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Old 05-18-2019, 08:52 PM
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Retirement question


If I retire at 60 I get a 42K per year pension. I'm likely to have around 200K in a 403b, and we have a house next to a soon to be Metro stop outside DC. The house should be almost paid for by the time I hit 60, so we should clear 300K or more if we sell it. Is it realistic to think we could move somewhere houses go for 150K or so and live comfortably? Wife is a massage therapist and can do her thing in a lot of places.
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Old 05-18-2019, 08:57 PM
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I don't understand the question. If you wife can "do her thing" in a lot of places, can't you live comfortably in a lot of places?
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Old 05-18-2019, 08:59 PM
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I don't understand the question. If you wife can "do her thing" in a lot of places, can't you live comfortably in a lot of places?
It's not that high paying; I just mean that she can work in a lot of areas.
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Old 05-18-2019, 09:12 PM
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So you'll have 350k in assets (assuming you buy a 150k house), your wifes income and a 42k a year pension?

You'll also have social security for both of you that kicks in sometime in your 60s.

You should be fine if your expenses are reasonable. Assuming a 4% withdraw rate you can pull about 14k out of your assets, which means you'd have 56k a year without counting your wife's income or social security. If you live without a mortgage and aren't supporting kids thats a fairly decent income outside of the big coastal cities.

What about health insurance?
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Last edited by Wesley Clark; 05-18-2019 at 09:14 PM.
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Old 05-18-2019, 09:26 PM
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So you'll have 350k in assets (assuming you buy a 150k house), your wifes income and a 42k a year pension?

You'll also have social security for both of you that kicks in sometime in your 60s.

You should be fine if your expenses are reasonable. Assuming a 4% withdraw rate you can pull about 14k out of your assets, which means you'd have 56k a year without counting your wife's income or social security. If you live without a mortgage and aren't supporting kids thats a fairly decent income outside of the big coastal cities.

What about health insurance?
Health insurance is the big question. I may have to work just for the insurance. Former NBA star Adrian Dantley has worked as a school crossing guard in our neighborhood just for the insurance. I'm thinking if I do work it will be part-time, though. Another option would be to work half-time in the DC school system while drawing the pension. Also, we probably will have another 150K in assets that are in various accounts.
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Old 05-18-2019, 09:41 PM
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Lifestyle (meaning spending habits) and health insurance are the big issues it seems. If your lifestyle is reasonable in a paid off home and you have health insurance you should be fine, and when SS kicks in for both of you I assume you guys will have another 30k or so in income to work with. 500k in assets, 42k in a pension, ~30k in SS and a paid off home is a fairly decent standard of living for a retired couple, esp in a lower cost of living area.

As far as health insurance, there is the cliff that occurs when income is above 400% of FPL. I believe for a famiy of 2, the limit is about 68k a year in income. At your ages, the premiums on the ACA will skyrocket if your income goes above 68k.

But as long as you keep it under there, your premiums should be limited to 8-10% of your income with the rest covered by subsidies. So if you guys make 60k a year (42k from your pension, 18k from your wifes work) I think ACA premiums would be limited to about 9.5% of your income, so about $500/month for both of you.
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Old 05-18-2019, 10:17 PM
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Another aspect to health insurance in retirement is what happens when you shift to Medicare.

It is not as free as I thought it would be. The basic plan requires that you pay 20% of all charges, with no annual cap. You can add MediGap (the best coverage) or Advantage (narrow networks & insurers calling the shots) to lessen that expense.

After five years of Medicare + MediGap + Part D, it is the household expense that has inflated the fastest.
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Old 05-18-2019, 10:20 PM
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Another aspect to health insurance in retirement is what happens when you shift to Medicare.

It is not as free as I thought it would be. The basic plan requires that you pay 20% of all charges, with no annual cap. You can add MediGap (the best coverage) or Advantage (narrow networks & insurers calling the shots) to lessen that expense.

