41 Replies Latest reply on Dec 6, 2014 5:32 PM by MPBrodeur

    Planning for retirement

    juliesand

      Hi,

      I just turned 50, have been a teacher for 28 years, and I am hoping to retire at 60.  I have a pension, currently with 153k.  In ten years, I will have paid off my mortgage and my daughter's student loans.  I currently earn 48k a year, and my husband is seasonally employed as well.  I've used retirement calculators, and hope to delay starting SSN, but I'm wondering if retiring in 10 years is way out my reach?  I don't want to sound nosy, but what is a good pension amount to retire on for someone who wants to live simply (I would be willing to work part time in another industry if I have to)

      Thanks

      Julie S.

        • Re: Planning for retirement
          MyR Community Manager

          Hi juliesand,

           

          Thanks for starting a discussion thread! It's great to see you on the community!

           

          -Genevieve

          • Re: Planning for retirement
            BoBraxton

            In replying, we are not allowed to provide specifics (I may be mis-interpreting the rules); however, for my own last ten (actually eleven) years, personally (and spouse, I am married almost 47 years) I put in the maximum every year: Roth IRA (after tax), 403(b) AND - there is an over age 50 catch-up PLUS both my spouse and I were beneficiaries of "defined contribution" retirement plans. Because of allocations and the fact that the market plummeted during much of this period, this was a great way to build up our retirement "credits" and made a huge impact of the time following our retirements (not quite three years ago). For ourselves, we did delay Social Security until we each were age 67. However, that is a "crap shoot" because any number of people may not live to be that age.

              • Re: Planning for retirement
                juliesand

                Thanks,

                I should add that I work in North Dakota, where cost of living is quite low (but wages too, unfortunately).  I'm confident I can grow my pension to 250k by retirement, but I keep reading that the average teacher has 300-350k in pension by retirement.  So, I'm worried and wondering if retirement will ever be an option for me.

                  • Re: Planning for retirement
                    BoBraxton

                    Although by accident of history (WW II) I was born in Florida, I grew up in NC 1945 to college graduation 1966 June 6. My family of origin lived near Saxapahaw (Alamance County). Vocabulary needs to be clarified: for example, the word "cost" is used in many contexts when what writers really mean in the "price" (what one pays). "Cost" differs a lot - for the producer / manufacturer the cost (presumably) is not the price they charge, at least not in a capitalist society. It may "cost" me so and so when I purchase but the "price" varies, depending upon the sale "discount" at the time of my purchase, whether I pay shipping (or wait a lot of extra days for "free" - no charge - shipping). Likewise, the word "money" (enough) and "pension" -- personally, the word "pension" would be the regular payment I might receive -- such as an annuity (individual or joint - survivor). My opinion is that in a world of defined Contribution (not defined Benefit) there is no "pension" in this sense. Personally, an annuity ("pension") is something I avoid because of the (expensive) "insurance" component. I figure I have the personal flexibility to "do better" on my own over the long haul. So, without stating specific amounts (of money) and percentages (annual "returns") let me encourage that the issue is not only how much Nest Egg ("pension" in your terminology) one has but rather how much Income (also "money" -- but in a different sense) one is able to wring out of that Nest Egg (including investing after retirement in such a way as to "grow" the Nest Egg over time. JerryG  has written about this in other places eloquently.

                • Re: Planning for retirement
                  RobinH

                  Living simply and modestly, and with no mortgage or other debt, it should be doable.  My experience (my wife and I retired a year ago at age 62) was that there is a double advantage to saving the maximum, or close to max, into your 403b each year for the last 5 or 10 years before retirement.  First, you build up your retirement savings powerfully.  Second, you get used to living on a much lower income, so have less far to reach in terms of figuring out what income you need in retirement.

                   

                  I Would only retire before age 65 if I had health care provided.  In my case, my university employer provides healthcare up to age 65 for folks who retire age 62 or older.

                    • Re: Planning for retirement
                      BoBraxton

                      Totally agree. For me personally, getting used to a lower "effective income" is a big boost. Plus, having the investments made (automatically) from money that I never actually see (and therefore, in my mind "does not exist") helps a great deal to keep us focused. "Discretionary" or "disposable" income never made much sense to me. My foundation has been to start with the basics: the tithe, investing, then "needs" -- even then, we have always had something left (reminds me of the Bible, Elisha and the widow and son) the meal and the oil - never ran out.

