s/o: How to retire financially secure?

[Azalea]

Are you expecting Social Security to be completely gone by the time you retire? On current projections, Husband and I will get around USD 15,000 a year from the UK government. I will get another 7,000 in work pension. With a paid off small house and just one small car, we won't need millions more.

 

I agree with you and fully expect Social Security to be there when I retire. Firecalc can take SSI into considerations in its calculations, if you go beyond the simple calculator on the first page of the website. Or using the simple calculator you could enter only the amount you need above and beyond SSI. 

 

I guess the yearly expenses times 25 mostly pertains to those planning to retire early, and who follow the 4% rule. Which means only withdrawing from investments 4% each year, which is what is recommended.

 

[Azalea]

 

For example, let's say a couple is getting $2,000 a month from SSI, $24k a year, but needs another $12,000 for a total of $36,000 per year to get by.  They have investments of $250,000 and plan to live another 25 years. They are invested 75% in stock fund, 25% in bond fund. Here is what Firecalc returns on that experiment (fancy graph left out):

 

FIRECalc Results

 

Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.

 

 

 

FIRECalc looked at the 120 possible 25 year periods in the available data, starting with a portfolio of $250,000 and spending your specified amounts each year thereafter.

 

Here is how your portfolio would have fared in each of the 120 cycles. The lowest and highest portfolio balance at the end of your retirement was $-160,840 to $1,115,548, with an average at the end of $312,303. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

 

For our purposes, failure means the portfolio was depleted before the end of the 25 years. FIRECalc found that 20 cycles failed, for a success rate of 83.3%.

 

        A success rate of 83.3% isn't too bad. Let me do a bit more experimenting...

 

 

 

[Azalea]

I increased the investment total to $300,000 and the success rate was 98.3%. 

 

FIRECalc Results

Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.

 

FIRECalc looked at the 120 possible 25 year periods in the available data, starting with a portfolio of $300,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 120 cycles. The lowest and highest portfolio balance at the end of your retirement was $-15,917 to $1,499,579, with an average at the end of $515,478. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 25 years. FIRECalc found that 2 cycles failed, for a success rate of 98.3%.

[madteaparty]

Die at a young age. :-)

 

Seriously, my grandparents all had very comfortable retirements, but they died in their late 70s/early 80s. They all were children of the depression who saved like crazy and lived way under their incomes. Even my grandmother on my mom's side, who was abandoned by her husband in her 40s after not working for 20 years (and him emptying out the savings account) paid all her expenses, including nursing care, left a sizable inheritance. When she was first divorced, she got a minimum wage job in a cafeteria. When her daughters cleaned out her (rented) apartment, they found thousands of dollars of cash in her monthly envelopes around the place.

 

OTOH, my husband's grandmother, who retired with a teacher's pension, barely scraped by at the end because she lived until 98.

 

Morbid, yes.

 

Emily

That's my plan too ;) die before I get too sick. I have a grandparent several years past 100 though so this willl require some managing.

To that end, I'm trying to maximize life enjoyment now.

[Arcadia]

My parents are doing well financially despite my mom's rheumatism bills because of my dad's pension and medical benefits. He gets $4k per month which covers HOA, out of pocket medical expenses, property tax, transport, grocery and utilities.

 

Hubby and I would have to retire somewhere with cheaper health cost. That would be the biggest expense. The second biggest would be property tax. Hubby's grandmother is almost a hundred years old and now needs an aide. It is really hard to estimate how much retirement savings anyone needs.

[MedicMom]

My grandparents did. Grandpa owned a business that he managed to sell and retire very comfortably from. They built a house in the 70s and probably paid it off within a few years or possibly pay cash for it. He and my dad designed it and did most of the work themselves. He invested in stocks and IRAs, mostly IRAs. As a kid I assumed that they had sold the company for a lot; later on I learned that it was a mixture of insurance money following a flood and someone paying for the building afterward. It wasn't nearly as much as I thought, but Grandpa invested very wisely and then they literally, from 1972 to 1996, lived on less than $30,000 a year. They grew most of their own food, traveled very little, Grandma darned their socks and repaired their appliances. They lent their kids money for houses and charged them fair interest. The only thing they ever bought was brand new cars.

And then they had the decency to die in their mid-70s after short, non bankrupting illnesses. Afterward we found a notebook of my Grandpa's where he had figured out how to make the money last from 1972 to 2020. And it would have, as he had predicted a stock market crash and planned for that, as well as other contigencies like an expensive illness.

 

What have I learned from them? Save everything possible. Even on paramedic salaries, we work hard and put almost all of our OT into our 401Ks as well as our cost of living increase every year. Diversify, plan for contingencies. We bought a house cheap that I hate, but we will pay it off by the time I am 45 and my husband can do all the upgrades and remodels himself, that we've paid for in cash. The other thing I learned from Grandma is to spend very little. Well, I'm trying to learn that. We're working on it.

[Annie G]

I puffy heart love FIREcalc and how it makes me feel confident about retirement.  I'm comfortable planning to use our Social Security funds to help with retirement because we're in our mid-late 50's and I'm sure it'll still be around.

