How much do you need for a decent retirement? (1 Viewer)

[MAC_32]

For those with a financial planner...Is it worth it? I do my own planning. Yeah Ok maybe I'm not diversified enough, but I also don't see the value in giving up to 1% of my retirement to a planner. I see a lot of articles suggesting it, and they are probably all written by financial planners, so I don't always trust the advice.
Can you all add some insight into it?

I don't mind giving up 1% to a planner if they can get better than a +1% return on my investments.

That's the way I look at it, at least.

It's paid for by itself if that's the case. I'm sure there is a better way for me to justify it or even prove to myself that my planner is giving me at least 1% more than I could do on my own, but I'm trusting their ability to understand the options, my risk factor, my future plans, the market, etc. much better than I can at this point.

I don't even need it to be that much. Even at ~0.5% more return than what I can do, I'll pay the other amount for the "peace of mind" that I'm not missing something. That, along with the time I don't have to spend to make sure something hasn't slipped through the cracks and/or keeping tabs on everything and it's worth it for us.

Right. My time is finite. I briefly toyed with adding investments to my plate during covid and very quickly realized this isn't going to be sustainable once on the other side.

 

[-OZ-]

along with the time I don't have to spend to make sure something hasn't slipped through the cracks and/or keeping tabs on everything and it's worth it for us.

Right. My time is finite. I briefly toyed with adding investments to my plate during covid and very quickly realized this isn't going to be sustainable once on the other side.

Just curious, how complex is your financial plan?
We only have the Roth IRAs (no need for a back door), my traditional IRA (rollover) which I don’t contribute, a regular brokerage, I bonds, multiple Coverdell accounts, my TSP, savings and checking. None of that is overly complicated and I know we’re better off contributing to Roth accounts. This takes like 10
Minutes once a month and a few minutes weekly, which is mostly paying bills.

 

[gianmarco]

along with the time I don't have to spend to make sure something hasn't slipped through the cracks and/or keeping tabs on everything and it's worth it for us.

Right. My time is finite. I briefly toyed with adding investments to my plate during covid and very quickly realized this isn't going to be sustainable once on the other side.

Just curious, how complex is your financial plan?
We only have the Roth IRAs (no need for a back door), my traditional IRA (rollover) which I don’t contribute, a regular brokerage, I bonds, multiple Coverdell accounts, my TSP, savings and checking. None of that is overly complicated and I know we’re better off contributing to Roth accounts. This takes like 10
Minutes once a month and a few minutes weekly, which is mostly paying bills.

Same as you, 403b, previous 403b and 457, now a SEP, 529s, my HSA, i-bonds, had 2 mortgages when we had our old house as a rental, disability insurance, shopped for new term life insurance a couple years ago. They also help coordinate and make sure we have enough coverage with our disability/home insurance/umbrella coverage, help coordinate estate coverage/trusts, living wills, etc.

 

[-OZ-]

along with the time I don't have to spend to make sure something hasn't slipped through the cracks and/or keeping tabs on everything and it's worth it for us.

Right. My time is finite. I briefly toyed with adding investments to my plate during covid and very quickly realized this isn't going to be sustainable once on the other side.

Just curious, how complex is your financial plan?
We only have the Roth IRAs (no need for a back door), my traditional IRA (rollover) which I don’t contribute, a regular brokerage, I bonds, multiple Coverdell accounts, my TSP, savings and checking. None of that is overly complicated and I know we’re better off contributing to Roth accounts. This takes like 10
Minutes once a month and a few minutes weekly, which is mostly paying bills.

Same as you, 403b, previous 403b and 457, now a SEP, 529s, my HSA, i-bonds, had 2 mortgages when we had our old house as a rental, disability insurance, shopped for new term life insurance a couple years ago. They also help coordinate and make sure we have enough coverage with our disability/home insurance/umbrella coverage, help coordinate estate coverage/trusts, living wills, etc.

It seems the rental is a good reason to have one, at least a tax planner.
I’m not worried about the living wills or estate planning. We get simple legal services from work.

 

[MAC_32]

along with the time I don't have to spend to make sure something hasn't slipped through the cracks and/or keeping tabs on everything and it's worth it for us.

Right. My time is finite. I briefly toyed with adding investments to my plate during covid and very quickly realized this isn't going to be sustainable once on the other side.

Just curious, how complex is your financial plan?
We only have the Roth IRAs (no need for a back door), my traditional IRA (rollover) which I don’t contribute, a regular brokerage, I bonds, multiple Coverdell accounts, my TSP, savings and checking. None of that is overly complicated and I know we’re better off contributing to Roth accounts. This takes like 10
Minutes once a month and a few minutes weekly, which is mostly paying bills.

