Retirement - Managing your money

[Captain Graham]

Originally Posted by Mike OReilly

Not sure about the USA, but this is definitely not true for Canadian seniors. Only a small percentage end up in some for of facility. Most (~92%) remain in their own dwelling.

It’s certainly true that any form of assisted living facility will be a huge cost, and likely bleed the resident dry. But most seniors don’t require institutionalization.

Based on a few websites the number of people over 55 in assisted living facilities in the US is 2.4%.

Here is one website for reference.
https://www.aplaceformom.com/caregiv...ome-population

So should you protect yourself for having to spend large amounts of money in an assisted living facility of a 2.4% risk.

It depends on many factors.
Your health, your family etc.

[Captain Graham]

Originally Posted by Lisa Longshadow

Captain Graham,

In my experience of cruising full time for the last 3 years since retiring, the costs associated with maintainging and running my yacht has tripled. When we did a prelim cruising budget pre-retirment, we based it on usagfe at that time - which was weekend cruising.

Even though you won't share your correct numbers, in my experience they are both low and off.

Sorry and I hope you're not offended

No not offended at all.

I think I may have not explained myself well.
In my case I am just explaining how I plan to management my money in retirement.
My posts have been about
1. How to handle the next bear market
4% rule, Bucket system etc.
2. How to handle the risk of inflation
Spreading my retirement assets into SS, Home, Stocks, etc.
3. The reasons why I am planning on taking my SS at 70
4. My plan for working part time in the early years of retirement.

Just to be clear I am not planning to do extended cruising on my sailboat.
I will do some small 1-2 week trips around the great lakes and maybe the Erie Canal but I will always return home, assuming my wife wants me back.

[Captain Graham]

Another Video with some other advice about spending in retirement

I like item 2 creating 3 budgets in retirement and listing what retirement would look like if you where limited to these budgets.

Then based on the market and your life flip between these budgets.

These budgets will be different for each of use but here is an example for my wife and I
1. Basic
All housing, food, shelter, etc paid for, but little else.
You can still do many activities that are free or very low cost.
Walking, hiking, visiting parks, street fairs, free concerts, High School plays, taking free classes at the local community college.
2. One step up in spending
Added expense of eating out, some travel, going to plays, the cost of owning a sailboat, etc.
3. Final step up in spending
Added expense to take a major trips, etc.

https://www.youtube.com/watch?v=VLGfHj-g_Wo

[Captain Graham]

Well my wife and I have decided the following
1. I will retire this time next year. (6/2024)
My wife will be 65, I will be 67 1/2 and we both will qualify for Medicare.
This is 1 year earlier then we originally planned.
2. She will keep working part time but will reduce her hours down to about 20 hours per week.
3. I will continue my side boating business with a goal of $20,000 per year.
My boating business has earned $8,000 the past 3 years so $20,000 should be easy.
4. I will do some math and science tutoring during the school year with a goal of earning $10,000
5. I will not take my SS until I turn 70 so we will be taking about 4% from our retirement saving until SS kicks in 2 1/2 years.
6. Once SS kick in I will be reducing my withdrawal rate to just 2% or less.

In order to make this work we decided to not remodel the kitchen next year but wait a few extra years.
We have also assumed our investments will grow at 5% not the historical 10%.

[thomm225]

Originally Posted by AKA-None

There are people here who have shared years of actual expenses that will give you an idea of what kinds of things come up

You may need the help from "the people here" with your lack of knowledge, but it's much better to trust your own experiences rather than some random poster on an internet forum

You can pretty much judge your expenses if you have sailed locally for a few years based on your 3 day to 2 week cruises.

Also, many don't know how to maintain their boat as well and with less expense than some of us that have been on the water for years.

All you have to do is read their expense numbers some of which are way too high.

