One million dollars needed for retirement?!

[Mama_Zappa]

@Voyager

Not a good comparison, since person 1 is unlikely to have $1 million without an IRA build up with employer contributions, while person 2 with no pension will have, all things being equal, more savings. Income from these savings can replace a lot of the pension money, very possibly more than replace it.

It’s an oversimplified example, true. The point being (as you also state): if you do NOT have a pension, then you need to have savings that will cover what a pension would have covered. If the non-pension person has been saving diligently (using employer match if available), this is indeed quite doable.

Unfortunately, a lot of people these days simply are not putting money aside (like my daughter - AAARGHHHH). She’s setting herself up for a retirement with minimal Social Security (due to her issues, she does not work full time, and while she is in an area where housing is cheap, and hourly wages for retail are relatively goood, it’s still not livable) and virtually no other savings. I MADE her deposit money to an IRA when she was still living with us, and I took her to her credit union to make sure she deposited money in an IRA, one time when we were visiting. But otherwise, nothing.

@Tamerlane

Mine does (or will). It has a capped COLA with a COLA bank. To be sure it won’t fully protect against rampant multi-year inflation as the cap isn’t very high (currently 3%, I think), but it’s better than a poke in the eye with a sharp stick.

That’s pretty unusual - is it a public sector pension? Those often have inflation adjustments (CSRS / FERS do, I know); private-sector ones rarely do.

Switching gears: I stumbled across this article on “solo agers” just this morning.

Solo Agers | Partnerships In Aging (unc.edu)

For those who are in that situation, there might be some useful info there; I have not really read the page yet. Looks like a lot of the info is NC-specific (in fact, UNC is my alma mater, so I recognize some stuff I see) but the concepts should be useful wherever you live.

[Tamerlane]

@Mama_Zappa

That’s pretty unusual - is it a public sector pension? Those often have inflation adjustments

Oh, yes - I’m a snivel servant . Government is usually the best bet for “boring” but solid retirement plans. Mine isn’t perfect (the medical and dental have some real and somewhat costly structural flaws), but it is certainly better than many.

ETA: Our pension system does allow for a cash payout at retirement, but not at a multiplier. So it’s a perfectly idiotic option under most circumstances. Pretty much nobody does it because you’ll make more in a few years taking the pension than the cash is worth.

[MrAtoz]

@Mama_Zappa

That’s pretty unusual - is it a public sector pension? Those often have inflation adjustments (CSRS / FERS do, I know); private-sector ones rarely do.

My pension (state of Indiana) also has, at least in theory, an occasional cost of living adjustment. This has to be passed by the state legislature, however, and the last couple of years, I’ve noticed that they haven’t done so. Even though I haven’t retired yet, I have begun following the news in that regard. So even in the public sector, while a COLA is possible, it’s not necessarily guaranteed.

I receive an annual statement from INPRS (the Indiana Public Retirement System) projecting how much my pension is likely to be, and also telling me how much I would need to have saved if I were to buy an annuity that would match what I will be getting from the pension. Assuming that the legislature doesn’t completely eliminate pensions altogether (always a possibility, I suppose), it will be a substantial help in my declining years.

[Mama_Zappa]

@MrAtoz

Assuming that the legislature doesn’t completely eliminate pensions altogether (always a possibility, I suppose), it will be a substantial help in my declining years.

It’s unlikely they could eliminate pensions already earned, even if you’re still working, though of course the amount you’d get might be fixed based on your salary history to date + years of service to date. So if your most recent x years has an average of 50K a a year, and the formula is .02 x years of service x avg salary, and you’ve been there 10 years, that would give you a pension of 10,000 a year. Stay there 20 years and with the same average salary, you’d get 20,000 a year.

But if they freeze that, and you stay another 10 years, you still only get the 10,000 a year. Plus, of course, any COLA that has been voted (dunno if they would apply that to the figure between now and when you retire, or just start you at 10K a year whenever you go, and apply COLA after that). My own defined benefit pension was frozen when the company eliminated that; I will still get a whopping 240 dollars a month. Brand-name kibble for me!!!

On COLAs and Social Security: A couple years back, I created a spreadsheet that included my salary history, the AWI (average wage index, which is used to multiply earlier years’ income to make it comparable to today’s income), and the calculation formulas. I got to within a dollar or two of what the SSA website said my full retirement age benefit would be.

Since then, SSA says I’m due somewhat more. Turns out, it appears that my benefit calculation base figure is adjusted for ongoing earnings (which I expected), and that base figure seems to then be adjusted by COLAs applied since I turned 62.

I’m also seeing that, assuming my salary remains stable, working additional years makes very little difference in my ultimate benefit at full retirement age; if I earn the same this year as last year, I get a whopping 7 bucks more each month. It does, however, mean I’m not taking a discounted SSA amount for claiming early, and that I’m not depleting other savings sooner, so it’s still worthwhile, financially, to keep at it.

[LSLGuy]

@Mama_Zappa

My own defined benefit pension was frozen when the company eliminated that; I will still get a whopping 240 dollars a month. Brand-name kibble for me!!!