We allocate a few $ to our guy monthly and meet with him annually to review and consider depositing a few extra $'s. What does he do with those dollars? Hell if I know, but we keep beating the averages so as long as that's the case no questions from me.

 

[-OZ-]

we keep beating the averages so as long as that's the case no questions from me.

Which average and how much is he beating it by?

 

[MAC_32]

we keep beating the averages so as long as that's the case no questions from me.

Which average and how much is he beating it by?

Each year is obviously different but the standard is 5-8%, we're north of that since I started tracking ~a decade ago, and each year when I evaluate our performance over what the googles tell me I should expect we're either the same or better. That's the extent of the time and energy I intend to allocate until I have information suggesting considering otherwise.

 

[IvanKaramazov]

For people who are nearing retirement, what are you doing in terms of setting aside funds in low/no-risk assets to cover living expenses?

I'm probably five years away, give or take. All of our retirement savings are in equities*. What I've always read is that you eventually want to have 3-5 years or so of living expenses in something like T-bonds or munis or something that you can hold until maturity. The eventual goal, of course, is to use our dividends/gains from equities to fund our bonds which will fund our living expenses -- I understand that concept. But if I'm 5 years out from retirement, that implies that I should be building up that "3-5 years from now" fund now. I certainly don't want to sell anything off to reallocate, but I am thinking that it would be smart to begin redirecting dividends into a cash account that I can purchase specific bonds with each quarter.

I know to stagger maturity dates and all of that. I'm just asking about the "how to manage the internal plumbing of your retirement accounts" logistics, and especially about the transition period that occurs when you're still working but can see retirement from where you stand.


* I know this is risky, but my job is very secure, I have a fixed-benefit pension coming, and I'll eventually inherit some farmland. I don't need or want any more diversification.

 

[-OZ-]

For people who are nearing retirement, what are you doing in terms of setting aside funds in low/no-risk assets to cover living expenses?

I'm probably five years away, give or take. All of our retirement savings are in equities*. What I've always read is that you eventually want to have 3-5 years or so of living expenses in something like T-bonds or munis or something that you can hold until maturity. The eventual goal, of course, is to use our dividends/gains from equities to fund our bonds which will fund our living expenses -- I understand that concept. But if I'm 5 years out from retirement, that implies that I should be building up that "3-5 years from now" fund now. I certainly don't want to sell anything off to reallocate, but I am thinking that it would be smart to begin redirecting dividends into a cash account that I can purchase specific bonds with each quarter.

I know to stagger maturity dates and all of that. I'm just asking about the "how to manage the internal plumbing of your retirement accounts" logistics, and especially about the transition period that occurs when you're still working but can see retirement from where you stand.


* I know this is risky, but my job is very secure, I have a fixed-benefit pension coming, and I'll eventually inherit some farmland. I don't need or want any more diversification.

I’m all equities except I’m starting to build our I bonds. i figure the primary risk other than equities dropping for a few years is inflation. Which makes I bonds hard to beat. Of course you have to deal with the limited contributions, but even 5 years out that’s $100k if married. I’m ~10 years out, with a goal of having $200-250k in bonds, which covers 4-5 years (accounting for pensions)

 

[Alex P Keaton]

For people who are nearing retirement, what are you doing in terms of setting aside funds in low/no-risk assets to cover living expenses?

I'm probably five years away, give or take. All of our retirement savings are in equities*. What I've always read is that you eventually want to have 3-5 years or so of living expenses in something like T-bonds or munis or something that you can hold until maturity. The eventual goal, of course, is to use our dividends/gains from equities to fund our bonds which will fund our living expenses -- I understand that concept. But if I'm 5 years out from retirement, that implies that I should be building up that "3-5 years from now" fund now. I certainly don't want to sell anything off to reallocate, but I am thinking that it would be smart to begin redirecting dividends into a cash account that I can purchase specific bonds with each quarter.

I know to stagger maturity dates and all of that. I'm just asking about the "how to manage the internal plumbing of your retirement accounts" logistics, and especially about the transition period that occurs when you're still working but can see retirement from where you stand.


* I know this is risky, but my job is very secure, I have a fixed-benefit pension coming, and I'll eventually inherit some farmland. I don't need or want any more diversification.

