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Personal Finance Advice and Education! (3 Viewers)

Let's say you drop dead tomorrow.  RIP.  Assuming if your wife works, that she would be so distraught and wouldn't be able to work again. 

How much money would your wife need to pay off the mortgage and then cover all of the families current and future expenses up until the kids finish college.  Then how much will she need for the rest of her life.  Start with that number as your baseline for what you should have in coverage.

Or you can google "life insurance calculator" and look at a bunch of different ones
Kids though bring SS survivor benefits into play. Assuming the traditional FBG salary, probably looking at 1600 a month per kid until 18. Rounding the kids ages up, that's 57.6K for the older one and 268.8K for the younger one. You can probably back this figure out of your life insurance carry.

 
Kids though bring SS survivor benefits into play. Assuming the traditional FBG salary, probably looking at 1600 a month per kid until 18. Rounding the kids ages up, that's 57.6K for the older one and 268.8K for the younger one. You can probably back this figure out of your life insurance carry.
Soooooo, how exactly would my kids be collecting survivor benefits?  I have basically nothing in my work pension.  I have been there 2 and a half years.

 
ghostguy123 said:
Soooooo, how exactly would my kids be collecting survivor benefits?  I have basically nothing in my work pension.  I have been there 2 and a half years.
It's social security, not work:
https://www.ssa.gov/pubs/EN-05-10084.pdf

Your unmarried children who are under 18 (up to age 19 if attending elementary or secondary school full time) can be eligible to receive Social Security benefits when you die.

 
Whose wife likes them that much?  Anyone?  Show of hands.
:lmao:

It's so peculiar that the people that sell life insurance want you to have enough $ that your wife and kids can live better than their current lifestyle and without having to work (and obviously the wife would never re-marry because you are so awesome).  

 
:lmao:

It's so peculiar that the people that sell life insurance want you to have enough $ that your wife and kids can live better than their current lifestyle and without having to work (and obviously the wife would never re-marry because you are so awesome).  
Probably the 75th time I've posted it, but...

Enough that the family's not living in an alley in a cardboard box.  Not so much that she becomes immediately more attractive to other men.

 
:lmao:

It's so peculiar that the people that sell life insurance want you to have enough $ that your wife and kids can live better than their current lifestyle and without having to work (and obviously the wife would never re-marry because you are so awesome).  
See, that's the thing. I don't want my wife to have to change a whole lot for the next decade. So she has to be covered that long as a SAHM. 

She could get a job as a secretary or something, but I want our kids to be out of middle School before she has to work. 

 
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:lmao:

It's so peculiar that the people that sell life insurance want you to have enough $ that your wife and kids can live better than their current lifestyle and without having to work (and obviously the wife would never re-marry because you are so awesome).  
Yeah, I am a little hesitant to make myself worth more dead than alive.  Not sure how much incentive I want to give my wife to murder me. 

 
It does seem like life insurance through work isn't that great of an idea.  Sure it would cover sudden death but would be a real kick in the nuts if an illness dragged out killing me after my employment was terminated.  
I write life insurance, and as for group life insurance, it all depends.  Generally speaking you can do better elsewhere, but if there are health issues you may be better off with what your employer offers.  There are some downsides, which include a high likelihood that you are under-insured, if you leave your employer the coverage does not come with you (you don't know what your next employer will offer), it's usually more expensive, and what most people don't want to think about is, like you mentioned, having to hang onto your job if an illness strikes so that you can keep your life insurance.  Even if the rates are slightly cheaper just know that group life insurance is 'renewable' term insurance, which means that every year or few years the rates will increase.  As you get older the rate increases become more dramatic.

Some of the advantages are that there is no medical exam, and it's convenient to get started.  Even if the cost is slightly higher on an individual term policy it's because you are paying a little extra up front to guarantee your rate for a longer period of time.  If you compare the costs of a 30 year term to the renewals in a group life plan it usually comes out way cheaper long-term.  Often a 30-year term is less expensive right out of the gate than the 1-year renewable term at the same face amounts.  

