Retirement

[greybeard]

Had a friend who retired at 61 and thought he would be ok until he turned 62 so that he could sign up for ss. Had a stroke sitting in his recliner before he turned 62 ( Medicare seems like kicks in at 62 ) was in the hospital and rehab until he turned 62.

You have to be within 3 months of age 65 to apply for Medicare part A & B. There are exceptions for the disabled but they are few. Most people near age 65 sign up for medicare at the same time they apply for SS benefits and their Pt B premium is deducted from their SS monthly benefit. (Pt A is 'free')

Who’s eligible for Medicare?

www.hhs.gov

 

[504RP]

Take the interest rate you are receiving and divide that into 72 and that is how long it takes to double your money (in years).

Example: You earn 10% on your savings. 72 divided by 10 equals 7.2 years to double. So at the local bank you may be getting one percent. 72 divided by 1 equals 72 years for you money to double.

Here's a link that may help. https://www.kiplinger.com/article/s...-72-shows-investors-power-of-compounding.html

D2Cat I am glad you posted this link. Have a grand daughter turning 3 August 1st.

Have been meaning to start her some type of savings account ever since she was born.

I am going to start that savings account and when she gets old enough to understand rule 72 explain it to her.

I wonder if there is something other than a savings account that would pay a better interest rate to help a little one like that accumulate some savings ?

 

[Son of Butch]

I wonder if there is something other than a savings account that would pay a better interest rate to help a little one like that accumulate some savings ?

She's got 15+ years before tapping savings.
S&P 500 index fund, but $3000 minimum to open an account.
A lower minimum option:
Vanguard 2050 targeted all in one fund $1,000 minimum.
mix of 90% indexed stocks and 10% indexed bonds that automatically rebalances each year {targeted for retirement in 2050)
Throw a $1,000 in it and in 10 years you can explain the performance to her.
Then she can have a goal of adding her baby sitting money or whatever to it until it reaches $3,000 and use the money to buy a 500 indexed fund.
or
best option might be Vanguard 529 College Savings Plan
not sure of details, but check into it as it might have certain limitations depending on your state's 529 rules. It's targeted to your home state 529 plan for favorable state tax benefits, creditor protection, financial aid and other benefits offered in your state.

I'm a fan of Vanguard because they are known for having the lowest fees in the industry.

 

[Bigfoot]

My parents are age 80 and 78. They both retired at 62. Never made a plan outside of social security. I had my suspicions, and asked a few times, how they were making it. Found out 3 1/2 years ago, they were living off the equity in their home and farm. They were completely upside down on their mortgage, shut off from borrowing, and facing foreclosure. My brother wouldn't help ( I don't blame him we both tried to talk to them over the years and they wouldn't listen). I had to buy their place ( gave them a lifetime estate), and we still have to help with living expenses as well as upkeep and maintenance.
It has put us in a pretty tight spot. I had to come out of retirement, and now work two jobs and farm. It was that or they'd file bankruptcy and move to a trailer park. I honestly have days I wish I'd have allowed that ( hate myself on those days). It is very draining making two households float. I honestly thought I understood hardwork and forgiveness. I assume I had a little more to learn.
The take home from this, for you……please don't plan on social security to see to your financial needs in old age, it won't do it.

 

[TennesseeTuxedo]

Tough break Bigfoot. They sound like they would have been perfect candidates for a reverse mortgage. That would have allowed them to stay in the home until they passed or had to move to assisted living with a monthly check to supplement their social security.

 

[D2Cat]

D2Cat I am glad you posted this link. Have a grand daughter turning 3 August 1st.

Have been meaning to start her some type of savings account ever since she was born.

I am going to start that savings account and when she gets old enough to understand rule 72 explain it to her.

I wonder if there is something other than a savings account that would pay a better interest rate to help a little one like that accumulate some savings ?

I'd suggest something like an American Century growth fund. The beautiful thing about starting something for her, it doesn't matter if/when the market dips.....she has time to wait!

My wife has a few IRS's and I was checking some details on one because she received a letter wanting her to reply because they had not heard from her and was wondering if they were going to turn the thing over to where ever the put the funds when the person is no longer alive.

When I was visiting with the rep. she asked me if I knew how much she put in the fund, or when. I told her no, but I could look it up. She said, no I have the information right here. What I learned was she put $2K in 1980, then 2800 in '81. Nothing more. Last month the total was 76K. Just so you can see what can happen for your grand daughter.

You are doing something for that young lady she will not understand until a much latter date.

 

[SmokinM]

Sounds to me like that's what they did and outlived their equity. Relying on the government as the sole source of your welfare (or anything really) at any point in your life is a foolish mistake. Sorry you had to take up the slack there Bigfoot.