I’m all equities except I’m starting to build our I bonds. i figure the primary risk other than equities dropping for a few years is inflation. Which makes I bonds hard to beat. Of course you have to deal with the limited contributions, but even 5 years out that’s $100k if married. I’m ~10 years out, with a goal of having $200-250k in bonds, which covers 4-5 years (accounting for pensions)

I’m a few years behind IK, but Oz what you described is how one of my mentors / gurus is addressing this. Frankly since I’m 7-10 years out (at least) I’ve kicked the can down the road on the mechanics of this and instead focused on just saving money. Which would be easier if I didn’t have teenagers. Or a less than frugal spouse.

 

[JohnnyU]

The big deal is when you are sick and the system takes everything. Families that take in older folks to prevent this is key. My mother-in-law had a stroke and lived many years afterwards in assisted living and eventually a nursing home, but it took all of her 500K. So, if any of you think you have enough money, don't forget one thing. Old age will zap of you of that money unless you are ridiculous rich.

Or unless you have enough foresight to buy LTC insurance. Or, you know, a good FA who looks out for you and recommends stuff like that...

Isn’t long term care insurance ridiculously expensive?

 

[-OZ-]

Which would be easier if I didn’t have teenagers. Or a less than frugal spouse.

Preach brother!

 

[Judge Smails]

The big deal is when you are sick and the system takes everything. Families that take in older folks to prevent this is key. My mother-in-law had a stroke and lived many years afterwards in assisted living and eventually a nursing home, but it took all of her 500K. So, if any of you think you have enough money, don't forget one thing. Old age will zap of you of that money unless you are ridiculous rich.

Or unless you have enough foresight to buy LTC insurance. Or, you know, a good FA who looks out for you and recommends stuff like that...

Isn’t long term care insurance ridiculously expensive?

Yes - which is why my financial advisor wants me to self insure

 

[JohnnyU]

The big deal is when you are sick and the system takes everything. Families that take in older folks to prevent this is key. My mother-in-law had a stroke and lived many years afterwards in assisted living and eventually a nursing home, but it took all of her 500K. So, if any of you think you have enough money, don't forget one thing. Old age will zap of you of that money unless you are ridiculous rich.

Or unless you have enough foresight to buy LTC insurance. Or, you know, a good FA who looks out for you and recommends stuff like that...

Isn’t long term care insurance ridiculously expensive?

Yes - which is why my financial advisor wants me to self insure

What does self insure mean?

 

[ConstruxBoy]

Isn’t long term care insurance ridiculously expensive?

Yes - which is why my financial advisor wants me to self insure

What does self insure mean?

Die before 80

 

[JohnnyU]

Isn’t long term care insurance ridiculously expensive?

Yes - which is why my financial advisor wants me to self insure

What does self insure mean?

Die before 80

I can do that, no problem.

 

[matttyl]

The big deal is when you are sick and the system takes everything. Families that take in older folks to prevent this is key. My mother-in-law had a stroke and lived many years afterwards in assisted living and eventually a nursing home, but it took all of her 500K. So, if any of you think you have enough money, don't forget one thing. Old age will zap of you of that money unless you are ridiculous rich.

Or unless you have enough foresight to buy LTC insurance. Or, you know, a good FA who looks out for you and recommends stuff like that...

Isn’t long term care insurance ridiculously expensive?

Yes, but so is the alternative. I sell the stuff. Have someone on claim now receiving over $15k a month, which goes up 5% compound each year. That’s covering their care need now, but recent news is that they will require 24 hour care for dementia related issues. Receiving that care in their own home), which is their hope, will cost twice that (and the policy is paying all it can).

Self insuring is simply having enough money to pay for it yourself. Or said another way - not having insurance at all.

The new(er) way to obtain LTC coverage in the market is actually through a permanent life insurance policy (which I’m sure will garner a bunch of eye rolls here. The idea is you buy a permanent life policy, and you can use the death benefit to pay for LTC needs before you pass away. Have a $500k life policy and use $250k of it to offset LTC needs before you pass…and you still have $250k of a death benefit to pass on to beneficiaries.

 

[JohnnyU]

The big deal is when you are sick and the system takes everything. Families that take in older folks to prevent this is key. My mother-in-law had a stroke and lived many years afterwards in assisted living and eventually a nursing home, but it took all of her 500K. So, if any of you think you have enough money, don't forget one thing. Old age will zap of you of that money unless you are ridiculous rich.

Or unless you have enough foresight to buy LTC insurance. Or, you know, a good FA who looks out for you and recommends stuff like that...

Isn’t long term care insurance ridiculously expensive?

Yes, but so is the alternative. I sell the stuff. Have someone on claim now receiving over $15k a month, which goes up 5% compound each year. That’s covering their care need now, but recent news is that they will require 24 hour care for dementia related issues. Receiving that care in their own home), which is their hope, will cost twice that (and the policy is paying all it can).

