I tell my kids regularly that my goal is to at least not cost them anything during my retirement. It would be NICE if they get an inheritance, but I will be satisfied if I don’t cost them anything.
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Even with Medicare + PartD + Supplemental (+ potential of IRMAA)… insurance cost at age 65 still is less than what younger self-employed people would pay. Perhaps even less than some employed workers pay. But they are definitely NOT zero (which at one time had been my silly, younger self assumption). Need to be part of the budget plans.
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IF I understand correctly, IF your kids inherit Roth accounts, they don’t need to pay any taxes on the inheritance. I can’t remember if they have to take the $$s out within a certain number of years or not, but at least the no taxes would be nice.
For now I’m hesitant to give the kids too much, because I’m a little afraid of how much we might need for medical expenses/LTC. We are paying for some trips and I have given 0 interest loans to help with mortgage options.
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I’ve talked quite a bit in this thread about the ridiculous cost we are paying for our ACA plan which covers much less than the employer plan we have ending in 2 days. I won’t bore you with the details again.
Like @sabaray talked about, I’m afraid that my in laws are going to gift us money and we will be afraid to spend any lest we be judged for how it’s spent. It’s ok because we have enough for our modest lifestyle.
I would say that we’ve saved enough for retirement. We aren’t used to anything lavish and that will continue. I will continue to think about the cost of things and try not to spend too much.
We did have a 401k and did consistently save there. My husband did have a pension so that’s helping but helping in that it added to but was not the only way we saved. Mostly saved pretty modestly as income wasn’t grand and raising a family is expensive.
We’ve gone on one vacation per year since retirement. We need to do some home improvements. This year we spent a lot more than we anticipated on a wedding. Or budgeted for.
We did pay for our kid’s college education which many in our income bracket did not when talking with them. It was important to us but was a decade and more of sacrifice. No vacations, no home improvements except those that were necessary. It was a tough decade that I don’t think my children really understand.
If there was some money gifted to us that we could spend without impunity. I would do our home remodeling in one swing instead of the piecemeal that we are currently thinking of. Because finding a contractor for piecemeal is not working that well. And maybe rent a vacation place for us and our children for my husband’s milestone birthday this year.
But if that doesn’t happen, then it won’t be a problem. Because we are used to our modest lifestyle.
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Unless the total value of your estate exceeds the Fed estate tax limit (or state estate tax limits, which vary by states), inheritance taxes are not due on inherited funds, IRA, Roth, or otherwise. Assets receive a step up in value at the date of your death, so taxes will not be due on the capital gain upon sale of an inherited house, or the increase in value of brokerage fund post-tax holdings.
Both traditional IRA & Roth IRA accounts require that non-spouse beneficiaries (and a couple of other categories that I cannot be bothered to look up) withdraw all funds from the inherited Roth or inherited IRA within ten years of inheriting. See Secure Act 2.0 for details.
Money withdrawn from the inherited Roth will not be subject to income tax; money withdrawn from an inherited IRA will be. If your children will be in a higher tax bracket when they inherit than you are today, then it could make sense for you to convert excess IRA funds to Roth, sparing them the future tax hit. Additionally, if you think that you will be in a higher tax bracket when withdrawing from your IRA than you are presently, converting to Roth would once again makes sense. Married couples need to consider the tax impact after one spouse passes, as the RMD will be the same for one as it had been for the couple.
Depending on the timing, beneficiaries could be forced to withdraw funds from an inherited IRA at the same time they will be applying for financial aid to colleges.
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Thanks - you summed it up well, and when I was paying more attention that was my thought - it would especially benefit the kids for us to convert to Roth. BUT, we live in a high tax state, so the taxes to us are pretty hard to swallow.
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We have a modest lifestyle with our big splurges being travel. In 2024, we spent on home maintenance- roof, electrical, foundation repair, whole house painting. Our biggest monthly expense is my health insurance- $981 a month, 1030 deductible. Includes vision thanks to my diabetes. We went to the Olympics. Veterinary expense. This coming year will be much lower expense wise, thankfully.
I don’t know that you can anticipate every possible scenario for your beneficiaries. D is our primary beneficiary and she has been in a much higher tax bracket than we’ve ever been in for some time now. It’s my hope to help her with a home purchase in 2025 as she’s doing a great job investing for her retirement.