[Captain Graham]

Originally Posted by Captain Graham

Well my wife and I have decided the following
1. I will retire this time next year. (6/2024)
My wife will be 65, I will be 67 1/2 and we both will qualify for Medicare.
This is 1 year earlier then we originally planned.
2. She will keep working part time but will reduce her hours down to about 20 hours per week.
3. I will continue my side boating business with a goal of $20,000 per year.
My boating business has earned $8,000 the past 3 years so $20,000 should be easy.
4. I will do some math and science tutoring during the school year with a goal of earning $10,000
5. I will not take my SS until I turn 70 so we will be taking about 4% from our retirement saving until SS kicks in 2 1/2 years.
6. Once SS kick in I will be reducing my withdrawal rate to just 2% or less.

In order to make this work we decided to not remodel the kitchen next year but wait a few extra years.
We have also assumed our investments will grow at 5% not the historical 10%.

How that we have decide to retire in 12 months I am starting to move my money into my 3 buckets.
Bucket1 - 3 years of spending out of the market (Cash and CDs)
Bucket2 - another 3 years of spending in safer investments that do not swing as much as the market in general.
Mostly in value mutual funds.
Bucket3 - the remainder in growth mutual funds.

Step 1 fill up Bucket1
So I just adjusted my retirement saving from 25% to 10%.
This will give me the max match from my employer.
The extra money in my take home pay will be going into bucket1.
I will also slowly start to sell some of my investments to have Bucket1 full at time of retirement.

Step2 Fill up bucket2 and bucket3
After I retire I will be moving all of my company 401k to an IRA account with a major broker.
This way I will have more mutual funds to pick from.
After this is done is when I will moving my money into bucket2 &3.

[Lucky Luke 1]

Originally Posted by Captain Graham

How that we have decide to retire in 12 months I am starting to move my money into my 3 buckets.
Bucket1 - 3 years of spending out of the market (Cash and CDs)
Bucket2 - another 3 years of spending in safer investments that do not swing as much as the market in general.
Mostly in value mutual funds.
Bucket3 - the remainder in growth mutual funds.

Step 1 fill up Bucket1
So I just adjusted my retirement saving from 25% to 10%.
This will give me the max match from my employer.
The extra money in my take home pay will be going into bucket1.
I will also slowly start to sell some of my investments to have Bucket1 full at time of retirement.

Step2 Fill up bucket2 and bucket3
After I retire I will be moving all of my company 401k to an IRA account with a major broker.
This way I will have more mutual funds to pick from.
After this is done is when I will moving my money into bucket2 &3.

I'm glad you have decided to retire rather than semi retire. Great news! I hope the next 12 months goes quickly and you enjoy your retirement years.
I'm still trying to work out how to go from semi retired to retired in the next few years, before i hit 60 hopefully but id like 60 to be the cut off point. I cannot access the old age pension till I'm 67.

[Simi 60]

Originally Posted by Lucky Luke 1

. I cannot access the old age pension till I'm 67.

If it's still available.

[Lucky Luke 1]

Originally Posted by Simi 60

If it's still available.

I so hope it is... 67 is so far away and any later means not much enjoyment in old age. But knowing the gov they will change the dates and I'll be waiting till I'm 71..

[Captain Graham]

I am starting to look into the details of income taxes during retirement.

I think the best way to explain it is with an example.

Assume my wife and I will get $50,000 per year in SS
We want to spend about $100,000 per year the first few years in retirement (go go years) so we will be taking $50,000 from out 401K retirement account.

Step#1 Calculate how much of your SS will be taxed.
The amount of SS that is counted for taxes is based on your Provisional Income (PI).
PI = 50% of SS + all other income.
PI = $25,000 (50% of $50,000 SS ) + $50,000 (from my 401K)
PI = $75,000
How calculate how much of your SS will be taxed.
PI 0 to $32,000 = 0% of SS is taxed
PI $32,000 to $44,000 = 50% is taxed.
PI over $44,000 = 85% is taxed
My PI = 75,000
The first 32,000 is not taxable
The next 18,000 (50,000 – 32,000) only 50% is taxable ($9,000)
So out of our $50,000 SS payment only $9,000 is taxable.