Self insuring is simply having enough money to pay for it yourself. Or said another way - not having insurance at all.

The new(er) way to obtain LTC coverage in the market is actually through a permanent life insurance policy (which I’m sure will garner a bunch of eye rolls here. The idea is you buy a permanent life policy, and you can use the death benefit to pay for LTC needs before you pass away. Have a $500k life policy and use $250k of it to offset LTC needs before you pass…and you still have $250k of a death benefit to pass on to beneficiaries.

Thank you !!

 

[NutterButter]

As a single guy, my home is my ltc plan. If I don't ever need ltc, then my offspring get the home when i pass.

 

[NewlyRetired]

As a single guy, my home is my ltc plan. If I don't ever need ltc, then my offspring get the home when i pass.

This was our original plan many years ago as well but we have had to pivot as our daughter will remain with us for life and we want to assure the house asset goes to her.

As we age, we are probably going to put it in her name to protect against being taken if one of us has to go into a home some day.

 

[-OZ-]

The new(er) way to obtain LTC coverage in the market is actually through a permanent life insurance policy (which I’m sure will garner a bunch of eye rolls here. The idea is you buy a permanent life policy, and you can use the death benefit to pay for LTC needs before you pass away. Have a $500k life policy and use $250k of it to offset LTC needs before you pass…and you still have $250k of a death benefit to pass on to beneficiaries.

That might be the best reason for the permanent life insurance. Personally, I’d rather just invest with term and have a couple million dollars or a paid off beach house (to rent out or sell) in case it’s needed.

 

[Orange&Blue]

Like in all jobs, you are going to find, good, average or bad planners.

To help mitigate this, stick to fee only financial planners and then do your due diligence.

Note that the more long term successful a planner has been, the more money they typically require of a client to have for them to take on.

why only fee?

 

[NewlyRetired]

Like in all jobs, you are going to find, good, average or bad planners.

To help mitigate this, stick to fee only financial planners and then do your due diligence.

Note that the more long term successful a planner has been, the more money they typically require of a client to have for them to take on.

why only fee?

from a very high level, fee only advisors take a % of your wealth. The better you do, the better they do.

In contrast, if you used a commission based advisor, the advisor makes money on buying and selling investments. They are not as tied or incentivized for you to do well.

You will also find that fee only advisors tend to recommend solid, no non sense vehicles that have long track records of doing well in certain financial environments where as commissioned based advisors will be much more experimental in their choices, since they make money by making lots of transactions.

 

[matttyl]

The new(er) way to obtain LTC coverage in the market is actually through a permanent life insurance policy (which I’m sure will garner a bunch of eye rolls here. The idea is you buy a permanent life policy, and you can use the death benefit to pay for LTC needs before you pass away. Have a $500k life policy and use $250k of it to offset LTC needs before you pass…and you still have $250k of a death benefit to pass on to beneficiaries.

That might be the best reason for the permanent life insurance. Personally, I’d rather just invest with term and have a couple million dollars or a paid off beach house (to rent out or sell) in case it’s needed.

I appreciate the thought, but I don't quite understand this being the best reason for permanent life coverage. Not everyone will need LTC (odds are about 50/50 for Americans turning 65, and about half that do only need it for 90 or less days).

On the other hand, everyone dies. If I have a permanent (and paid up) policy in retirement I can use my retirement assets for what they were intended for - retirement, and not have to worry about what I’m leaving to my kid. If I end up running out/low on retirement assets in my 80 or 90s should I still be around, I’ll have a huge amount of cash value in my policy I can access tax free to live off of.

I’m not suggesting you do this instead of investing in the market. Do both.

 

[Judge Smails]

Show me a life insurance or LTC policy of any kind that doesn’t skyrocket the last 20 years of an 85 year olds life and I’ll consider buying it. Never seen it. All are cheap until then.

 

[-OZ-]

On the other hand, everyone dies. If I have a permanent (and paid up) policy in retirement I can use my retirement assets for what they were intended for - retirement, and not have to worry about what I’m leaving to my kid. If I end up running out/low on retirement assets in my 80 or 90s should I still be around, I’ll have a huge amount of cash value in my policy I can access tax free to live off of.

I’m not suggesting you do this instead of investing in the market. Do both.

I won’t get permanent life insurance, but the LTC element is the only part that intrigues me. I’m not worried about what I’ll leave for my kids, they’ll get some money while I’m alive. I do plan to leave my wife a fair amount but that can be planned without the permanent life insurance.

 

[Mrs. Rannous]

As we age, we are probably going to put it in her name to protect against being taken if one of us has to go into a home some day.