After five years of Medicare + MediGap + Part D, it is the household expense that has inflated the fastest.
I've heard budgeting about $500 per month per person for things not covered by medicare is a reasonable number. But that doesn't even include long term care, which also is expensive as hell in America.

https://www.aarp.org/health/medicare...-check-fd.html

Quote:
The KFF report reveals that in 2013, the average out-of-pocket health care spending for Medicare recipients was 41 percent of their average per capita Social Security income. The study projects that rate will rise to 50 percent in 2030.

The average Social Security benefit in 2013 was $13,375; it is projected to be $15,904 in 2030.
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Old 05-18-2019, 10:28 PM
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Another aspect to health insurance in retirement is what happens when you shift to Medicare.

It is not as free as I thought it would be. The basic plan requires that you pay 20% of all charges, with no annual cap. You can add MediGap (the best coverage) or Advantage (narrow networks & insurers calling the shots) to lessen that expense.

After five years of Medicare + MediGap + Part D, it is the household expense that has inflated the fastest.
Medicare shouldn't inflate by more than about 4% a year on average. Something isn't right if it is going up faster than that. You should make sure to shop your coverage regularly.

But you are right, it's not free and depending on your health the prescription plans in particular can get pricy. Lots of reasons for this and at the moment it doesn't look like it's trending towards getting better.

Also, there is no such thing as decent dental insurance that isn't group coverage. If you want dental work done do it now while you are on a group plan. If you can keep your group plan into retirement (rare but not unheard of) DO IT.

Last edited by NAF1138; 05-18-2019 at 10:29 PM.
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Old 05-19-2019, 05:13 AM
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Wesley Clark laid out the basics, but you haven't really mentioned the most important variable, which is how much you want to be able to spend. And how much you would receive in Soc Sec if you wanted/needed to start at 62.

You mentioned a total of about $500k in assets besides the pension. 200k 403(b), $150k from the sale of the house, $150 in other accounts.

You would probably want to keep somewhere up to $50k in cash, so let's drop your investable assets down to $450k.

If you put it in stuff like REITs (put the REITs in the 403(b)) and utilities, you should be able to throw off at least 4%, or $18,000 a year.

So you have $18,000 + $42,000 from the pension, for a total of $60,000 a year (not counting what your and your wife could earn part-time) until Soc Sec kicks in. All of that is going to be taxable, so you have to subtract that, at the federal level your taxable income would be $36,000 and the tax would be about $3,900.

So the first couple of years at least you'd have about $56,000 a year to work with if you have no state income tax.

Add up all your recurring bills (ex-mortgage) that you don't pay via credit card. Then look at last year's credit card spend. Add 'em together, and compare to $56,000. If they're close, then yeah, mathematically you can do it, but you really leave no room for the unforeseen, other than the $50k you keep in cash.

Bridging the gap to when Medicare kicks in is a big deal. If you weren't able to get coverage through an employer, paying for it could basically replace your monthly mortgage payment.
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Old 05-19-2019, 12:02 PM
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I don't mean to monopolize the thread, but its also relevant that you can adjust your MAGI to quality for ACA subsides if you make too much money or can't get insurance through work.

https://www.healthinsurance.org/faqs...come-eligible/

So if your wife has a good year and earns more than 26k or so, I'm assuming she can dump a lot of money into a 401k to get your AGI below 68k so that you still qualify for about $1500/month in ACA subisides, if you earn $1 more than 400% of the FPL your subsidies disappear and you'll be looking at 2k+ a month in insurance premiums.

