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Author: FuwlEd Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1488  
Subject: Parents Nearing Retirement Date: 8/3/2006 12:07 AM
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My parents are 3-4 years from retirement, have saved some money but will still rely heavily on social security, so I'm sure the standard of living adjustment will take some getting used to for them.

So moving towards retirement, are there certain things they should be doing with their assets other than saving and investing? And by that I mean is it ok for their house to stay in their name only, making sure they sign up for Medicare, draw down a Roth before a 401K, etc?

That's rather open ended but looking for some general guidance, tips. Perhaps a suggestion regarding books that may provide overall guidance on preparing for the few years just prior to retirement.

Thanks, FuwlEd
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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 941 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/3/2006 12:22 AM
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<<My parents are 3-4 years from retirement, have saved some money but will still rely heavily on social security, so I'm sure the standard of living adjustment will take some getting used to for them.
>>


Perhaps the most critical decision is to decide when and if to retire.

I've had a chance to see a couple of underfunded retirements ----it's not pretty. If your parents really don't have the savings to support retirement, continuing to work (if it's possible) may be the smart move.

How old are your parents, and what are their reasons for desiring to retire in 3-4 years?




Seattle Pioneer



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Author: FuwlEd Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 942 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/3/2006 12:42 AM
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Thanks. Any specific horror stories to share are underfunded retirements? I'm trying to convince them to work full time until 66, maybe even 70, and then even consider a part-time job. Both are 63 right now and would retire tmw if they could. No hobbies other than watching tv, and honestly not many friends they hang with. Prefer to stay home, watch tv, go out to dinner. Sounds like a recipe for a very short post-retirement life.

They have liquid assets of about $200K, gross about $80K/year, and will get about a combined $30K from social security. So quick math here tells you they need to learn to live on less rather quickly.

Thanks...

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 943 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/3/2006 1:01 AM
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Why would they drawn down the ROTH before the 401K? The 401K has minimum distribution requirements. ROTH does not. Since there income will be low, they will be able to make some withdrawls from the 401K with little or no income tax consequences.

It doesn't sound like estate taxes will be a problem. The balance of 401Ks are included in the estate. Since the amount is pre-tax, when estate taxes are a concern there is an advantage to drawing down the 401Ks.

Do they have wills, living trust and advanced medical directive? Are they candidates for long term care insurance? Do they have a mortgage or debt? If they retire at 62, do they have medical insurance and a plan to pay for it? Have they planned a retirement budget?

If one becomes disabled and requires long term care, it will be necessary to have professional advise on how to preserve assets for the other spouse. Moving the home out of the trust and buying a fixed annunity would be options.

Debra

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 944 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/3/2006 2:37 AM
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<<
Thanks. Any specific horror stories to share are underfunded retirements? I'm trying to convince them to work full time until 66, maybe even 70, and then even consider a part-time job. Both are 63 right now and would retire tmw if they could. No hobbies other than watching tv, and honestly not many friends they hang with. Prefer to stay home, watch tv, go out to dinner. Sounds like a recipe for a very short post-retirement life.

They have liquid assets of about $200K, gross about $80K/year, and will get about a combined $30K from social security. So quick math here tells you they need to learn to live on less rather quickly.

Thanks...

>>


What is the debt/equity situation in any home and extent of other debts owed?


If it were me and I wanted to retire, I'd plan to live off Social Security and not use my savings for living expenses at all, reserving savings for unexpected problems long term.


If they really want to retire, they should plan on cutting their living expenses to that $30,000/year NOW to decide if they are willing to do that and add further to their savings. If they prefer to keep spending, they should keep working indefinitely.




Seattle Pioneer




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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 945 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/3/2006 2:40 AM
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I don't often agree with Seattle Pioneer, in this case the suggestion for them to live on $30,000 now is a very good idea. Even that doesn't account for medical expenses.

Debra

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 946 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/3/2006 7:17 AM
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FuelEd:

I'm trying to convince them to work full time until 66, maybe even 70, and then even consider a part-time job.

Why?

You say:

Both are 63 right now and would retire tmw if they could. No hobbies other than watching tv, and honestly not many friends they hang with. Prefer to stay home, watch tv, go out to dinner.