                        • Re: Planning for retirement
                          juliesand

                          Thank you for the interesting responses! I'm finding that I look at the future in quite a different way as I move into my 50s, but that is not a bad thing.  I'm ready to live more simply, a life without 60+ hour workweeks (I'm a composition teacher), and I'd sacrifice to do that.  I do agree about the health insurance piece and will look into whether my university offers that.

                          Thanks

                          Julie S.

                            • Re: Planning for retirement
                              BoBraxton

                              Composition - my favorite (teacher, university) I connected with her fifty years on - she has influenced my writing for these five years (2009 to present). I never thought of writing poetry. I do have fun reading, particularly each issue of POETRY magazine (founded 1912).

                          • Re: Planning for retirement
                            smaneck

                            With ObamaCare getting health care when you are under 65 is not that difficult so long as your income is below 45K if single or 62K for a couple. In that case you get a government subsidy.

                          • Re: Planning for retirement
                            painter33

                            You have to total your expenses to know what your per month financial needs are.  Lifestyle continuity is what you are seeking. Your retirement savings probably has to increase quite a bit, and where you live and the local cost of living index has to be considered.  Continuing to work for another 10+ years and saving everything you can is necessary. I generally feel that I will continue to work until I can't remember where I work is my only option, and we have about seven times your savings amount. We live in a major east coast metropolitan area, so we project relatively high costs. Our families (genes) are long-lived so it adds to the number of retirement years.

                              • Re: Planning for retirement
                                jmarknielson

                                Read the book "The Millionaire Next Door" by Stanley and Danko.  It has been years since I have read it but the authors discuss what people did to accumulate financial independence.  Over the years, while being with TIAA/Creff I have gradually become more aggressive as I have learned more about investing.  I wish I had paid more attention to it in the beginning but when you get married later in life and have three kids, things begin to take on new meaning financially especially when medical issues are involved.  In fact I have been seriously thinking about becoming a financial planner for a number of reasons but mainly because I enjoy the strategy that is involved...furthermore I enjoy watching money grow, but patience is the key.  The key is to live within your means in the present, be content with what you have and not always having to have the most expensive things in the now, so that financial independence can be enjoyed during retirement.  

                                  • Re: Planning for retirement
                                    BoBraxton

                                    a book that I read (an influence on me) "The Wealthy Barber"

                                    • Re: Planning for retirement
                                      JerryD

                                      You mention one of my absolutely favorite books, "The Millionaire Next Door", and then the follow on, "The Millionaire Mind". These books define in quantitative terms what is meant by "wealthy" ($1,000,000) and a formula for required accumulations based on non-inherited income and age, what a very effective wealthy person (couple) is (PAW - prodigious accumulator of wealth), and how actual people obtained this status. And there has to be something recommending this book by noting that it describes the successful attributes of most wealthy people they studied starting ON PAGE 3.

                                       

                                      A couple of the really big take-aways for me from this book of examples is: They have lived well below their means. Those that gave their money to the kids so that they could live beyond their means created dependent and basically, unsuccessful kids.

                                       

                                      This book has been around for over 15 years but it is still available for under $10 on the likes of Amazon. I highly recommend it. Years ago, I was so impressed with this book that I gave each kid a copy for the holidays. Doesn't seem like they were quite as impressed with the content as I am.   :-))) 

                                    • Re: Planning for retirement
                                      BoBraxton

                                      With the two of us (spouse and me), although we are spending even more than our "fixed" retirement income (totals), we are what I consider heavily invested in what used to be our individual 403(b) accounts as well are (each of us) Roth IRA. These fluctuate substantially but recently have climbed to where they are the highest they have ever been. Most we keep invested (index, very low fees, equities, U.S.).

                                    • Re: Planning for retirement
                                      dogsareus

                                      Hi

                                      Your daughter should  pay off her own college loans.

                                      As for retiring at 60, that could be a mistake.  I retired too early, thinking I would be in good shape.  The market crash in 2008 wiped out a lot of my savings.  I had less than you do in your retirement plan, and I finally had to annuitize it in order to have  something to supplement  my social security income.  The college where I taught did not have a pension plan or 401K, only TIAA-CREF.