 

 Although I read Mr. Money Mustache, I have to adapt the advice because we're not retiring young like many of the folks there. Yeah, retiring young means you can't count on SS to cover you in your early retirement.  Dh will be an old man- either 60 or 62 when he leaves his career.  So we don't have to bridge many years before we're eligible for SS. 

 

 

[SKL]

I am assuming social security will be there also.  Or some version of it.  I believe that as long as housing costs are manageable, I won't starve to death and I'll be able to get basic health care.

 

There are no guarantees.  But if I live my life like nothing is ever enough, I will live and die unhappy.  What good is that?

 

I don't believe people need over a million dollars to retire on in this country.  I don't and won't have expenses anywhere near $50,000 per year, for starters.  Like I said before, I'm not saving up all my "bucket list" items for after I can't work any more.  I think I will probably be content to hang out in a small house and enjoy books and tea and old movies and maybe a small pet and the occasional visit from my kids and grandkids.

[Jenny in Florida]

We, on the other hand, have managed to do all the wrong things, it seems.  We've moved a lot.  We have 27 years left on a mortgage.  My husband has had some major health issues, and our insurance is NOT as good as my in-laws.  I don't see him being able to work until retirement age.  We took out our 401K after the crash (and watching it vanish before our eyes) and bought a much needed vehicle.  The only things working in our favor is that dh has worked for the same company for over 20 years, and he is fully vested in their pension plan.  Right now though, it will not pay out anything near what he currently makes.  

I'm our retirement plan.  Back in college to get a degree, so I can hopefully work for 20-25 years, have health insurance and get us set up enough to pay for our old age.  

 

Yep, we are in much the same position. We started off behind the curve, financially, because of some life stuff that happened well before we were married, and every time we get our ducks in a row and try to get intentional and responsible about saving, there's another disaster. We cleaned out retirement savings more than once to cope with one emergency situation or another (occasionally "our fault," but often not), then had me out of the workforce for 18 years while I homeschooled two kids who would have crashed and burned in traditional classroom situations.

 

My husband has worked for the same company for 17 years now; however, because they periodically close out and/or outsource entire departments only to re-hire the same folks just long enough out to mean the employees lose their seniority, we won't reap the benefits that other equally settled workers enjoy. He does have a 401K, but we haven't been able to contribute to it consistently. 

 

Because we are in our 50s and Social Security isn't broke yet, we do assume we will have that to help. I haven't worked much in the last couple of decades, but when last I checked my anticipated benefits, it looked like enough to at least pay rent on a small, no frills apartment. It wouldn't keep even one person in style, but between the savings we do have and my husband's 401K and Social Security for both of us and whatever we can bank now that I'm working again -- barring a disaster of epic proportions -- we should be able to chug along for a good, long time.

 

I earned my degree before we married and am now attempting to rebuild some kind of career. The hope is that having me working and having only two of us to support (once we pay off both kids' degrees), we will be able to make up some of the ground we have lost. He is not aging especially well, though, and I'm getting concerned about how long he will be able to continue to work. 

 

So, we're crossing our fingers.

Edited February 4, 2016 by Jenny in Florida

[Jenny in Florida]

The funny thing is that we do many/most of those "frugal living" things, and my husband makes decent money, but we still aren't financially secure. 

 

In the 22 years we've been married, we've purchased one new car. Otherwise, we buy used and keep them until they aren't worth fixing.

 

The "nicest" furniture in our house came from Ikea. Otherwise, it's been Target and thrift shops.

 

"Store brand" is my default setting when grocery shopping. 

 

We've taken a few nice vacations, but with one exception, we've paid out of pocket for all of them (rather than putting anything on a credit card) and gone only when we've actually been able to afford to do so.

 

I don't own jewelry or buy expensive clothing.

 

I could go on. 

 

For us it's a mix of living now and saving for then.

 

I learned quite young that we need to live now because some people I knew well who saved everything and didn't do anything never lived to use what they had saved.  Essentially, they never lived.  It made an impression on me.

 

This, too. What we have spent money on over the years have been mostly experiences and educational / extracurricular things for the kids. 

 

And I don't regret one of them.

 

My in-laws were fantastically responsible with money. They saved and invested and lived in a modest-when-they-bought-it home that appreciated rapidly. They didn't do luxuries for themselves or their kids. (My husband remembers exactly one family vacation.) They looked forward to a very comfortable retirement.

 

Then my mother-in-law died within a year after my father-in-law retired. He had continued consulting for his previous employer and, after she died, he worked nearly full-time just because he had nothing else he wanted to do. He died just a few years after she did, and neither of them ever got to enjoy all of that money they scraped and sacrified all of those years to sock away.

 

I think there should be a happy medium. Clearly, we're too far at the other end of the spectrum. But, yeah, I would definitely prefer to look forward to a more frugal, less luxurious retirement as long as I can look back on the joyous experiences I had with my kids when I was young enough to have them.

[Guest]

We've been pretty lucky.  I'll say that up front.  

 

Thing is, even if you get lucky and have things set aside, disaster can strike.  What if a spouse gets Alzheimers at 60?  How in the world do you *plan* for that?  It hasn't happened here, but what I am saying is that IF IT DID, all our good planning would be right out the window.  So at some point, it is a crapshoot. 

 

But it is better to be prepared than not.  It is better to live simply all along than to live extravagently and then wonder why you are in a sub-optimal situation later on.

