Author Topic: Will this money last?  (Read 1631 times)

MillyMoney

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Will this money last?
« on: October 26, 2018, 04:43:00 PM »
We "retired" about 15 years ago in our 40s after reading and implementing the ideas in the book Your Money or Your Life by Joe Dominguez and Vicky Robbins.  We have rental units that net $3000 a month, $2500 a month in pension income and soon we will have $2000 a month in SS income which we are taking early for a total of $7500 per month. We have about 900,000 in savings: 70% in total stock mkt funds and 30% in total bond funds and we reinvest any earnings.   Our annual living expenses are aprox $50K which includes a $9000 health insurance deductible which we never meet.  We are debt free.  Although this seems like a lot of money, I keep reading that medical expenses can be overwhelming in old age (there already).  My mom is on medicare and she never pays a penny for medical care between that and her supplemental plan so I'm not sure what "people" are talking about.  Also, the money we have invested in those two funds does not earn much income.  Should I switch to some tax free dividend paying funds to generate some income?  We are moderately frugal (renting a movie and a salad at Wendy's is a night out for us) but we could really cut down quite a bit more.  In fact, we have THREE cars...a minivan that is 20 years old... our beater for the rentals.  A station wagon that is 13 years old and the new minivan that is 2 years old.  I want to get rid of one of the old ones but can't figure out which one because they both work great but aren't worth much money.  What can I do to make this money last?  I want to have enough to carry us through assisted living so our child doesn't have to take care of us at home.

ysette9

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Re: Will this money last?
« Reply #1 on: October 26, 2018, 04:59:01 PM »
You spend $50k a year and are (or soon will be) taking in $90k a year in income, plus you have almost $1M invested? That sounds like a wonderful retirement position to be in. I bet you are better off than most retirees. If you can’t make it, no one can.

blingwrx

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Re: Will this money last?
« Reply #2 on: October 26, 2018, 08:22:43 PM »
With 50k expense with 9k set aside for medical expenses that doesn't get used, and the expenses will fall even further as medicare kicks in and usually people tend to spend less as they age. So the real expenses are really around 40k annually or less.

You have 90k income plus 900k investments and you're not tapping into the the potential 4% SWR giving you an extra 36k. Technically you could have 126k income annually and still be safe and this is against 40k expenses. So you're using less than 1/3 of your money. Even in a catastrophic event i think you're safe, but for peace of mind maybe you could look into medigap insurance as that should fill in anything that medicare doesn't cover.

Also you didn't mention how much your rentals and house your currently living is worth. The equity could be an additional safety net in the crazy event your other sources of income dry up which they shouldn't with your current spending levels.

I say live a little if you find you didn't use the 9k set aside for medical expenses in a given year take a nice vacation you earned it and even if you did you still have so much surplus to go around. Life is short you never know when things can take a turn for the worst, enjoy yourself before you're too old to move.

For me i'd get rid of all the old cars and get a newish used car with lower miles. If you need an extra car for backup sure keep an old one and buy a newer one but you certainly don't need 3 cars. Then you should be saving on insurance with less cars to insure and you don't have to worry about all the potential problems and repair bills that come with owning a 20 yr old car, also newer cars are built to be a-lot safer these days and they're more gas efficient.

lhamo

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Re: Will this money last?
« Reply #3 on: October 26, 2018, 09:06:08 PM »
One of the smartest/kindest things you can do for your kids is to start looking at assisted living options NOW so that you know what the costs will be and are ready to make a move when the time comes. 

If you hope to keep some of your assets to pass on to your kids you should also speak with an estate planning attorney.  Property may need to be placed into a trust, etc. -- there are lookback periods for Medicaid, but if you plan ahead far enough there may be workarounds.  The key is thinking/planning far enough ahead  so that you all know what you want and what to expect.

MrThatsDifferent

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Re: Will this money last?
« Reply #4 on: October 27, 2018, 04:02:47 AM »
You’re fine, stop stressing and reading things that scare you. Enjoy your life and your retirement.

wenchsenior

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Re: Will this money last?
« Reply #5 on: October 27, 2018, 08:27:41 AM »
We "retired" about 15 years ago in our 40s after reading and implementing the ideas in the book Your Money or Your Life by Joe Dominguez and Vicky Robbins.  We have rental units that net $3000 a month, $2500 a month in pension income and soon we will have $2000 a month in SS income which we are taking early for a total of $7500 per month. We have about 900,000 in savings: 70% in total stock mkt funds and 30% in total bond funds and we reinvest any earnings.   Our annual living expenses are aprox $50K which includes a $9000 health insurance deductible which we never meet.  We are debt free. Although this seems like a lot of money, I keep reading that medical expenses can be overwhelming in old age (there already).  My mom is on medicare and she never pays a penny for medical care between that and her supplemental plan so I'm not sure what "people" are talking about. Also, the money we have invested in those two funds does not earn much income.  Should I switch to some tax free dividend paying funds to generate some income?  We are moderately frugal (renting a movie and a salad at Wendy's is a night out for us) but we could really cut down quite a bit more.  In fact, we have THREE cars...a minivan that is 20 years old... our beater for the rentals.  A station wagon that is 13 years old and the new minivan that is 2 years old.  I want to get rid of one of the old ones but can't figure out which one because they both work great but aren't worth much money.  What can I do to make this money last?  I want to have enough to carry us through assisted living so our child doesn't have to take care of us at home.