Not necessarily good advice for Texans. Homesteads are protected and have tax breaks. Consult an estate attorney.

 

[matttyl]

Show me a life insurance or LTC policy of any kind that doesn’t skyrocket the last 20 years of an 85 year olds life and I’ll consider buying it. Never seen it. All are cheap until then.

Any whole life insurance policy. They are permanent with level premiums.

Term is cheap until 85. In fact most carriers won’t sell a person a term policy after age 65.

 

[matttyl]

On the other hand, everyone dies. If I have a permanent (and paid up) policy in retirement I can use my retirement assets for what they were intended for - retirement, and not have to worry about what I’m leaving to my kid. If I end up running out/low on retirement assets in my 80 or 90s should I still be around, I’ll have a huge amount of cash value in my policy I can access tax free to live off of.

I’m not suggesting you do this instead of investing in the market. Do both.

I won’t get permanent life insurance, but the LTC element is the only part that intrigues me. I’m not worried about what I’ll leave for my kids, they’ll get some money while I’m alive. I do plan to leave my wife a fair amount but that can be planned without the permanent life insurance.

No worries. Everyone’s plan is personalized and (hopefully) what they want. I do plan to leave my wife and/or child a fair amount as well - but not knowing what estate taxes might be (again, hopefully) 30-50 years from now, it could all be taxable to them, and illiquid. The life insurance would be immediate, and liquid. Also, not knowing when I might leave this world, I want to know that I’ll have that insurance in place when I pass, no matter when that is. I can’t do that with term.

 

[tri-man 47]

The big deal is when you are sick and the system takes everything. Families that take in older folks to prevent this is key. My mother-in-law had a stroke and lived many years afterwards in assisted living and eventually a nursing home, but it took all of her 500K. So, if any of you think you have enough money, don't forget one thing. Old age will zap of you of that money unless you are ridiculous rich.

Or unless you have enough foresight to buy LTC insurance. Or, you know, a good FA who looks out for you and recommends stuff like that...

Isn’t long term care insurance ridiculously expensive?

Yes, but so is the alternative. I sell the stuff. Have someone on claim now receiving over $15k a month, which goes up 5% compound each year. That’s covering their care need now, but recent news is that they will require 24 hour care for dementia related issues. Receiving that care in their own home), which is their hope, will cost twice that (and the policy is paying all it can).

Self insuring is simply having enough money to pay for it yourself. Or said another way - not having insurance at all.

The new(er) way to obtain LTC coverage in the market is actually through a permanent life insurance policy (which I’m sure will garner a bunch of eye rolls here. The idea is you buy a permanent life policy, and you can use the death benefit to pay for LTC needs before you pass away. Have a $500k life policy and use $250k of it to offset LTC needs before you pass…and you still have $250k of a death benefit to pass on to beneficiaries.

I have a handful of permanent insurance policies, which I started with a small policy late in college and then added to roughly every five years. We have a policy on my wife, too, and started a $100K policy on each kid right after they were born (cost for them about a $ a day). The policies (through NML) all pay for themselves, now, out of the dividends. As things stand, it’s comforting to have them. My coverage is about $500K, so good support for ltc or nest egg for wife or kids.

I know the alternative is to invest those funds through the years instead of buying insurance …but I wouldn’t have had the discipline, and in many years, I’d have to used the money for day to day living.

 

[ConstruxBoy]

Other options for LTC are a deferred annuity and using your HSA.

 

[NutterButter]

On the other hand, everyone dies. If I have a permanent (and paid up) policy in retirement I can use my retirement assets for what they were intended for - retirement, and not have to worry about what I’m leaving to my kid. If I end up running out/low on retirement assets in my 80 or 90s should I still be around, I’ll have a huge amount of cash value in my policy I can access tax free to live off of.

I’m not suggesting you do this instead of investing in the market. Do both.

I won’t get permanent life insurance, but the LTC element is the only part that intrigues me. I’m not worried about what I’ll leave for my kids, they’ll get some money while I’m alive.

Same. If I get close to the age of death I financially plan for, they'll be in their 60s. If I kick it considerably sooner than that, they'll have a nice chunk of my retirement savings.

 

[matttyl]

On the other hand, everyone dies. If I have a permanent (and paid up) policy in retirement I can use my retirement assets for what they were intended for - retirement, and not have to worry about what I’m leaving to my kid. If I end up running out/low on retirement assets in my 80 or 90s should I still be around, I’ll have a huge amount of cash value in my policy I can access tax free to live off of.

I’m not suggesting you do this instead of investing in the market. Do both.