 

I have personal experience from both sides of our family that living expenses get dramatically less in the later years.  One relative gets $1700 a month.  Her rent is $1300--because she likes to live in a place where she can see out.  Fine. And you know what?  She's FINE.  She has managed to stay within these restricted means because she lives her life through her front window, not through having a car and getting out and about. 

 

And another relative has about the same income but her rent is less, and it HAS to be because she LOVES getting out for dinners and meet-ups with friends and church and doing her own shopping and so on.  

 

Same amount of money, spent differently based on what matters, and seemingly ***completely not enough money*** but it works out because the living expenses are wayyyyy lower. 

 

I'm 58 and I'm already seeing it.  I don't care about having stuff anymore.  No new shoes in 3 years.  Simple "uniform" that I wear every day.  It's a lot cheaper and we were never extravagent.  We never kept more than 50% of our income--the rest went to savings, 401K (with matching to the max),, other savings, and charity.  Part of what giving to charity does is it keeps you mindful that others live on less.  It also reminds you that YOU can live on less.  Give.  It is important for your mindset.

 

Blabbering on here:  most people DO tend to live on less as they age.  The big expenses are rent and meds.  So GET HEALTHY.  :0)  

 

And don't think you can make things "secure" financially.  Anyone is open to disaster.  You do what you can, while you can, and then you roll with the punches.

 

[purplejackmama]

Well I'm turning 40 this year and we are way behind the 8 ball.

 

The economic collapse of 2008 devasted us. Despite all our best laid plans we couldn't survive. We floundered for the past 6 years then hubby found a new career. We are now 18 months into a positive cash flow situation. Yay! I worry about retirement but not nearly as much time as I have spent worrying about keeping the lights on and feeding my family. Sometimes life happens, and all you can do is pick up the broken pieces.

[Bluegoat]

I think this thread has a lot of really good advice.  We do a combination of the above, and aside from a lot of that we've given a lot of our years to military service in order to have a "guaranteed" income stream into our old age.  I put guaranteed in quotes, because a lot of times military retiree benefits seem to be fungible to TPB.

 

However, I also think that anything can happen, and living with the expectation of not having to work in some capacity for the last 10-20-30 years of life can be unrealistic for a lot of people.  I think pension-style retirements on company dollars that the WWII generation set up for themselves (working for one company for 40+ years in a manufacturing job or some such) are not necessarily sustainable.  My grandpa retired at 65 after working for 45 years at the same place, and his company has paid him a pension for over 20 years now.  While that was what he was promised, I don't think anyone really thought about the idea of paying a huge contingent of workers who were not working for decades and the actual financial ramifications.

 

I think that is probably true to some extent - people often have a longer healthy period in old age than they used to.  The expectation of spending 30 years just travelling and having fun is, perhaps, a little odd when you think about it. In some areas like medicine or academia it is pretty common for people to say active a lot longer.

 

On the other hand - there are still plenty of people in jobs that are physically demanding, and that does take a toll.  I have two uncles, one a carpenter and one a butcher, who as they got into their 60s began to see a need to do something different, and cut back work.

 

The other thing I wonder is - there are many roles in society that need to be filled by competent adults, which are not paid work.  To some extent those have often overlapped with retired people - younger ones may help care for their very elderly parents, or their grandkids.  There aslo used to be significant numbers of people doing special work in things like religious orders, essentially for their room and board for life, and they did a lot of work we now have to pay people a lot more for.  I wonder - has our capacity as a society to carry people in those kinds of roles - stay at home parents for example, or those who do significant volunteer work - been affected by the expectation of having that demographic that isn't working?  It may not at all, but I think its interesting to think about a shift in who the non-paid population are.

[Laura Corin]

I think that is probably true to some extent - people often have a longer healthy period in old age than they used to.  The expectation of spending 30 years just travelling and having fun is, perhaps, a little odd when you think about it. In some areas like medicine or academia it is pretty common for people to say active a lot longer.

 

What I hadn't realised is that there have always been a fair number of people who lived for a long time, but these were balanced in the statistics by the number of small children who died.  The average (mean) does not tell a clear tale.  The modal life expectancy in England and Wales has been over 70 for most of the last 150 years.  Not 30 years to play after age 60, for sure, but more years than I thought - see graph on page 4 of the PDF:

 

http://www.ons.gov.uk/ons/rel/mortality-ageing/mortality-in-england-and-wales/average-life-span/rpt-average-life-span.html

[Bluegoat]

What I hadn't realised is that there have always been a fair number of people who lived for a long time, but these were balanced in the statistics by the number of small children who died.  The average (mean) does not tell a clear tale.  The modal life expectancy in England and Wales has been over 70 for most of the last 150 years.  Not 30 years to play after age 60, for sure, but more years than I thought - see graph on page 4 of the PDF:

 

http://www.ons.gov.uk/ons/rel/mortality-ageing/mortality-in-england-and-wales/average-life-span/rpt-average-life-span.html

 

Yes, I did know that, and certainly there were always some people who libved long.  And they were often supported by the work of others in a direct sense.  But they didn't usually expect to be set up to live in their own household to live independently while being involved in leisure activities.