                                      I have gone back to work as an adjunct in a local university.  I am still working AT 73 years of age.  I'm hoping to stop again at 75, but prices, taxes etc. keep rising, so who knows.

                                      If I had known, I would have not retired at 65, and I would have waited until I was 70 to take my social security payments.

                                      If your husband is a seasonal worker, that is especially risky.

                                      My advice is that you make as much money as you can now while you are young enough and healthy, and put off retirement.

                                      bev

                                        • Re: Planning for retirement
                                          BoBraxton

                                          Bev, I empathize. Currently both my spouse and I are age 70. Three years ago we began getting Social Security and I was able to stay on her Medical plan as long as she was employed, then we began Medicare at the same time. 2011, age 67.

                                          My brother, on the other hand, an Engineer - retired at age 60 by design and by choice. He is one year younger, so that means he has been retired nine years (so far).

                                        • Re: Planning for retirement
                                          julietta

                                               Hello,

                                          That sounds much too low. I know it is probably incredibly inexpensive to live in ND compared to NYC but I  would AT LEAST try to accumulate as much as you can.

                                          Look I know that sounds CRAZY but I am going to retire at age 66--in 2015--I know I am going to some bucks to make it SANELY into my 80's.

                                          My advice is to find the best financial adviser you can and start building a diversified portfolio.

                                          I have 30 years in higher ed field and now I AM GOING TO HAVE A BLAST.....

                                           

                                          Again, that amount is not enough-- you need to have fun--WOW --60 that's great! 

                                          • Re: Planning for retirement
                                            Wendy KR

                                            A session with Financial adviser is an excellent suggestion if you haven't done it yet (good resources within the company you have your funds with).  Looks to me that the $153K+ is only one leg of your retirement plan.  How much of the 153K+ you will need to fill in your expenses after retirement? I was advised to look at the plan like a stool - you are only as stable as the stability of the legs. 

                                            The second leg is how much will you need for expenses monthly/annually after you retire (remember to figure health insurance and taxes into your estimate). According to a recent survey by Rowe, retirees are finding they are at about 66% expenses compared to before retirement.  What is your plan to do after retirement? Will it cost you $$ (travel, home remodel, etc)?

                                            The third leg is what does your spouse bring to your joint retirement plan?  Age of spouse? What will your spouse's Soc Sec be? Depending on his age, can you draw on spouse's Soc Sec (to build up your funds) while you work (50% of his draw)?  If you draw before you/spouse are "of age" per Soc Sec, you will be locked out of other financial choices later. If you draw before you/spouse are "of age" per Soc Sec you will be significantly limited later.     

                                            How much will Social Security supplement your 153K+? Can you/spouse delay drawing Soc Sec until at least 66? Be sure to review the plethora of information on internet for Soc Sec options (Soc Sec agents are not allowed to give you this information).  With this tight retirement fund, you dont want to leave any money on the table that you don't have to

                                              • Re: Planning for retirement
                                                BoBraxton

                                                Social Security is periodic (monthly) income - the 153K is a "stash" and not directly comparable. I don't know what numbers I am allowed to write but an "interest rate" near zero is a lot different from recent year (or two) behavior or market indexes (reported in the business news section daily when the market has operated the previous day). By itself, a lump sum has very little meaning. In fact, if you take the Rate of return and divide that into the YEARLY (monthly times 12) Social Security you will get a picture of just how much "lump some" that income represents. In our case, I figured the amount would be equivalent to four million or more (not our money, the equivalent - lump sum).

                                                  • Re: Planning for retirement
                                                    BoBraxton

                                                    "sum" intended, not "some"

                                                    • Re: Planning for retirement
                                                      Wendy KR

                                                      So true BoBraxton. My point is there is more to look at in addition to the $153K.  As a teacher-depending on the state-does she pay into PERA and not receive Social Security (unless other parameters are met).  Some states (example N.M. pays into PERA and Soc Security, though many pay into PERA only)

                                                      Looking at what might be coming thru husbands Soc Sec is relevant planning.  The other significant piece is spending/expense needs. 