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Abasket, we definitely fit that category. Our new house is less than 1000 sq feet, my husband and I share use of 1 vehicle, and we were both in public education/public service. We were extremely frugal when our kids were little (think powdered milk, suave shampoo, home haircuts, home cooking, clothes from tag sales or garage sales, etc), but I think we lived well. We are lucky now in that I receive a small teacher’s pension, social security, and both DH and I receive a pension from our former city. The pensions have no cost-of-living adjustments, so their value will diminish over time. We don’t have even a million dollars in a retirement account, which is why I will save as much money as is comfortably possible from our current pension income stream to balance inflation reducing the pension value in the future, and why DH will wait until 70 to claim his Social Security.
That is another reason I am shelling out a lot of money for solar and battery backup now. I want to pay upfront for electricity, so that our ongoing expenses will be low in the future. Adding resilience, we plan to put in a garden, and by moving next door to family, we have increased our support network. Also, there are some cost saving measures with the bills (trash, internet and cell phone service, home insurance, etc) that we split…
The CC longtime crowd tends to be more wealthy…but there are plenty of us here who are not…at least not in terms of money in the bank.
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I am not home to see the returns we had on our 401k over the past years that had really boosted our nest egg but some terrific years that really improved our bottom line. We had the potential for higher income, but we didn’t ‘chase’ it - DH absolutely used his skills at work but it didn’t reflect on his income stream, but he was ‘saved’ off layoff list during a lot of lean-ness in his company (global contracts electronic manufacturing). DD1 in a Master’s preferred job 8 years out of her bachelor’s is earning more money than when DH earned when he left his career (which had stagnation in his earnings over the last 15 years of his career). Her government job (with the VA Hospital) has a pension and 401k.
A primary reason we do have the nest egg is we were married for 15 years before children and saved - and once we had 401k’s, studying the investment options we did very well with returns. I do remember the downturn times with stocks (which was discouraging). We did have some inheritance in 2010-2011 time frame, which we spent some on the kids’ educational opportunities (foreign travel) and a new primary vehicle since our two were many years old. Since then, we have bought cars a few years old from Car Maxx and have been happy with those vehicles.
DDs lament the fact/idea that it is harder for them to purchase a home with their incomes and the cost of homes - and that might be true a bit, but they are also not living as frugally as DH and I did in early years. We spent the money on the home we built in 1992, and DDs were born in 1994 and 1996. We also didn’t have some of the tax advantages as there are now - I remember spending quite a lot on child care w/o tax deduction or tax credit for some time before some things came in on it. But I tell DDs that when the time is right they will be able to purchase a home.
One thing is we have been educating our DDs on financial and investing things. DD1 is a natural saver and budgeter. DD2 is learning to be more selective in her spending habits.
Perhaps one of the reasons that even rich people fear running out of money is the possibility of unplanned health care expenses, including assisted living and nursing care.
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Good article - points out how hard it is to go from a savings mentality to a spending one.
If you are really rich you are unlikely to run out no matter how expensive care is. My mother in law had a bit over 4 million when she started needing care and that cost 190k a year. She was worried. Not that’s she’d run out but that she’d deplete money to her kids. But as my brother in law explained to her earning at even 5 percent on her investments plus the tax break from expensive care meant she would exhaust not a dime of her savings.
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Have you been educating them on “how much you need to retire”, the thread topic? I see your one daughter DD1 has a pension and 401K at her job. Is she investing well in that 401K? We all know rhat investung hesvily early can pay off so much more with the time value of compounding interest.
Is your orher daughter DD2 saving for retirement? I helped my oldest son stsrt a Roth IRA with funds from his first summer job. That $1k has grown nicely over the last few years. It’s been a good tutorial in beginning to save for the future even when you are just starting out.
To me, saving for retirement is a long term proposition that is best started as soon as possible. That’s also a good lesson to teach.
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I’m not the poster you posed this question to.
My children are very good at saving for their retirement. They know they don’t have the cushion of any pension and so funding their 401k is very important.
It helps that their undergrad college graduation was paid for. They did take the loans that are offered for all students (the name escapes me, old age!). We paid them and it was a belt tightening job for us. That money they were then free to invest.
My children for the most part are frugal. The one who has a child is saving for their college, something we weren’t able to mostly because we were a decade younger when we had our kids. Not in the same position financially wise. They put gifts into the college fund.
I like to think that our advice has helped but the reality may be that college educated professionals have the tools and income to be able to pay the bills and save for the future.
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Not likely. Medical care is covered by Medicare less a deductible and monthly premiums that are peanuts to the wealthy. And if they fear “assisted living and nursing care”, which is capped by Medicare, they can easily afford a LTC policy. And I’m sure taht their FA will be happy to sell them one.
