Retirement Planning Thread

[Zeno]

It seems the Market thread was sort of hijacked by retirement talk. I figured we could have a thread specific to retirement to discuss things like 401Ks, Social Security, IRA's etc.

I'll start by posting some of the Retirement Calculators I have found and used.

https://www.ssa.gov/benefits/calculators/

https://www.aarp.org/work/retirement-planning/retirement_calculator.html

https://www.bankrate.com/retirement/calculators/retirement-plan-calculator/

https://www.bankrate.com/retirement/calculators/retirement-calculator/

https://www.calculator.net/roth-ira-calculator.html

Also figured we could talk about those "Best Places to Retire" lists...

https://www.forbes.com/sites/willia...est-places-to-retire-in-2021/?sh=611bef97106c

https://realestate.usnews.com/places/rankings/best-places-to-retire

https://www.investopedia.com/retirement/best-countries-to-retire/

 

[Zeno]

Median Retirement Savings by Age

According to this survey by the Transamerica Center for Retirement Studies, the median retirement savings by age in the U.S. is:

• Americans in their 20s: $16,000
• Americans in their 30s: $45,000
• Americans in their 40s: $63,000
• Americans in their 50s: $117,000
• Americans in their 60s: $172,000

What’s the Average Retirement Savings by Age?
2019-2020 Federal Reserve SCF data also shows us the average retirement savings by age in the U.S.:
• Ages 18-24: $4,745.25
• Ages 25-29: $9,408.51
• Ages 30-34: $21,731.92
• Ages 35-39: $48,710.27
• Ages 40-44: $101,899.22
• Ages 45-49: $148,950.14
• Ages 50-54: $146,068.38
• Ages 55-59: $223,493.56
• Ages 60-64: $221,451.67
• Ages 65-69: $206,819.35

What Is the Recommended Retirement Savings by Age?
The above savings amounts may seem impressive, but consider this "rule of thumb" given by some financial experts on how much individuals should have saved in their retirement accounts for a goal of retiring by age 67:

• Americans in their 30s: 1–2 times their annual salary
• Americans in their 40s: 3–4 times their annual salary
• Americans in their 50s: 6–7 times their annual salary
• Americans in their 60s: 8–10 times their annual salary

That means, for example, that a 35-year-old making $45,000 a year should have up to $90,000 in their retirement accounts—twice the median and average of what most Americans have saved.

https://www.synchronybank.com/blog/median-retirement-savings-by-age/

8.9%
The average employee 401(k) contribution rate (as a percentage of salary).

https://www.investopedia.com/articles/personal-finance/010616/whats-average-401k-balance-age.asp

 

[Zeno]

I have 7 years to go until I can retire with full benefits--July 2028, but I currently plan to retire in December of 2029 but I plan for both possible timelines. I am looking at a lot of possibilities for locations, my wife and I have no kids and no strong family ties to a particular part of the country. We want to live somewhere warm, near a beach, with low taxes and relatively affordable. Our first place to check out was Galveston TX--we liked it, real estate was reasonable, no state taxes but property taxes were high and homeowners insurance was high as well. We are also considering Mississippi, Alabama and Florida--all are tax-friendly for retirees and you can find reasonable real estate.

 

[elindholm]

I have friends who are planning to retire overseas, which sounds potentially appealing, but how does health care work? Obviously it's going to depend on the circumstances, but, in general, how does an American citizen get into the health care system of another country?

I'm looking at another 8-9 years, retiring summer of 2029 or 2030. But what I really mean is, retiring from my current job. I'd like to do part-time work after that, if I could find something that's a good match for my skills and interests.

 

[Russ Smith]

I have friends who are planning to retire overseas, which sounds potentially appealing, but how does health care work? Obviously it's going to depend on the circumstances, but, in general, how does an American citizen get into the health care system of another country?

I'm looking at another 8-9 years, retiring summer of 2029 or 2030. But what I really mean is, retiring from my current job. I'd like to do part-time work after that, if I could find something that's a good match for my skills and interests.