Industry standard is 10x income in coverage, but I don't go by that since everyone's financial situation is different.  The goal is simply to prevent a financial burden, but not get anyone rich.  I take that seriously, but unfortunately it's a pretty corrupt industry.

 
This has probably also been discussed, but what about disability insurance?  Say I don't die, but can't perform my job anymore due to some injury or illness.  

 
What age do you guys see yourself retiring?

What age are you now?
My youngest daughter will be out of high school when I turn 53.  My plan when I turned 40 was to retire at 55.  I still am pretty confident I can retire at 55, but I may put it off an extra year just to be sure.  The bridge from retirement until I can tap into retirement funds (59 1/2) is what I'm working on now.  I should have more than sufficient funds in our retirement accounts, but I mean how much money will I need for 3-4 years with no income coming in is what I wonder about.  I'm expecting to have >500K and no house payment.  But you know, stuff happens.

 
What age do you guys see yourself retiring?

What age are you now?
38 now

Assuming nothing super major I could fully retire at social security age.

I plan to semi retire at 50-55 which is basically just working part time.

I will probably never 100% fully retire unless I am unable to work.  I plan to always have some sort of earned income for fun stuff.  

Nevr know though.  My dad retired at 48, is 70 now, and hasn't worked a day since 48.

 
This has probably also been discussed, but what about disability insurance?  Say I don't die, but can't perform my job anymore due to some injury or illness.  
I've always carried long term disability insurance.  Not too expensive through work, if memory serves.

 
I mean, I'm still hitting the same stumbling block. The long-term care costs are insane and 40k/yr isn't going to cut it. The author's rebuttal is "don't get sick", as if bicycling for an hour a day is going to prevent cancer or Alzheimers. He's avoiding the point, instead of addressing it.
The answer is somewhere in between.  IMO 80k per year gives some slack for the possibility of expensive care, which means a stash of 2.5M or so.  Suzie's proposal of 5M seems absurdly high.

Then again, the variable we tend to worry about most is :moneybag: , when the most precious variable is time.  If you wait forever for the money you may not end up with a lot of time.  

 
Recently dug more into HSA's and my general advice (always possible for exceptions as there is no one size fits all answer when it comes to finances) now is if you qualify for an HSA then before you max out out your 401k and IRA's is to max out your HSA. For those that are not familiar with them the basics of an HSA is that if you have a high deductible insurance plan it can off set the costs of the deductible. Think of it like an IRA for health costs. Money going in is pre-tax and when you pay for qualifying medical expenses it is tax free. So, if you spend it on medical expenses then you not paying taxes on that money at all. The money is tax sheltered and does carry a penalty (20%) plus taxation if you withdraw it for other purposes. However, at age 65 you are allowed to withdraw it for any reason and only pay the taxes on it. The beautiful thing is that unlike the traditional IRA there is no RMD (Required Minimum Distribution) so it gives you more flexibility in retirement. It ends up being superior to both traditional and ROTH. 

So, highlights of why it is a great financial tool: 

-No taxes paid if used for healthcare

-Can be withdrawn at regular tax rate for any purpose at 65 years of age

-No RMD

Oh, and there is a once a lifetime transfer allowed from an IRA to a HSA. 
In my open enrollment period for work this week and am evaluating this again.  I decided against it last year, but can't really remember why.  I have a kid with a few relatively expensive prescriptions and a few times per year specialist visits, so perhaps it's just that 100% out-of-pocket until the deductible is met that scares me.  Something about paying her pediatrician $500 instead of a $20 copay on that first visit in 2019 just feels wrong.  But my employer contributes 53% of the annual deductible amount to the HSA, and the decrease in monthly contributions effectively makes up the rest.  So why am I still hesitant?  Anything else I should be considering?

 
Fair. 

I kind of also think it's weird to see the FIRE-types talking about only having to figure out how to get to the median age. "I only need to pay for getting to age 84", for example. I mean, on average, sure, half the people die before the median, and half after, but, doesn't it make the most sense to plan for yourself to make it one or two standard deviations above that, just for your own peace of mind. Making it to 87 and living the last three years in poverty doesn't seem appealing, balanced against, say, working 8 extra months at age 34 could have paid for it. 
Planning for 84 (or whatever) is folly.  It is interesting to note, though, that the safe withdrawal rate at 40+ years is essentially a static number.  And it really doesn't dip a huge amount from 30 years to 40 years, either.