From what you say, they lead relatively laid-back lives. If they want to retire, why not do it now? We did at 62 and we love it! I admit that we do have some family and some friends and we're active in our church, and we also enjoy a couple of hobbies, but otherwise we tend to lead a life that sounds a lot like theirs. We're happy as heck and have been for several years.

Sounds like a recipe for a very short post-retirement life.

Again, why do you say that?

The only danger signal I really see is the fact that they now make $80K a year, but so did we before we retired. Now we live happily on our $30K SS plus occasional extra from my IRA (we save hers as emergency backup) for big extra things like occasional trips or paying the whole coming year's oil in advance to save money next winter.

Happiness is what people make it. There is no formula. Some want to be very "active", and that's great -- for them. Others are very happy just being together, maybe enjoying the scenery, watching some TV, dining out, and otherwise just plain enjoying a quiet life. It need not be a recipe for disaster.

Don't push them to "work" if they don't want to. We enjoyed our careers but we LOVE being free as birds now.

Vermonter

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 947 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/3/2006 7:20 AM
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SP:

What is the debt/equity situation in any home and extent of other debts owed? If it were me and I wanted to retire, I'd plan to live off Social Security and not use my savings for living expenses at all, reserving savings for unexpected problems long term.

If they really want to retire, they should plan on cutting their living expenses to that $30,000/year NOW to decide if they are willing to do that and add further to their savings. If they prefer to keep spending, they should keep working indefinitely.


Wise advice.

Again, as you and I both know, there is no "formula" for retirement. They need to do what works for them and what makes them happy, and that may not be what others would do.

Vermonter

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 948 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/4/2006 12:30 PM
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I'm not totally up on Social Security, but don't they get a lot less in terms of payment if the retire now instead of at 65? Why not hang in there - keep working - so they can get the bigger payout. In the meantime they can try to scale back, adjust and see if they CAN live on $30K - $35K a year.

They can't fund a retirement for two for what could be 20 or more years to come (hopefully!) on $200K. It just can't be done.

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 949 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/4/2006 2:38 PM
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Sure, hang in there if they want to or have to. But if not, they CAN retire -- yes, at a reduction -- at age 62. Anyone can.

We did and we have no regrets, which was all I was saying.

To each his or her own. We'd had enough and had no desire to work to 65.

Vermonter

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 950 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/4/2006 4:27 PM
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I'm not totally up on Social Security, but don't they get a lot less in terms of payment if the retire now instead of at 65? A#

They can figure all the choices and the differences out with the calculator here : http://www.ssa.gov/planners/calculators.htm

You might want to play wit hit yourself.

rad

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 951 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/4/2006 5:50 PM
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Vermonter - good for you!!! Sounds like you guys have the right attitude that makes it work.

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 952 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/8/2006 11:47 AM
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...they CAN retire -- yes, at a reduction -- at age 62. Anyone can.
We did and we have no regrets...We'd had enough and had no desire to work to 65.


I'm with you Vermonter--the sooner I can get out of the 'rat-race' the better!

Hoping to retire at 62 and live a quiet, lay-back, fairly frugal life,

2old


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Author: determinedmom Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 953 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/20/2006 11:24 AM
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Staying home, watching TV and going out for dinner is not all that expensive and may be quite manageable on $30k a year.

My mother is now 82 and retired in her mid-60s. She lives just fine entirely out of about $14k social security. She does have some savings which she rarely spends.

She is not much a spender. Her house is paid for. Utility costs are low. Her car (which she rarely drives) is paid for. Her property taxes are relatively low. She likes to watch TV and visit with family. She rarely eats out. She doesn't have cable TV (always thought that was a waste of money -- thinks ABC, CBS and NBC are enough for anyone). She has no real hobbies that cost money.

Her biggest expense is prescriptions. She is someone who has saved a lot through the prescription drug plan.

While my dad was still alive and drawing social security they managed to save money at that time as they just didn't spend that money each year.

The one thing that might have been a problem for them was when my dad was still alive he was hospitalized several months and came close to reaching the limit that Medicare would have paid for. It would have been good for them to have long term care insurance but they didn't have it.

Anyway, it is perfectly possible to live just fine on $30k a year particularly if your house is paid for.

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 954 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/20/2006 3:52 PM
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Anyway, it is perfectly possible to live just fine on $30k a year particularly if your house is paid for.

