Don’t forget long term care insurance for If you should become disabled. Medicare & most health insurance will generally only cover home care or rehab care on a short term basis. Otherwise it’s an out of pocket expense, and can drain even a substantial nest egg pretty rapidly, then you’re dependent on Medicaid… Unless you can count on family to take care of you, it’s something else to consider.
Long post to follow, I will not be offended if those not interested in “how to live on $15k a year” skip it.
We have adequate heat in winter. In our climate that’s a matter of survival, it’s not optional.
We have an air conditioner for 1 room of the house. We have a couple fans for the rest, but when the heat gets bad we sort of live in the bedroom until things cool off.
We have incredibly low rent for our area. That’s because we were good friends with the landlord before we moved in, we trade a little maintenance for the rent not rising, and we’re really lucky. Unfortunately, the place is starting to deteriorate and we may have to move which will have enormous impact on us.
I keep a large garden to help with food expenses, although last year it didn’t do well. Also, foodstamps although currently they only cover half our food budget (I got a raise at work, my benefits were cut. This is life). We eat quasi-vegetarian, we don’t get meat every day, and I make use of low cost meat, buy the cheap fruit and vegetables (as an example, we only get chard when it grows in the garden - it’s far too expensive to be worth buying in this area although the price is coming down)
“New” clothes are purchased at second hand stores, especially Goodwill (there’s one just down the block). The exceptions are underwear, which we buy new but those are cheap.
We maintain our vehicles rather than replacing them. What happens when they finally die for good I have no idea. The “new” one is 13, the older one 16. Still cost-effective to repair but if something happens to total one I don’t know if we can replace it.
We have a subsidized health plan from the state. We pay some of the premium, the state pays the rest. This is based on percentage of income, so when I get a raise at work our premiums also go up. It’s not unmanageable, though, however frustrating it is to get a raise and still get no further ahead.
Paying for eyeglasses is a major problem - but I need them to function. Last time I needed new ones some folks on the Dope helped me out, so I suppose fund-raising (begging) skills play into this. I need an update on that pair, but I think I might be able to swing it without outside help this time. I think it’s stupid that things like vision correction, hearing aids, and dental care are so often completely uncovered because people need those things, even more so as they get older. Unless, of course, you don’t mind being blind, deaf, and toothless. I know I’d be sort of pissed about it.
There are some annoyances - I can’t afford a snow blower so I have to shovel snow. Thank Og I’m still strong and healthy. Then again, if I was collecting SS/pension I wouldn’t have the urgent need to get out of the house, but since I’m working that’s sort of necessary.
A lot of things we have from the past and don’t update - our furniture is old, we don’t replace it. About half my kitchen equipment I got from my mother, who got it at her wedding - making it older than either the spouse or myself! Recreational equipment like my bike and my skis date back to when I was in high school they’re over 30 years old. My hiking boots are pushing 40. Yeah, I’ve been frugal pretty much my whole life, I guess, I hate getting rid of stuff that still has some use left in it. A lot of books and movies come from the library. We do pay for Netflix - which is much cheaper than cable so we see a lot of stuff 6-12 months after the premiere but that doesn’t bother us. We eat out maybe six times a year.
A lot of it has to do with not developing expensive habits. I mean, I love fantastic food as much as the next person but we’re also content eating poor people food (which can be pretty damn good on its own). We don’t drink much (it takes about 4 years for us to finish a fifth of whiskey, and about two months to finish a six pack of beer - and when things are really bad we don’t buy those luxuries at all. Last few years that sort of thing has mostly been as a gift from friends). We were never into expensive vehicles - both the car and the truck we paid around $14k for new. We paid those prices back when we were middle-class and could have paid more, but we didn’t need a fancy car so we didn’t spend on money on that. One of the reasons we do so well on such a low income is that we spent so many years living under our means that having to downsize wasn’t the psychic shock it would have been otherwise.
We do have a few indulgences. We did splurge on the TV - but we buy a TV maybe once every 20 years and it’s a major source of entertainment so we decided that made sense for us (although some serious research on the part of the spouse allowed us to get it at 55% of the usual price). I also have become quite fond of genuine wool socks for the winter, which are not cheap - but I buy the yarn and make them myself, dropping the cost considerably. AND I enjoy knitting. I did get a Kindle - but given I’m a voracious reader that actually made sense, too, especially as the cost of e-books is starting to come down and the library system here lends e-books. But I made the cover for my Kindle instead of buying one. Really, though, by middle-class standards our “luxuries” are small potatoes (which I eat way too many of these days, as potatoes are cheap).