 

Mind you, many people now also don't get to live that life, but it exists as a kind of ideal - like those Freedom 55 commercials.  I wonder how many people would be happier if that idea didn't exist?  Maybe if we expected people to slow down, or retrain for a slower type career or do unpaid work or work part time, and be supported as necessary to allow for that.

[umsami]

Even if your kids do not work for a company with a 401k, they can open a Roth IRA.  Online brokerages are usually the easiest ways to do this.  Choose a mix of mutual funds with good long-term performance.  The younger you are, the higher the risky percentage you can afford.

 

Learn about interest rates.  Learn about debt, mortgages, etc.  Keep a log of everything you spend for at least a week, preferably a month or two. See where your money is going....where it is being wasted, etc.  

 

Limit your credit cards.  Far easier to keep track of one or two if using. 

 

Learn to cook.  Learn to do some basic home repairs.

 

If your company offers a 401k, max it out.  If your company offers a stock buying plan, utilize it.  If your company offers a savings bond plan, use it.  If your bank offers something where they can automatically deduct a percentage of your paycheck and put it into savings, use it.  It's often easier for people to save if they don't ever see the money.

 

Consider seeing a financial planner when you're in your 20s, and let them help you work out a plan.  Look for a CFP.  Listen to their advice.

[Laura Corin]

Yes, I did know that, and certainly there were always some people who libved long.  And they were often supported by the work of others in a direct sense.  But they didn't usually expect to be set up to live in their own household to live independently while being involved in leisure activities.

 

How far back are we thinking?  My grandparents were born around the turn of the 20th century and retired (surveyor and wife; headmaster and wife) at sixty-ish to a life of leisure in their own homes.  My paternal grandfather was retired from before my birth until his death just after Calvin was born, 36 years in all.

[Mom-ninja.]

The thread about destitution in old age is scaring the pants off of me, even though we are probably at least moderately well situated for our stage in the game.

 

For any of you that are near retirement or who have seen friends/parents/etc retire with plenty, do you have any tips or observations about how that came to pass?

 

 

Yeah, they didn't have children. 

[Sarah CB]

The thread about destitution in old age is scaring the pants off of me, even though we are probably at least moderately well situated for our stage in the game.

 

For any of you that are near retirement or who have seen friends/parents/etc retire with plenty, do you have any tips or observations about how that came to pass?

 

Just looking for best practices to implement and/or pass on to the kids for their futures!

 

 

Sent from my iPhone using Tapatalk

 

My Grandma was widowed three times.  And each husband had life insurance.

[SKL]

My grandmother who died at 87 was working part-time almost until she died.  She did work she enjoyed for the most part.  The choice to work was partly (if not mostly) based on the desire / need to be among people.  She was widowed decades earlier and lived alone in the big house her father had built.

 

That said, I'm not even 50 and things are different, physically and mentally.  Some of it is due to choices, but probably not all of it.  My job is the kind where you can only make so many mistakes and be forgiven iykwim.  I can work in some extra cross-checks, but that means less work [output] gets done in the time I have.  Just being honest here.  Besides, this industry depends on stuff that could change - my job could easily disappear over the next decade, and I don't know how much mental energy I will have for re-tooling.  I have a couple of other things going on, but none of them are guarantees of a life of ease.  :)

[Laura Corin]

 

 

That said, I'm not even 50 and things are different, physically and mentally. Some of it is due to choices, but probably not all of it. My job is the kind where you can only make so many mistakes and be forgiven iykwim. I can work in some extra cross-checks, but that means less work [output] gets done in the time I have. Just being honest here. Besides, this industry depends on stuff that could change - my job could easily disappear over the next decade...

Husband was in a high pressure details job. He found increasingly hard to maintain performance, despite good health. Even in my admin job, I have to put many more reminders in place than if it had been a decade or two ago.

 

My organisation is growing within a growing industry. I'm hoping to work until 67, when my government pension kicks in. After that, I should be able to carry on getting casual work in my organisation to cover gaps, maternity leave being the big one.

[umsami]

Oh, forgot to add, if you buy stock, look at dividend rates.  Utility companies are often good investments, that while they don't go up or down much, pay a good dividend.

 

Look from DRIP program....dividend reinvestment plans where the dividend from the stock is automatically reinvested back in that stock.

 

 

Caveat on the whole 401k and company stock plan....do not put all of your apples in one barrel.  You do not want all your investments in the company you work for.

[idnib]

For any of you that are near retirement or who have seen friends/parents/etc retire with plenty, do you have any tips or observations about how that came to pass?

 

I have tips after watching people retire comfortably, with extra money to give to charity and pass to heirs:

 

1) Have money taken out automatically so you never see it, whether a 401k before you get paid, or an automatic transfer from  your bank to investments. 

 

2) Use an index fund. Don't try to time the market with individual stocks.

 

3) Don't invest money in friend and family business ventures. If they knew what they were doing, they wouldn't have to come to you.

 

4) Automatically reinvest dividends if you can afford to.

 

5) Every time you get a raise, add the extra to your investments and keep living as before, with a possible nod to inflation, but inflation has been quite low in recent years.

 

6) Take advantage of any matching offered by an employer. 

 

7) Although you should invest more conservatively as you age, don't just pull your money out of the market in fear. Selling when it's low is about the worst thing you can do, especially if you include taxes on the gains and IRS penalties.

