Given this is a recurring issue and at such a high value you may want to look to get some advices from a CPA and/or SSI attorney. Buy an hours worth of time from each and see what they can give you. Plus if you are due a refund for any of these monies you might be better served with their assistance.
Retirement questions
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eman1200
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Bro do you even lift
Imma make it rain when I retire!!
Paying it off is nice for many people, especially those that rely heavily on SS income in retirement.
We have a mortgage on our townhome, but at just over 3% I'll let it ride. My dividend stocks pay way above that, and the long term market growth is well above that too.
I agree that I wouldn't go get a mortgage for investment dollars though. We bought this townhome before selling the other house, so we had two mortgages. We could have paid it off, but didn't due to the interest rate. Instead we are holding the mortgage for our oldest daughter and SIL. Helped them get into a nice house and provides a small amount of income for us too. Yeah stocks would have paid more, but better to put our money to good use for the kids while we're alive than in our will.
You have to look for one that you just pay a fee. It does take some looking though. Many of them are looking to sell products other than their financial planning services.
NoBShere
Pre-takeoff checklist
Some great information on here, thank you! From a previous thread someone mentioned finding an advisor that you just pay a fee and I haven't been able to do that. We have met with two advisors and I told them up front that I am looking for someone to provide guidance. Its starts well and then it goes into I can manage all of your accounts/money for you. If i was starting from scratch maybe that make sense but, I'm not starting from scratch. I am happy to pay for an advisor to provide guidance or suggest options as we move towards retirement or provide background on the pros/cons of "semi retirement", etc. It seems like an hourly fee based or an annual subscription or combination is a mythical service. Maybe I just don't understand the "business".
Someone mentioned that the people they talked to who had retired said they should have done it earlier. Is that based upon the state of the economy or they over prepared or both? I'd guess both.
Someone mentioned that the people they talked to who had retired said they should have done it earlier. Is that based upon the state of the economy or they over prepared or both? I'd guess both.
There are variations, but most of the data shows that the income flows come out even at around age 79 whether you take SS at 62 or 70 or somewhere in between. If you live past 79 then waiting is better. If you die before 79 taking it earlier is better. How long are you going to live?
We were planning on my wife waiting until she's 70 to start, as she's older than I am, but now I'm taking early retirement next summer. If I go back to work after that we may still push out her start date. I was thinking we'd push mine out too, but a financial planner told me it really didn't matter when I started. She couldn't tell me why other than her model showed that. My BIL also does financial planning and he told me what is probably the driver. He said, why put off SS if you have to withdraw from your investments. If you need to tap your savings/investments for an on-going need you should start SS; hitting them once for a big repair doesn't need to be a driver.
How much do you need? What's your budget? I don't need to know, you just need to know. How much does your lifestyle cost you? Then look at what you have as known incomes (work, social security, pension, dividends from stocks, etc.). Then you can look at how much more you need. Is that more than 4% of your stock portfolio? More than 6%? You can draw down on your IRA, in fact once you hit RMD age you are required to do so; I believe that's been bumped up to age 72.
What do you want to do in retirement? How much will that cost? That needs to be considered in your budget. My wife and I want to travel, including international travel. Domestically we'll travel quite a bit as well, typically in the SR22. We also want to live in a location in Atlanta that we can walk to dinner. Those things cost money. We could have retired years ago if we wanted a lower cost lifestyle. I've told my co-workers for years that I'm working for lifestyle.
How much do you need? All depends upon your lifestyle.
Not at all. While didn't have a regular "financial guy" my CPA set me up with an advisor who charged $150/hour. Ended up buying 2.5 hours of his time. Perhaps network with a CPA or someone to find one with an hourly rate?
Neither. It was mainly based on their perceived fear/risk of leaving good paying jobs and crossing that line "underprepared." However, once they got settled on the dark side, they realized those previous fears or risks were mostly unfounded. Hence when they "thought" they needed another year to retire they could have left a year earlier based on the same data they had. For example, I took those discussions to heart and changed my original retire date from 59 1/2 to 55 then as I became more comfortable in my data I left at 52. If that makes sense to you.
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MooneyDriver78
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Tom
FPs charge based on your assets under management, so for example if you paid off a $500000 mortgage, that’s going to cost your FP $5000/year, or more.
Larry in TN
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Those IOUs are government bonds. Where else could they put the surplus funds?
