<p>A generation or two ago, many people who did not save on their own for retirement could count on a decent amount from Social Security and/or a defined benefit pension. These days, Social Security will need either benefit cuts or tax increases to keep going in the future, and many either do not have defined benefit pension plans or are nervously watching them and hoping that they do not fail.</p>
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<p>I agree with this. I’ve been saving for retirement since the age of 22 and thought I was doing well but got “scared” by listening to investment people. My new investment manager (of which I had none and flying by the seat of my pants until 3 months ago) is very realistic. He shows us what we have been living on by subtracting kid expenses, money to retirement and mortgage (will be paid off in 7 years). It’s a lot less than we currently earn (about 60%). It turns out we’re doing fine.</p>
<p>My neighbors are in their mid fifties and healthy, but age takes its toll nontheless. They have no idea what they will do when they are forced to retire. The H has had to transition to a less physically demanding position in his company. His job is tied to the whims of the construction industry, and he has already weathered one layoff in this recession. The W runs a home daycare. She is very successful, but again, it is a physically demanding job. They live modestly, and within their means, but without much of a cushion. They have almost nothing put aside for retirement.</p>
<p>Just this summer they used a home equity line to pay for a needed new roof. They also got hit unexpectedly with $7000 in vet expenses, and their AC is barely limping along. Their furnace/AC will need to be replaced before winter. Their anxiety about the future is unbelievable. Any unexpected health issue for her (broken leg, major surgery, anything requiring her to stay off her feet or not lift a baby or toddler) would be devastating. They have health insurance, but if she had to take a lengthy time off she would be forced to close her daycare or she would have to hire someone to do her job for the duration.</p>
<p>Good, solid people. Great family. No chance for a comfy retirement on the horizon. I feel a little anxious just writing about it.</p>
<p>Given the typical past underfunding of pension plans, people with defined benefit pensions or retirement medical care supplemental plans may want to keep an eye on the financial stability of such plans.</p>
<p>eastcoastcrazy - If your 50-something neighbors have been working for thirty or so years their individual SS incomes will run about $2600 per month. If one dies, the survivor can collect the spouse’s SS if it is higher. I guess I’m the lone ranger out there, but I do think SS will survive, but that’s another thread.</p>
<p>Even if they never saved a penny whatsoever in a retirement fund, they should be able to feed and house themselves on $50K per year. </p>
<p>Their $7K vet bill is very high. I have had two pets live a very long time and had to make some decisions that were difficult near the end of their lives. I’m sorry but if these people can’t afford to maintain the roof over their heads, they should not probably be spending $7K for a pet’s health care. </p>
<p>If the wife does a day care from her home, that is a huge source of tax write-offs for their home, including the roof expense.</p>
<p>I agree with posters who do not think we need 80% of pre-retirement income to survive in retirement. There is no way, because of other taxes that we pay while working such as SS, state tax, federal, retirement fund, college cost, mortgage, etc… I think the financial industry likes to scare us so we can invest more and the people in that industry do benefit. Who really needs 20 of pre-retirement income to retire? If you don’t have any idea how much you spend per month then you should at least sit down and figure that out soon. My estimate is probably 20-30% at most.
I do wish there is another long running thread like the investment/gambling thread about people starting retirement/or those who have retired to give us some idea. I do read city-data retirement forum but think it’s better to have one in CC.</p>
<p>There is probably a lot of variation in retirees’ expenses. Probably one of the biggest variations is due to one’s health. A healthy senior citizen living independently likely has much lower costs than someone who is dependent on others for a lot of assistance.</p>
<p>I’m not sure monthly costs actually go down that much for us.</p>
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<li><p>We aren’t paying tuition out of current income for the most part – fully funded 529 plans. But, with 2 kids in college, there are still lots of kid-related expenses in the Shawbridge family (food for 6’4" ShawSon when he comes home and doubles our weekly food bill), travel, clothes, entertainment (ShawSon is scarily frugal but ShawD not so much). These cost will go away. But what replaces them?</p></li>
<li><p>We did a financial plan and pulled out some of these costs. We assumed that health care and travel would grow at 7% a year and that other costs 3.5% a year. I think travel may be even more – we’ll visit kids and take kids and (here’s hoping) grandkids on trips. Plus health care may get significantly higher as ucbalumnus and others suggest.</p></li>
<li><p>On housing, I’m anticipating downsizing a little here but renting/buying a house/condo in a place that is warm for the winter. </p></li>
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<p>If you put these together, do costs go down? I’m not sure.</p>
<p>Neither ShawWife nor I anticipate retiring. I love what I do (as does she) and can’t see stopping. Slowing down, maybe. Our financial planner assumed a slowdown in work at age 65 and full stop in our 90’s. Who knows?</p>
<p>I think health care is the big wild card and largely non-discretionary. I agree with a previous poster that some expected retiree benefits are at risk; my in-laws lost their GM health care and are paying more out of pocket than the GM offset. I hope my long-term care insurance provider stays in business. My exposure to them is probably my biggest risk.