$404.70 for me. Woot! Brand name kibble and one Budwieser per day. Sure is comfy under this bridge.

@Euphonious_Polemic

Yep, location. Around my neck of the woods, a 2 bedroom apartment averages around $2000 (USD) per month

Yeah. I just rented an apartment w 1 bedroom, 1 bath, and a small auxiliary den. $5K/mo.

A million bucks doesn’t go very far around here.

[Mama_Zappa]

@LSLGuy

Yeah. I just rented an apartment w 1 bedroom, 1 bath, and a small auxiliary den. $5K/mo.

A million bucks doesn’t go very far around here.

I looked in my zip code, and the cheapest would be about 1500 for a senior apt (not sure how many bedrooms), or 2,000+ for a 1 bedroom in a regular place. Our mortgage is actually cheaper than the rent for a 2+br place (to be fair, we’ve been here 21 years, and refinanced when rates were rock bottom).

My daughter is paying 650 a month in a small(ish) town in Vermont. I looked at an apartments website there last night, out of curiosity, and the rates have definitely gone up in the past 3 years. Her place may be a dump, but anything else would be 300 or more higher per month.

I looked at my employer’s “new, improved” pension plan (that they started this year, replacing the 401(k)-matching scheme, and for a LESSER AMOUNT). They credit it at the end of the month, so no growth whatsoever the first month. Each month since then, it’s grown about 2.80 a month. Well, 2.80 the second month, 5.60 the third, and so on, because of course each month, the interest paid is on a larger principal amount.

The one thing to like about this approach, versus the x% of salary x years of service defined benefit approach, is that it’s a LOT more transparent, and portable. It may not be as good as the old “work for the company for 40 years then get your gold watch” approach, but it’s better than nothing.

If I stay there another year or so, I may be able to afford an extra Alpo on Sundays!

[LSLGuy]

I chose to sell then rent in the same area. My monthly outlay is 20% more, my SF is roughly 40% as big = 60% smaller. Admittedly in a nicer complex.

But my decision was driven by a desire to retire the portfolio risk of owning a waterfront condo in slowly sinking FL. Plus ordinary maintenance risks like new appliances, plumbing issues, etc.

My investment returns on the equity no longer tied up in the condo pay for much of the increased outlay.

At my stage of life it’s more about worst case risk management than about scrimping pennies or maximizing the possible upside returns.

[puzzlegal]

@LSLGuy

At my stage of life it’s more about worst case risk management than about scrimping pennies or maximizing the possible upside returns.

Hi, discourse

[Balthisar]

@LSLGuy

At my stage of life it’s more about worst case risk management than about scrimping pennies or maximizing the possible upside returns.

What do you do about rental appliances, though? I’ve stayed in rentals for work many times, and even so-called “luxury” apartments always have the shittiest refrigerators, dishwashers, faucets, washing machines, etc., not to mention Formica countertops, and other low-end, builder-quality garbage. That doesn’t bother you at all?

[LSLGuy]

I have none of those things. Top-drawer stuff all the way. IME with this management company at other properties, if I say my refrigerator needs replacing the answer is “Yes, Sir” and it’s done in a couple days.

I agree there’s a lot of builder-grade garbage out there across America.

[Broomstick]

@Balthisar

What do you do about rental appliances, though? I’ve stayed in rentals for work many times, and even so-called “luxury” apartments always have the shittiest refrigerators, dishwashers, faucets, washing machines, etc., not to mention Formica countertops, and other low-end, builder-quality garbage. That doesn’t bother you at all?

In my experience as a life-long renter “luxury” frequently just means “we charge you more” or “there’s a pool and a clubhouse you can rent for parties”.

My current rental doesn’t have the newest appliances but everything works, anything that broke over the past 7 years I’ve lived here has been replaced promptly. Alright, the kitchen counters are Formica, but they’re intact and easy to keep clean so I can live with that.

Also - most landlords will allow you to install appliances that you choose and purchase if you ask nicely - why not? They can take the ones you’re not using and use them to replace any that break down elsewhere and they don’t have to pay for yours. Not universal, but if you’re planning to rent long term and that sort of thing is important to you by all means look into it.

[Dewey_Finn]

From long-time reading of the New York Times, some renters in NYC don’t just buy appliances for their rental apartments but even pay for kitchen remodels.

[doreen]

I’m not going to say it never happens , but ordinary tenants paying for kitchen remodels isn’t common. I say ordinary because people who own shares in a co-op are technically tenants and I’m sure they do it all the time . As far as kitchen appliances go , mostly people who buy their own do so because the apartment doesn’t come with that appliance ( I’ve seen apartments that don’t come with a stove or refrigerator). Otherwise , you have to keep the landlord’s somewhere or buy a new cheap one when you leave unless you want to leave your nice appliance behind. Because if you rented the apartment with a stove, there has to be one when you leave.

( Yes, lots of people in NYC are life-long renters. But even they don’t normally stay in their first apartment until they die. )

[Broomstick]

@doreen

I’m not going to say it never happens , but ordinary tenants paying for kitchen remodels isn’t common

Yes, I said it was an option.