I believe full retirement age for someone like OP is around 67. You can take SS from age 62 to 70, and I believe benefits will vary from around 70% to 130% depending on when you take it, but it tends to break even around age 80 no matter when you take it. If you come from a family of people where everyone lives to be 95, you may want to wait to start collecting SS. If everyone dies in their 70s and early 80s then taking it earlier is better.
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Old 05-19-2019, 05:09 PM
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Originally Posted by P-man View Post
If I retire at 60 I get a 42K per year pension. I'm likely to have around 200K in a 403b, and we have a house next to a soon to be Metro stop outside DC. The house should be almost paid for by the time I hit 60, so we should clear 300K or more if we sell it. Is it realistic to think we could move somewhere houses go for 150K or so and live comfortably? Wife is a massage therapist and can do her thing in a lot of places.
My daughter bought an immense house for about $400K in a very good suburb of Indianapolis, so since you are going to be less ritzy and need less space, you should do well with $300K. It is easy to pick some places you might want to live and look up houses on local real estate agent sites. It depends strongly on the area you're looking for. Do you love DC or hate DC?

I retired about 6 months before I turned 65, and I went on COBRA for the gap. My wife hit 65 10 months after me. COBRA was expensive, but less so with a lot better coverage then Covered California (our ACA). But it only goes for 18 months, so it might not work for you. Healthcare was a big factor in my retirement date.
Now I have Medigap coverage (option F) which pays for all co-pays. It works for me. I haven't paid a cent except for drugs for 2 1/2 years. But there are a lot of options. The plan is more expensive than the others, but not horribly so.

My financial planner did a Monte Carlo simulation of how much we could expect to have until age 93 given a certain spend rate. You get the probability of having at least a certain amount of money, determined by simulating a bunch of market conditions. It was quite reassuring, and far better than the retirement planners I've found on-line.
We looked at our yearly bank statement summary to figure out our spending. That covers credit card and other things like our mortgage too. That was helpful.
We moved a lot of our money into relatively more stable income-producing funds. They don't go up as fast as general stocks but don't go down as fast either. If they produce enough income, you never have to touch them.
I converted my pension into an annuity. I haven't taken anything from it yet. I'm old enough that I can go on my wife's social security, and switch so that she goes on mine when I hit 70. I don't think that works for you though. It worked for us since my Social Security will be more than twice my wife's, so her taking hers before 66 doesn't hurt us in the long run.
So far, so good. We basically have as much money as we did when I retired.
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Old 05-19-2019, 07:12 PM
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At your ages, the premiums on the ACA will skyrocket if your income goes above 68k.
I basically wrestle with the "retire or not" question these days, too. And the big stickler is whether the ACA will even exist in a year. Or two years. The GOP is dead set on taking away any sort of options for affordable real health insurance, then making the previously horrible system worse.

It's a lot easier to keep a job than to get a new one late in life, and the incredible uncertainty about what health care will look like pre-Medicare in the US in a year or two makes me currently unwilling to actually take the leap.
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Old 05-19-2019, 08:13 PM
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Retiring at 60 isn't happening unless we move out of the area. There are plenty of parts of the country where we could buy a house for way, way less than ours will go for. We tend to live fairly frugally. We've never even had cable. As many have mentioned, health insurance is likely to be the big sticking point. There would be no mortgage, just insurance and property taxes. It could be that we'd just get a condo. It's not happening for another 6 years, so we've got a while to figure it out.
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Old 05-20-2019, 05:07 AM
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...Assuming a 4% withdraw rate you can pull about 14k out of your assets
Sorry to sidetrack, but is 4% typically what is factored into the equation?

(I'm assuming this refers to withdrawing 4% of your retirement savings annually once you retire)


mmm
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Old 05-20-2019, 07:38 AM
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The "4% rule" is based on an assumption that over time you can generate at least an average return of 4% a year on investments. So theoretically you'd basically never run out of money.

Of course, it also assumes you want to either live forever or pass money on after you die, which isn't always the case.
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Old 05-20-2019, 09:03 AM
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Health insurance is the big question. I may have to work just for the insurance. Former NBA star Adrian Dantley has worked as a school crossing guard in our neighborhood just for the insurance. I'm thinking if I do work it will be part-time, though. Another option would be to work half-time in the DC school system while drawing the pension. Also, we probably will have another 150K in assets that are in various accounts.
Wait, what? Is that true about AD? Wow.