I won’t get permanent life insurance, but the LTC element is the only part that intrigues me. I’m not worried about what I’ll leave for my kids, they’ll get some money while I’m alive.

Same. If I get close to the age of death I financially plan for, they'll be in their 60s. If I kick it considerably sooner than that, they'll have a nice chunk of my retirement savings.

While this is what would happen, Id rather it not be. Let me explain. My father in law passed about 9 years ago now. Mother in law in ok health, in her 70s, but worries she’ll pass and what she’ll leave (to my wife and two other kids). She’s told us that she’s got a few hundred grand in IRAs that she’ll leave to each child, which we’re grateful for of course - but we’ll have to fully deplete that over 10 years. And we don’t need the income now. That’s all taxable to us, fully in at least the 24% federal tax bracket - perhaps into the 32%. And we can’t offset it by increasing our 401k contributions as wife and I already pretty much max those out annually, or at least come really close.

I want what I leave to not have strings attached to those who receive it. And I’d like my retirement funds to be used for their intended purpose.

 

[matttyl]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

 

[NutterButter]

On the other hand, everyone dies. If I have a permanent (and paid up) policy in retirement I can use my retirement assets for what they were intended for - retirement, and not have to worry about what I’m leaving to my kid. If I end up running out/low on retirement assets in my 80 or 90s should I still be around, I’ll have a huge amount of cash value in my policy I can access tax free to live off of.

I’m not suggesting you do this instead of investing in the market. Do both.

I won’t get permanent life insurance, but the LTC element is the only part that intrigues me. I’m not worried about what I’ll leave for my kids, they’ll get some money while I’m alive.

Same. If I get close to the age of death I financially plan for, they'll be in their 60s. If I kick it considerably sooner than that, they'll have a nice chunk of my retirement savings.

While this is what would happen, Id rather it not be. Let me explain. My father in law passed about 9 years ago now. Mother in law in ok health, in her 70s, but worries she’ll pass and what she’ll leave (to my wife and two other kids). She’s told us that she’s got a few hundred grand in IRAs that she’ll leave to each child, which we’re grateful for of course - but we’ll have to fully deplete that over 10 years. And we don’t need the income now. That’s all taxable to us, fully in at least the 24% federal tax bracket - perhaps into the 32%. And we can’t offset it by increasing our 401k contributions as wife and I already pretty much max those out annually, or at least come really close.

I want what I leave to not have strings attached to those who receive it. And I’d like my retirement funds to be used for their intended purpose.

Yeah, I'm probably gonna be in the same boat as you when my mom passes. Never really considered that some of her money is gonna be taxed. Considering its all found money as far as I'm concerned, doesn't seem like a bad problem to have. I think we might just have a different view of the intended purpose of retirement funds. I totally understand if your kids are at a point in their lives where they're dependent on you but me being in my 40's, I'm way past that point.

 

[Da Guru]

We were with my wife`s aunt last week and she was asking about this very topic as she is paranoid about running out of cash. I started doing the numbers but really have no experience with this. My wife is good with numbers but again no retirement background

At 65, she and her husband have about 1.1 million in their savings portfolio. Between their pensions and SS combined they are getting 110K a year without touching anything else. Hubby does some free lance stuff and makes another 10K a year. They have a house worth around 500K that is paid off, live nice but are not huge spenders, couple small vacations a year and go out to eat once a week. I asked about their vehicles and one is older but pristine, the other is a 22 they paid for in cash.

I am thinking they are doing pretty good for their lifestyles but have no real data to prove I am correct.

 

[NewlyRetired]

We were with my wife`s aunt last week and she was asking about this very topic as she is paranoid about running out of cash. I started doing the numbers but really have no experience with this. My wife is good with numbers but again no retirement background

At 65, she and her husband have about 1.1 million in their savings portfolio. Between their pensions and SS combined they are getting 110K a year without touching anything else. Hubby does some free lance stuff and makes another 10K a year. They have a house worth around 500K that is paid off, live nice but are not huge spenders, couple small vacations a year and go out to eat once a week. I asked about their vehicles and one is older but pristine, the other is a 22 they paid for in cash.

I am thinking they are doing pretty good for their lifestyles but have no real data to prove I am correct.

Everything starts and ends with how much they spend, not a general estimate but something more exact that was tracked.

Once they have that number, everything else should be easily answered. Normally having a $110k in retirement and ss income is fantastic.