                                                       

                                                      A rough guideline to get $1000/month, one needs $300,000 in retirement. $1000 x 12= 12000 x 25 years = $300000. This is estimating living 25 years to 85 and not figuring in the interest and inflation but it at least gives a very very rough starter

                                                        • Re: Planning for retirement
                                                          BoBraxton

                                                          A pastor (my spouse being one, now retired) traditionally was not REQUIRED to contribute to Social Security. I never considered NOT having her pay SE FICA. Technically the amount paid in is double, since a pastor is (for Social Security) considered to be Self-employed. Because she always did (pay in), she gets both Social Security and a Pension (which was designed to complement / supplement Social Security retirement income). She gets hers, I get "his."

                                                    • Re: Planning for retirement
                                                      DRJJG

                                                      Start 35 years before you are ready to retire and every 10 years reacess your plans cause your situation is fluid and will change with age and experience. Don't waite unitl you reach your 50's cause it is too hard to catch up.

                                                      • Re: Planning for retirement
                                                        FrugalDude

                                                        I think $300,000 at retirement should be the very minimum.  That will earn you $1,000 per month.  If you're getting $1,500 /mo in social security payments, then $300,000 + social security will give you an income of  $2,500 per month.

                                                         

                                                        I think you need to contribute a little more and also be a little more aggressive in your investment. So, you are right about $300,000 - $350,000. 

                                                         

                                                        I read somewhere that the target retirement figure at age 50 is about  $390,000.  So, try and do the catch up contribution.  You are allowed to contribute more to your retirement at 50.

                                                        • Re: Planning for retirement
                                                          jkom51

                                                          AFTER you do the figures for expenses vs income, then you need to have a "pot"; e.g., an account for your medical expenses and long term care expenses, which are treated separately as far as government reimbursement/payments are concerned. Learn the difference between Medicare and Medicaid, and keep updated on your state's issues.

                                                           

                                                          Many people don't realize that one of the reasons Medicare is in financial trouble is that 80% of its expenditures are spent on 20% of retirees who are the sickest and at the end of their lives. If you look at total coverage by Medicare including end-of-life care, on average it pays only 51% of medical expenses. The rest is up to insurance and your pocketbook.

                                                           

                                                          Long Term Care is an even bigger issue. Advice by financial experts to set aside up to $280K for lifetime medical expenses does not include costs for long term care. Your morbidity vs your mortality requires expert risk assessment; unless you've worked in the insurance industry or financial svcs industry I've found very few people know how to judge this properly. You may need to find professional assistance in determining how high/low your medical risks are.

                                                           

                                                          When it comes to retirement budgets, always build in as much 'wiggle room' as you possibly can. Inflation will eat up 50% of whatever your current income is, over a 25- to 30-yr average period.

                                                          • Re: Planning for retirement
                                                            Chrysalis

                                                            I think that I am going to start lobbying for a new attitude towards retirement planning. I love the stories about people who socked away the maximum the law allows into their retirement accounts for 30 years. Yes, now they can live comfortably, have plenty for medical expenses and long-term care, and "leave a little something for the kids". That's great for those who can do it.

                                                             

                                                            But even with 28 years' experience, the OP only makes $48,000/yr. A teacher in the Atlanta with similar experience will make $55,000-$60,000/yr, which I think is comparable. That means, of course, that they made considerably less in their younger years when they were getting started and raising their children. There is no way they could save the maximum in their retirement account during those years (or even now, for that matter). To me, being a teacher is a nice, respectable, middle-class career. But the numbers just won't support them in a secure, middle-class retirement.

                                                             

                                                            So my "different attitude" is: 1) yes, save as much as you can for retirement early and often, 2) be as aggressive as possible with your investments, 3) plan to spend down your retirement nest-egg by the time you are 80 (few people are healthy enough or vigorous enough to do many expensive activities after age 80),  4) when your retirement account is empty, plan to get the money out of your house either by selling it or getting a reverse mortgage (your house is an investment just like stocks and bonds), 5) when the house money is gone and you are really sick and old with no remaining assets, go on Medicaid.

