# Saving for retirement question **URL:** \ **Category:** In My Humble Opinion\ **Created:** [July 31, 2019, 1:29am UTC](https://boards.straightdope.com/t/saving-for-retirement-question/837907 "2019-07-31T01:29:50Z")\ **Posts on this page:** 5\ **Page:** 3
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [August 8, 2019, 3:28am UTC](https://boards.straightdope.com/t/saving-for-retirement-question/837907/41 "2019-08-08T03:28:47Z")
> [@Mama\_Zappa](#): > > Medigap policies vary widely depending on where you live and they still don’t cover everything you might need. > > For giggles, I once went to a price estimator site and plugged in two locations: our current area, and the location where my in-laws live (Palm Beach County, FL - a.k.a. God’s Waiting Room). The prices were something like _double_ down in Florida compared to here. > > Planning for retiree medical expenses is much on our minds - the in-laws had enough money from an inheritance to pay cash for a condo in Florida, and were loving it, until some bad decisions plus a devastating illness (MIL developed multiple myeloma) completely wiped out all their assets. > > Most people my age or younger have no medical “safety net” in retirement, with fewer and fewer companies offering any kind of retiree health benefits. If you have sufficient cash flow to cover a very good Medigap policy, you may still get wiped out with the incidental expenses (as my in-laws did). > > Honestly, we could downsize and probably do fine on 80% of our pre-retirement income. We couldn’t do it _now_, because we have a lot of other expenses (including paying for the in-laws to live; obviously we’re not eager for that expense to go away given the ramifications). Our house won’t be paid-off, but we could sell and move to a cheaper place locally, or to a cheaper part of the country. That all supposes we continue to work until age 65 and save more in the interim. > > I actually looked at my Social Security benefits estimate the other day. took a WAG at what my husband’s would be (slightly less), and added up all our retirement accounts to figure what we’d get if we took 4% of it - and that added up to only about 60% of our current income. So we’re not quite there yet. > > I have an annual chat with a planner at Fidelity. Every year, I say “So, just tell me when I have to die”. How did they lose everything in between medicare and medigap? Thats terrifying. I’ve heard medicare has an actuarial value of around 80%. Throw in medicare D and medigap and you’d assume the actuarial value is over 90%. Its scary if a health plan with an actuarial value of over 90% still cost people their life savings. I know long term care isn’t covered by medicare, and I’ve heard stories of million dollar inheritances being wiped out by that. Personally I may just move to mexico. All inclusive health insurance for \<$200 a month, and long term care for $1500 a month. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [August 8, 2019, 4:44am UTC](https://boards.straightdope.com/t/saving-for-retirement-question/837907/42 "2019-08-08T04:44:38Z")
> [@Wesley\_Clark](#): > > How did they lose everything in between medicare and medigap? … I’m not sure of the details, but MIL has said that they zipped right into and out of the “doughnut hole” within a few weeks for several years in a row. Even with 90% coverage that will add up. Add in some other bad decisions that wiped out most of the rest of their money, and there they are, living FAR more frugally than they had hoped to have to do. I can’t say what percentage of their pre-retirement income they are taking home, but when adjusted for inflation etc. probably less than 80%. The adult kids are having to help with housing and transportation expenses or they literally could not make it. And yeah, long-term care is a bit frightening. They can’t afford it. We can’t afford it for them. If they need it, it’s a Medicaid-funded facility and those can be pretty grim. We’ve made a LOT of financial decisions based on what we see them going through. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 8, 2019, 6:37am UTC](https://boards.straightdope.com/t/saving-for-retirement-question/837907/43 "2019-08-08T06:37:27Z")
Sure there are worst case situations. And I’m all for a decent UHC that would prevent people from going broke for medical care. But I’d hate for people to keep working at a job they hate because Medicare is too expensive or the threat of Alzheimer’s is at the door. Some more encouraging anecdotes. My father died at 95, still at home. He had a nurse half time, but he died very quickly. My father-in-law lived to almost 101 and was in assisted living for only about six months before he died. Also quickly. I’m going through some probably expensive stuff right now, but haven’t paid a cent in co-pays. For drugs, yes, but they are all covered and very cheap. Nothing is certain, but I think it is better to take the risk rather than work until 70 and die two weeks after quitting. Unless you really, really want to work until 70, that is. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [August 8, 2019, 7:27pm UTC](https://boards.straightdope.com/t/saving-for-retirement-question/837907/44 "2019-08-08T19:27:24Z")