 

8) Don't save for college until you are putting 15% of your pre-tax income into retirement vehicles. There are loans and scholarships for college, but not for retirement.

 

9) Do some reasonable planning using Firecalc and Vanguard's Monte Carlo simulator. These tell you how your plans would have fared historically. Investment houses have a bit of a conflict of interest in that they want you to invest as much as possible. You may not need as much as you think you need. I'm not saying this to make you invest less that you could, but to encourage those who may do nothing because they feel helpless and think there is no point in saving.

Edited February 4, 2016 by idnib

[Matryoshka]

I have tips after watching people retire comfortably, with extra money to give to charity and pass to heirs:

 

1) Have money taken out automatically so you never see it, whether a 401k before you get paid, or an automatic transfer from  your bank to investments. 

 

2) Use an index fund. Don't try to time the market with individual stocks.

 

3) Don't invest money in friend and family business ventures. If they knew what they were doing, they wouldn't have to come to you.

 

4) Automatically reinvest dividends if you can afford to.

 

5) Every time you get a raise, add the extra to your investments and keep living as before, with a possible nod to inflation, but inflation has been quite low in recent years.

 

6) Take advantage of any matching offered by an employer. 

 

7) Although you should invest more conservatively as you age, don't just pull your money out of the market in fear. Selling when it's low is about the worst thing you can do, especially if you include taxes on the gains and IRS penalties.

 

8) Don't save for college until you are putting 15% of your pre-tax income into retirement vehicles. There are loans and scholarships for college, but not for retirement.

 

9) Do some reasonable planning using Firecalc and Vanguard's Monte Carlo simulator. These tell you how your plans would have fared historically. Investment houses have a bit of a conflict of interest in that they want you to invest as much as possible. You may not need as much as you think you need. I'm not saying this to make you invest less that you could, but to encourage those who may do nothing because they feel helpless and think there is no point in saving.

 

 

But looking back at people who have retired already is pretty much meaningless.  For one thing, most of them had pensions, not just private investments.  And they got regular cost-of-living increases. Seems like most people don't even get that anymore. And energy was cheaper (well, we've hit another nice spot in the past year, but I doubt that will last), housing was cheaper in relation to wages, healthcare was paid for by the employer and had much more coverage, housing investments went up in a way that will not be seen again, college was affordable for most people.  I could go on and on.

 

We invested from our early 20's.  We did all the stuff mentioned above. We were given all the rosy pictures of how compounding interest would solve our retirement worries.  Bullcr*p.  Hasn't happened.  Dh will be 60 in a few years, and none of that has come true.  The system is rigged.  The only people who have made out on this 401k business is the fund managers who are often taking out so much in fees that it offsets much of the gains, even when it is an up year.

[TianXiaXueXiao]

Following this thread for wisdom. We are pretty much starting over from scratch with savings and retirement after buying our house. I think we will need a miracle to not have to work in our 70s and 80s. We needed a home and couldn't afford to rent in this area.

[idnib]

But looking back at people who have retired already is pretty much meaningless.  

 

Are you talking about my particular tips, or the calculators? The calculators still apply because you can simply increase the amount you think you will need in retirement (for increased healthcare, cost, lack of pensions, etc) and run them. They are not based on the cost of living, simply on historical market performance over time and how much you think you'll need. You can control that as an input.

Edited February 4, 2016 by idnib

[Azalea]

I agree that funding 401K plans is no guarantee of financial success. Some of the funds offered through 401Ks have ridiculous fees attached. Why are the employers not simply giving us the option to invest in Vanguard index fund or an equivalent fund with very low costs? It's borderline criminal.

[Matryoshka]

Are you talking about my particular tips, or the calculators?

I'm talking about looking at already retired people that are well off and thinking that doing what they did will work for this generation, for all the reasons mentioned in my first paragraph. Nothing to do with calculators.

[idnib]

I'm talking about looking at already retired people that are well off and thinking that doing what they did will work for this generation, for all the reasons mentioned in my first paragraph. Nothing to do with calculators.

 

Aaah, got it. So your issue is not necessarily with my particular tips, but the premise of the entire thread? The OP was asking what people who we know retired successfully did so I was just answering that question. Perhaps is was my mistake to call them "tips." My apologies.

 

I'm sorry you have had a difficult time.  :grouphug:

[Jane in NC]

I agree that funding 401K plans is no guarantee of financial success. Some of the funds offered through 401Ks have ridiculous fees attached. Why are the employers not simply giving us the option to invest in Vanguard index fund or an equivalent fund with very low costs? It's borderline criminal.

 

When my husband started with his current employer, the only good option was company stock. I felt like they were forcing us to put all of our eggs in one basket.  We diversified through Roth IRAs and now the employer offers betters options.

 

[Matryoshka]

Aaah, got it. So your issue is not necessarily with my particular tips, but the premise of the entire thread? The OP was asking what people who we know retired successfully did so I was just answering that question. Perhaps is was my mistake to call them "tips." My apologies.

 

I'm sorry you have had a difficult time.  :grouphug:

 

Well, because we were good little savers and have saved and saved, we are much better off than most people.

