender. After all the books I've read on finance: YMOYL, Dave Ramsey, All Your Worth, Suze Orman books, The Science of Getting Rich, Think and Grow Rich, etc. etc. etc. I still think I can have my cake and eat it, too. Earn it, keep it, give it away. Actually I don't mind giving it away. It's wasting it that really, really bothers me.
So here is where I come out on the lake house issue: I did recall that one of the positive things that came out of my losing the CT cottage was that in fact, I am glad I didn't keep it. I had a rough early marriage. The worst thing that could have happened would have been for that cottage to go from being a blessing and a Utopia to being a huge burden. We wouldn't have been able to keep it up. We would have destroyed its wonderful aura. We might have even lost it to foreclosure, like we did our house in NY state.
So I've always said that it's a good thing my memories are sealed away with my memories of Aunt F.
In terms of my DH's little bungalow, that came to no good end, because there was no will or provision by the matriarch in the family. At that time, one of the heirs occupied the house more often and the matriarch simply said, "N will do what's right" meaning, continue to share with the family. That never happened, and my MIL had a huge falling out with her because of it.
I wouldn't want that to happen to my kids, either.
So:
1) I hope I don't wind up needing a nursing home
2) I'm not going to go nuts protecting this house for the future: I don't want the house to become a burden to the kids, and I also don't want them to fight over it. You're right--they are not handy like your folks or the Vermonters in my neighborhood
3) I trust that over the next 10-15 years, if I live that long, the answer will appear. In the meantime, I'll stick with my plan of trying to stop working within 2-3 years.
I don't feel bad about my NJ son not yet closing on the house. He needed the extra time. He's paying us rent every month. For six months wait, I was not about to kick him out and go through the hassle of selling the house.
frugal-one
8-18-21, 9:21pm
but a transfer of deed wont go through with a lien against it.
If this was done before the lien, would the "heir" be able to work with an attorney or court? I don't know the law and am sure it depends what state this is applicable for and the amount of indebtedess???
iris lilies
8-18-21, 9:47pm
If this was done before the lien, would the "heir" be able to work with an attorney or court? I don't know the law and am sure it depends what state this is applicable for and the amount of indebtedess???
A lien prevents a clear title.
I don’t see how a deed can transfer from one person to another without the lien being satisfied, and that would mean somebody has to pay the amount of the lien. But what do I know, this is Internet legal advice worth what you pay for it.
I agree with IL regarding the lake house catherine. If you think your kids want it leave it to all of them equally as part of your estate. After you're gone they can haggle over who gets what asset. Just like when my father was dying and I told my sister "I want his car". When she (as executor) divided up his assets the car was one of them. I got less of other assets to offset the value. Or similar to how my mom's siblings divided up their mother's assets. She had a lot of "stuff" that held sentimental but not much monetary value. The only valuable asset she had was a house. So all the stuff in the house was sold at a garage sale. Mom and her siblings could purchase stuff at the sale. After the sale was over the money it brought in got split 8 ways among all the siblings. If one sibling had wanted it all they could have bought it all but then received 1/8 of the proceeds and the rest of the proceeds would've been split equally among the other siblings.
In your case, leave the house as part of your overall estate and let them decide what to do. If they want to keep and share it they can work that out. If one kid really wants it and the others not so much then he can buy them out. If no one wants it that badly they can just sell it and split the money equally. But no matter what I'd give them the agency to sort this out on their own after it's all been given to them in equal shares. They are adults. They can handle this.
catherine
8-18-21, 10:19pm
I agree with IL regarding the lake house catherine. If you think your kids want it leave it to all of them equally as part of your estate. After you're gone they can haggle over who gets what asset. Just like when my father was dying and I told my sister "I want his car". When she (as executor) divided up his assets the car was one of them. I got less of other assets to offset the value. Or similar to how my mom's siblings divided up their mother's assets. She had a lot of "stuff" that held sentimental but not much monetary value. The only valuable asset she had was a house. So all the stuff in the house was sold at a garage sale. Mom and her siblings could purchase stuff at the sale. After the sale was over the money it brought in got split 8 ways among all the siblings. If one sibling had wanted it all they could have bought it all but then received 1/8 of the proceeds and the rest of the proceeds would've been split equally among the other siblings.
In your case, leave the house as part of your overall estate and let them decide what to do. If they want to keep and share it they can work that out. If one kid really wants it and the others not so much then he can buy them out. If no one wants it that badly they can just sell it and split the money equally. But no matter what I'd give them the agency to sort this out on their own after it's all been given to them in equal shares. They are adults. They can handle this.
Yes, I agree. I have to fall back on one of my favorite quotes: Unnecessary possessions are unnecessary burdens. I'm trying to live a simple life. I have enough. That's it.
Thinking more about this there's only one situation that I would offer different advice. And it ties back to my mom's experience. As I mentioned, the only valuable asset grandma had was her house. I think I've told this story before here but anyway... Grandma had been blind due to diabetes for decades before she died. My youngest uncle, and his family, lived in her basement and took care of her for the last 15 years or so of her life after grandpa had passed away. Drove her to all her medical appointments, most 80 miles away in the nearest real city, etc. Cooked her meals. Cleaned for her. And on and on. When she died mom and 3 of her siblings gave their share of her house to my uncle to thank him for caring for their mom all that time. The remaining 3 siblings didn't. Young Uncle had to take out a loan to buy out their 3/8 shares of the house. (and it caused a life long rift in the family that was severe enough that decades later when I was in my 20's and was first told this story I was easily able to guess who the three were.) If one of your kids does the same for you as my uncle did for my grandma then give him the house. At that point don't worry about splitting things equally. Thank the child that cared for you in your dotage by giving them the house.
dado potato
8-21-21, 12:19pm
Take a look at this: 100k a year on average for long-term care
https://www.statista.com/statistics/310446/annual-median-rate-of-long-term-care-services-in-the-us/
My thoughts, when I read this, is how likely are people tho have to spend down all their assets at this exorbitant rate? The answer is 25%.
https://www.elderneedslaw.com/blog/how-many-older-adults-will-wind-up-in-skilled-nursing-homes
Wade Pfau has written several articles on Long Term Care, as an expensive "contingency" during retirement. The following link is a general introduction to the continuum of Long Term Care services. http://retirementresearcher.com/the-continuum-of-long-term-care
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