 

[D2Cat]

My parents are age 80 and 78. They both retired at 62. Never made a plan outside of social security. I had my suspicions, and asked a few times, how they were making it. Found out 3 1/2 years ago, they were living off the equity in their home and farm. They were completely upside down on their mortgage, shut off from borrowing, and facing foreclosure. My brother wouldn't help ( I don't blame him we both tried to talk to them over the years and they wouldn't listen). I had to buy their place ( gave them a lifetime estate), and we still have to help with living expenses as well as upkeep and maintenance.
It has put us in a pretty tight spot. I had to come out of retirement, and now work two jobs and farm. It was that or they'd file bankruptcy and move to a trailer park. I honestly have days I wish I'd have allowed that ( hate myself on those days). It is very draining making two households float. I honestly thought I understood hardwork and forgiveness. I assume I had a little more to learn.
The take home from this, for you……please don't plan on social security to see to your financial needs in old age, it won't do it.

I have empathy. My brother and his wife were in a similar situation when he became suddenly ill, unable to work and not going to improve and was caused by stress and worry.

We offered to purchase a home for them to live in one mile from us. They could sell their home in Co. and use any equity to help pay expenses and we'd help them. After asking several times my SIL said they are not leaving Co. My brother had lived in this area for seven years earlier and still knew people here.

When I got the emphatic "We're not moving" I sent an email detailing our offer and told them we were not going to do/help them with anything becausse they did not want it. Their choice. Life goes on, we just never discuss anything about funding anything.

 

[greybeard]

One can live on the avg SS monthly benefit only if one is:
1. 100% Debt free (no car, tractor or house payment)
2. Habit free (no smoking or drinking.
3. Minimal utility usage.
4. No eating out.
5. Nothing vital breaks down. (vehicles and/or household necessities such as heating/ac, washer/dryer.
6. Frugal at the grocery store.
7. Don't have a house full of kids to support.
8. Affordable health insurance.
9. Don't go anywhere that uses more than minimal gas/diesel use.

In other words, you're still alive and breathing and eating relatively well but that's about it.

I tried it for a couple months last year just to see if it was doable on $1,536 SS check. Not something I would want to do for any length of time at all. Wife was not a happy camper those 2 months.

 

[simme]

Several examples were stated showing the big effect of time on savings and investing. Starting that saving plan early is key. Also think about taxes. IRA's and 401K's generally allow you to choose between a regular (original) version or a Roth version. The regular version allows you to invest a portion of your earnings (income) each year without paying taxes on that money that year. Taxes are deferred until you make withdrawals. The Roth version is based on investing/saving a portion of your earnings, but you do have to pay income taxes on that money before you invest it. But, your withdrawals will never be taxed. Many people take advantage of the immediate tax break and use a regular version - paying less taxes each year.

The thing to consider is that all that growth and increase in value over a long time will get taxed with a regular account when you withdraw it many years later. If you invest in a Roth account, only your contributions get taxed. All that growth over time is tax free to you. If you retire with $500,000 of regular IRA/401k savings, you will have to pay taxes as you withdraw it for your living expenses. That $500,000 is not all yours - the tax man wants his share. That same $500,000 in a Roth IRA or 401k is all yours - no taxes to be paid. That person with the Roth account ends up with a lot more spending money that that person with the regular account, even with the same account balance. If you end up with a few million in a regular account, the tax bill gets very big every year when the minimum distribution kicks in. You are forced to withdraw (and pay taxes on) the minimum distribution amount for a regular account - even if you don't need that much money to live on. Investing after tax money in a Roth account seems like the best plan - certainly if you max out your contributions each year. If you already have a regular IRA or 401k, you can probably transfer/convert it to a Roth version a little at a time each year - but you have to pay taxes on the amount converted each year. But, if you are 10+ years to taking withdrawals, this will probably save you money (on taxes) overall. General issue is that when you are young, you might not put much effort into all this. By the time you understand all the options and the importance of it, there is less time to take advantage of it.

 

[shaz]

Several examples were stated showing the big effect of time on savings and investing. Starting that saving plan early is key. Also think about taxes. IRA's and 401K's generally allow you to choose between a regular (original) version or a Roth version. The regular version allows you to invest a portion of your earnings (income) each year without paying taxes on that money that year. Taxes are deferred until you make withdrawals. The Roth version is based on investing/saving a portion of your earnings, but you do have to pay income taxes on that money before you invest it. But, your withdrawals will never be taxed. Many people take advantage of the immediate tax break and use a regular version - paying less taxes each year.

The thing to consider is that all that growth and increase in value over a long time will get taxed with a regular account when you withdraw it many years later. If you invest in a Roth account, only your contributions get taxed. All that growth over time is tax free to you. If you retire with $500,000 of regular IRA/401k savings, you will have to pay taxes as you withdraw it for your living expenses. That $500,000 is not all yours - the tax man wants his share. That same $500,000 in a Roth IRA or 401k is all yours - no taxes to be paid. That person with the Roth account ends up with a lot more spending money that that person with the regular account, even with the same account balance. If you end up with a few million in a regular account, the tax bill gets very big every year when the minimum distribution kicks in. You are forced to withdraw (and pay taxes on) the minimum distribution amount for a regular account - even if you don't need that much money to live on. Investing after tax money in a Roth account seems like the best plan - certainly if you max out your contributions each year. If you already have a regular IRA or 401k, you can probably transfer/convert it to a Roth version a little at a time each year - but you have to pay taxes on the amount converted each year. But, if you are 10+ years to taking withdrawals, this will probably save you money (on taxes) overall. General issue is that when you are young, you might not put much effort into all this. By the time you understand all the options and the importance of it, there is less time to take advantage of it.