The really whack thing? If I retired today (meaning, if I was old enough to retire) I’d double my monthly income between SS and my pension. Yes, I have a genuine pension waiting for me, assuming I live long enough and my former employer doesn’t find a way to dick me out of it. Given that I plan to work to 70 (healthy people in my family live into their 90’s, so that actually makes a lot of sense for me and I’ve planned for that since my 20’s) I’m hoping to do a little more career-building in the next two decades and rebuild my savings so I’ll have that in retirement, too.
But living with this low of an income isn’t fun. There is no travel that isn’t of dire necessity (when I have family reasons to travel it usually involves other family members subsidizing part or all of the trip), the budgeting is really really tight, and there are times I’d really like something new or pretty or whatever and it’s just not going to happen because we don’t have the money. We spend a LOT of time at home and sometimes we get tired of feeling shut in all the time, especially the spouse.
Speaking from personal experience (not mine, my husband’s parents) and glancing at a budgeting spreadsheet from a year or so ago:
Medicare is included in social security but doctor and drug coverage are extra, and if you have any major medical bills that Medicare doesn’t cover, you can be wiped out.
So, most people get some kind of Medicare supplement policy. The in-laws pay roughly 550 a month for the policy + drug coverage, and it’s over 20% of their joint income. On top of that, they spend 300+ a month (on average) for drugs and perhaps copays. So probably 40% or more of their income goes toward medical expenses one way or another.
The entire rest of their income goes toward food, transportation, utilities, and very small amounts for clothing / entertainment.
There is no money for housing.
Arguably they should qualify for some assistance though their income is just above the level that would get them a subsidized apartment. This is nearly unfathomable - there is no way they could even pay for a subsidized apartment (and still eat etc.). They should have qualified for food assistance (if only a couple hundred a month) but I think they did the application wrong and were turned down.
Bottom line: they don’t survive on Social Security. They did for a while because of an inheritance but that’s gone. If we were not providing housing, I’m not sure what would happen.
All this is why I’m nearly rabid about saving at least something for retirement. In theory our social security should be quite a bit more than the parents are getting because of a longer history of uninterrupted, well-paid employment, but who knows what’ll be available in 12 years. We could certainly not live on that in our metropolitan area; even if the house were paid off we’d need to move to some place much cheaper because we couldn’t swing the taxes and upkeep.
I’ve been retired since 1994 on Social Security and 401K plan, giving a combined adjusted gross income of just under $40K annually. This provides a very confortable living, even including maintaining a beach cabin up in the San Juan Islands.
As mentioned above, supplemental insurance plus Medicare does an excellent job for our health care. Our supplemental insurance costs us less than $200 per month (for myself and my wife) and covers just about everything.
Last year my wife had a pretty severe medical condition, luckily gone away now, and had a hospital bill of $77,000. Our insurance paid all but $4,000 of that, which I thought was pretty good.
And a typical prescription drug will cost around $90 per refill, of which our copay is usually from $3 to $6 dollars. I have no complaints.
I keep hearing this. But I still have to wear clothes and what I wear hasn’t changed. Commuting costs? I used to walk to my office and take a commuter train home, about 4 days a week, say 200 trips. Cost then was about $400. I still go to my office once a week or so and take the train both ways. Yes, we cook a lot from scratch but we always did. And I grew a larger garden than I can now because I don’t have enough energy to do it. And I find doing repairs harder and harder and have to hire people for it. So I don’t see why living is any cheaper than before.
I am thinking of moving to the US (all three kids live there), but I do not have 40 quarters of SS (34 to be exact), since I moved away too early and some of my employment was not covered. I guess I could buy in to medicare, but I think it would cost several hundred a month for each of us. The complications of medical coverage are the main reason I hesitate.
FWIW, I agree with you. There are *some *expenses which go down somewhat for *some *people. But for many people those differences are pretty minor.
And that’s just the immediate effects of ceasing work. As you say, as one gets older one spends more on compensating for slowly growing infirmity.
IISTM that if anything the typical worker will *want *to spend more during their early retirement recreating in their now-free time than they spent in work-related expenses using that same time before. Whether they can afford to satisfy that want is the big question.
It also seems that once one hits about age 70 out of pocket medical expenses start climbing. More copays, more maintenance meds, etc. A $500/month medical hobby in addition to the various premiums will consume most of a generous entertainment / optional purchase budget, if not the grocery budget as well. Ref **Mama Zappa **just above.
Couple that to the IMO low-yielding investment environment for the next 20-30 years and a lot of people are going to be very surprised at their penurious old age.
I love Medicare. I’m not on it, but my Mother is. She got it because my late father qualified and there’s a process where a non Social Security qualified spouse can get medicare through the qualified account of a late spouse.
Medicare Part B is amazing. I get bills from her doctor that are like $3 to $7. Some of her meds are a couple of hundred dollars, she pays $20. Plus she has health insurance through her former employer.
