How Much Do You think You Need to Retire? What Age Will You/Spouse Retire? General Retirement Issues (Part 2)

Parent Cafe
8709

More generally you could say, there are many cash vehicles that will get you a guaranteed fixed income return of near the federal funds rate. The high federal funds rate is currently5.5%, so you can get returns of at or slightly below 5.5%. Some examples are below, All are converted to APY, which differs from the APR format that some default.

  • Short-term treasury bills (no expense ratio) – 5.5% + state/local tax exempt
  • Promotional HYSA rate at certain small and low quality banks (MBD) – 5.5%
  • Vanguard 100% treasury money market (0.1% expense ratio) – 5.4%+ state/local tax exempt
  • Short-term treasury ETF (SGOV/USFR/… , 0.1% expense ratio) – 5.4% + state/local tax exempt
  • Top rates for short term brokered CDs – 5.4%
  • Fidelity 100% treasury money market (0.4% expense ratio) – 5.1% + state/local tax exempt
  • Regular HYSA rate at certain quality banks – 4 to 5%
  • Short-term CD rates when purchased through certain quality banks – 4 to 5%
  • HYSA rate at the biggest US banks (Chase, BoA, …) – 0.01%
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8710

Just met with my Vanguard personal advisor and am shocked that the Monte Carlo analysis numbers are in today’s dollars. I mean, the simulation takes inflation into account on the expense side so why not on the outcomes side? Obviously, the dollar amount would be lower as your purchasing power drops so doesn’t look as good, but that really irritates me. Thought I’d pass that on in case others didn’t know that.

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8711

I think often things are all brought back to current dollars on financial projection discussions. It seems like at one point SS statements (or maybe my employer retirement estimates) switched from future dollar to current dollar. Reason was that it prevented savings complacency (“gosh… I will get xxx dollars a year, I’ll be rich”).

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8712

“The Washington Post did a report and a survey this year asking people what it meant [to be middle class]. And around 90% of U.S. adults agreed that being in the middle class means you have a secure job, the ability to actually save money, to afford an emergency thousand-dollar debt, to pay bills on time without much concern, to afford health insurance and to retire comfortably. That WaPo report also found that only a third of Americans met that definition of “middle class.””

One does have to ‘evaluate’ about these rankings like the latest US News and World Report state ranking. Here is an article published in AL discussing: We’re No. what?: Down in Alabama - al.com

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8713

More on ‘middle class’:

“The Pew Research Center, meanwhile, defines income levels for the middle class as between two-thirds to double the national median income, or $67,819 to $203,458 for a family of four. The Washington Post survey found that most Americans think of a household income level of $75,000 to $100,000 as middle class.”

" The good news for Alabamians: according to a new study by GoBankingRates, the income needed to live a middle class lifestyle in Alabama remains below the national average.

The study found the minimum income needed to qualify as middle class sits at $39,739 – 41.4% lower than the lowest national figure. Only five states have a lower threshold: New Mexico ($39,148), Louisiana ($38,568), Arkansas ($37,557), West Virginia ($36,811) and Mississippi, which has the lowest household income to qualify as middle class at $35,323."

I know in a lot of states and certain metro areas, it is very difficult to live ‘middle class’ on less than probably $100,000.

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8714

Any chance of doing a gift link on the Roth record keeping article?
Thanks

8715

I hope this works.

https://www.wsj.com/personal-finance/taxes/a-backdoor-roth-ira-income-limits-fbf6418f?st=4toizgq488lljmn&reflink=desktopwebshare_permalink

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8716

It did… thanks!

8717

This Ted talk by Scott Galloway shows all the things we are doing as a polity to transfer wealth to our generation and away from younger generations. It shows how much harder it will be for the younger generation to form households, buy houses, pay for their kids’ college tuition. One of those things is exclusionary zoning, which I think I mentioned in an earlier post.

I think this helps explain why many fewer adults of our generation want to have kids and why there is significant discontent as they have a sense that society is stacked against them (and Galloway’s slides strongly support that view). I think the sense that the system is stacked against them makes it easy to buy the oppressed versus the oppressor argument in favor of DEI generally, in support of BLM and in opposition to Israel.

We on this thread are thinking about retiring, but it is worth trying to figure out how to help the younger generation, who on average have a harder road than we had. I’m thinking less about our kids – I just coached ShawD through the process of buying a new car – as I think they are with some probability going to end up in good places but I am thinking more generally.

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8718

Same.

Though it’s annoying because they give that rate for “new money” into their accounts, so they push back on letting to internally transfer money into the 5% account. For example, if you’re other investments are throwing off dividends. I can usually get them to do it, but it’s a thing every time.

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8719

Well said. I think we also have to realize this is the mass shooting generation, which also leads them to sympathize more with the “underdog”.

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8720

The life transition into retirement - many on this thread have planned over years, adjusted things with ongoing information and decision making, and also incorporate thinking about their children and grandchildren. Children and grandchildren will move forward with the opportunities and challenges they will face.

