PBS Frontline : The Retirement Gamble, sorta Must See (1 Viewer)

[-OZ-]

Full stop.  Without the financial suck of kids, you're already one of the evil rich.  

Preach brother! 

5 kids = no

I know a slightly pudgy 46 year old who needs a nice adoptive home...

 

[Zegras11]

I'd love to know how you could conservatively make almost 7% a year.  I haven't given too much thought about to what I'm going to do with my retirement savings throughout retirement other than the typical 120-age percentage in a stock index and the rest in a bond index.

In May, we got into a life insurance product that has 2 forms.  one is SP500 and we get yearly increase minus 4%.  If it goes up 20, we get 16.   The other is we get a max of 11% no matter how high it goes.  It goes up 20, we get 11. If goes up 7, we get 7.   We are 75/25 split on those.  We are guaranteed no loss and min 0.5% gain every year, which covers most of the fees.   It also pays 3x death benefit and you can use 25% of the balance in a year for long term senior care if you need to.  SP500 up 10% since we funded it end of May.

These products historic averages are 8% and 7%.

 

[proteus126]

Long term care insurance. Generally 2-3 year policies and can be either simple or inflation-adjusted (those cost more). Without looking it up, the average stay in a long term care facility is ~2 years I think. Just like life insurance, rates are cheaper if you buy when you're younger. My wife and I bought our policies several years ago (we're now in our 40s) and we pay $26/month for $3K/month coverage. I don't think our rates are guaranteed but they haven't gone up yet since we're still young. My wife is the insurance expert in our household, I just stayed at a Holiday Inn once so do your own research.

Pig in a poke.  Rates are not guaranteed as far as I know.  No thanks, I'll insure my own demented self.

Workplace example (Federal Gov't).  Coworker is in her late 20s and has been paying premiums for LTC insurance for 6 years.  Nice low numbers, because she started real young.  A lot lower than mine would have been if I signed up (in my mid-40's at the time).

Well, in the summer of 2016 word comes around that the premiums are going up.  How much?  83%.  So now what does the employee do?  Start paying double, with no knowledge of what premiums will escalate to along the way?  Stop paying, forfeiting all that has been sunk into the insurance already?  Pay the same for less coverage?  All three choices stink.  I would never sign on to insurance where I didn't know what (a) I was paying in and (b) what I was getting out.

 

[jabarony]

Full stop.  Without the financial suck of kids, you're already one of the evil rich.  

No kidding. If I had no kids I'd retire tomorrow.  I don't need much disposable income.

 

[xulf]

All the calculators say I'm going to be short. 

But, if we are short...dumping ~$55,000 per year into 401ks (between my contributions, my wifes and matches/profit sharing at 37) then the world should just ####### end. 

I hate advisors and calculators because they are all ridiculously rigid. All advisors just follow stupid "rules" without thinking.  They aren't experts.

 

[Sand]

Preach brother! 

5 kids = no

You know, you'd figure that after the 2nd or 3rd one you'd figure out this bird and bees thing...

 

[-OZ-]

You know, you'd figure that after the 2nd or 3rd one you'd figure out this bird and bees thing...

we did import the 5th.

 

[KCitons]

All the calculators say I'm going to be short. 

But, if we are short...dumping ~$55,000 per year into 401ks (between my contributions, my wifes and matches/profit sharing at 37) then the world should just ####### end. 

I hate advisors and calculators because they are all ridiculously rigid. All advisors just follow stupid "rules" without thinking.  They aren't experts.

The last adviser we spoke with was about 4 years ago at Wells Fargo. He was trying to get us to buy some products they offered. After he looked at all our current savings, investments, pension and SS. He said that we were well within our goals. We never bought anything from him, but I felt better after he ran the numbers.

I was a little angry when he contacted us a few years later when he left Wells Fargo and went out on his own. I expected my information to stay private. 