Our retirement home is NOT all paid off, but it's a small mortgage at a fixed 5.75% rate, mainly because calculations suggested that it was better to keep it that way vs pulling all that cash out of our rather small IRA's to pay it off.

Until we both hit Medicare age, we had to also pay Blue Cross rates for health insurance -- which started at $425/month 5 years ago and reached $700+/month soon before I hit 65; then she hit 65, too, and now it costs us $88 apiece for Medicare Part B plus $120 each for Medigap insurance -- or about $416/month now. However, we don;t have those huge $5,000 deductibles now (like with Blue Cross), so it feels better!

Yes, staying home, watching TV and going out for dinner is not all that expensive and may be quite manageable on $30k a year. We also pledge a chunk to our church, by the way.

Vermonter

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 955 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/20/2006 4:06 PM
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FuwlEd:

As I reread this thread, including your post, it occurred to me to suggest a couple of things beyond previous posts.

First, I suggest that anyone of any age considering retirement take the time to learn a bit about investing -- bonds, equities, annuities, etc. -- so they can hopefully make wiser decisions about their own situation. I was shocked to learn just how few people even want to know about such things, which means they end up trusting someone else to handle all of their money! Younger people, especially, need to learn to appreciate the incredible value of "compounding" over many years!

Second, as I have said, if they are within 3-4 years of retirement, they should know what their Social Security payments will be -- at 62 or at their so-called "full" retirement age of 66 or whatever the formula says. In our case, for example, my wife would have gotten very little on her own; however, by applying as my spouse, she got a lot more, up to almost half of what I got.

Third, the Roth came along just about too late for us, really. We could see no advantage at our age of paying taxes up front on an existing IRA to convert it and then have to wait 5 years to withdraw the money.

Finally, for SS guidance, please go to the source -- Social Security Administration. Go to their web site, call them or whatever. They can be very helpful.

Again, we went from maybe a $100K combined income to about $30K or so in retrement and find it not that bad. HOWEVER, a big caveat is that we HAVE had to suck extra amounts out sometimes for big things (special trips, the annual whole year oil bill, etc.), bringing our income up closer to $40K, but even then we paid no taxes for the last two years, thanks to deductions, the amount of Social Security, our age, etc. And, because I personally "cultivate" (work at) my IRA, I work at rebuilding it if need be by buying/selling stocks and funds along the way.

Good luck!

Vermonter

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Author: determinedmom Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 957 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/21/2006 11:36 PM
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When I look at my mom (in her 80s) one difference that I see between her and (unfortunately perhaps) me is that she just doesn't have all that many "wants." She never had cable TV and doesn't miss it. She never had a cell phone and doesn't miss it. She isn't someone who has to have the newest, greatest thing. I know that I tend to like new "gadgets" and when I see some cool new product, I tend to want to have it. She doesn't. So, she has most everything she really wants and doesn't need to spend that much money.

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 958 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/22/2006 4:58 AM
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determinedmom:

When I look at my mom (in her 80s) one difference that I see between her and (unfortunately perhaps) me is that she just doesn't have all that many "wants."

There may be a message for you in there, too, of course.

So many people rush around these days, slaving at work, putting in extra hours, and missing out on family/spouse time, not necessarily to be able to live a good life, but just to be able to buy more "stuff"! However, I confess that, back when we were both working and raising our family, WE did a lot of the same thing, though we tried not to.

I sometimes wonder where it will all end up. Will the coming generations eventually get so "busy" that they just plain go mad?

Good luck finding a "balance"!

Vermonter

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Author: WyneFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 959 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/22/2006 3:43 PM
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There may be a message for you in there, too, of course.

So many people rush around these days, slaving at work, putting in extra hours, and missing out on family/spouse time, not necessarily to be able to live a good life, but just to be able to buy more "stuff"! However, I confess that, back when we were both working and raising our family, WE did a lot of the same thing, though we tried not to.

I sometimes wonder where it will all end up. Will the coming generations eventually get so "busy" that they just plain go mad?

Good luck finding a "balance"!


I need to disagree with RV on a couple of levels. I believe that we all, during our working days, tend to try to 'keep up with the Jonses'. As we mature (read - grow older and wiser) many of us no longer feel the need to impress our peers with stuff. We slow dow the spending and live out our lives more frugally. (And I know that RV is a conservative spender in retirement.)