Al Gore talked about a 'lock box' but what does that mean? You can't bury it in Mason jars behind the Capitol Building.
Clip4
Final Approach
Do some math income / Part B premiums paid by the bottom end of the retiree income scale if you want to see not right and unfair.
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Mahneuvers
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https://dissidentvoice.org/2015/06/greenspan-finally-tells-the-awful-truth-about-social-security/
"Over a 30-year period, the $2.7 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, was taken from Social Security and spent as general revenue. As the money was spent, it was replaced, dollar for dollar, with non-marketable government IOUs called special issues of the Treasury. These are government IOUs which are not marketable. They couldn’t be sold to anyone, even for a penny on the dollar."
https://www.taxpolicycenter.org/briefing-book/are-social-security-trust-funds-real
"So, are the trust funds real? Yes. They have legal consequences for the Treasury and are backed by the full faith and credit of the federal government, just like other Treasury bonds. When the Social Security Administration redeems the bonds, the government has a legal obligation to pay the money back with interest, with no additional appropriation by Congress required.
The trust funds are not a free lunch for taxpayers. Money from the general fund used to repay debts to the trust funds cannot be used for other purposes, like building roads or providing for national defense. And as an additional outlay for the government, those general fund payments increase the Treasury’s need to borrow from the public, increasing federal deficits and adding burdens on future taxpayers."
Larry in TN
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That's how bonds work. That's how bank accounts work. They are all "IOU"s.
Where do you think they could put the money which isn't an "IOU"?
Where do you think they could put the money which isn't an "IOU"?
Bill
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Also people realize that while working another year or two adds some more money to the war chest, one cannot buy time or health. We're very near DH/DA, and I'm thinking we may go missed a little early, I have things I want to do while I still have relative youth and health.
Mahneuvers
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True. But what makes this case special is the gov't stands on both sides of the transaction -- they are both the buyer and seller of the bonds. When the SSA redeems a trust fund bond from the general fund, the general fund must find that money somewhere, which in deficit years means adding to the debt. Years ago I heard this analogy. A couple is spending more money than they make and cannot pay all of their bills. The husband decides to solve the problem by borrowing money and writing checks to his wife. The wife then pays the bills and promises to repay the husband.
My perspective did change when researching this topic. It used to really bother me when I heard politicians talk about the trust fund. Currently, <10% of current SS outlays come from the trust fund. So while it's interesting to engage in a trust fund academic debate, we're ignoring the elephant in the room which is the overall structural challenge of a pay-as-you-go program when the numbers of people paying in are declining while those drawing benefits is increasing.
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steingar
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Two decades ago I got sold on an alternative retirement scheme instead of the State System that everyone's used since Hector was a pup. They guys selling me claimed I'd be a millionaire by the time I retired and I'd have way more money. No pension, no Social Security.
Fat forward 20 years and they were right about one thing, I am a millionaire. Its just that a million dollars isn't what it once was.
Oh well, I like my job and its easy. No retirement for the Steingar, at least not for a long time.
The really big mystery in all this is how long I'm likely to stay above the grass. Papa Steingar had Alzheimer's when he was the age I am right now. He was dead before he hit 70. Mama Steingar lost her battle with cognitive decline early in her 80's. Could be I've only a couple decades left to do whatever I'm going to do.
On the other hand, Papa and Mama Steingar had horrid lifestyles, full of bad food and free of exercise. Papa Steingar smoke and drank even more than me, way more. Those in the Tribe of Steingar who remained free of obesity and other evils of a middle class lifestyle lived into their 90's. Difficult planning indeed when the error bar is 30%.
As for @AKBill, it really doesn't sound like you've enough money. Were I you I'd work as long as I could, save up more. Way more. 20 years ago a million dollars was a lot of money. It isn't anymore, what's it going to look like 20 years from now?
I suspect I'll eventually become an economic refugee in some Central American country with gorgeous views, sketchy government and inexpensive rentals. I'll probably die of something that could be cured here, but as least I'll live well before that event.
Fat forward 20 years and they were right about one thing, I am a millionaire. Its just that a million dollars isn't what it once was.
Oh well, I like my job and its easy. No retirement for the Steingar, at least not for a long time.
The really big mystery in all this is how long I'm likely to stay above the grass. Papa Steingar had Alzheimer's when he was the age I am right now. He was dead before he hit 70. Mama Steingar lost her battle with cognitive decline early in her 80's. Could be I've only a couple decades left to do whatever I'm going to do.