 

[-OZ-]

The last adviser we spoke with was about 4 years ago at Wells Fargo. He was trying to get us to buy some products they offered. After he looked at all our current savings, investments, pension and SS. He said that we were well within our goals. We never bought anything from him, but I felt better after he ran the numbers.

I was a little angry when he contacted us a few years later when he left Wells Fargo and went out on his own. I expected my information to stay private. 

Interesting. It seems like he didn't share it with anyone else but tried to take his past clients with him as he builds his business. I'd probably do the same in his position.

Did you pay for the initial consult? 

All the calculators say I'm going to be short. 

But, if we are short...dumping ~$55,000 per year into 401ks (between my contributions, my wifes and matches/profit sharing at 37) then the world should just ####### end. 

I hate advisors and calculators because they are all ridiculously rigid. All advisors just follow stupid "rules" without thinking.  They aren't experts.

Did you just start this year? That sure seems like a lot if you're doing it over enough time and actually get some capital gains. I mean if you're investing exclusively in low yield bonds you might not make your goal, or if your goal is to play golf with Gates and Trump you're probably going to be short but if you have all 5 key components (low to no debt, time, adequate input, reasonable yield and reasonable goals) that doesn't make sense.

 

[xulf]

Did you just start this year? That sure seems like a lot if you're doing it over enough time and actually get some capital gains. I mean if you're investing exclusively in low yield bonds you might not make your goal, or if your goal is to play golf with Gates and Trump you're probably going to be short but if you have all 5 key components (low to no debt, time, adequate input, reasonable yield and reasonable goals) that doesn't make sense.

No we have been saving and have ~$480,000 in our combined retirement accounts.

We both have great matching plans with our employers which allows us to dump so much in.  I get a 4% match and 6% profit sharing and my wife is tiered based on pay but its approximately 8%. 

 

[-OZ-]

No we have been saving and have ~$480,000 in our combined retirement accounts.

We both have great matching plans with our employers which allows us to dump so much in.  I get a 4% match and 6% profit sharing and my wife is tiered based on pay but its approximately 8%. 

You seem set up well. Unless you're looking to retire in the next few years something is amiss.  Did you use firecalc? I just did with more detailed information, we're older than you and putting about 1/3 as much into investments (although we will have two pensions) and it came back with us dying at 100, no failures, while spending $100k / annually. 21 more years of working and the pensions are key for us but the amount you're putting in should more than compensate.

 

[xulf]

roth IRA's only let you put 5K a year in. That's not going to get anyone to retirement.

so you have to use the 401k system which is only tax deferred... :(

Roth 401ks are becoming way more popular.  As an owner, I would imagine you can get that added to your plan relatively easily.

 

[KCitons]

Interesting. It seems like he didn't share it with anyone else but tried to take his past clients with him as he builds his business. I'd probably do the same in his position.

Did you pay for the initial consult? 

No. It was free of charge. I'm not sure if it was because of my holdings or longevity with WF. Or just a one time thing they did for all customers. 

We didn't meet with him after he left WF. Or financial situation hadn't changed, so I don't know if he could do anything more than what he offered while at WF.

 

[NutterButter]

Oh, I think I mentioned this earlier, but I keep a chart with two sets of numbers, one with SS set to 0, and one including SS that I can adjust based on the projected shortfall. I just took a peek. With SS at 0, I go broke at 101. With SS at 77%, I go broke at... 108. The nasty part of it is that the expenses keep going up with inflation, so even though SS is there it's covering less and less as time goes on (if SS increases annually at 1% less than inflation), and all those later years are the expensive ones. Money runs out fast with 2077-2087 dollars. 

(Yeah, I know, it's silly to project living to 108. But, what the hell, my great-grandparents make 99s, my grandparents made 92-100, my parents are still around, who knows what science could bring--and what health care for someone that old will cost in 2070)

That's a good point about SS cola's not keeping up with inflation.  And I see nothing silly about projecting until you're 108.   I project until 100 when I have no idea if I'll live that long, but one of my biggest fears is running out of money and being a burden to my kids.   

