In preparing to retire, the best thing you can do is eliminate all of your depts. No mortgage, no car payments, no HELOC, no credit card balances, get rid of all of your debts. If you can’t, if you are still making house and car payments, you are not ready to retire.
Heavens to murgatroyd…having that amount of savings or more would be wonderful but I know and have known many, many folks (duh…like dang near all!) who managed and have managed to retire on much, much, much less and are quite content. Yes, the odds increase for additional health-related expenditures as we age but hell, the odds increase for a whole lotta not-so-pleasant stuff that we know we may have to deal with if we live long enough so quite frankly, it becomes just one more thing that we’ll deal with if and when it happens.
Financially “ordinary folks” are always aware of the possiblity that financially catastropic events can occur at any time no matter what stage of life one is in (the universe is gonna do what it’s gonna do). Most of the retired folks I know and have known never earned anywhere near the income to have the savings that these “experts” insist is needed for a comfortable retirement but yet many of us (maybe most?) feel pretty good about where we are.
Any financial adjustments I needed to make to remain “comfortable” for me were understood years before I retired. I don’t believe that I’m unique in this regard - I believe most folks contemplating retirement are pretty pragmatic about their finances.
I think the ancient tradition of being abandoned on an ice floe would be due for a revival if climate change weren’t melting all the ice floes.
That is one approach. But depending on what the debt is, and at what rate, a dumb approach. I’d lose money paying off my car loan compared to what I earn on that money invested. OTOH, carrying interest-bearing credit card debt would be silly since I can’t out-earn that rate with my investments.
Just today I took on a large lump of credit card debt. At zero APR if paid off in a couple of years. So I’ll make minimum principal-only payments for as long as they’ll let me then zero the remaining lump sum in 24, 36, or 60(!) months and the credit card company will have loaned me mid-5 figures for two to five years at no cost just for the asking. Net of inflation and my returns on the money I didn’t give them (yet), they’re paying me a darn nice rate.
There is dumb debt and smart debt. It pays to know the difference.
I’d agree that’s generally solid advice with one big caveat.
I think the recent figure was that ~40% of folks over 64 in the US are carrying a mortgage. Out here in the SF Bay Area I suspect that figure is rather higher 
. I know if I end up retiring locally I’ll be paying high rent/mortgage until the day I die. Unlike a car a mortgage is hopefully gaining you a little equity over time, so it’s definitely not the worst sort of debt.
It would be nice to retire with no house payment, but I think for a great many Americans it’s not realistically feasible. You just have to factor that cost into your retirement projections.
I retired on far less than a million- my Fed retire + Soc sec covers the mortgage and all the bills. Mind you, it doesnt leave much. My wife still works PT and I do a little consulting.
But they can.
The unfortunate truth is, nursing homes can discharge residents for lack of payment, but they do have to follow some guidelines while doing it. The specifics can vary by state, but in general nursing homes must obey two rules when they discharge a resident:
• Nursing homes must give the resident or the appropriate family member/guardian a written notice 30 days prior to the date of the discharge.
• Nursing homes must provide a discharge plan.
Giving away your money to your heirs, as you said in an earlier post, is therefore also not a good idea. A really good nursing home will investigate your finances before they let you in. If you see you giving away your money expecting to freeload off them, you better find some other accommodations.
The difference between really good nursing homes, okay nursing homes, and lack of money nursing homes is gigantic. That’s the real reason behind the advice to have a million or several tucked away. The average cost for long-term care here in Rochester, a low-cost area, is $114,000 a year. I’d want to go to the best place, so I’m figuring two to three times that. A mere million at 5% won’t cover even average unless social security and pension income helps.
Costs will only get worse in the future. Seriously, start putting money away now.
I’m 57, and have around $2M for retirement.
I am thinking about giving up everything and spending my retirement in doing things I want to do.
As for nursing home care, my understanding is that memory care facilities are particularly expensive. So I’m hoping not to get dementia, Alzheimer’s or related disorders.
Nope…like people have said depending how you want to retire. I always weigh the need for what we want to do. No debt and able to travel when we want…, not first class but comfortable,
Just like many younger people are not even considering that owning a house will ever become a realistic proposition, not possibly after some years or decades but simply never, I assume that many people are not able to retire. I know people in their mid-70s right now who are still working, and it might get worse. As for the O.P.'s million dollars, meh, I wouldn’t rely on that.
In order to maintain our current frugal lifestyle, we’d need my current take-home net pay, which we’re not going to get with a measly million dollars. I could pay off the house and truck, but at 2.25% and 1.9% respectively, that would be idiotic. Plus the little ones will start to go to college in 12 years, and I’d like to make sure they don’t have to enlist in the military to pay for it like I did.
If I wanted to live like my mom in a subsidized apartment and do nothing but go to the cinema a few times per month, then, yeah, a million would be more than enough. But that’s not the plan.
I’d say too, do you own your home outright? If so, that’s $2000 / mo you don’t have to come up with. If we owned a house with no mortgage and cars are paid off, we’d live easily off of just our pensions.
I don’t have any heir. No family left. And I don’t have anywhere near a million dollars.
I will retire with my pension and social security and travel the world unencumbered.
That’s my plan.
Honestly, you’re lucky if you still have a pension plan, as few employers offer that nowadays, and you don’t need to think about how much to pull out of a 401(k)/IRA type account each year, hoping you’re not going to run out of money.
I am not worried. I have a huge pension and good amount of social security. House is paid off. No family to take care of.
Back when I had it I owned my own condo outright. But condo maintenance fees, property insurance, and property taxes alone were nearly $2K/ mo AFTER the mortgage was zero.
And this was not some fatcat penthouse with hot and cold running starlets/strumpets. Just professional-class standard Florida near-beach property.
Even in a single family HOA-less home you do not live for free once the mortgage is zero. Maintenance costs, insurance, and taxes will continue unabated until the Sun fries the Earth a billion years from now.
I would LOVE to get that kind of deal. I suspect I don’t have the kind of income stream to qualify.
I have friends who used to own a nice house in Florida, near the beach. They sold it and bought a castle in Italy with the proceeds.
I’ve known plenty of people that preached that approach, but I hate debt. HATE HATE HATE debt. Even low rate debt. And my hate of debt has absolutely paid off. I now own two houses worth over $1M and have zero debt. Could I have been in a better place leveraging them for putting money into the stock market…maybe?
For me, living debt free is a way better place to be. Every month I put a lot of money into savings/investments rather than paying off mortgages. I’m 54 and could’ve retired a few years ago. If I decide to retire tomorrow, I have no mortgage payments. Or any other debt payments.