Sadly, though each bill is small, I’ve totaled up her medical expenses for this year and it’s in the thousands.
They probably did fill out the app correctly. The way income is calculated mean virtually no one with social security qualifies for food stamps. Ditto for disability. Mrs. H, another tenant of my landlord, is on the lung transplant list and very much disabled. She qualifies for all of $50 per month for food stamps.
One thing Medicare doesn’t cover is prescription drugs. Even with a Part D drug coverage, the copays can be a killer. I pay over $1000/month just for copays. And that’s not even in the “donut hole.”
When we went through comparisons of different drug plans for one of my older relatives, the monthly costs (premiums + copays) of the various plans ranged from less than $100 to over $500, because of how each prescription fit into the different formularies. Are you sure you’ve got the cheapest plan for your set of prescriptions?
This is not true. The eligibility requirements for SNAP actually make it easier for the elderly and disabled to receive SNAP than non-elderly, non-disabled people (resource limits are higher; households that consist entirely of elderly and disabled people are not subject to the gross income limit; and medical expenses of elderly and disabled people can be deducted from income). I found one statistic from 2007 that about half of SSI (disability) recipients also receive SNAP benefits. From the other angle, 9% of SNAP recipients are elderly (age 60+) and 10% are non-elderly disabled (meaning receiving SSI).
Can’t speak to the OP, though.
Similar to SNAP, it is also easier to qualify for Medicaid if you are already enrolled in Medicare Parts A and B (Dual Eligible). Medicaid will pay both all premiums and essentially all out of pocket costs, depending on your level of eligibility. This is true whether enrolled in original Medicare or Medicare Advantage, through what is known as a Dual Eligible Special Needs Plan (D-SNP). Medicaid eligibility still varies by state, but generally anyone with <100% of the Federal Poverty Limit will have all of their out of pocket costs covered.
Things are different for Medicare Part D coverage, but similar. Members can be auto-assigned into Medicare Advantage Part D plans, and have all premiums and cost sharing covered, depending on their income level.
Asset limits can also come into play, but generally, if you are truly destitute but enrolled in Medicare, all of your medical expenses will be covered.
This cannot be true. The donut hole begins at about $2850 in total drug spending, of which only about $945 was attributable to the beneficiary as cost sharing. That is per year. Edit: this is in 2014.
After all cost sharing, including the donut hole, reinsurance kicked in after about $4700 in out of pocket costs in 2014. Above that, you only pay 5% of the cost of your prescriptions. In order for this to be true, you would need to accrue over $120K in drug costs, just above the reinsurance limit.
I suspect you have things mixed up here.
Check out the Mr. Money Mustache blog for some thoughts on living simply and retiring early. My wife and I live a similar lifestyle although maybe not quite as frugally as we could, but we should be able to retire early and comfortably (55 for me and 50 for my wife). Maybe even earlier if we decide to relocate out of the country for retirement. Decisions.
Not that we’ll have to live on SSN alone…
Also, I pay a lot more in copays for one of my heart medicines than others because it is not a generic. (This is on regular insurance.) I’m not arguing because it is a complicated one, but plans charge more for non-generics. I’m only 63, but I know way too much about drugs already.
As a follow-up, the cost differences for the same medication across the different formularies can be tremendous.
For example, I just ran a quick comparison at the Medicare Plan Finder for a person whose only prescription is for Invokana, a new diabetes medication for which no generic is yet available. The cheapest plan in my zip code has an estimated cost (premiums + deductible + copay + coinsurance) for the rest of the year of around $700 for that medication; the most expensive plan will cost me about $5300 (and there are 25 other plans with prices in between those extremes). The difference is that for the cheapest plan, it’s on the formulary as a “Tier 2 Preferred Brand” so I’d pay only modestly more than for a generic; the most expensive plan doesn’t have it on the formulary at all so I’d pay basically the full cost.
With regular insurance, of course, you usually don’t get to pick which prescription plan (and which formulary) goes with your health plan, but with Medicare, selecting the best prescription plan for your particular set of prescriptions can equal savings of thousands of dollars a year.
I did the crunching a year or so and their net income was just under the limit using the figures I had at the time. It might have gotten them about a hundred dollars in assistance.
What I wonder, though, is how they input their medical numbers (and how the SNAP program is supposed to work when one month it’s 300, the next it’s 900, so it averages to 600).
I don’t have their current numbers but MIL and FIL both had lengthy hospital stays last year - and FIL has been doing some part-time teaching which brings in a few hundred a month. So right now, it’s possible they would NOT qualify.
Yes, the assumption is that your income never varies month-to-month. When it DOES vary it gets… complicated. At one point I was submitting 6 months worth of work data plus the prior year’s tax returns.