 

[wilked]

No we have been saving and have ~$480,000 in our combined retirement accounts.

We both have great matching plans with our employers which allows us to dump so much in.  I get a 4% match and 6% profit sharing and my wife is tiered based on pay but its approximately 8%. 

480 at 37 isn’t that far behind. If you’re doing 55/yr and can get about 20 more years in you’ll be very comfortable 

 

[Tiger Fan]

I don't give financial advice.  But even with a quick search I was able to find a number of tax free bonds/funds yielding near 5%, which is even better than the 6% yield I quoted above!

where?  Are these accessible to anyone?

 

[-OZ-]

where?  Are these accessible to anyone?

I'm not overly interested in the tax benefits but 5% taxfree yield on bonds is better than I've found.

 

[James Daulton]

480 at 37 isn’t that far behind. If you’re doing 55/yr and can get about 20 more years in you’ll be very comfortable 

Holy crap, you'll be balling when you're retired.

Yeesh, I thought I was doing ok but holy smokes that kind of nut will be awesome.

Let me guess, no kids?

 

[Sand]

where?  Are these accessible to anyone?

Yes.  There are both muni ETFs and CEFs (closed end funds).  CEFs get a bit more yield as they typically use some leverage (ETFs don't use leverage - MUB is the gold standard of muni ETFs).  You pay for that with longer duration.  There are many types around - concentrate on limited duration, on certain states, etc.  CEFs require a bit more investigation as they're a bit different than ETFs - both are bought as easily as AAPL at your favorite stock broker, though.

https://www.cefconnect.com/

http://etfdb.com/type/bond/municipal-bond/

 

[⚡DEADHEAD⚡]

No we have been saving and have ~$480,000 in our combined retirement accounts.

We both have great matching plans with our employers which allows us to dump so much in.  I get a 4% match and 6% profit sharing and my wife is tiered based on pay but its approximately 8%. 

Depending how long you work, you may find yourself with $10 million in your mid-60s. You're going to be more than fine.

 

[Sand]

I can give you a real world example of my folks for instance, but who's to say I'm not making stuff up.  I do know if I have $3MM, I could conservatively parlay that into an income stream of over $200K/year and I could live on that without touching the principal, ever.  

How would you conservatively get to 7% withdrawal rate?  That's well over a typical, safe withdrawal rate (which is in the 4% range).

 

[xulf]

Holy crap, you'll be balling when you're retired.

Yeesh, I thought I was doing ok but holy smokes that kind of nut will be awesome.

Let me guess, no kids?

2 kids.  One is almost 6 the other just turned 4.  We have $30,000 combined in their 529s....which is way below what we need based on forecasts.

 

[Sand]

Another semi-useful post.  With the excel retirement calculator I use (self-made) I went through and adjusted for new tax rates.  At least for me it makes a bit of a difference - increasing the withdrawal rate by about $1500/yr over 40 years.  Not too shabby.

 

[James Daulton]

2 kids.  One is almost 6 the other just turned 4.  We have $30,000 combined in their 529s....which is way below what we need based on forecasts.

Aye' Caruba.  You guys are in great shape.

 

[NutterButter]

Yes.  There are both muni ETFs and CEFs (closed end funds).  CEFs get a bit more yield as they typically use some leverage (ETFs don't use leverage - MUB is the gold standard of muni ETFs).  You pay for that with longer duration.  There are many types around - concentrate on limited duration, on certain states, etc.  CEFs require a bit more investigation as they're a bit different than ETFs - both are bought as easily as AAPL at your favorite stock broker, though.

https://www.cefconnect.com/

http://etfdb.com/type/bond/municipal-bond/

Would something like this qualify?

 

[⚡DEADHEAD⚡]

2 kids.  One is almost 6 the other just turned 4.  We have $30,000 combined in their 529s....which is way below what we need based on forecasts.