 

[Desert_Power]

We were with my wife`s aunt last week and she was asking about this very topic as she is paranoid about running out of cash. I started doing the numbers but really have no experience with this. My wife is good with numbers but again no retirement background

At 65, she and her husband have about 1.1 million in their savings portfolio. Between their pensions and SS combined they are getting 110K a year without touching anything else. Hubby does some free lance stuff and makes another 10K a year. They have a house worth around 500K that is paid off, live nice but are not huge spenders, couple small vacations a year and go out to eat once a week. I asked about their vehicles and one is older but pristine, the other is a 22 they paid for in cash.

I am thinking they are doing pretty good for their lifestyles but have no real data to prove I am correct.

DistantlyRetired is right, but it sounds like they are probably pretty good.

 

[ConstruxBoy]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

 

[matttyl]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

 

[NutterButter]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Isn't another factor the point in your life at which you'll need the care? I'd think that the longer before you need the care, the worse of a bargain ltc becomes. If you're getting the same amount of care at 70 that you're getting at 90, that's 20 additional years of premiums paid along with the lost opportunity cost that comes with that.

 

[Mrs. Rannous]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

Me, too. The house always gets a cut.

 

[Mrs. Rannous]

My father in law passed about 9 years ago now. Mother in law in ok health, in her 70s, but worries she’ll pass and what she’ll leave (to my wife and two other kids). She’s told us that she’s got a few hundred grand in IRAs that she’ll leave to each child, which we’re grateful for of course - but we’ll have to fully deplete that over 10 years. And we don’t need the income now. That’s all taxable to us, fully in at least the 24% federal tax bracket - perhaps into the 32%. And we can’t offset it by increasing our 401k contributions as wife and I already pretty much max those out annually, or at least come really close.

I'm confused. If she leaves those IRA's to your kids, how are you paying any taxes on them at all? If you are, that should be fixable.

My MIL was concerned that she didn't have anything to leave to us. I told her we would be fine; and if she died with $1.78 in her bank account, she had done it right. She seemed a lot more happy about stuff after that.

 

[matttyl]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Isn't another factor the point in your life at which you'll need the care? I'd think that the longer before you need the care, the worse of a bargain ltc becomes. If you're getting the same amount of care at 70 that you're getting at 90, that's 20 additional years of premiums paid along with the lost opportunity cost that comes with that.

Well sure. Same with life insurance. If I make it to 90 my life policies weren’t much of a bargain. But it also meant I had a long life, and I’m ok with that.

 

[matttyl]

My father in law passed about 9 years ago now. Mother in law in ok health, in her 70s, but worries she’ll pass and what she’ll leave (to my wife and two other kids). She’s told us that she’s got a few hundred grand in IRAs that she’ll leave to each child, which we’re grateful for of course - but we’ll have to fully deplete that over 10 years. And we don’t need the income now. That’s all taxable to us, fully in at least the 24% federal tax bracket - perhaps into the 32%. And we can’t offset it by increasing our 401k contributions as wife and I already pretty much max those out annually, or at least come really close.

I'm confused. If she leaves those IRA's to your kids, how are you paying any taxes on them at all? If you are, that should be fixable.

My MIL was concerned that she didn't have anything to leave to us. I told her we would be fine; and if she died with $1.78 in her bank account, she had done it right. She seemed a lot more happy about stuff after that.

My MIL is planning on giving her three kids (one of which is my wife) her IRA money when she passes. It will be a few hundred grand each. That’s an inherited IRA to my wife, and she’ll need to pull all that money (and anything it earns) out in at most 10 years. We’ll have to pull that money out in at least the 24% bracket, possibly 32%.

 

[-OZ-]

My father in law passed about 9 years ago now. Mother in law in ok health, in her 70s, but worries she’ll pass and what she’ll leave (to my wife and two other kids). She’s told us that she’s got a few hundred grand in IRAs that she’ll leave to each child, which we’re grateful for of course - but we’ll have to fully deplete that over 10 years. And we don’t need the income now. That’s all taxable to us, fully in at least the 24% federal tax bracket - perhaps into the 32%. And we can’t offset it by increasing our 401k contributions as wife and I already pretty much max those out annually, or at least come really close.

I'm confused. If she leaves those IRA's to your kids, how are you paying any taxes on them at all? If you are, that should be fixable.

My MIL was concerned that she didn't have anything to leave to us. I told her we would be fine; and if she died with $1.78 in her bank account, she had done it right. She seemed a lot more happy about stuff after that.

My MIL is planning on giving her three kids (one of which is my wife) her IRA money when she passes. It will be a few hundred grand each. That’s an inherited IRA to my wife, and she’ll need to pull all that money (and anything it earns) out in at most 10 years. We’ll have to pull that money out in at least the 24% bracket, possibly 32%.

