Retirement - Managing your money

[sailorboy1]

The decision of when to retire and where to start collecting aren't the same for many people. If they are not the decision to collect SS is really a time value of money invested.

[Captain Graham]

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.

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.

Well I have had 2 meetings with my financial advisor and they think my plan has a 92% chance of success.
They included Roth conversions.
I checked it with the free version of newretirement software and my own spreadsheet.
Newretirement = 99% chance of success
This plan did not include Roth conversions.
My spreadsheet also looks good,
So I am feeling pretty good about my plan.
Retire next year when my wife turns 65
Delay my SS until 70
My wife will start taking SS at her full retirement age and then add the spousal benefit when I start taking my SS at 70

I assumed the following
Investments will grow at 5%
Inflation will be 3%

[sailorboy1]

She doesn't get spousal benefit if collecting hers or with you collecting yours. Guess you already schedule death.

[Captain Graham]

Originally Posted by sailorboy1

She doesn't get spousal benefit if collecting hers or with you collecting yours. Guess you already schedule death.

Yes she does.
She gets 1/2 of my full retirement amount (not the amount I get at 70) when I retire.
It is her benefit plus a top off which is called the spousal benefit.
But the details are a little confusing.

Lets use an example (not my real numbers)
My Full Retirement amount is $3,000 at 67(but I am 2 years older)
Her Full retirement amount is $1,000 at 67.
So when she retires at 67 she will get $1,000 per month.(for 2 years)
When I retire at 70 she will get the $1,000 plus $500 to top it off at 1/2 of $3,000 or $1,500.
If she takes her SS early lets say her benefit is reduced to $900.
When I retire her SS payment will be $900 + $500 giving her $1,400.
The top off amount does not change.

But when I am 70 I will get $3,720. (3000+8% for 3 years)

After I die she will only get my SS payment of $3,720

[Captain Graham]

I did a little stress test of my plan.
I assumed
1. The stock market will stay flat no growth.
2. I will die at age 85.
SS will drop because my wife will only be collecting my SS hers will go away.
3. The same spending during the entire time (no increases or decreases)
The spending level is what we spend today plus $1,000 more per month.

If I take SS at 67 my wife will run out of money at age 96.
If I take SS at 70 my wife will run out of money at age 111.

Just to review, I have tested my plan the following ways
1. The simple 4% rule
2. My own spreadsheet
3. Used the free version of NewRetirement software
4. Used the free FIREcalc
5. Used the free portfolio visualizer backtest (uses real historical data)
6. Used the free portfolio visualizer Monte Carlo Simulation
7. Hired a fee only financial advisor and they reviewed my plan
8. Stress tested my plan doing what if the stock market does not grow.

So after all the fear I am now very comfortable with retiring next year (67) and delaying my SS until 70.

I do want to thank everyone who has posted their thoughts and ideas on the subject, they helped me review issues I did not think about.

I hope people who read this thread will see that my plan is just one plan and others are have completely different plans that are working for them.

[Captain Graham]

FYI Some information about the S&P 500 for those who where worried about the recent bear market.

High was about 4766 in late Dec 2021
Low was about 3583 in early Oct 2022
Today it is about 4590 on Dec 1 2023

So the market dropped -1183 points in 10 months
But is has gained back + 1,027 points or about 87% in 11 months.
Only 176 more points (about 4%) and we will be back to the all time high.

It seems like a very normal bear market.

[Shanachie]

You're wrong on spousal benefits. You get either your own benefits or the spousal benefits, not both. Obviously, you claim the higher of either one. The SSA web site explains this clearly.



Until a few years ago, there was an angle to be worked in which you could claim spousal benefits early under some circumstances, then switch to yours. That loophole was plugged, though.

[Captn Caveman]

This is from the social security website:
If you turn 62 before January 2, 2016, and:

You are eligible for benefits both as a retired worker and as a spouse (or divorced spouse) in the first month you want your benefits to begin and
You are not yet full retirement age, you must apply for both benefits (known as deemed filing). You will receive the higher of the two benefits.

If you turn 62 on or after January 2, 2016, and:

You are eligible for benefits both as a retired worker and as a spouse (or divorced spouse) in the first month you want your benefits to begin, then:
Deemed filing applies at age 62 and extends to full retirement age and beyond. In addition, deemed filing may occur in any month after becoming entitled to retirement benefits.

Deemed filing means that when you file for either your retirement or your spouse’s benefit, you are required or “deemed” to file for the other benefit as well. The Bipartisan Budget Act extends deemed filing rules to apply at full retirement age and beyond.

What is the reason for this change? Historically, if spousal benefits were higher than their own retirement benefit, they received a combination of benefits equaling the higher benefit. This change in the law preserves the fairness of the incentives to delay, but it means that you cannot receive one type of benefit while at the same time earning a bonus for delaying the other benefit.