Mine are 7 and 4. We have nearly $20k in each. Where should we be? We put in $450 and $350/month in theirs respectively.

 

[Gawain]

Don't quote me on this, but I was reading that you want the 529 in a name other than your child's. The FAFSA wants a much bigger percentage if the 529 is in the child's name.

 

[Sand]

Would something like this qualify?

Yep - that is a CEF.  it is about 37% levered, does have some AMT exposure, appears not to have much debt from bad places (IL, PR, etc.).  8% discount, which is good.  It did cut distributions in April, so it deserves some attention to see whether it's distributions are sustainable.  

CEFs are more complex than ETFs, so do your due diligence before utilizing them.  They cover many different investing areas, though I'm of the belief that they suit muni investing better than other areas (taxable bonds, options, equities, etc.).  Munis, on a risk basis have very low chance of default (certainly compared to equity bonds), which allows for safer leverage.  There are a number of junk bond CEFs that are also highly levered - a walk on the wild side.  

If I ever manage to retire I'll likely have a chunk of these (10% or so) to go along with other diversified yield instruments.

 

[Doctor Detroit]

https://www.cnbc.com/amp/2017/12/29/in-retirement-a-1-million-nest-egg-isnt-enough.html

While the article itself isn't anything new, one paragraph stuck out to me:

It's even worse for a 42-year-old Gen Xer, whose $1 million at retirement will only generate an inflation-adjusted $19,000 in year one after all is said and done. And a 32-year-old millennial planning to retire at 67 with $1 million would be below the poverty line.

a million dollars still sounds like a lot of money but put in those terms really brings the point home. This seems to exclude SS, but poverty plus SS still isn't good living. 

I was hurt by spending 12 years in the military, only three of which I could contribute to the military TSP with no match.  So you either go 20 and get a pension, or left early and got nothing (although I bought my military time back and it will go towards my federal retirement).  I did establish an IRA in 1994 and made it a Roth in 1998 when Roth became a thing.  I maxed it out for a long time but also took some withdrawals on principal over the years which I somewhat, but not totally regret. 

I think my biggest regret is not putting more in TSP when I became a civilian.  I averaged about 9% over the first decade but I wish I would have put more like 12% in, instead of having two car payments for four or five years during that time.  Dumb. 

I'm in good shape and will have plenty of money in retirement, but it sure would be nice to have X amount more in those first ten years that I could blow doing whatever while I'm still in physical condition to enjoy it. 

 

[xulf]

Mine are 7 and 4. We have nearly $20k in each. Where should we be? We put in $450 and $350/month in theirs respectively.

I have seen ridiculous projections...from $180,000 to $250,000 for my oldest.  And that is in state public school.  You can see projections here https://vanguard.wealthmsi.com/collcost.php#

I should say that I believe the whole education system cannot sustain what it is doing and something HAS to change.  There is no way spending $250k is feasible for a degree.

 

[-OZ-]

I was hurt by spending 12 years in the military, only three of which I could contribute to the military TSP with no match.  So you either go 20 and get a pension, or left early and got nothing (although I bought my military time back and it will go towards my federal retirement).  I did establish an IRA in 1994 and made it a Roth in 1998 when Roth became a thing.  I maxed it out for a long time but also took some withdrawals on principal over the years which I somewhat, but not totally regret. 

I think my biggest regret is not putting more in TSP when I became a civilian.  I averaged about 9% over the first decade but I wish I would have put more like 12% in, instead of having two car payments for four or five years during that time.  Dumb. 

I'm in good shape and will have plenty of money in retirement, but it sure would be nice to have X amount more in those first ten years that I could blow doing whatever while I'm still in physical condition to enjoy it. 

I wish I could buy my years but the pension is nice.

I'll assume you like the new military retirement plan? 

 

[rascal]

My kids education plan requires the education bubble to burst.  I don't make enough money to save enough for three kids.  It's idiotic.