> [@F.U.Shakespeare](#): > > Another reason wealth managers overstate how much most people will need is they’re trying to convince potential clients that the returns achievable with a self-managed buy-and-hold strategy (around 6% annually long-term) will fall short. So people need to let the wealth manager take over and grow the money at 10-20%. The glitzy TV ads showing retirees living better than the target audiences are living are designed to sweeten the deal. > > Only problem is, no one can deliver such returns long-term. But by the time a client realizes this, it’s too late. > > If wealth managers could do what they claim, it might be worth considering. But reams of data indicate they can’t. I agree professional money management makes no sense except possibly in case of very high net worth people and even in that case it’s to seek out and facilitate alternative types of investment (not just public stock and bond market) that require large scale and somebody to manage the details. As far as getting you a better return in the regular public stock market, professional management doesn’t work, I agree. The expected return after expenses of professional management of a stock portfolio is less than whatever you think the self managed portfolio would return, assuming self managed uses lowest possible cost index funds and _no_ attempt to time the market, just buy and hold. Loads of studies have shown that. Unless you pick a well above average manager, but the most reasonable assumption is that on average, you’d choose an average manager. 🙂 And I don’t know if nowadays anybody but a borderline crook would really tell clients they can earn anywhere near 20% in public securities markets with assets priced as richly as they are now. The honest appeal for example for hedge funds is that they can give returns which are not correlated to the stock market’s return, not that they’d be a lot higher, or even as high, as the stock market’s return on average. Anyway if people really believed they could get consistent 15% returns, they might save _less_ to reach a given goal. The relationship between what you tell naive investors is the expected return and how much they’ll save is ambiguous. I frequent some investment forums that have a mix of naive and knowledgeable people, for example ‘Bogleheads’. IME the old time ‘core members’ there are sometimes pretty touchy about ‘newcomers’ saying that the returns they use as examples, while in line with past returns, are probably too high for expected returns from here, given how highly valued both stocks and bonds now are by historical standards. They aren’t trying to rip anyone off, or gain monetarily in any way. They just believe, I’ve come to conclude, that if you tell people a 60/40 stock/bond portfolio now has an expected return of maybe 2.5% after inflation (4% real for stocks, 0.5% real for bonds), so maybe 4-4.5% pre inflation\* not even 6%, they’ll just lose interest in the whole topic and go back to watching TV or whatever else they do. Or, they’ll figure a professional _must_ be able to do better for them than _that_. The old timers there, and it’s also true I think of people writing personal finance columns for a living, IMO figure that you have to gussy up expected returns _somewhat_ to get ordinary people interested in investing at all. But if OTOH you can convince people they can get very high returns, they might be interested but figure ‘OK then I don’t have to save as much’. \*overseas it’s even worse, in a 60/40 bond portfolio in Germany the 40% if in domestic bonds is _subtracting_ from whatever you get from stocks, not just diluting it. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [August 8, 2019, 9:01pm UTC](https://boards.straightdope.com/t/saving-for-retirement-question/837907/45 "2019-08-08T21:01:56Z")
> [@Mama\_Zappa](#): > > I’m not sure of the details, but MIL has said that they zipped right into and out of the “doughnut hole” within a few weeks for several years in a row. Even with 90% coverage that will add up. > > Add in some other bad decisions that wiped out most of the rest of their money, and there they are, living FAR more frugally than they had hoped to have to do. I can’t say what percentage of their pre-retirement income they are taking home, but when adjusted for inflation etc. probably less than 80%. The adult kids are having to help with housing and transportation expenses or they literally could not make it. > > And yeah, long-term care is a bit frightening. They can’t afford it. We can’t afford it for them. If they need it, it’s a Medicaid-funded facility and those can be pretty grim. > > We’ve made a LOT of financial decisions based on what we see them going through. Thats fair I guess, your out of pocket maxes out at about $5100 a year for medicare part D, but after that catastrophic coverage kicks in. But you still have 5% copays for that. So if the drugs are really expensive (like 200k a year) that could add up to about 15k a year in drug costs. [Previous page](https://boards.straightdope.com/t/saving-for-retirement-question/837907.md?page=2)