We are not counting on Social Security, expecting higher tax rates, and planning some great trips, so we save a lot at the expense of spending now. </p>
<p>I will not take a dime from my kids as I get older unless under the most dire of situations. My mom won’t take a dime from me (she has savings and lives very modestly), but will take my help with doctor stuff, technology stuff, house maintenance stuff, financial management stuff, etc. Mom is just now (in her mid 70s) allowing me to pick up the tab when we eat at a restaurant!</p>
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Will you be trading your current home for the new one (in other words will you have a mortgage).</p>
<p>I know for Mom3ToGo and I we will need a lot less money to live in retirement … no mortgage, no college savings or payments, and no savings for retirement. The 3 expenses that will go up for us are … 1) Medical expenses … 2) Real estate taxes … 3) Travel (visit grand kids (I hope)) … and the medical expenses is the one that possibly scares us.</p>
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<p>Wouldn’t doubling a frugal food bill of rice and lentils/beans for ShawSon still not be that expensive?</p>
<p>Frugality will serve him well in a future with less economic growth and potentially higher taxes for reduced government services as the debt and liabilities from overspending and overpromising (pensions, Social Security, Medicare) in the past must be paid down.</p>
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<p>For any type of long term insurance contract (long term care, long term disability, etc.), the financial strength and stability of the insurance company is an important aspect in choosing.</p>
<p>It is very tough to predict how much any individual may need for care if/when s/he becomes medically fragile. The costs of having attendant care in varying forms can be significantly more than $20/hour, 24/7, 365, that really adds up!</p>
<p>A lot of people have worked at labor intensive jobs. Once they no longer have the strength to continue working those jobs, if they have no savings and if their assets, pension, social security, etc. aren’t sufficient to provide for them, what then? I think that scares many.</p>
<p>When H & I are in good health, we’re quite sure we have adequate assets, even for part-time help if we need it down the road. When it comes to year after year of assisted medical care, that’s a bottomless pit. We are fortunate to have assets and a pension and health insurance that will last as long as each of us lives, but many don’t.</p>
<p>3togo, we wouldn’t be selling a house up north (though we’ll right-size and shoot for energy efficiency), but we will probably not need a mortgage unless it is advantageous for tax reasons or unless we buy a really expensive property. We have one rental property and are currently purchasing a second which we will rent out to ShawD and two roommates. We could easily sell one or both to fund a purchase.</p>
<p>College savings were done a while ago, so graduation won’t turn off an expense spigot. My plan is to keep saving as long as possible – to fund me in my 90’s and our kids and their kids if I can. Right now, we’re pretty big savers.</p>
<p>ucbalumnus, unfortunately ShawSon’s frugality does not extend to being a vegetarian. Clothes and creature comforts, yes. But, lots of red meat went into the growth from 5’3" to 6’4" in high school. He’s now eating more healthily but the volumetric intake is high. On the plus side, in addition to not spending much, he makes money consistently playing poker so he’s gone a whole school year with no withdrawals from his bank account – just $500 on his school cash card. He’s one kid who will likely end up doing well economically. Extremely bright, good skill set (math/econ major at high-end school), is driven to succeed (it would be hard to overstate the drive once he’s chosen a goal), and skill in playing/winning complex games. There is a decent chance is that he will be in the upper part of the top 1% of the income distribution.</p>
<p>I agree with sewhappy, I don’t feel too sorry for folks who make the decision to spend 7K at the vets.</p>
<p>^^I agree with that in theory, but keeping my doggies well is not a luxury, it is a necessity. Which is why, after realizing that we would do whatever it takes to keep them healthy, we purchased pet insurance and an annual wellness plan from the vet. The wellness plan has saved us thousands of dollars (actually 7K in the last 3 years, according to how they figure it…which is probably exaggerated). A couple of years ago we paid $2500 to get the little ones anal sacs surgically removed, they kept bursting. We would not have allowed her to just die.</p>
<p>But I love my dogs. I’d no sooner neglect them than my kids. Then again, if I was hurting for money I would forego having pets.</p>
<p>Our 12 y/o Lab was clearly suffering a few weeks ago. She was weak, lethargic, her eyes didn’t look right. Friends were coming and going that weekend as we were hosting a big July 4 thing. They all commented “WHAT is WRONG w/ your dog?!” I thought we were just losing her. At one point she began walking through the house towards me, all the way urine squirting out of her uncontrollably. Not a good sign. Another time, I called her to the door to go do her business. She couldn’t get up, though she tried hard. I had to lift her lower legs up to help her stand. It was horrible. We took her to the vet, thinking we were going to get “the talk.” Turns out she has diabetes and was getting close to going into diabetic ketoacidosis, a fatal condition. Giving her insulin shots 2 times/day has completely invigorated her. So for now we have bought her some time. This incident has cost us over $1,000. 7K would make me really re-evaluate the whole thing, though we love her so much. I don’t know that we would do it at her advanced age, but I can see how you could persuade yourself to do it, especially for a younger animal who might really benefit from it for years. When you love animals, they really do seem like part of your family. I get it, it can really be a dilemma…</p>
<p>^^Definitely a dilemma, especially if they are very old and the treatment is painful and costly. In your case, though, it sounds like it was well worth the money. If she’s back to normal, happy and could have many years left, definitely worth it.</p>
<p>No. They are my blessing. I will give to them until my last breath.</p>
<p>I love dogs and cats. I can’t have one due to DH’s significant allergies/asthma. But aren’t pets a luxury? Should folks struggling financially have pets and bear the responsibilities that come with owning pets? 7K is a roof and a big chunk of an emergency fund. And to bring it back to the topic on hand, should the monthly cost of pet ownership for this particular couple be put into a retirement fund or are pets a necessity?</p>