Because our parents lived through the Great Depression with that stone for soup or reused the paper from the butcher they tended to think frugal. I find that we (aging boomers as an inclusive class) are starting to do the same. We've seen the papers where others have had their 401k's wiped out by Enron/Worldcom scams or pensions that were promised are being taken away. If we think about it our parents were right, no one will take care of us but ourselves. As part of a HS project in Family Life (back in 1972 no less) I determined that Congress would tinker with SS and it really was a Ponzi Scheme. I vowed then that I would do what I could to not be dependent on the Government or any company where I worked. I've become more frugal in my old age and still spend for those Items that make my life rich.

I see the next generation as a mixed bag. Some are spending wildly but more are Fiscal Conservatives. More are at least talking about the future and investing than my generation ever did. Savings rates in this country are low until you consider 401K,403B,IRA's and Roth's and the equity building in the houses being purchased. I don't like the trend toward 40-50 year house mortgages and 7-10 year car mortgages but they will figure it out.....we did didn't we?

Anyway, the kids today will be fine and will learn their lessons by considering the stupid things we did. Just like we learned from our parents. Now go and re-use that paper bag!

Nechochwen - walking a different path -

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 960 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/22/2006 4:12 PM
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WnyeFool:

I see the next generation as a mixed bag. Some are spending wildly but more are Fiscal Conservatives. More are at least talking about the future and investing than my generation ever did. Savings rates in this country are low until you consider 401K,403B,IRA's and Roth's and the equity building in the houses being purchased. I don't like the trend toward 40-50 year house mortgages and 7-10 year car mortgages but they will figure it out.....we did didn't we? Anyway, the kids today will be fine and will learn their lessons by considering the stupid things we did. Just like we learned from our parents.

Thanks for the thoughtful post.

Actually, I think you're right. Hey, we figured it out, as have so many generations before us, and so will the next generations.

At least some people will. Some people will always end up screwing themselves up, of course -- the grasshoppers and the ants!

Vermonter

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Author: WyneFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 961 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/22/2006 4:22 PM
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Actually, I think you're right. Hey, we figured it out, as have so many generations before us, and so will the next generations.

At least some people will.


Vermonter,

Out of curiosity, do you talk with your kids about investing and dumb things you have done? I don't have children so I tend to talk to any of the next generation that is willing to listen and has patience. Some of my nieces will listen others.....take after their parents. I watched dad make lots of mistakes and he did manage to do a number of things right. I've found that time has made up for lots of foolishness on my part.

WF -planning to retire in 3 years at 55-

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 962 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/23/2006 5:04 AM
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WF:

Out of curiosity, do you talk with your kids about investing and dumb things you have done?

Some of the "dumb" things I/we have done are obvious, of course! We're all pretty close, after all.

As for investing? Depends. My youngest -- our son -- and I had a thorough talk a day after he graduated college, as he prepared to start his first job. He already had a "plan" for sticking aside as much as he could in a 401k, etc., so we just talked about whether he should be "aggressive" or "cautious". I urged "thoughtful aggressive" at his age. Today, 10 years later, he's doing pretty well, but is more diversified, as he should be. One daughter and her husband are pretty well set, both professionals, and both putting in money, etc. The oldest hasn't got much but has it in a couple of good mutual funds, and I have counseled her to please NEVER touch it, and let it grow.

They see that we're not wealthy but quite happy in retirement, and that's good. We enjoy seeing them lead good, caring and honest lives with their families and we're just grateful that they seem to have turned out well and made pretty good choices. What more can we do?

Vermonter



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Author: WyneFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 963 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/23/2006 8:50 AM
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We enjoy seeing them lead good, caring and honest lives with their families and we're just grateful that they seem to have turned out well and made pretty good choices. What more can we do?


Amen to that. I hope for that for my nieces and nephews, so far most have done well.

WF

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Author: GlennRim Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 964 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/30/2006 12:04 PM
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This situaion is, unfortunately, all too common in the good ol' U S of A. It a country where the overwhelming majority would be considered wealthy by most of the rest of the world, we have folks who have worked their butts off for 40 years and have little or nothing to show for it. The time to plan for retirement is when you get your first job, not when you're in your 50s or 60s. The most depressing statistic of economics in this country is that our savings rate is a negative 2%. We spend more than we earn, live in the lap of luxury with huge credit card debts, live in homes we can't afford (and so big there are rooms we never use), buy new cars every 3 years, can't live a moment without buying the newest and greatest, and then complain that we can't afford to retire. SHEESH!