                                                             

                                                            I think that 90% of the retirement advice we read is produced by investment companies. They try to scare people into thinking that they have to have at least $1,000,000 at age 66 because you can "only" take 3% per year for 30 years. They try to scare you into thinking that you do not want to "lose your home". Why would a couple in their 80's need the same big house they needed when they were raising their children? Sell the house and get a smaller condo. The investment industry also tells you that you want to have an estate for your children. Why? So the brokers can invest it! You paid to raise your children. You often paid for private schools and/or student loans. If they want to take you in and support you in your old age (assuming you would want that) then, sure, leave them an inheritance. But if you're not living with them, use your money yourself and let them worry about themselves. Better they should not expect an inheritance and plan accordingly than that they expect to inherit a nice chunk of change only to find that your medical costs and long term care has left them nothing.

                                                             

                                                            I guess my new philosophy is take care of your family while you (and they) are young. Have as much fun as possible between the ages of 65 and 80. Then wrap up your financial affairs by draining all your assets for your health and comfort. As they say, you can't take it with you. Stop trying.

                                                              • Re: Planning for retirement
                                                                JerryD

                                                                Chrysalis says: "There is no way they (teachers) could save the maximum in their retirement account during those years (or even now, for that matter). To me, being a teacher is a nice, respectable, middle-class career. But the numbers just won't support them in a secure, middle-class retirement." Be careful. In the book I referenced just above your post, "The Millionaire Next Door", the PhD marketing professors that studied for years successful self-made millionaires state "as a group, teachers are frugal". One of their chapters that characterizes self-made millionaires is "Frugal, Frugal, Frugal".  Elsewhere they state that high school and elementary school teachers and professors that are given cash gifts (most likely from parents) are number one among 8 other occupations, many that we would consider quite high powered like those with professional degrees, in their ability to accumulate wealth. On top of that, when given cash gifts these teachers are more likely to teach in lower-paying private schools! Good people, those teachers!!!

                                                                 

                                                                I agree strongly with your statement: "I think that 90% of the retirement advice we read is produced by investment companies." A lot of this advice is correct for a subset of people or represents an average approach that can and does fail in certain circumstances if followed blindly. Following generalized investment advice without fully understanding it and when or even if it applies, can be a danger for you happy retirement. One needs to educate oneself enough to know when some recommended approach is failing them and then change course, even if that is just protecting principal until a viable alternate approach is found. Few of us are investment gurus, including me, but scrutinizing your results and finding another approach when things go South is required IMHO.  :-)))

                                                                • Re: Planning for retirement
                                                                  BoBraxton

                                                                  For me a little more than nine years to the magic Eighty.

                                                                  • Re: Planning for retirement
                                                                    MPBrodeur

                                                                    Thankyou for your comments on advisors.  After consulting with several, I have come to the same conclusion.  They are all conflicted.  If the 4% rule is their guide to not outliving your assets, then 5% is reasonable withdrawal rate without their fees.  I am consolidating a 401k, 403b, and Defined Benefit Cash balance plan all into a TIAA-CREF  , low Expense Ratio, IRA,  Diversifying with NO ADVISOR FEE,  and no advisor induced anxiety!  I plan on living modestly by adjusting a systematic withdrawal to economic conditions, and projecting that well into our 80's.  Back-up is the reverse mortgage option.  That's  enough planning.  Take time to enjoy your life, family, and health while you can.

                                                                  • Re: Planning for retirement
                                                                    MrElias

                                                                    Here is my 2 cents contribution, based in part on my wife's work as a teacher in California:

                                                                     

                                                                    1. if you have a true pension (Defined Benefits), then your salary is based on a formula which you will need to know and follow to figure out your income. The $153K has nothing to do with what to expect.

                                                                     

                                                                    2. if your nest egg is not too conservatively invested ( under 7.2% average interest), then it should double without adding a penny to it. If you add to it, the sum will surprise you (in 10 years)

                                                                     

                                                                    3. In California, teachers do NOT get Social Security

                                                                     

                                                                    Wishing you God's blessings as you research your options.

                                                                    • Re: Planning for retirement
                                                                      beach_rose

                                                                           You should look at all your sources of income--pension, social security, part-time work income, etc.--that you and your husband expect to have when you retire, and at the anticipated monthly costs for taxes, food, housing, long-term medical plans etc. that you will have. From that, estimate if the sources of income will cover your costs. Information that you have give in your inquiry above is insufficient. Talk to several financial planners or services to find an advisor that you like and trust. TIAA-CREF can give you a starting consultant about allocating your retirement resources at this time.