Depends on the country. I've looked at NZ because I have dual citizenship. You can get healthcare there you just have to be a resident which if you retire there you would be. It appears i can own property there because I'm a citizen.

everyone has different rules it's the biggest issue IMO after where and when for retirement.

 

[Russ Smith]

From BRR in other thread I accidentally hijacked.

"So, I decided to look up retirement calculators because of you guys. Just punching in random stuff and estimates, it says for me to have 50k annually in retirement income and retiring at 63 years old, I would run out by 83 years old. Now, I only factored 401k because my personal investments are meant to buy some property as my permanent residence and I did not include social security at all. This is all assuming I keep making the same wage and putting the same amount into retirement annually the whole time so I guess I have some work to do.

In the big picture, I am trying to get 3-5 acres in the valley as a permanent place for me to live and plenty land for my kids to build homes on and pay a fraction of what buying a home randomly would cost them (100k vs 500k) so it is more of a help them retire plan but once I get this property, then I can truly focus on what I need to do to have it paid off before retirement and make sure 50k annually is more than enough money to get by"

Suzie Orman says the average retiree spends 46K per year. it's not clear to me if that's 92K for a couple or how she gets that. It actually seems low to me but then I live in california.

in 2017 we "retired" for a year in Sacramento, really a change but I had knee surgery so we were both out of work so it was a trial retirement. So no income, Cobra for insurance, renting a house etc. We spent about 60K, hard to be exact I wasn't totally tracking it. During that time before I got hurt we did a 6 week vacation in the Philippines and about 3 or 4 2-3 day trips somewhere else. The knee surgery hijacked the rest but we obviously would have spent more I'm guessing it would have been about 75K if I hadn't have hurt the knee. Staying home rehabbing lowered our costs. So 46K in California is ridiculously low, in other states maybe not. She did say average.

My Wells Fargo retirement person says we need 100 to 120K a year for myself and my GF to retire. My Fidelity person says 80 to 100 again with the caveat of where are you going to retire. In the Philippines much less, in NZ that may be right, in the US depends on the state.

 

[BigRedRage]

I have friends who are planning to retire overseas, which sounds potentially appealing, but how does health care work? Obviously it's going to depend on the circumstances, but, in general, how does an American citizen get into the health care system of another country?

I'm looking at another 8-9 years, retiring summer of 2029 or 2030. But what I really mean is, retiring from my current job. I'd like to do part-time work after that, if I could find something that's a good match for my skills and interests.

Retirement to me is just stopping a 9-5 too. I am happy to still "work" I just want it to be play money and secondary income instead and I want to do whatever is fun instead of punching a clock. I've never considering actually retiring overseas but I have daydreamed about spending a few months here a few months there while having my property still in arizona. Sounds fantastic and by then there should be more than plenty services ala Airbnb where you can rent months at a time and stay places.

 

[BigRedRage]

Suzie Orman says the average retiree spends 46K per year. it's not clear to me if that's 92K for a couple or how she gets that. It actually seems low to me but then I live in california.

I literally came in here to talk about this specifically. I came up with 50k, for me alone, as a random number I thought would be plentiful in retirement off the top of my head so it is interesting that Orman said 46k. This is assuming my primary residence is paid off. At that point, I figure $50k annually is really comfortable.

But yeah, I wanted to ask for those who are closer to retirement (I am only 38) or those who have planned much more than I have, what do you think it a reasonable and comfortable retirement annual income for one person and or a couple? Where you live matters for sure and what you do but I am super curious what everyone is eyeing as their annual retirement income. I will likely still be here in AZ but will want to travel a whole lot so living comfortably will be important.

 

[elindholm]

I literally came in here to talk about this specifically. I came up with 50k, for me alone, as a random number I thought would be plentiful in retirement off the top of my head so it is interesting that Orman said 46k. This is assuming my primary residence is paid off. At that point, I figure $50k annually is really comfortable.