On the other hand, Papa and Mama Steingar had horrid lifestyles, full of bad food and free of exercise. Papa Steingar smoke and drank even more than me, way more. Those in the Tribe of Steingar who remained free of obesity and other evils of a middle class lifestyle lived into their 90's. Difficult planning indeed when the error bar is 30%.
As for @AKBill, it really doesn't sound like you've enough money. Were I you I'd work as long as I could, save up more. Way more. 20 years ago a million dollars was a lot of money. It isn't anymore, what's it going to look like 20 years from now?
I suspect I'll eventually become an economic refugee in some Central American country with gorgeous views, sketchy government and inexpensive rentals. I'll probably die of something that could be cured here, but as least I'll live well before that event.
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Bob Noel
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When I retired at 58, I figured I cost myself about 7 years worth of income to pay for, in effect, a 7 year vacation.
Was it expensive? sure as heck it was.
Was it worth it? sure as HECK it was!
Was it expensive? sure as heck it was.
Was it worth it? sure as HECK it was!
Clip4
Final Approach
I agree in part, but over the recent decade borrowing is from the federal reserve not the public. If the borrowing was from the public, we would not have record low interest rates.
Mikey B
Pre-takeoff checklist
I think someone mentioned this recently, but if you're looking for a fee-only planner, try www.garrettplanningnetwork.com. I used one of their members (who has since retired), and was very satisfied.
Crashnburn
Pattern Altitude
Thanks for the great and civil discussion. What's POA coming to? I kid. I learned a lot about retirement issues and a couple books went on my reading list.
Larry in TN
En-Route
SS is not allowed to invest elsewhere because elsewhere doesn't have the government guarantee that it will be paid back.
If SSA was not investing the fund surpluses in the equivalent of government bonds then the General Fund would had had to borrow that money elsewhere, likely at higher rates. IOW, putting the SS surpluses in Mason Jars wouldn't have reduced government debt.
Despite all the complaints about the "IOU"s, still nobody has suggested any viable alternatives. If not government securities/bonds, then where?
Mahneuvers
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Exactly! We borrow less now by using SS funds on immediate, non-SS expenditures.
I understand your point about SS not having investment options in surplus years. My motivation for contributing this thread was in reaction to the apparent misconception that only in 2033 does SS become a problem. It's a problem now. The country is going further into debt in 2021 b/c of SS.
Half Fast
Touchdown! Greaser!
The rest of the story, though, is that the husband then goes down to his basement printing press and prints out new money to pay the creditors. The USG can do that. You and I can't.
Rcmutz
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one thing I need to do some calculus on is the effect on income level for IRA withdrawals plus pension plus traditional to Roth conversions, all of which factor into income for the year. Want to make sure I don’t hit that next Medicare penalty level which gets applied to both me and my wife. Ouch!
FYI: income management after retirement is everything and different than in pre-retirement. Same with investing after retirement.
Rcmutz
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Income Management?? Nah... just trying to figure out how to spend it all so I hit zero on the day I die. LOL
Ha. Well when you figure out the formula send it my way. It would definitely cut down on the yearly suspense!
FastEddieB
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Fast Eddie B
Thanks. I had not considered that and had to look it up.
Looks like The Medicare premium doesn’t go up until you reach $182,000 in income for married filing jointly, if that’s what you’re referring to. In retirement we’re nowhere near that, and if we were I doubt the increased premiums would hurt that much.
Daleandee
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That is my strategy! Talking with a financial advisor that was telling me how much I would have at 90 years old if I did the beans & rice diet, walked everywhere I went, and got my air time bumming rides with friends. "Nope" I told him. "When the children come to the reading of the will they need to bring money to pay the folks that will be looking for it."
Going with the theme of "you need less than you think", I read somewhere that spending tends to stay somewhat consistent through late 60s & 70s as people travel and spend on hobbies. As most people get into their 80s spending falls way off as they just can't get out and do as much. The last couple years of life then usually eats up whatever is left unless there's a lot of money or a lot of insurance.
Pugs
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That's been my parents experience. They retired at 59 and did a lot of traveling and now at 84 are pretty much happy being at home. Dad still flies R/C 2-3X a week, Mom has her social group and volunteer stuff but they really don't leave a 30 mile radius of home. I was down last week and they basically live on a couple thousand a month and just reinvest their minimum require distributions unless they decide they want a new car or something.