 

However, none of the promises of "and then through the magic of compounded interest you'll have a million dollars or so by retirement" have come even close to coming true.  We've been sold a bill of goods.

 

 

 

[Jane in NC]

Well, because we were good little savers and have saved and saved, we are much better off than most people.

 

However, none of the promises of "and then through the magic of compounded interest you'll have a million dollars or so by retirement" have come even close to coming true.  We've been sold a bill of goods.

 

I too am sorry that you are angry and frustrated.

 

We too are savers and while our portfolio has had peaks and valleys, overall there is growth.  Like you, our investments have been made for several decades now.  Black Monday of 1987 came early in my investment experience--but I did not panic.  Obviously the market bounced back.

 

A couple things though:  I know people who have retired with less than a million who live a high quality life.  Some of the calculators, in my opinion, seem to assume that one will live a lavish lifestyle in retirement.  Of course, COL is everything.

 

Secondly, I think part of the reason that we are so fortunate with our investments is that we had some spare cash.  Some of my friends who live in high COL areas have not been able to put much into retirement after they pay their mortgage and property taxes.  I will say that we were lucky.  We bought into an area when it was significantly undervalued.  Property values rose astronomically after we bought. Property values have gone down here but still we have more than doubled our investment. That makes us lucky.  (And we did not make the mistake of borrowing against that short term paper equity like some folks did!)

 

Diversification has helped.

 

So we are like you--good little savers.  But I feel very secure financially.  So I am not going to say it was all a bill of goods.

[Rosie_0801]

3) Don't invest money in friend and family business ventures. If they knew what they were doing, they wouldn't have to come to you.

 

That's not necessarily true.

 

If they'd already done what they are trying to do, they wouldn't need to come to you.

 

 

Investing in a stranger's business venture is hardly safer. They are strangers and won't be at all affected if they lose your money.

[Joules]

I agree with most of what you wrote. I know that not everyone can afford it but we have long term care insurance... People in our families tend to live to late 90's at least and some to their early 100's.

 

I come from a long-lived family.  Unfortunately if you have auto-immune illnesses, you get rejected for LTC insurance, even if you are young.  The people most likely to need the insurance can't get it.  It didn't occur to me to look at LTC when I was in my 20s, pre-diagnoses.

[Matryoshka]

I too am sorry that you are angry and frustrated.

 

I'd probably be a lot less cranky if college weren't such a racket on top of it, and if the FAFSA's asset protection allowance wasn't ridiculously tiny, even with an older parent in the upper 50's.

 

[Jane in NC]

I'd probably be a lot less cranky if college weren't such a racket on top of it, and if the FAFSA's asset protection allowance wasn't ridiculously tiny, even with an older parent in the upper 50's.

 

 

This was one reason that I was happy we had money in Roths.  FAFSA does not consider retirement accounts (unlike the dreaded CSS Profile used by some of the top colleges) but withdrawals of funds deposited in Roths can be made without penalty.  I view Roth IRAs as a great way to save for college.  We did not have to tap into our Roths but I always had them as a back up.

 

Goes without saying that merit aid is a beautiful thing.

 

[Matryoshka]

This was one reason that I was happy we had money in Roths.  FAFSA does not consider retirement accounts (unlike the dreaded CSS Profile used by some of the top colleges) but withdrawals of funds deposited in Roths can be made without penalty.  I view Roth IRAs as a great way to save for college.  We did not have to tap into our Roths but I always had them as a back up.

 

Goes without saying that merit aid is a beautiful thing.

 

 

I've been trying to convince dh to diversify into some Roths.  He can't add any (because he already maxes his 401k), but we also always invest in my name, and those could be Roths...

 

[SKL]

The 401K is a good investment, but what your 401K is invested in has some level of risk.  I always kept mine in money market, so mine always grew.  A lot of people thought I was too conservative, but in this case it worked out much better when the market crashed.  But even so, interest rates went down to practically zero, which was good for debtors but not so good for savers.  Oh well.  If the interest rates had not tanked, I'd have a lot more $ in my savings accounts, so I don't feel like I was misled.

 

Now I have a fair % of my wealth in hard assets (real estate).  Of course real estate could always take a dive, but at least I would have a roof to sleep under.  :P

[FaithManor]

I have a Roth. We like to have our eggs in more than one basket.

 

I had known numerous individuals in their 60's who prior to the mortgage debacle sold their paid off larger homes, got primo money for them, used their over 55 exemption from capitol gains, and bought a smaller home in a lower COL. This was one way they made modest savings and social security work for a comfortable retirement. They got the equity out of their homes and lowered their property taxes and monthly expenditures which gave them some travel money, some fun spending cash.

 

However, looking at the current state of things including some pretty wicked property tax rates in many parts of the country, expensive high deductible homeowner polices, maintenance,...I am not certain that home ownership will be a good investment for my children's generation.

[idnib]

That's not necessarily true.

 

If they'd already done what they are trying to do, they wouldn't need to come to you.

 

 

Investing in a stranger's business venture is hardly safer. They are strangers and won't be at all affected if they lose your money.

 

I was thinking specifically of people who've been turned away from getting money from other sources, meaning if a bank/Small Business Association has gone though their business plan and financial circumstances and won't loan them the money, I wouldn't either. And if the bank/SBA would loan them the money, they can get it there. 