But yeah, I wanted to ask for those who are closer to retirement (I am only 38) or those who have planned much more than I have, what do you think it a reasonable and comfortable retirement annual income for one person and or a couple? Where you live matters for sure and what you do but I am super curious what everyone is eyeing as their annual retirement income. I will likely still be here in AZ but will want to travel a whole lot so living comfortably will be important.

If you're 38 now and are thinking about retiring at 63, that's 25 years in the future, by which time $50k is going to have the effective spending power (in today's dollars) of only $20-25k due to inflation. That sounds really low to me. Admittedly, my perspective is skewed because I live in Los Angeles County, but property tax and home/auto insurance already have me at about $12k/year before I even take a bite of food. Then figure in utilities (including a phone, or whatever has replaced by the phone by the 2040s) and health care, and you're probably into the 20k range right off the top.

The short version is that even once your primary residence is paid off, it's very difficult to live "cheaply" while maintaining the level of creature comforts that we've all become accustomed to.

 

[Zeno]

I literally came in here to talk about this specifically. I came up with 50k, for me alone, as a random number I thought would be plentiful in retirement off the top of my head so it is interesting that Orman said 46k. This is assuming my primary residence is paid off. At that point, I figure $50k annually is really comfortable.

But yeah, I wanted to ask for those who are closer to retirement (I am only 38) or those who have planned much more than I have, what do you think it a reasonable and comfortable retirement annual income for one person and or a couple? Where you live matters for sure and what you do but I am super curious what everyone is eyeing as their annual retirement income. I will likely still be here in AZ but will want to travel a whole lot so living comfortably will be important.

A lot of those calculators ask you what percent of your current working income you want replaced. I normally set it to 80% or so considering that in retirement I won’t be paying in to social security, Medicare, 401K or IRA and I am on track or exceeding that % based on my projections.

Basically you need to figure out what is comfortable for you based on what you want out of retirement and where you are living.

 

[Zeno]

Retirement to me is just stopping a 9-5 too. I am happy to still "work" I just want it to be play money and secondary income instead and I want to do whatever is fun instead of punching a clock. I've never considering actually retiring overseas but I have daydreamed about spending a few months here a few months there while having my property still in arizona. Sounds fantastic and by then there should be more than plenty services ala Airbnb where you can rent months at a time and stay places.

I want to travel when I retire--travel a lot to be honest so I don't intend to work once I retire. There is so much I want to see of the world, I plan to spend my first few years of retirement seeing what I can. Maybe when I tire of that I will look at doing something part time but whatever it is it will be probably for more of the get out of the house and socialize type of job than being too concerned about making money.

 

[Zeno]

Some interesting stats on this site...

https://www.annuity.org/retirement/retirement-statistics/

• In 2016, the average retirement age in the United States was 65 for men and 63 for women. The official retirement age is 67 for those born after 1959.
• A 2018 Gallup poll of 1,015 employed people found that the average predicted retirement age was 66.
• The retirement age is lowest in Alabama, Arkansas, Kentucky, Michigan, Missouri, South Carolina and West Virginia, where people retire at 62 on average.
• The retirement age is highest in Connecticut, Kansas, Massachusetts, Nebraska, New Hampshire, New Jersey, North Dakota, Utah, Vermont and Wyoming, where people retire at 65 on average.

• The average American started saving for retirement at age 27.
• Twenty-two percent of Americans have less than $5,000 saved for retirement, and 15 percent have no retirement savings whatsoever.

• In 2019, only 56 percent of workers were enrolled in a workplace retirement plan. Twenty-one percent of workers had a pension plan, and 43 percent of workers had a retirement savings plan.

• In 2018, the average monthly Social Security benefit for retired workers was $1,461.

• More than half of workers (55 percent) plan to work in retirement.
• Of those who plan to work in retirement, 35 percent list lack of retirement savings as a cause.
• Seventy-two percent of listed reasons for working in retirement were “healthy-aging reasons,” including staying active (47 percent), keeping the brain alert (39 percent), maintaining a sense of purpose (34 percent) and maintaining social connections (21 percent).