I expect I have a 50/50 shot at 65 (horrible family history) and I'm planning with 90 as my terminal age.

 
 Anything else I should be considering?
If you have the cash to not touch it and let it grow it's easily the best retirement vehicle that exists.  That's a big draw.  In your case it looks like your employer is adding in a lot of the HSA balance for the year?  That sounds pretty good.  Make an excel file and go through the math.  I wouldn't be surprised if you are in a no lose situation.

 
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If you have the cash to not touch it and let it grow it's easily the best retirement vehicle that exists.  That's it's big draw.  In your case it looks like your employer is adding in a lot of the HSA balance for the year?  That sounds pretty good.  Make an excel file and go through the math.  I wouldn't be surprised if you are in a no lose situation.
I think you're right, it's just that mental hurdle of paying "out of pocket" for stuff I'm not used to.  I think even if I need to use enough of the HSA to cover the deductible I can still come out ahead, as the math seems to be in my favor.

 
Will be debt free in 4 months.  Will then start maxing out roth IRA and maybe 401(k).  We've been thrifty for a while so may increase the budget on trips at the expense of maxing 401(k).  Kids will be 10,4,&4.

Also, i am stopping all 529 contributions immediately, not that they were much, as you can now withdraw IRAs for children education penalty free.

 
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I always was in awe of people that could max Roth and 401k.  When income for me was that low I struggled to pull that off.  

I know there is a backdoor option for the roth, but jesus frowns on the backdoor.  Good on everyone that can make that work.  

 
What I didn't realize is that you can create a 529 for yourself and there's no restriction on how long you have to keep the money in there, as long as you pay for a qualified educational expense.

For example, my friend is changing careers and getting a trade degree at a local community college. My friend can open a 529 in her own name, with herself as the beneficiary, put her rent money in the 529, leave it for 24 hours, then withdraw it back to her bank account and pay the rent with it. The benefit is that her rent (up to the educational cost at that college) is now tax-deductible up to the state limit. I think where she lives in Oregon she can use it for a nearly $3000 deduction. In NY it's $10,000 that can be deducted from income on the tax return. Not a bad dodge if you qualify.
It's not bad, but i don't like that its only for education.  I mean, my kids are freaking brilliant, so they are getting scholarships.  Both wife and i have masters and have no desire to go back to school.

 
In my open enrollment period for work this week and am evaluating this again.  I decided against it last year, but can't really remember why.  I have a kid with a few relatively expensive prescriptions and a few times per year specialist visits, so perhaps it's just that 100% out-of-pocket until the deductible is met that scares me.  Something about paying her pediatrician $500 instead of a $20 copay on that first visit in 2019 just feels wrong.  But my employer contributes 53% of the annual deductible amount to the HSA, and the decrease in monthly contributions effectively makes up the rest.  So why am I still hesitant?  Anything else I should be considering?
That sounds pretty amazingly generous compared to most companies. We are finally switching this year, I should have done it a decade ago but knew nothing about HSA's. I had piled up a ton of free employer contributions in another plan that I chose when I was young and single and always healthy and we would have lost all the accumulated funds had we switched a few years ago. We finally spent that down completely last year when my wife had shoulder surgery so we lose nothing switching now.

My company puts in $400 at the beginning of the year (it's up to $800 but I make too much in income so get a reduced benefit.) My wife and I can both "earn" health and wellness dollars up to $800 a piece for $1600 total (activities are like biometric screenings, online stuff, a few other health related things.) HSA max contribution for 2019 is 7K for us so the remaining 5K is on us to contribute. However, the difference in premiums from the old plan we were on is 2K annually so really it's only about 3K extra in pre-tax contributions to max the HSA. My plan was to put to up my 401k contribution a few percent in 2019 but instead I'll be putting that aside in the HSA now.