 

[James Daulton]

I have seen ridiculous projections...from $180,000 to $250,000 for my oldest.  And that is in state public school.  You can see projections here https://vanguard.wealthmsi.com/collcost.php#

I should say that I believe the whole education system cannot sustain what it is doing and something HAS to change.  There is no way spending $250k is feasible for a degree.

Daughter's a freshman at the University of Maryland.  All-in cost to live there is about $23.5k.  That's about as cheap as you can get for a 4 year school near here.  If the kids don't live at school, the tab is roughly half.  So right now we're talking about $100k for 4 years. 

 

[NutterButter]

Don't quote me on this, but I was reading that you want the 529 in a name other than your child's. The FAFSA wants a much bigger percentage if the 529 is in the child's name.

One nice thing about knowing you're not going to get any financial aid is not having to worry about stuff like that.  

 

[xulf]

Daughter's a freshman at the University of Maryland.  All-in cost to live there is about $23.5k.  That's about as cheap as you can get for a 4 year school near here.  If the kids don't live at school, the tab is roughly half.  So right now we're talking about $100k for 4 years. 

So brutal...ugh.

 

[NutterButter]

So brutal...ugh.

I was going to say he's lucky to live in maryland at least as far as being on the cheaper side of state schools.    Its going to cost me an additional $40k if we send our kids to rutgers and he's got me beat by a few spots on the us today college rankings.  

 

[xulf]

I was going to say he's lucky to live in maryland at least as far as being on the cheaper side of state schools.    Its going to cost me an additional $40k if we send our kids to rutgers and he's got me beat by a few spots on the us today college rankings.  

OK...moving my ceiling to $300k 

My wife and i were very lucky that we both had our undergrad college paid  for  (and had scholarships so we were debt free) and I will pay for both my kids college.  If they get into an ivy league or Northwestern (go 'cats) or Stanford, or whatever school is best in their field...I am going to eat the bill.  If they aren't accepted to a top tier school they are going state (again will pay)...which are now harder and harder to get in to on the main campus (maybe not a bad thing if they go satellite).

If they drop out or fail out they will need to pay us back (maybe)...so it is essentially a loan until they graduate.

Education should not be this expensive!! Someone who wants to teach shouldn't be crippled with debt to mold our kids or anyone for that matter.

 

[James Daulton]

We're paying 75% but the kids are chipping in 25%.  I think it's important they have some skin in the game without being crippled.  Any scholarships they get or if they RA or whatever I deduct from what they owe.  My son owes $20k since he was an RA for 2 years. 

 

[NutterButter]

OK...moving my ceiling to $300k 

My wife and i were very lucky that we both had our undergrad college paid  for  (and had scholarships so we were debt free) and I will pay for both my kids college.  If they get into an ivy league or Northwestern (go 'cats) or Stanford, or whatever school is best in their field...I am going to eat the bill.  If they aren't accepted to a top tier school they are going state (again will pay)...which are now harder and harder to get in to on the main campus (maybe not a bad thing if they go satellite).

If they drop out or fail out they will need to pay us back (maybe)...so it is essentially a loan until they graduate.

Education should not be this expensive!! Someone who wants to teach shouldn't be crippled with debt to mold our kids or anyone for that matter.

That's almost exactly what I'm thinking at the moment.   If they really have their heart set on some sub-elite private school, they'll get whatever I would be paying for rutgers and they can figure out how to make up the difference.  

 

[Doctor Detroit]

I wish I could buy my years but the pension is nice.

I'll assume you like the new military retirement plan? 

Yes I do.  It gives someone who is in for 4, 8, 12 years a chance to keep up with their civilian counterparts in retirement. 

You can buy your years back, anyone can if they join federal, it just isn't a good financial decision for most who retire from the military above the grade of E-6.  I am told by those who know best, E-7 is about the tipping point. 

 

[cincredfan]

Has anyone changed jobs due to tuition remission.