• In 2018, average annual spending by Americans aged 55–64 was $66,212. Spending for those 65–74 was $56,268, and average spending for those 75 and older was $43,181.
• Average annual spending by retirees in 2018 was $49,441, compared to $65,834 spent by workers.

• In 2018, about 930,000 people over the age of 60 moved across state lines. The top destination states were Florida, Arizona, North Carolina, Texas and South Carolina.

 

[Western Font]

I have friends who are planning to retire overseas, which sounds potentially appealing, but how does health care work? Obviously it's going to depend on the circumstances, but, in general, how does an American citizen get into the health care system of another country?

I'm looking at another 8-9 years, retiring summer of 2029 or 2030. But what I really mean is, retiring from my current job. I'd like to do part-time work after that, if I could find something that's a good match for my skills and interests.

A lot of overseas retirees pay cash for healthcare if the country of residence has a low cost of living. If you are vested for Medicare (IIRC the requirement is having worked 40 quarters in the US) you can return to the US to access it, which I believe many do for surgeries. But you have to plan your coverage before you expatriate. For example, many choose to retain Medicare A (inpatient/hospital) but forego Medicare B (outpatient/medical) to avoid paying premiums for coverage they can’t use outside of the US, and which may be cheaper out-of-pocket where they have retired. But you can’t just move back and start Medicare B immediately.

People retiring somewhere more expensive usually have an avenue for obtaining a residency status that allows them to access the health care system. But such countries generally want skilled workers, not retirees, so it’s tough without some kind of second citizenship. Some residency statuses can effectively be bought, but if you can afford to do that your retirement calculator is already different than the average American’s.

 

[BigRedRage]

I want to travel when I retire--travel a lot to be honest so I don't intend to work once I retire. There is so much I want to see of the world, I plan to spend my first few years of retirement seeing what I can. Maybe when I tire of that I will look at doing something part time but whatever it is it will be probably for more of the get out of the house and socialize type of job than being too concerned about making money.

yeah, retirement work I mean fixing up houses or painting rooms or whatever types of odd jobs for socializing and just creating passive income streams on occasion vs actual work however with also wanting to travel a ton, I have no idea what that will look like.

 

[Russ Smith]

Read an article last night that says retirements are way up due to Covid. Just like people are quitting their jobs in record numbers as the pandemic reset their priorities, same with retiring. The combination of the pandemic, and the surging stock market convinced lots of Americans to retire. There's some concern it's going to have an impact on social security.

 

[Zeno]

Read an article last night that says retirements are way up due to Covid. Just like people are quitting their jobs in record numbers as the pandemic reset their priorities, same with retiring. The combination of the pandemic, and the surging stock market convinced lots of Americans to retire. There's some concern it's going to have an impact on social security.

I can see that. I read somewhere that lots of people would rather quit and take an early retirement than return to work after working from home for months. I was sick of working from home personally but I get it. I just hope that those that chose to retire are prepared financially to take care of themselves.

 

[Ouchie-Z-Clown]

If you're 38 now and are thinking about retiring at 63, that's 25 years in the future, by which time $50k is going to have the effective spending power (in today's dollars) of only $20-25k due to inflation. That sounds really low to me. Admittedly, my perspective is skewed because I live in Los Angeles County, but property tax and home/auto insurance already have me at about $12k/year before I even take a bite of food. Then figure in utilities (including a phone, or whatever has replaced by the phone by the 2040s) and health care, and you're probably into the 20k range right off the top.

The short version is that even once your primary residence is paid off, it's very difficult to live "cheaply" while maintaining the level of creature comforts that we've all become accustomed to.

And that’s the key - do you expect to live close to the same level of lifestyle as you presently do? In the retirement industry most calculators project a need for 75-80% wage replacement in retirement.

 

[elindholm]

And that’s the key - do you expect to live close to the same level of lifestyle as you presently do? In the retirement industry most calculators project a need for 75-80% wage replacement in retirement.