I watched that Scott Galloway Ted talk. He may be right about people wanting increase compensation and less accountability – be it in higher ed faculty/staff, in government jobs, etc. I think he is wrong about his higher ed analysis on increasing enrollment and lowering tuition on what he considered ‘elite’ colleges - but he may be influenced by specific country regions/specific schools; aimlessly having more people go to 4 year colleges (sleep away schools) and then also shifting vocational/certification programs away from trade schools and community colleges in their local community; it is almost like trying to extend high school for young adults. Many students don’t put in enough energy into their academics through high school (we see that when students are not able to make the transition to college because they never developed study skills or had challenges/took challenging curricula in HS). Students/parents taking out college debt - his statistics were real (college debt as percentage of first year income, 31% in 1987, and 53% in 2022). House prices to first year income, 4.4X in 1987, and 8.5X in 2022. Maturity of students and how effective the parenting is when student is under parents’ roof and after, and what parents are willing to pay/finance.

At the start he targeted when one is under 30 and under 40. Maybe it is taking longer for young people to be on a more solid path with career and financial growth, but many careers are taking time. I totally agree about being able to keep students under parents’ family health insurance plan until 26 – that does give opportunity with taking that responsibility off young people who have involved parents. Yes home prices are where one has to rent longer, but first establishing one’s career may mean not settled in a particular location yet.

“Drunk on luxury”. He didn’t really explain this, but I think may young people do not ‘live lean’ as their parents and grandparents have done during early life and early career periods. I believe my kids and grandkids will do well; kids are currently doing as well as their peers (living with stability) while grandkids are in healthy home life and getting very good early education (they are very young, 6 and under) - and ‘living well’ to me means feeling of being in middle class and enjoying w/o extreme worry, while handling crises and life transitions well. To me, just have enough of a nest egg for security w/o worry, and through life having the sense of well-being.

People are living longer, and some of that is the reason for the 1989 to 2023 comparison of 70+ having 19% of wealth versus 30%. Also senior poverty is down from 1970’s at 17% versus 9% in 2010’s. Overall financial planning/saving while trying to live healthier longer with financial security.

The growth of the federal debt during our lifetime with absorbent interest payments; 1941/3.9T; 1964/3.44T; 1980/4.01T; 1999/9.99T; 2000/10.78T; 2012/21.94T; 2017/27.08T; 2023/33.17T. Politically no one seems to have this trend subside.

He talked about 3 stocks, Apple, Amazon, and Netflix. “The Magnificent Seven” are Apple, Google, Microsoft; Amazon, META, Tesla, and Invidea. Jan 2024, 5 stocks represent more than 25% of the S & P gains.

There are effective ways to pump the economy, while there are ways that are really not good for long term for everyone.

Things on people’s minds on this thread…

He was right when saying biology is ageist. That is why with those of us who are comfortable in ‘middle class retirement’ are concerned for children/grandchildren - and pass along the tools for them to figure their lives out in the environment they live in.

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8721

Yes, those things count – but in some cases, only the last time you do it counts – ie, if you bought your house in 1995 and replaced the water heater in 1997, 2010 and 2024, only the last one counts towards the increase in basis. See https://www.irs.gov/forms-pubs/about-publication-523. Download the PDF, go to page 8. Lots of info!

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8722

My husband is turning 65 and going on Medicare. Once you include parts a & b, a separate dental plan, a drug plan, and a supplement, it will cost almost $500 a month (in MA). For two of us (next year when I turn 65), that is $1,000 a month for health insurance. Not an insignificant amount, our biggest monthly expense after rent!

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8723

Yes it can…but how is it $500 a month each? But your Medicare costs parts will be deducted from your SS once you start collecting that. And I don’t think there is a choice about that.

8724

Most retirees find dental “insurance” plans not worth it, unless your former employer offers a discount. Easier to self-insure, and some dentists give a small discount for cash-pay upon service.

edited to add: bcos of Romney Care, all Mediap plans in Massachusetts are community-rated, so there is no ‘discount’ for the young 'ens at 65.

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8725

He won’t take SS until I am also on Medicare (so that I get lower premiums from the MA marketplace health insurance plans).

Part A free
Part B $178
Part D $50
Supplement 1A $200
Dental $57
Total $485

We have always had Dental and frankly the Dental plan on the marketplace is $57 a month each - well worth it.

8726

The MA marketplace and before that NJ marketplace premiums were less. $800 a month for both of us in MA and $600 a month for both of us in NJ (including dental).

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8727

~$700/yr for two cleanings and an exam. Say, $450 for ‘maintenance’ services. That leaves $250 after the deductible towards a filling (paid at 80%) or major work (paid at 50%). What’s the annual max? $1500? Not gonna go very far, unless you go in to fix one crown every year.

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8728

My teeth are great - usually just a cleaning. My husband is another story. He gets fillings, replaces crowns, etc. every year. I think it is worth it.