Many times articles talking about very high health care costs in retirement do not clearly describe said costs.  The extremely high costs quoted (those running >300K/couple) are almost always referring to costs of long term care (assisted living, nursing home, in-home care, etc).  Those costs are not covered by Medicare and can quickly run up gigantic bills since costs of >50K/year are typical.   Many people do not require much in the way of LTC either, but you can't be sure you'll be one of these. So it does pose a problem from a planning perspective.

Most people in the U.S. cannot, of course, dream of covering these bills, so in the vast majority of LTC situations lasting more than a few months, the estate is drained and then Medicaid kicks in to cover the rest of the cost. E.g. when my working class grandparents aged, my gf eventually needed more care than my gm could provide and entered a nursing home.  After 6 months or so their small nest egg had been drained, and the state Medicaid took over the bill, leaving my gm only the house (which was signed over to the state in compensation, to be sold after my gm's death) and their small pension. After several years, my gf died and my gm went into the same nursing home.  After several more years, she died, and the house reverted to the state to be sold.

Medicaid rules (in terms of what assets can remain to support a surviving spouse, etc) differ from state to state.  The upside of Medicaid is that there is going to be care for everyone (hypothetically).  The downside is that most people who require LTC for more than a year or so end up using up their estate and/or turning the remainder over to the Medicaid program. 

This poses a problem if you want to be sure to cover all your own LTC costs (as in your case), leave assets for heirs, or be sure the longer-surviving partner has more than minimal assets to live on.  Some people purchase LTC insurance to help offset potential costs, but cost and qualification can pose a whole 'nother bucket of worms. 

As with all issues of insurance or future planning, this is somewhat of an best-guess/play-the-odds question.  Your particular estate looks more than sufficient to meet your general lifestyle needs until death, as well as any non-LTC medical costs.  But if you are concerned about planning for LTC costs/estate protection, for yourself or your own parents, your best bet is to consult an attorney who specializes in elder care planning/estates for your particular state.

Nickel

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Re: Will this money last?
« Reply #6 on: October 29, 2018, 01:56:50 PM »
We "retired" about 15 years ago in our 40s after reading and implementing the ideas in the book Your Money or Your Life by Joe Dominguez and Vicky Robbins.  We have rental units that net $3000 a month, $2500 a month in pension income and soon we will have $2000 a month in SS income which we are taking early for a total of $7500 per month. We have about 900,000 in savings: 70% in total stock mkt funds and 30% in total bond funds and we reinvest any earnings.   Our annual living expenses are aprox $50K which includes a $9000 health insurance deductible which we never meet.  We are debt free.  Although this seems like a lot of money, I keep reading that medical expenses can be overwhelming in old age (there already).  My mom is on medicare and she never pays a penny for medical care between that and her supplemental plan so I'm not sure what "people" are talking about.  Also, the money we have invested in those two funds does not earn much income.  Should I switch to some tax free dividend paying funds to generate some income?  We are moderately frugal (renting a movie and a salad at Wendy's is a night out for us) but we could really cut down quite a bit more.  In fact, we have THREE cars...a minivan that is 20 years old... our beater for the rentals.  A station wagon that is 13 years old and the new minivan that is 2 years old.  I want to get rid of one of the old ones but can't figure out which one because they both work great but aren't worth much money.  What can I do to make this money last?  I want to have enough to carry us through assisted living so our child doesn't have to take care of us at home.

Yes of course.  You have successfully retired for 15 years and have set yourselves up with a great retirement plan.  Many are aspiring.  You succeeded.

Once you get to age 65 with a portfolio like that you are home free.  Medicare has you covered.  The main risks now are long term care and taxes on your estate, unless you develop a gambling/drug addition or something. 

Enjoy life, focus on your physical/mental health and talk to a wills/trusts/estate attorney. 

As for long term care, you never know what you might need, but I know at least one guy who lives in Chapala, Mexico, developed a community of friends there, and has plenty of money for in-home care if the need arises because the care is excellent and inexpensive, and the climate is perfect year round.  My mom died from Alzheimers.  She never got stuck in a care facility, because we (dad and siblings) were collectively able to care for her in home with some help from paid care personnel.  If I needed long term care and my spouse/kids would likely be unable to manage it or afford supplemental in-home care, I would consider going to an expat community in Mexico, where the care is better and more affordable. 

A friend's grandmother got stuck in a long term care facility.  Apparently she finally died in misery just as expensive long term care, Medicaid and the five-year Medicaid clawback drained all her assets.   When I die, my final act will not be to prolong my own misery or to enrich a corrupt, profit-driven, monopolistic health care system.  Talk to an estate attorney and make a plan.  Thinking about your own death often motivates you more to take care of your own health.