Yeah, and that feels low to me. I guess taxes will be lower, but health care costs will be higher, to a degree that's unknown. And I'd rather not be thinking that I have to budget for discretionary expenses much differently from how I've been doing it before. I've been using 90% for my retirement estimates, and ignoring whatever I'll get from Social Security. That means I'll have to work longer, of course, but the trade-off seems worth it.

 

[Ouchie-Z-Clown]

Yeah, and that feels low to me. I guess taxes will be lower, but health care costs will be higher, to a degree that's unknown. And I'd rather not be thinking that I have to budget for discretionary expenses much differently from how I've been doing it before. I've been using 90% for my retirement estimates, and ignoring whatever I'll get from Social Security. That means I'll have to work longer, of course, but the trade-off seems worth it.

I’m that overly conservative as well. Better to have more than you need and be capable of doing good with the excess than running outta money.

 

[Ouchie-Z-Clown]

Yeah, and that feels low to me. I guess taxes will be lower, but health care costs will be higher, to a degree that's unknown. And I'd rather not be thinking that I have to budget for discretionary expenses much differently from how I've been doing it before. I've been using 90% for my retirement estimates, and ignoring whatever I'll get from Social Security. That means I'll have to work longer, of course, but the trade-off seems worth it.

And the healthcare is a very salient point that most people recognize but don’t effectively plan for. What everyone should be doing is maxing out their employer match in a qualified plan (401(k), 403(b), 457), then maxing out their HSA (investing it and NOT spending it), and then maxing out the remainder of their qualified plan and nonqual (if available). The tax benefits of the HSA for healthcare distributions far outweigh those offered in qualified retirement plans. If you know on average Americans have like $250,000-500,000 in retiree healthcare costs, there’s no reason not to max out the HSA.

 

[Dback Jon]

And that’s the key - do you expect to live close to the same level of lifestyle as you presently do? In the retirement industry most calculators project a need for 75-80% wage replacement in retirement.

Is that with or without your house paid off?

 

[Ouchie-Z-Clown]

Is that with or without your house paid off?

I’ve never dove into in depth but the calculators try to solve for the average, so I’m guessing without it paid off.

 

[Dback Jon]

I’ve never dove into in depth but the calculators try to solve for the average, so I’m guessing without it paid off.

Thanks

 

[Folster]

Is that with or without your house paid off?

I do think it's universally good to have your home paid off prior to retirement regardless if it's a early or standard retirement age.

But, accelerating your mortgage payoff is a bit controversial right now considering current mortgage rates and historical market returns.

Why rush to pay off a long term loan at 3-4% when you can invest the extra money and earn a potential 7-10%? Obviously over 30 years, that extra 3-7% return could could grow be a massive nest egg.

A lot can go wrong in 30 years and market returns are never a sure thing. Being free of a mortgage can allow for earlier retirement and financial freedom to pursue other goals and dreams.

 

[elindholm]

And the healthcare is a very salient point that most people recognize but don’t effectively plan for. What everyone should be doing is maxing out their employer match in a qualified plan (401(k), 403(b), 457), then maxing out their HSA (investing it and NOT spending it), and then maxing out the remainder of their qualified plan and nonqual (if available). The tax benefits of the HSA for healthcare distributions far outweigh those offered in qualified retirement plans. If you know on average Americans have like $250,000-500,000 in retiree healthcare costs, there’s no reason not to max out the HSA.

I didn't realize that you could roll over HSA balances. In my case it's moot, because the health plan I have doesn't qualify for an HSA, but it's still good to know, if something might happen to change down the road.

Regarding the other stuff, the restrictions on IRAs or our 403b make me uncomfortable, and their tax advantages depend on assumptions about future tax brackets that I'm not all that confident are valid. So we have more than half of our retirement savings in normal investment accounts that are partially taxed as they grow. I'd rather get some of the tax out of the way now than have to pay it all later.