Exactly.
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We began Roth IRAs for DDs with early money earnings as well. When DD2 completed work for state employment (had less than 10 years) she rolled those funds into IRA then her established Roth IRA. DD2 now work for employee-owned firm and has Roth 401k there, and her separate/personal Roth IRA account. The advisor that briefed them at work essentially talked highly on target year fund, so her early investments were in that - but she agreed to have future investments placed in better return funds for her with the future moneys. I have sat down with her and gone through my analysis - and essentially, she said “I trust you” - not as interested in learning a lot now but small chunks at a time. I spot check the returns and DD can learn how one may rebalance over time. Not too long ago DD2 allowed me to adjust investments in her personal Roth IRA after analyzing returns with the stocks.
DD1 has navigated everything well on many fronts - she has gotten every pay raise earned (she learns well the criteria, and many times has to have HR re-review – every time they have gone through). I asked if she did want her investment choices reviewed, and she said she was good on it. She has taken over on all her funds, stock and Roth IRA.
DD2 has asked about our cash flow in retirement. Her BF’s paternal grandparents have several pensions between the two of them, and DD understands their cash flow (they are in a crisis right now with the grandfather dementia and sorting out the cost of care and if he can be on the right medications to be ‘safe’ at home). Evidently, he hit her at home in a demented state, and it scared her to keep him at home - but the facility has been expensive, and she was concerned about very thin staffing over these holiday periods.
Many on this thread are concerned (and rightly so) about the need for long term care. Here is what the grandmother responded to me about their situation " I still have to live and pay bills and cannot afford for all his pension to go for his care. I cannot afford for them to wipe out our savings and checking and drain us of everything we have. I cannot afford what they want us to pay each month." I advised her to talk to an elder attorney or the free elderly ombudsman person in her community to also see what options are there and also near their responsible son in another state. She should have her pension and her SS, and should be able to keep her home. Care is expensive in these facilities. IDK how calm/manageable he would be with a caretaker coming in - certainly a lot less than a facility, but that is based on him being a calm and manageable individual. She can get a personal attendant to come in to get him showered for example on a schedule. My mom was able to stay at home with dementia, but she was calm, cooperative. We had a live in housekeeper/cook. Different states may have different guidelines and also offer different services. She is currently checking into the services for the elderly and other guidance outside of this particular facility. I inquired with DD2 about grandfather having a PCP, and if a neurologist/psychologist has put him on the right combination of medications for him possibly to be able to stay at home safely.
DDs both had a stock account for college, and they saw the time value of money with that investment (my mom had two small life insurance policies that went to the 9 grandchildren, so both stock accounts had a nice burst of money invested) - DD1 had to use the money earlier, and DD2’s scholarships were slightly better so she used less of the stock money to get through college.
Absolutely the time value of money and a long-term proposition.
Fyi if the grandmother is in danger the grandfather should be taken to a hospital with a geriatric psychiatric unit where his medications can be adjusted. Guessing he might be put on antipsychotics.
In the meantime her safety should be taken very seriously, and things like guns and knives removed from grandpa. Demented people (mostly with FTD) have been known to kill their caregivers.
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Can you clarify if he is currently at home or if he is in a facility? Its a little unclear.
A gerontologist, geriatric psychiatrist or geriatric neurologist would be a good direction to pursue. Some forms of dementia have a day-to-day variability in symptoms, and also some meds have differing half lives and can interact with each other to cause behavioral fluctuations.
We are getting a bit off track, but to get back on the retirement track, I would recommend to those who can afford it, the time to look into purchasing LTC insurance is in one’s 50s or so. Thats when we purchased it, IIRC.
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The LTC policies that are available now are way less robust than the policies we looked at 20 years ago. Many restrictions on use, and determining eligibility. And costs are a lot higher, of course.
Even when we researched this, there were some things they needed to be considered. For example, some policies only covered you in the state where you purchased them. Some policies had fixed premiums until a certain time and then they radically increased. Some policies covered just about everything but others were more limited.
So, if you decide to buy LTC insurance, take the time to research this very carefully.
Oh…and a number of providers no longer even offer LTC insurance.
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My bigger concerns with LTCs are they can change the rates year to year so you buy today but in 5 years you may not want to no longer pay bcuz they’ve crushed you.
If it were a fixed price like term life, I’d consider it.
But I’ve read about too many people who no longer have it when it’s actually needed.
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