 

It was wasn't really meant to compare to investing in a stranger's business, it was just an answer to the question of how people I know have managed to have successful retirements. Quite a few times after they built their nest eggs they were approached by others and either said no (and saved their money from being lost) or said yes (and lost their money.) 

 

That's just been the experience of people I personally know, but I think that's what kubiac was asking for.

[idnib]

However, looking at the current state of things including some pretty wicked property tax rates in many parts of the country, expensive high deductible homeowner polices, maintenance,...I am not certain that home ownership will be a good investment for my children's generation.

 

The trouble with not owning and renting instead (as an investment strategy) is that these same escalating costs you mentioned apply to landlords who then pass them on through rent increases. There's no way to avoid them by simply renting, although if you live in a larger complex the cost of some of these things are spread out over more units and can sometimes come out to a lower per unit cost.

[Rosie_0801]

I was thinking specifically of people who've been turned away from getting money from other sources, meaning if a bank/Small Business Association has gone though their business plan and financial circumstances and won't loan them the money, I wouldn't either. And if the bank/SBA would loan them the money, they can get it there. 

 

Oh, I see what you mean.

 

I'm hearing about a funny (not ha-ha) situation where the banks and local government are terribly excited about a business proposal, but won't lend the money anyway because too much of their deposit comes from a single source (their mum.) Or that's what I understand to be the problem. I know it is no problem with the actual business plan. They were also after some government funding for drought-proof agriculture, missed out due to a lack of votes and the winner was a plan which will use a huge amount of water and only provide temporary jobs. Maybe there is sense to be found in it, but I can't find it.

[FaithManor]

 

The trouble with not owning and renting instead (as an investment strategy) is that these same escalating costs you mentioned apply to landlords who then pass them on through rent increases. There's no way to avoid them by simply renting, although if you live in a larger complex the cost of some of these things are spread out over more units and can sometimes come out to a lower per unit cost.[/quote

 

That could be true, but in many areas of the Great Lakes Region and Midwest in particular, homeowners are paying a lot of interest and ever increasing property tax while not experiencing any increase in home value and paying primo for repairs, and taking out loans to pay for repairs. Not to mention that homeowner insurance policies have skyrocketed in price, cover less, and have even bigger deductibles. In total, many people are just taking a huge, huge financial bath on home ownership. This is especially so due to the fact the unlike previous generations who experienced some job security and when they purchased homes had a reasonable chance of staying in one place long enough to recover the costs of getting into home ownership, my children's generation is expected to have to be VERY mobile in order to remain employed.

 

Our financial advisor counsels his clients that in this region, if one does not have a reasonable guarantee of staying put for ten years, home ownership is a bad investment because home values are increasing at such a poor rate but property taxes and maintenance costs are crazily increasing so purchasing a house is a big loss except for a few high end areas - ie. not middle class neighborhoods.

[idnib]

Our financial advisor counsels his clients that in this region, if one does not have a reasonable guarantee of staying put for ten years, home ownership is a bad investment because home values are increasing at such a poor rate but property taxes and maintenance costs are crazily increasing so purchasing a house is a big loss except for a few high end areas - ie. not middle class neighborhoods.

 

Gotcha. That makes sense. I think the general rule of thumb to recoup money spent in buying a house is 7 years, so I agree with you if in your area 10 years is the norm.

 

I assume the property taxes are going up quickly because the cities are losing people while having to maintain the same infrastructure levels. Is that the case?

Edited February 5, 2016 by idnib

[Tita Gidge]

The other thing I wonder is - there are many roles in society that need to be filled by competent adults, which are not paid work.  To some extent those have often overlapped with retired people - younger ones may help care for their very elderly parents, or their grandkids.  There aslo used to be significant numbers of people doing special work in things like religious orders, essentially for their room and board for life, and they did a lot of work we now have to pay people a lot more for.  I wonder - has our capacity as a society to carry people in those kinds of roles - stay at home parents for example, or those who do significant volunteer work - been affected by the expectation of having that demographic that isn't working?  It may not at all, but I think its interesting to think about a shift in who the non-paid population are.

 

Short answer: I married well, then divorced well, and I've always contributed to the interests of our extended family. 

 

I retired in my mid-30s. I left the workforce with modest pay and decent benefits, and now focus fully on home schooling my kids and being available to help my relatives - childcare for siblings, eldercare for my grandma and HER four living siblings (who range in age from 90 to 99 and all live at home). This is common for my family culture - a home is often multi-generational and multi-family - and the pooling of our resources allows us to sustain this 'unpaid class' you to which you refer. 

 

I'll be better off in my 60s+ because in addition to my current retirement income I'll be getting 50% total of my ex-husband's military pension and 50% total of his TSP. He contributes the max amount (and must, per our divorce decree).  His civilian career has a mandatory retirement age, so he can't just keep working to avoid tapping into "our" retirement funds. If there's SS, it'll be the gravy but I'm in my 30s so I don't count on it. I'm required to be named my ex's sole benefactor for all insurance and retirement payouts. 