Traditional IRA? Many people assume Roth when they see IRA

 

[matttyl]

My father in law passed about 9 years ago now. Mother in law in ok health, in her 70s, but worries she’ll pass and what she’ll leave (to my wife and two other kids). She’s told us that she’s got a few hundred grand in IRAs that she’ll leave to each child, which we’re grateful for of course - but we’ll have to fully deplete that over 10 years. And we don’t need the income now. That’s all taxable to us, fully in at least the 24% federal tax bracket - perhaps into the 32%. And we can’t offset it by increasing our 401k contributions as wife and I already pretty much max those out annually, or at least come really close.

I'm confused. If she leaves those IRA's to your kids, how are you paying any taxes on them at all? If you are, that should be fixable.

My MIL was concerned that she didn't have anything to leave to us. I told her we would be fine; and if she died with $1.78 in her bank account, she had done it right. She seemed a lot more happy about stuff after that.

My MIL is planning on giving her three kids (one of which is my wife) her IRA money when she passes. It will be a few hundred grand each. That’s an inherited IRA to my wife, and she’ll need to pull all that money (and anything it earns) out in at most 10 years. We’ll have to pull that money out in at least the 24% bracket, possibly 32%.

Traditional IRA? Many people assume Roth when they see IRA

Yes, traditional (pre tax). She inherited all the traditional IRA assets from my FIL when he passed literally a year or so into his retirement. She can do that without strings. She now has that earmarked as “inheritance”, or “break glass in case of emergency” for herself monies - as she now has her pension, his remaining military pension and SS, which all combined is enough for her.

 

[NutterButter]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Isn't another factor the point in your life at which you'll need the care? I'd think that the longer before you need the care, the worse of a bargain ltc becomes. If you're getting the same amount of care at 70 that you're getting at 90, that's 20 additional years of premiums paid along with the lost opportunity cost that comes with that.

Well sure. Same with life insurance. If I make it to 90 my life policies weren’t much of a bargain. But it also meant I had a long life, and I’m ok with that.

I think I was comparing more to paying for ltc out of pocket. I think. The thing with ltc insurance is that those early years when it is a bargain, you don't really need it as much b/c you have most of your retirement savings still. And the later years when you would need it more b/c the retirement funds are dwindling, you might have just been better off saving those premiums. Probably not easy to calculate though b/c there's no way to tell how much premiums will go up which is one of the things that really turns me off to ltc insurance. That and there's enough stories out there about difficulties collecting on your policy. At that point in your life, you're not even capable of fighting the insurance company so your kids are left doing it which is the last thing I want for them. Life insurance seems a lot more straightforward to me. Fixed premiums. I think no questions asked about collecting on it. I mean if you're dead, you're dead. And its more the inverse for when you need as it comes most in handy early on in the policy when you have no other savings to leave your family. There really is no alternative at that point.

 

[ConstruxBoy]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Maybe, but with the uncertainty of if we'll need it and for how long, I think it makes more sense to have a slice of money invested for it and hope it ends up being enough if needed. I understand from your point of view, uncertainty = insurance. I just don't view it that way for LTC.

 

[JohnnyU]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Isn't another factor the point in your life at which you'll need the care? I'd think that the longer before you need the care, the worse of a bargain ltc becomes. If you're getting the same amount of care at 70 that you're getting at 90, that's 20 additional years of premiums paid along with the lost opportunity cost that comes with that.

Well sure. Same with life insurance. If I make it to 90 my life policies weren’t much of a bargain. But it also meant I had a long life, and I’m ok with that.

I think I was comparing more to paying for ltc out of pocket. I think. The thing with ltc insurance is that those early years when it is a bargain, you don't really need it as much b/c you have most of your retirement savings still. And the later years when you would need it more b/c the retirement funds are dwindling, you might have just been better off saving those premiums. Probably not easy to calculate though b/c there's no way to tell how much premiums will go up which is one of the things that really turns me off to ltc insurance. That and there's enough stories out there about difficulties collecting on your policy. At that point in your life, you're not even capable of fighting the insurance company so your kids are left doing it which is the last thing I want for them. Life insurance seems a lot more straightforward to me. Fixed premiums. I think no questions asked about collecting on it. I mean if you're dead, you're dead. And its more the inverse for when you need as it comes most in handy early on in the policy when you have no other savings to leave your family. There really is no alternative at that point.

Nursing homes and assisted living places take what you thought was enough and if you live long enough they take it all. My mother-in-law had $500K plus social security when she had her stroke and was broke (except for social security) before she croked. She lived another 15 years.