Our children are taught that they have a right to be given anything they want rather than having to work for it. It's just a mess.

Every person who has a job in this country can afford to save something. I don't care if they are living on minimum wage, they can still afford to save something. All they have to do is make choices not to spend.

I'm speaking from experience. I never had a high-paying job but retired comfortably at age 50. I have no financial worries and probably won't for the rest of my life. Basically this was done through a consistent and absolute budget that required that I pay myself first. I'm somewhat of an example of the folks you can read about in "The Millionaire Next Door," although I never owned my own company nor had a high income.

I realize it's too late for your parents to have much impact on their current net worth, but it's certainly not too late for you. Learn from their experience and start saving, not spending.

GlennRim

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Author: GlennRim Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 965 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/30/2006 12:09 PM
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In every situation where I've done it, a present value calculation of SS payments shows that it's much more prudent to take the money at 62, not later. The small increase one would get by waiting takes many many years to make up for what they would be getting by starting earlier. Waiting until 66 usually takes about 15 to 18 years before that decision becomes positive. In every calculation I've done, waiting until 70 NEVER pays back.

GlennRim

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 966 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/30/2006 1:53 PM
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<<Every person who has a job in this country can afford to save something. I don't care if they are living on minimum wage, they can still afford to save something. All they have to do is make choices not to spend.

I'm speaking from experience. I never had a high-paying job but retired comfortably at age 50. I have no financial worries and probably won't for the rest of my life. Basically this was done through a consistent and absolute budget that required that I pay myself first. I'm somewhat of an example of the folks you can read about in "The Millionaire Next Door," although I never owned my own company nor had a high income.
>>


You should fit in right well on this board, Glenn.


As a way of recognizing the virtues you describe above, I'm pleased to be able to appoint you a Seattle Pioneer "Favorite Fool," and to be the first person to recognize you as a Favorite Fool as well.



Seattle Pioneer

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Author: GlennRim Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 967 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/30/2006 2:52 PM
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Geez! Not knowing what "favorite fool" is, I can only assume that there is a little sarcastic tongue-in-cheek there.

GlennRim

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Author: Crazyinlovefool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 968 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/30/2006 6:29 PM
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Heh heh

No good deed goes unpunished.

Crazyinlovefool


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Author: sunrayman Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 969 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/31/2006 12:31 AM
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Waiting until 66 usually takes about 15 to 18 years before that decision becomes positive. In every calculation I've done, waiting until 70 NEVER pays back.



+++
+++


I intend to start collecting SS when I turn 62.


sunray
a retured man getting nearer to 62 every day
PAL= 969

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 970 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/31/2006 1:06 AM
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<<In every situation where I've done it, a present value calculation of SS payments shows that it's much more prudent to take the money at 62, not later. The small increase one would get by waiting takes many many years to make up for what they would be getting by starting earlier. Waiting until 66 usually takes about 15 to 18 years before that decision becomes positive. In every calculation I've done, waiting until 70 NEVER pays back.

GlennRim
>>


I wonder what an actuary would say about this issue using good data? Someone must have studied the issue in an unbiased way.

Plus, you get to make the decision based on your personal knowledge of family health history and your knowledge of your own heath and physical condition. That should allow a reasonable person to improve the odds of making a favorable decision quite a bit.



Seattle Pioneer

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Author: GlennRim Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 971 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/31/2006 10:50 AM
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<<
I wonder what an actuary would say about this issue using good data? Someone must have studied the issue in an unbiased way.

Plus, you get to make the decision based on your personal knowledge of family health history and your knowledge of your own heath and physical condition. That should allow a reasonable person to improve the odds of making a favorable decision quite a bit.>>



Of course, every decision is a personal one. I was only referring to the situations that were pretty straight forward and where a simple present value calcuation was appropriate. I've done somewhere close to 15 of them and in each case the age 62 option was clearly the better. The only major item that may make a later age better would be if there was a huge improvement in life expectancy. As it is now, assuming normal life expectancy makes the earlier age the supperior choice.