[Captain Graham]

Originally Posted by Captain Graham

Yes she does.
She gets 1/2 of my full retirement amount (not the amount I get at 70) when I retire.
It is her benefit plus a top off which is called the spousal benefit.
But the details are a little confusing.

Lets use an example (not my real numbers)
My Full Retirement amount is $3,000 at 67(but I am 2 years older)
Her Full retirement amount is $1,000 at 67.
So when she retires at 67 she will get $1,000 per month.(for 2 years)
When I retire at 70 she will get the $1,000 plus $500 to top it off at 1/2 of $3,000 or $1,500.
If she takes her SS early lets say her benefit is reduced to $900.
When I retire her SS payment will be $900 + $500 giving her $1,400.
The top off amount does not change.

But when I am 70 I will get $3,720. (3000+8% for 3 years)

After I die she will only get my SS payment of $3,720

Sorry I did a poor job in explaining.
The calculations are correct I just misused some words.
The spousal benefit is calculated based on my wife's benefit plus a top off.

The point is if she takes her SS before her full retirement age the spousal benefit will be less.

[skipperpete]

I’ve never really thought much about spousal benefits but as a former expat and bemused onlooker at the schemes of Thai and Filipino women I think it might be just this that makes the over 70 male pensioners so magnetically attractive as husbands to 20 year old women. Once married does the benefit or pension continue to include the young wife after the hubby expires?does a new wife get an income from whatever country the aged hubby hails from? Germany, France, UK and Australians seem to be the most popular,....... how does the US system work with pensions and benefits ?.

[dannc]

Originally Posted by skipperpete

I’ve never really thought much about spousal benefits but as a former expat and bemused onlooker at the schemes of Thai and Filipino women I think it might be just this that makes the over 70 male pensioners so magnetically attractive as husbands to 20 year old women. Once married does the benefit or pension continue to include the young wife after the hubby expires?does a new wife get an income from whatever country the aged hubby hails from? Germany, France, UK and Australians seem to be the most popular,....... how does the US system work with pensions and benefits ?.

I think for the US, the answer is yes, the wife would continue to get the husband's Social Security benefits. If the husband had a defined contribution retirement plan, the wife could get access that money but that depends on how the retirement was set up. The wife could also get other retirement funds depending on how that was setup, life insurance, bank accounts, property, etc. This also depends on local, state and Federal laws.

I know of a situation where a guy, right out of prison, conned a lonely elderly woman into marriage. He had access, and control, of all of her money, property and funds. She was not a wealthy person, in fact she was not well off at all and living in a trailer, but it was better than the streets of Chicago or a prison cell. Horrible situation that happens more often than one thinks and far to often.

Later,
Dan

[clamshack]

Originally Posted by 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.

We have a boat mortgage and car loan at just under 4%. Our savings over the same period should make 5-6%. Why would anyone pay down those notes?

[sailorboy1]

This thread explains why you don't ask money advise on a boat forum. In even highlights why you shouldn't do it on a money forum.

[Captain Graham]

Originally Posted by clamshack

We have a boat mortgage and car loan at just under 4%. Our savings over the same period should make 5-6%. Why would anyone pay down those notes?

Well this is the question that most people ask when talking about paying off their debt.
Based on the numbers alone some would say you are right.
You can earn money with the spread if everything works out.

For me when someone says they have debt on things that go down in value (boat, car, etc.) it normally tells me they are living above their means and are using future dollars (payments) to buy stuff today.
This might not be you situation.

Questions to ask yourself.
1. Do you have enough in saving to pay off the loans in full?
If the answer is no then you are living above your means.
2. Will your savings grow at a constant 5-6% over the entire time you are making payments?
If the answer is no then you are at risk of the spread working against you.
But if this happens and you have the money in saving to pay the loans off in full you can play the spread until it goes against you.

I have known a few people who play the spread and get burned.
One example a work friend sold his home during the .dot bubble.
He put the money into the stock market and rented an apartment.
His plan was to live like this for 1 year.
When stock market dropped he lost a lot and ended up buying a much smaller home.

In my case I do not want to go into retirement with debt of any kind and definitely not on things that go down in value like a boat and car.
This will give me peace of mind in retirement.

[Tedd]

I haven't been following this thread all that closely but I've noticed that several people mentioned making projections of investment growth. That's something I've spent a lot of time thinking about, too, so I thought other people might be interested in this plot I made of historical Dow Jones (DJIA) closing prices, from 1958 until the present.



We all know that past performance is no guarantee of future performance but it's remarkable how closely the DJIA has matched an exponential line (6.8 % annually, in this case) for 65 years, through a wide range of crises.

However, there are also prolonged periods of unusually low or high growth, such as the "malaise" period from the late sixties through to the early 80s or the "great moderation" from the mid 80s through to the 2008 financial crisis (including the dot-com bubble, which is clearly visible). My retirement is going to be affected quite a lot if the next 25 or 30 years contain a prolonged anomalous period such as those.

I've drawn my own conclusions from this but I'll leave it to you to draw yours.