Mahneuvers
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https://tradingeconomics.com/united-states/money-supply-m2 (click on max)
A whole other can of worms that makes retirement planning even more difficult. Possibly except during WWII, I don't think we've ever increased money supply like this. Powell comes across as a really smart guy. I trust he knows what he's doing but I fear history will judge him unkindly. Disclosure: Powell graduated from my HS so I feel a connection and hope he navigates this successfully.
MooneyDriver78
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Powell has no training in economics, he earned a degree in politics.
That tells you everything you need to know.
jayhawk74
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jayhawk74
As others have said you don't get VA Medical help unless your income is very low or you have a Service connected disability. What is beneficial about being in the Reserves is if you are in for 20 yeras (which counts Active Duty time as well as Reserve) and get the Military retirement you are eligible for Tricare for Life which is free and pays for the percentage that Medicare doesn't pay.
As for taking Social security before you are eligible for full Social Security (between 66 and 67 depending when you were born) if you earn more than $1580 a month then $1 will be deducted from your Social security benefit for every $2 earned above $1580 monthly. Once you reach full the full Social Security retirement age (again between 66 and 67) there is no restrictions on your earnings in regards to your monthly benefit, only to how your Medicare payments are determined.
As for taking Social security before you are eligible for full Social Security (between 66 and 67 depending when you were born) if you earn more than $1580 a month then $1 will be deducted from your Social security benefit for every $2 earned above $1580 monthly. Once you reach full the full Social Security retirement age (again between 66 and 67) there is no restrictions on your earnings in regards to your monthly benefit, only to how your Medicare payments are determined.
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Velocity173
It comes down to how well off you want to live in retirement and your confidence on your health (longevity). My brother retired from the FAA at only 50. While he has a TSP that he’ll most likely cash out at 62, he lives comfortably on FERS. Not well off, but he’s essentially set himself up with low debt (just a mortgage) and doesn’t spend extravagantly.
This classic commercial sums up my retirement planning. Live life for the here and now. Retirement isn't guaranteed.
This classic commercial sums up my retirement planning. Live life for the here and now. Retirement isn't guaranteed.
Sounds similar in many ways to my parents; retiring early and they'll be 80 next year. My parents travel quite a bit, that seems to be their hobby. My father was stilling doing Power Systems standards and they would travel to meetings. COVID brought a grinding halt to that. Even with all that traveling my dad would complain that RMD made him withdraw too much, so he would put the excess into other savings. Last year they got a reprieve from RMD from Congress, so he just pulled what they needed from regular savings and let the retirement money grow. That's true even with them eating out for many/most of their meals; seems like my mother has largely retired from cooking.
No mortgage and fairly simple lifestyle helps keep the costs down for them.
Mahneuvers
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True. But he has been working in capital markets since '84.
Half Fast
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Well, he didn’t attend my high school. I think he’s clueless and I don’t trust him.
Mikey B
Pre-takeoff checklist
And a law degree, but yeah.
Live life for the here and now. Retirement isn't guaranteed.
Yep, gotta have a good balance, as there are no guaranties.
At one end there are those that spend everything they make and then some; going into debt for lifestyle. At the other end are those that live frugally and saving everything. Problem is when the first one lives long, and they have to work until they drop. Other problem is when the second one dies young, never getting a chance to enjoy their savings. The goal should be to find a good balance between saving for the future and enjoying your income now.
My wife and I save well. We're not terribly frugal, but we don't live beyond our means either. My car is nice, but not expensive, I bought it used. I've bought only two new cars in my life, and one of those was a lower end model with a manual transmission and I kept it over 13 years.
We had a big house, that we down-size from almost 3 years ago, plus we travel, and the kids went with us when they lived at home. I also fly small planes. That's most of our "enjoy now" spending. Our other hobbies are fairly inexpensive; running, tennis, cycling, reading, movies, cooking.
We try to balance out saving for retirement and enjoying our money now. We see too many stories of people dying young; 40's, 50's, 60's. Can't put off spending money too long or you might put it off for your kids to spend.
Fortunately both of us had good careers. She retired in August. I have an early retirement date next summer. I'll take a 6 month sabbatical (getting 48 weeks of pay plus bonus) and then decide if I want to go find some other work to do or stay retired. We want to travel while we're still healthy and active enough to do it easily.