 
39

Plan is a minimum of 55 to retire at the moment. If I keep my day job and never get another raise or increase my contribution limit the calculators say I can retire at 59. So planing to shave quite a few years off that.

 
I know many of you don't want to rely on SS and some think it won't be around when they are of age to take it but I think it's important that people remember that your SS benefits are based on 35 years of earnings. 

I think this is definitely a knock to the "FIRE" community that wants to retire early.   

 
I know many of you don't want to rely on SS and some think it won't be around when they are of age to take it but I think it's important that people remember that your SS benefits are based on 35 years of earnings. 

I think this is definitely a knock to the "FIRE" community that wants to retire early.   
Started working full time at 23 after graduating college.  23+35=58.  That is 19.25 years from now.  Checks balances...

 
eoMMan said:
I know many of you don't want to rely on SS and some think it won't be around when they are of age to take it but I think it's important that people remember that your SS benefits are based on 35 years of earnings. 

I think this is definitely a knock to the "FIRE" community that wants to retire early.   
This is comprehended in their system.   It's a known limitation at least. 

 
eoMMan said:
I know many of you don't want to rely on SS and some think it won't be around when they are of age to take it but I think it's important that people remember that your SS benefits are based on 35 years of earnings. 

I think this is definitely a knock to the "FIRE" community that wants to retire early.   


True, if one is talking about retiring before 40.  You just don't have enough years in to get all of the more easily grabbed portion of the SS benefit.

However, if one is talking about retiring late 40's or early 50's, which I definitely consider FIRE, one has likely put in most/all of the key years for Social Security.  After 25 years of working a white collar job (I'm not talking big money like finance - just something solid like engineering), you are near/past the 2nd "bend point" and have reached the point of diminishing returns.  More years don't add a lot to the SS benefit.

1. Assuming you worked less than 35 years...  Calculate your monthly earnings.  Your earnings are listed in your SS statement and are indexed for inflation.

2. Let's say your average (indexed) salary was $80k and you worked 25 years (age 48, say).  That is a total of $2M over your career.  Divide by 35 years.  $57k/year.  Divide by 12.  $4,762/month.  That's your AIME - average indexed monthly earnings.

3. Check where you are vs. the Benefit curve.  AIME on the horizontal axis, SS monthly benefit on the vertical.  If you can, you want to get further to the right than "Joe".

4. Why?  Your SS monthly benefit (age 67) is computed as:  90% x (your first $895) + 32% x ($895 to $5397) + 15% x (monthly earnings over $5397).  You want to maximize the 32% chunk.

Once you are over $5397 AIME, bumping up your average monthly salary by working more years towards 35 years just doesn't impact benefit number that much.  Right at the 2nd bend point, your monthly benefit would be $2250.  After that, it really creeps upward.

For the worker in the case above, I'd definitely recommend working three more years to reach the 2nd bend point.

 
True, if one is talking about retiring before 40.  You just don't have enough years in to get all of the more easily grabbed portion of the SS benefit.

However, if one is talking about retiring late 40's or early 50's, which I definitely consider FIRE, one has likely put in most/all of the key years for Social Security.  After 25 years of working a white collar job (I'm not talking big money like finance - just something solid like engineering), you are near/past the 2nd "bend point" and have reached the point of diminishing returns.  More years don't add a lot to the SS benefit.

1. Assuming you worked less than 35 years...  Calculate your monthly earnings.  Your earnings are listed in your SS statement and are indexed for inflation.

2. Let's say your average (indexed) salary was $80k and you worked 25 years (age 48, say).  That is a total of $2M over your career.  Divide by 35 years.  $57k/year.  Divide by 12.  $4,762/month.  That's your AIME - average indexed monthly earnings.

3. Check where you are vs. the Benefit curve.  AIME on the horizontal axis, SS monthly benefit on the vertical.  If you can, you want to get further to the right than "Joe".

4. Why?  Your SS monthly benefit (age 67) is computed as:  90% x (your first $895) + 32% x ($895 to $5397) + 15% x (monthly earnings over $5397).  You want to maximize the 32% chunk.