My wife and I have had the discussion and at some point makes sense for her to change jobs to take advantage of this offering.

This could be a huge savings for us - below is just a little information for University of Cincinnati.

https://www.uc.edu/content/dam/uc/hr/benefits/tuition_remission/Tuition Remission for Employees.pdf

 

[Judge Smails]

I was lucky. All 3 went to community college for 2 years. 2 daughters went to Santa Barbara CC then on to UCSB. Lived in Isla Vista entire time so got full college experience and same degree. Saved tons. No debt. 

 

[⚡DEADHEAD⚡]

I almost went to SBCC with an eye to UC Berkeley. Glad I didn't. I never would have gotten out of that place. Glad your girls did. What a place. Too much fun. Should be illegal. 

 

[-OZ-]

We're paying 75% but the kids are chipping in 25%.  I think it's important they have some skin in the game without being crippled.  Any scholarships they get or if they RA or whatever I deduct from what they owe.  My son owes $20k since he was an RA for 2 years. 

That's close to our plan.

Our oldest 4 get one year each on Uncle Sam (post 911 GI Bill). We'll also match scholarships and whatever they save. I don't plan on matching loans but we'll have around $40k for those 3 years. They better graduate in 4. We'll do our best to match that plan for #5, but I'm hoping the female adopted Asian gets a few scholarships. (I only mention that because there are scholarships available and she's wicked smart)

 

[-OZ-]

Yes I do.  It gives someone who is in for 4, 8, 12 years a chance to keep up with their civilian counterparts in retirement. 

You can buy your years back, anyone can if they join federal, it just isn't a good financial decision for most who retire from the military above the grade of E-6.  I am told by those who know best, E-7 is about the tipping point. 

Ok, yes I can buy in but there's no way I'm giving up my pension (I retired as an officer). That's my complaint, that reservists can buy in and still get their pension. A few of my colleagues served 10-12 years, get all of that for leave purposes (if you retire you only get job specific time, so I got 8 years, my colleague who retired after 30 also got 8, seems wrong IMO so our captains get more credit than we got) and get to buy into retirement, serve another 8 (or more if they choose) in the reserves and get credit for both. Good for them, and you, but consistency would be preferred. 

Not that I'm really complaining. 

 

[wilked]

Don't quote me on this, but I was reading that you want the 529 in a name other than your child's. The FAFSA wants a much bigger percentage if the 529 is in the child's name.

It’s a common myth, but wrong 

 

[NutterButter]

I was lucky. All 3 went to community college for 2 years. 2 daughters went to Santa Barbara CC then on to UCSB. Lived in Isla Vista entire time so got full college experience and same degree. Saved tons. No debt. 

With California in general, you have a handful of highly ranked schools at half the cost of their private competitors.   Cal Berkeley for 30k/yr.  Where do I sign up?

 

[Judge Smails]

With California in general, you have a handful of highly ranked schools at half the cost of their private competitors.   Cal Berkeley for 30k/yr.  Where do I sign up?

The top 5 UC's are phenomenal value if you are a resident.  Very tough to get in though.

 

[The Ref]

My wife and I can sleep at night when it comes to college.

My daughter is 9, fourth grade.  When she entered kindergarten we signed her up for a four year pre paid university program in the state of Florida.  It's good at any of the ~20 universities and can be downgraded to be used at any of the ~300 colleges.  All she has to do is get in and she can use it.  If she oversteps the mark and gets into MIT or Stanford (she won't) she can find the money and we will gladly cash out the plan for her.

 

[⚡DEADHEAD⚡]

The top 5 UC's are phenomenal value if you are a resident.  Very tough to get in though.

Pretty much need a 4.0+ GPA, excellent test scores, extracurriculars, charitable work, etc.

I'm a Davis grad. Did not have that GPA. Pretty good test scores. Nothing else to speak of. It's a different era. Way freakin' harder and I get a sense it's robbing kids from enjoying being a kid.