Step#2 calculate my taxes
Our taxable income before deductions is $59,000 (SS $9,000 + 401k $50,000)
The Standard deduction is $26,600
Our taxable income $59,000 - 26,600 = $33,000

US tax bracket
The first $22,000 is taxed at 10% = $22,000 x 10% = $2,200
Anything over $22,000 is taxed at 12%
$33,000 - $22,000 = $11,000 X 12% = $1,320
A total tax bill of $3,520 ($2,200 + $1320)

So we will have $100,000 to spend and only pay $3,520 in taxes.

[thomm225]

Managing your money is quite simple when you have your home, your boat. and vehicles paid for.

It just isn't rocket science.

My biggest question is do I get a recurved bow and go old school or since I may not have time to learn it, just get a crossbow.

[Captain Graham]

I have been thinking about all of the advice (including my own) and have noticed something interesting.

Sometimes (depending on the investment) people will say invest is the known guaranteed investment not the unknown stock market investment.
But when talking about a different investment they (including me) will advise doing the opposite.

For example
I think taking SS at 70 makes more sense for me because between my FRA and 70 it will grow 8% per year plus cost of living adjustment. But it would require me to take more money out of my retirment 401k account until I get to 70.
So I am favoring the fixed return over the unknown stock market return.

But when people advised you can put money into a fixed rate CD I am against that advice because I think in the long run the stock market will do better then CDs.
So I am favoring the unknown stock market return over the fixed return.

Just an interesting observation.

[Captain Graham]

So far I have been doing the planning myself, using spreadsheets and free retirement tools on the internet.
Everything supports my ability to retire today, but I still have a fear of retiring.

So I hired a financial advisor who charges me $1,000 per year for their advice.
They do not manage my accounts but they will help me with making decisions.
They give me 4-1 hour reviews each year and I can call them anytime with questions.

The first major decision I need to make is
When do I stop working and when do I take SS.

Lots of details in making this decision.
My wife turns 65 and can go on Medicare in June, so should I wait until she is on Medicare.
Should I take SS in January and wait until June to retire, tax issues.
Should I hold off on SS until 70 and draw down my savings

The advisor has all my numbers (no access to my accounts) and will be loading them into their retirment software.
Next week we will review the data and my options.

[Bill O]

Originally Posted by Captain Graham

So far I have been doing the planning myself, using spreadsheets and free retirement tools on the internet.
Everything supports my ability to retire today, but I still have a fear of retiring.

The first major decision I need to make is
When do I stop working and when do I take SS.

Lots of details in making this decision.
My wife turns 65 and can go on Medicare in June, so should I wait until she is on Medicare.
Should I take SS in January and wait until June to retire, tax issues.
Should I hold off on SS until 70 and draw down my savings

If you are financially sound, then retire. If this is in place and you can see the #s, then that should help diminish that fear of retiring.

Do the calculations, if you take SS now vs. waiting until 70 for your monthly income. Really the big difference is the monthly distributions will be reduced by taking X number of months before you turn 70. Only you know if this is feasible to drain the bank account vs. take SS.

A few years back I did the calculation to look at the total SS distributions if I took my SS at 62.5 or waited. At that time total, calculated pay out was a wash until the age of 78. If you live past 78 and waited, then the total payouts would be more. (average male life expectancy in the US is 78). Not certain what your crystal ball is telling you when to take it.

[dannc]

Originally Posted by Bill O

...
A few years back I did the calculation to look at the total SS distributions if I took my SS at 62.5 or waited. At that time total, calculated pay out was a wash until the age of 78. If you live past 78 and waited, then the total payouts would be more. (average male life expectancy in the US is 78). Not certain what your crystal ball is telling you when to take it.

And the other consideration is if one has their own retirement investments.

I really don't care about trying to maximize SS payments by getting payments at 62, 65, 67, etc., because we have our own retirement funds. Every dollar we get out of SS, is a dollar of OUR money that we can save or use as we wish. Taking SS as early as we can, which is based on our life situation, as well as finances, is our goal. Trying to maximize the SS payments is just not a variable.

We planned to have no SS as a worst case, and now that we are close to retirement age, getting that SS dollar is a bonus and we intended to take it ASAP.

Later,
Dan