Once you are over $5397 AIME, bumping up your average monthly salary by working more years towards 35 years just doesn't impact benefit number that much.  Right at the 2nd bend point, your monthly benefit would be $2250.  After that, it really creeps upward.

For the worker in the case above, I'd definitely recommend working three more years to reach the 2nd bend point.
Interesting.  I'll have to look into this more later.  Thanks.

 
That was a very informative post by Proteus.  Looks like I have some math to do even though retirement is a ways off for me.  Having my child at 41 pretty much means I'm working into my early 60s.  

 
The full article from proteus link is here

https://retireby40.org/early-retirement-impact-social-security-benefit/

I think for me I plan to be full time until at least the youngest is off to college.  

So the scenarios I might run are retire at 55 (40 working years) vs retire at 60 (45 working years).  Can't see any reason to go beyond that (all kids out of undergrad at that point)

I also don't see a reason to run scenarios until I am 50 though, so not gonna bother now

 
I also don't see a reason to run scenarios until I am 50 though, so not gonna bother now
Probably a good idea.  I found that, once I got serious about tracking progress towards a somewhat early retirement in detail 3 years ago, thinking about it too much screwed up my work day.  Everyday nuisances had me running to my spreadsheet for solace, until I got a grip.  Not really, but kind of.  Had I started detailed planning in my 30s, it might have ruined the enjoyment of the 2nd half of my career.

Anyway, over the years I just maxed stuff in the recommended order (401k, then Roth, then after tax) as my financial flexibility grew over the years.  You pretty much can't go wrong with that.

Not having kids or large student loan debt made it pretty straightforward.  Folks with more stuff going on, who can manage FIRE, are incredible to me.

 
Probably a good idea.  I found that, once I got serious about tracking progress towards a somewhat early retirement in detail 3 years ago, thinking about it too much screwed up my work day.  Everyday nuisances had me running to my spreadsheet for solace, until I got a grip.  Not really, but kind of.  Had I started detailed planning in my 30s, it might have ruined the enjoyment of the 2nd half of my career.

Anyway, over the years I just maxed stuff in the recommended order (401k, then Roth, then after tax) as my financial flexibility grew over the years.  You pretty much can't go wrong with that.

Not having kids or large student loan debt made it pretty straightforward.  Folks with more stuff going on, who can manage FIRE, are incredible to me.
I look at retirement numbers a lot more frequently when work is frustrating. 

 
Probably a good idea.  I found that, once I got serious about tracking progress towards a somewhat early retirement in detail 3 years ago, thinking about it too much screwed up my work day.  Everyday nuisances had me running to my spreadsheet for solace, until I got a grip.  Not really, but kind of.  Had I started detailed planning in my 30s, it might have ruined the enjoyment of the 2nd half of my career.

Anyway, over the years I just maxed stuff in the recommended order (401k, then Roth, then after tax) as my financial flexibility grew over the years.  You pretty much can't go wrong with that.

Not having kids or large student loan debt made it pretty straightforward.  Folks with more stuff going on, who can manage FIRE, are incredible to me.
No HSA?

I knew 10+ years ago I wasn't working into my 50's.  Problem was, on our average incomes (accountant, teacher), we weren't getting there on retirement savings alone.  Thankfully, I took a shot when RE crashed that paid off.  Collected my last paycheck at 41 and have just managed my moderate RE portfolio since.  

 
proteus126 said:
Probably a good idea.  I found that, once I got serious about tracking progress towards a somewhat early retirement in detail 3 years ago, thinking about it too much screwed up my work day.  Everyday nuisances had me running to my spreadsheet for solace, until I got a grip.  Not really, but kind of.  Had I started detailed planning in my 30s, it might have ruined the enjoyment of the 2nd half of my career.

Anyway, over the years I just maxed stuff in the recommended order (401k, then Roth, then after tax) as my financial flexibility grew over the years.  You pretty much can't go wrong with that.

Not having kids or large student loan debt made it pretty straightforward.  Folks with more stuff going on, who can manage FIRE, are incredible to me.
Mangage FIRE?

And i thought the order was max 401(k) to contribution level, max roth ira, then max 401(k)?

 
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