 

I also have zero problem allowing my children, nieces and nephews the privilege to care for me as I age.  I don't see it as a burden any more than it was my burden to care for them as kids. But I'm not one to make poor choices and expect them to bail me out, either. I will contribute to their families however I can, and in return they will care for me. This is an expectation they've been raised with and already contribute to (when it comes to the elders in our family). I'm pretty mellow; it's my older sister the kids all need to be worried about taking in  :lol: .

[waa510]

We live well below our means, bike when/if we can, have one car if/when we can, the basic stuff. A lot of frugal living or money-saving blogs focus on the teeny, tiny things you can do to save $20 a year. I love MMM b/c he's focusing on the huge, monstrous money vacuums of daily life that we often discount like 3,500 sq. ft. house for 4 we don't need or gas-guzzling massive truck to drive 2 miles to work. Dh gets paid a lot more than we need, which we are very blessed by. We sack that cash away in Vanguard accounts, stocks, maxing out retirement funds for the year. Also, building back up the Emergency Fund (more like Moving Fund in the past decade) if it's been depleted (like when we moved here and had to pay out of the wazoo for stuff until we got reimbursed)

 

A lot of it is making wise decisions that aren't necessarily just with the here and now in mind. No big purchases made spontaneously. We usually only vacation when tacking it on to Dh's work travel (like to Hawaii). That way his plane ticket (ours with credit card $$ rewards), hotel, rental car and food is paid for. We vacation a lot like this for maybe $100 max. for activities and museums done there. 

 

So nothing mind-blowing. There really is no secret to the method by which it's done, IMO. 

[Tita Gidge]

To piggy back on that, 

 

my parents bought each of us a small place to live while we attended college. This was doable because we all were expected to earn at least partial scholarships and/or to work to supplement our educations. I did both.  The money they saved in tuition they invested in real estate. When we graduated college, the property became ours. I still own mine. It's long paid off and has never sat empty due to its proximity to a major university. In hindsight I wish I had picked a college abroad!

 

My parents weren't wealthy at the time, and this was no easy feat with so many kids.  We learned to invest in ourselves first and foremost. And if we thought we were a worthy investment, so did they - and they'd invest in us, too. It was a great life lesson on many fronts, and a great financial gift. 

 

That rental income from that property gave us a healthy head start in our marriage.  We always kept that money separate, using it to re-invest in other rental properties. We ended up with a number of properties and lots of passive income. We weren't hit by the recession because our properties were near universities and/or strong military bases. We bought every time we were relocated.

 

It was a snowball effect. I've had siblings sell off their properties, liquidating as needed for healthcare expenses or recession-related work gaps. I've had siblings continue to live in their paid-off properties for YEARS, not needing to keep up with the Joneses they graduated with. And I've had siblings like me, who just sit and collect the passive income for DECADES. It's a safety net of sorts. It's kept some of us from tapping into 401Ks for crisis money.

 

Real estate won't be the answer for every one or every area, but it might be a good strategy for some. It has been for us.

 

The other thing is for retirement, I don't expect to live alone. I never have, and don't imagine I ever will. I don't want to, I don't see that as ideal at all.  I have budgeted for the case that my children write me off, but it's more likely they will not. And so my retirement funds will go that much farther - and their income will, too.  If I'm sharing a home with them, I'm free childcare and housekeeping if my DD/DIL work (and even if they don't). Instead of paying rent or living in a paid off home while they pay a mortgage or rent, we can pool money to buy a bigger, better home together. Where I'm from  this is the norm. It's a real expectation my children will marry Americans, and ones who come from different traditions at that. So I'm okay living in a pool house  :lol: I'm spending my time educating them accordingly, so they may provide for their families - including me - with secure, higher paying jobs that afford them money and time for hobbies they love. Work is work; hobbies are where you enjoy yourself and find meaning IMO.

 

 

 

 

[kubiac]

Thanks for all the experiences and wisdom, guys, as well as the references to Mr. Money Mustache and Bogleheads. I appreciate hearing how some of you have done it and what pitfalls to try to avoid from others.

[amy g.]

We also tack vacations on to Dh's work trips. I'm taking the younger girls to Amsterdam with us in May. I'm sad we are gong to miss the trip to Vancouver next month.

 

We pay for our plane tickets with points. The company picks up the hotel and there are vendors who want to take us out to eat for every meal. My favorite part though is that it doesn't use up any of Dh's vacation time. We have the opportunity to take 3 or 4 of these "vacations" each year.

 

We have been consistent in contributing to our 401k. The company matches up to 8%. They also provide a pension, retiree medical and post employment life insurance.

 

I agree with other people though that luck is still a factor in how we will fare. So that leads me to the most important advice I have. Don't act like an ass.

 

If disaster were to strike and I was destitute, I would have options of kids and friends and relatives to share expenses and resources with because I have consistently shown them that I can be a team player and contribute without controling and above all else, treat everyone with respect even when I don't agree with/understand their reasonings.

 

I have relatives who will die alone because no one who knows them would live with them by choice.

 

So my advice is, don't be that person.

[Serenade]

I don't think people today will retire as well as people of our parents' generation.  My mom and her friends/acquaintances, even the ones who only had moderate jobs, are all traveling a ton, and living nicely.  Although until this year, my husband made a good salary and we maxed out the 401K and employer matching, we won't ever have the funds to travel like that and generally just not worry about money in our retirement.    It's just a different world today.