Sounds great but you can only put like 6K per year in a Roth last I checked.

 

[chaded]

Sounds great but you can only put like 6K per year in a Roth last I checked.

There is also income limits although i have heard of a loophole around it but ive never checked into it really. We just max out our regular one every year and move on.

 

[simme]

F

Sounds great but you can only put like 6K per year in a Roth last I checked.

Plus $1000 if you are at least 50 years old for a Roth IRA. But many companies now also offer Roth 401k's where the contribution limits are much higher - about $25,000 if you are over 50.
Regardless of the yearly contribution amount, not owing taxes on the withdrawals during retirement is big.

 

[greybeard]

Regardless of the yearly contribution amount, not owing taxes on the withdrawals during retirement is big.

HUGE!

 

[Brute 23]

Several examples were stated showing the big effect of time on savings and investing. Starting that saving plan early is key. Also think about taxes. IRA's and 401K's generally allow you to choose between a regular (original) version or a Roth version. The regular version allows you to invest a portion of your earnings (income) each year without paying taxes on that money that year. Taxes are deferred until you make withdrawals. The Roth version is based on investing/saving a portion of your earnings, but you do have to pay income taxes on that money before you invest it. But, your withdrawals will never be taxed. Many people take advantage of the immediate tax break and use a regular version - paying less taxes each year.

The thing to consider is that all that growth and increase in value over a long time will get taxed with a regular account when you withdraw it many years later. If you invest in a Roth account, only your contributions get taxed. All that growth over time is tax free to you. If you retire with $500,000 of regular IRA/401k savings, you will have to pay taxes as you withdraw it for your living expenses. That $500,000 is not all yours - the tax man wants his share. That same $500,000 in a Roth IRA or 401k is all yours - no taxes to be paid. That person with the Roth account ends up with a lot more spending money that that person with the regular account, even with the same account balance. If you end up with a few million in a regular account, the tax bill gets very big every year when the minimum distribution kicks in. You are forced to withdraw (and pay taxes on) the minimum distribution amount for a regular account - even if you don't need that much money to live on. Investing after tax money in a Roth account seems like the best plan - certainly if you max out your contributions each year. If you already have a regular IRA or 401k, you can probably transfer/convert it to a Roth version a little at a time each year - but you have to pay taxes on the amount converted each year. But, if you are 10+ years to taking withdrawals, this will probably save you money (on taxes) overall. General issue is that when you are young, you might not put much effort into all this. By the time you understand all the options and the importance of it, there is less time to take advantage of it.

The benefit of 401k is usually the match and high income cap.

Both IRAs have their place. Most wont know which one was the better choice until it's too late to matter most likely. LoL Guess a person should have one of each.

 

[Brute 23]

Sounds great but you can only put like 6K per year in a Roth last I checked.

... and income limits.

 

[Nesikep]

The folks that were paying $.15/gallon gas and a house cost $10K were also in the time frame when a union carpenter earned $3 an hour!

that math is really easy.. Lets multiply everything by 10
The union carpenter makes $30/hour now
Is gas $1.50 a gallon? Is a house $100K? No, Gas is $4 and a house is $400K... so your hour's work has 1/4 of the buying power it used to have

 

[sstterry]

My wife's father bought each of his kids, some stock in an Energy Company when they were small. I am sure her siblings have sold theirs long ago, but hers is now worth right at 100k since it has never been touched (nor has she added to it) but all of the dividends have been re-invested each quarter. If she goes before me, my plan is to give it to my kids for their future.

 

[bird dog]

Use the ETF SCHD for long term savings for your kids if you elect not to do a 529 plan. It trades as a stock so no minimum to get in. Very cheap fees with a good performance.
Actually a good investment for anybody or just a place to put some excess cash instead of fooling with a bond or a CD. There is some risk but minimal over a long period of time.

https://www.schwabassetmanagement.com/products/schd

 

[Dave]

that math is really easy.. Lets multiply everything by 10
The union carpenter makes $30/hour now
Is gas $1.50 a gallon? Is a house $100K? No, Gas is $4 and a house is $400K... so your hour's work has 1/4 of the buying power it used to have

I don't know where they got gas for $0.15. I am 70 years old. It was $0.25 except the occasional gas war.
The wife and I were just talking about this. Minimum wage here was $1.25. Gas was $0.25. One hour bought 5 gallons of gas. Today here everything is starting at $14+ an hour. Today gas is $3.65. About 4 gallons for a hours work. A year ago gas was $2.35. Almost 6 gallons for an hours work.