                                                                           Planning for retirement at 50 and then making the changes necessary--investments, choosing to live simply, estimating the age at which you will retire, maintaining good health--is good strategy. You will be better prepared because you planned ahead. Learn as much as you can now, plan and then put it into effect.

                                                                          Best wishes.

                                                                      • Re: Planning for retirement
                                                                        KateS

                                                                        Determine what you will live on in retirement and try doing that for a year (or two) before you retire. I realize there may be expenses which you will not have in retirement, but it should give you a good picture of the experience.

                                                                         

                                                                        Getting debt-free, saving the maximum in good investments should set you up nicely. Once you are debt free, try living on the income you would get from pension and SSA (if applicable)

                                                                         

                                                                        The health situation is generally the unknown ... not to mention the cost of health insurance increases. I got a long term care policy with an inflation-backer to offset unexpected expenses.

                                                                         

                                                                        Hope this helps!

                                                                          • Re: Planning for retirement
                                                                            Chrysalis

                                                                            Kate, you made an excellent suggestion-- live on your anticipated retirement income for a year or two BEFORE you retire and see what it's like. Yes!

                                                                             

                                                                            That is exactly what my husband and I are starting to do now. After looking at the numbers, I determined that we should try to cut our living expenses by 20% from what they have been. So now we are finding ways to save money that we never really looked at before (like getting rid of cable TV). It's great to be doing this now while we are still working because we don't feel we have a gun to our heads. We can take our time, try various strategies, get used to some new habits but not panic if we go over budget in a given month. I highly recommend that everyone do this. (I also recommend that young couples starting a family get used to living on one income for a year before the first baby arrives and put Momma's income into a savings account during that year.)

                                                                              • Re: Planning for retirement
                                                                                DRJJG

                                                                                Yes the most important thing is too have a plan starting with your last day of high school or first day of college.That plan may change 100 times before you retire, so be flexible. The best advice I ever got on financial planing was from my father after I got my first job. He told me to not spend your raises, invest them. If that is not possible then invest as much as you can and have 6 months of liquid rainy day money to pay for emergencies. Always have at least 6 months of disability insurance. Don't spend your money on expensive toys for you, your kids, or grand kids. They will cost you more money for maintenance then what you bought them for and when you try to resell them you will get about 10% of what you bought them for. Materialism is a disease, but if you absolutely must have that boat or RV rent one first. Then if you like it buy a used one in good shape from someone you know who can help you learn how to do a lot of the maintenance. By doing that and keeping it in good shape you will get most of your money back. 

                                                                                • Re: Planning for retirement
                                                                                  BoBraxton

                                                                                  Before our child, it was not every paycheck but every other paycheck (of hers) into Savings Account. She got paid two times per month - we put one of the two into the Savings (in our mid to late twenties).

                                                                              • Re: Planning for retirement
                                                                                jkom51

                                                                                There may be states where Medicaid nursing facilities are giving good care and are decent places to live. CA is not one of them - and because that's where we live and intend to stay, planning for convalescent and/or Memory Care is a necessity for us. Retirement planning that doesn't include high eldercare costs would be kidding ourselves.

                                                                                 

                                                                                It's up to each individual to personally investigate skilled care facilities nearby and decide if they would want to live there or would prefer to be elsewhere. We've done on-site research on eight full-service facilities and while doing charitable work have visited two Medicaid facilities as well. We wouldn't put a dog in the latter facilities; they were terrible!

                                                                                 

                                                                                My MIL is in a beautiful, comfortable full service facility and is so much happier than when she lived with us. With her dementia she could not deal with our unregulated lifestyle and frequent travel absences. Now she eats well, has friends who think she's "the young one" at age 86, and is no longer fearful of being alone or falling in the tub because there is 24/7 help. It's costing her $50K/yr in Asst. Living (it will be more when she finally needs to go into the Memory Care unit) and it's worth every penny. Her quality of life is far superior to the idea of "a Medicaid facility will be fine in my 80's". It wasn't easy talking her into selling her beloved home, but it was the right thing to do and has enabled the subsequent changes in her life to be much easier on her.