@doreen

Otherwise , you have to keep the landlord’s somewhere or buy a new cheap one when you leave unless you want to leave your nice appliance behind. Because if you rented the apartment with a stove, there has to be one when you leave.

People forget that a lease is a legal document and open to negotiation before you sign it. If you want your own appliances that’s something to discuss with the landlord in regards to storage of prior appliances, agreement on what to do when you leave (either you take it with you with no penalty or the landlord compensates you for it, for example). Granted, not everyone is willing to negotiate, but you won’t know until you ask.

[doreen]

@Broomstick

People forget that a lease is a legal document and open to negotiation before you sign it.

I should have quoted @Dewey_Finn , I didn’t realize it wouldn’t be clear that I was replying to his post about NYC. Landlords here really don’t negotiate - assuming you can even get a written lease (some landlords prefer to rent month-to-month without a written lease). Why would they when they can rent a bedroom for $700-$1200/month and have 20 applicants ?* . And if you’re renting in a 2-8 apartment building , they wouldn’t have anywhere to store the appliances if they wanted to.

* Probably not legal, but they do it anyway.

[Broomstick]

Well, OK, if you’re talking specifically about NYC…

I don’t live in NYC, in the threes states in which I’m familiar with renting - Michigan, Illinois, and Indiana - written leases are the norm, and yes, the size of the rental operation is a factor.

[Mama_Zappa]

@LSLGuy

But my decision was driven by a desire to retire the portfolio risk of owning a waterfront condo in slowly sinking FL. Plus ordinary maintenance risks like new appliances, plumbing issues, etc.

Hah - smart move!!

We owned a condo in Florida until last year (for the in-laws to live in ). It was NOT waterfront… though who knows, maybe in 10 years it would be. Housing down there (at least in Palm Beach County) is generally much cheaper than a DC suburb, and you no longer have to worry about maintenance, nor if you want to / need to move in the future, no hassle of selling the place.

I was really stunned when I finally looked at rents near us, compared with our mortgage payment. Our mortgage payment might get us a nice 2BR apartment. Moving any place cheaper would involve a complete relocation - minimum of 30 miles further out (which would be doable, as we won’t have a commute to worry about) or completely out of the metro area, which has its own issues.

[Mama_Zappa]

@Broomstick

Also - most landlords will allow you to install appliances that you choose and purchase if you ask nicely - why not? They can take the ones you’re not using and use them to replace any that break down elsewhere and they don’t have to pay for yours. Not universal, but if you’re planning to rent long term and that sort of thing is important to you by all means look into it.

We’ve never rented any place long enough for this to be an issue, but the only objection would be if the landlord then becomes responsible for maintaining whatever spiffy appliance you’ve installed. And presumably when you move out, you agree to leave the appliance there. In any case, it couldn’t hurt to ask, if an upgrade is important to someone.

As far as luxury: Yeah, I suspect that in most cases, it’s access to a pool or whatever. Maybe a fitness center. Or where we live, a shuttle to/from the Metro station (there are places here that have such a thing).

Would I enjoy granite countertops and a fancy stove? Sure. Do I NEED them? Nope.

As long as the stuff isn’t ratty or run down, I really don’t care.

[Broomstick]

@Mama_Zappa

We’ve never rented any place long enough for this to be an issue, but the only objection would be if the landlord then becomes responsible for maintaining whatever spiffy appliance you’ve installed. And presumably when you move out, you agree to leave the appliance there. In any case, it couldn’t hurt to ask, if an upgrade is important to someone.

Who maintains such appliances and whether or not you leave it when you move out are two points to negotiate. I haven’t done this, but of the people I do know who have the usual agreement is that if the appliances are your property then you maintain them, not the landlord, and you can take them with you when you leave, but both parties want that in writing. Especially if the renter is in the unit for many years ownership might get blurry over over time until it is explicitly written out, especially if ownership of the unit changes.

I’ve also worked for landlords and seen this sort of thing from the other side. Again, usually if the appliances belong to the renter the renter is responsible for them and can also take them when they leave. When a renter doesn’t want to take them when leaving it is possible to negotiate some compensation but of course, the appliance being used, it doesn’t have the same value as when initially purchased.

“Renter owns the appliances” seems to be more common when renting a house than for people living in apartment buildings.

[pullin]

@Broomstick

I haven’t done this, but of the people I do know who have the usual agreement is that if the appliances are your property then you maintain them, not the landlord, and you can take them with you when you leave, but both parties want that in writing.

I can’t bold that enough. What seem like “handshake” agreements with landlords often turn into targeted amnesia. I once entered a verbal agreement with LL to mount shelves in the garage, with a portion of the cost to be added back when our deposit was returned. After moving out, the POS turned on us and we got a stern letter about “damage” to the garage walls from mounting the shelves, and as a result our deposit was forfeit. We had to hire a lawyer and spend a lot of time, but eventually won our lawsuit. One of those learning experiences, I guess.