Last edited by JohnT; 05-20-2019 at 09:04 AM.
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Old 05-20-2019, 09:53 AM
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Wait, what? Is that true about AD? Wow.
Yeah - that was my big takeaway as well. Was always a big AD fan!

I'm in a similar place to the OP, nearing the end of my working career. Trying to figure out how much we are going to want to spend, so as to retire when, is not an easy question to answer.
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Old 05-20-2019, 03:37 PM
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Yeah - that was my big takeaway as well. Was always a big AD fan!

I'm in a similar place to the OP, nearing the end of my working career. Trying to figure out how much we are going to want to spend, so as to retire when, is not an easy question to answer.

Good thing I've got a while to figure it out. I'm certainly not going to just assume it will work without doing my research.

There was an article about Dantley in the Washington Post a few years ago. Apparently he saved a kid from being hit by a car with his reflexes. My kids didn't go to the school where he worked, but it's probably not more than a mile from our house. I've seen him at the grocery store with his uniform on. I'm not sure that I buy the part about him working for the insurance. He lives in a ritzy suburb; maybe he likes the work and getting insurance is a by-product. Hey, maybe I could use it to supplement the pension and solve the insurance problem! I wouldn't mind being a crossing guard.
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Old 05-20-2019, 04:32 PM
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There are certainly many places where you can get a comfortable house that doesn't need a gut rehab for $150k. Keep in mind that those house are mostly in small towns where you'll have nowhere the convenience you have right now, and you will need a car to perform the functions necessary to live, your healthcare options may be limited to an urgent care facility (if you're lucky) or a not-all-that-good doctor 50 miles away, and going into town for dinner and a show requires an overnight stay.

I think I could handle that type of culture change, but my wife put her foot down against it years ago.

Last edited by Kent Clark; 05-20-2019 at 04:33 PM.
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Old 05-20-2019, 05:50 PM
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Sorry to sidetrack, but is 4% typically what is factored into the equation?

(I'm assuming this refers to withdrawing 4% of your retirement savings annually once you retire)

mmm
Actually, the Bergen study that came up with the "4% Rule" was based on :

- take 4% of your retirement fund at 65. Say, $40,000 from a $1M account.
- each year thereafter, increase the $40,000 by inflation for the previous year.

This is often debated, updated and argued. Search for "Bergen study" for examples.


Determining a proper 'drawdown' of retirement funds is not for sissies...
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Old 05-20-2019, 06:01 PM
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There are certainly many places where you can get a comfortable house that doesn't need a gut rehab for $150k. Keep in mind that those house are mostly in small towns where you'll have nowhere the convenience you have right now, and you will need a car to perform the functions necessary to live, your healthcare options may be limited to an urgent care facility (if you're lucky) or a not-all-that-good doctor 50 miles away, and going into town for dinner and a show requires an overnight stay.

I think I could handle that type of culture change, but my wife put her foot down against it years ago.
Affordable housing doesn't have to require you to move way out into the sticks. Large cities in the midwest and south are affordable, and in my experience living in Indiana the cost per sq ft isn't much higher in the large cities than in the smaller cities. It hovers in the $100/sq ft range on average (obviously depends on neighborhood though, but that price will get you a decent neighborhood).

This excludes Chicago, which is much higher priced. But if you're willing to live in a big city in the midwest or south then housing is fairly reasonable. Looking at median home prices in Indianapolis IN, Columbus OH, Cincinnatti OH, etc. all hover around 150k. Median home prices in Dallas or Houston TX are about 200k.

From what I can tell, the big factors in affordable housing are things like population density and whether the city is land locked or borders water. The higher the population density and the more the city borders water generally the higher the real estate prices. Large cities surrounded by farmland are pretty affordable and they have the same amenities as a large city on the coasts.
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Last edited by Wesley Clark; 05-20-2019 at 06:05 PM.
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