GlennRim

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 972 of 1488
Subject: Re: Parents Nearing Retirement Date: 9/1/2006 1:19 AM
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Of course, every decision is a personal one. I was only referring to the situations that were pretty straight forward and where a simple present value calcuation was appropriate. I've done somewhere close to 15 of them and in each case the age 62 option was clearly the better. The only major item that may make a later age better would be if there was a huge improvement in life expectancy. As it is now, assuming normal life expectancy makes the earlier age the supperior choice.

GlennRim


Does your calculations include income taxes? Taking Social Security early while still working makes more of the distribution taxable (or lost due too high of income).

Debra

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Author: GlennRim Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 973 of 1488
Subject: Re: Parents Nearing Retirement Date: 9/1/2006 2:23 PM
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<<Does your calculations include income taxes? Taking Social Security early while still working makes more of the distribution taxable (or lost due too high of income).>>

Debra

In only one instance was there a concern about current income from actually working. In that instance, tax was not a consideration. In all the other cases, income was passive, either from an IRA, Retirement Plan, and/or other investments. I haven't a clue if we should or should not have considered income tax, but we didn't.

GlennRim

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Author: eatnbybears Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 974 of 1488
Subject: Re: Parents Nearing Retirement Date: 9/3/2006 11:35 AM
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What is the house worth and what is it's condition?

Great to say that they can live on $30,000, but a $3000 tax bill and $1500 for insurance throws 15% right out the window

Blow a furnace and there is another 15% a roof ... forget it.

Consider the house in 10 years, the cost of taxes, repairs .... and then what it's sales value is.

If the house could be sold and combined with the saving, there are 20 year notes going at 7% now ... that is another $30,000 a year to go with the SS.

How big is the house? Can they downsize into something that "you" would consider a "vacation" home. Look at the need for a down payment, and what the remaining monthly payment would be, against the $30,000 a year and offer to help out ... you can visit for vacation ... you will wind up with it sooner or later.

Just suggestions, I went through this with my mother.


Bears



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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 978 of 1488
Subject: Re: Parents Nearing Retirement Date: 9/12/2006 6:42 PM
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Plus, you get to make the decision based on your personal knowledge of family health history and your knowledge of your own heath and physical condition. That should allow a reasonable person to improve the odds of making a favorable decision quite a bit.


That an important advantage.

On the other hand, you can always take it at 62 and if you decide later it would have been a better deal to start at a later age, just give it all back and start at the new higher rate. You don't even have to pay interest on the money returned.

Who says you can't eat your cake and have it, too?




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Author: fred04 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 991 of 1488
Subject: Re: Parents Nearing Retirement Date: 9/15/2006 12:42 AM
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It occurred to me that you or other young people might not realize that your parents probably did plan for retirement. Many old folks planned according to what made sense at the time. However, they did not plan for the government to fail on the commitment to Social Security. They did not plan for the government to lie about CPI numbers in order to reduce SS payments. Neither did they plan for companies to be sold out to competitors,.. or pensions to go to wasteful managements and golden parachute packages. The old folks had good plans at the time, but they could not see the future.

It also occurred to me that although contributing to a 401K or IRA is a noble cause, it is not a sure thing. During the course of 20 or 30 years, laws and regulations change. Here in Michigan, the laws already changed regarding the IRA. The law was such that there was no state tax for IRA withdrawls if a person is over 59.5 years of age. Now, that's only true if the person has an income less than $100,000. Granted, that is a small percentage of people that will be hurt by this change and it is only a state law, but over the course of 30 years......? That's the way they do it, in small steps so that nobody complains until it is too late.

Continue to give your parents the benefit of the doubt. Give them credit for having planned as well as could have been expected.



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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 992 of 1488
Subject: Re: Parents Nearing Retirement Date: 9/15/2006 1:10 AM
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<<Continue to give your parents the benefit of the doubt. Give them credit for having planned as well as could have been expected.>>


I agree with that. What's done is done.


<<It occurred to me that you or other young people might not realize that your parents probably did plan for retirement. Many old folks planned according to what made sense at the time. However, they did not plan for the government to fail on the commitment to Social Security. They did not plan for the government to lie about CPI numbers in order to reduce SS payments. Neither did they plan for companies to be sold out to competitors,.. or pensions to go to wasteful managements and golden parachute packages. The old folks had good plans at the time, but they could not see the future.>>


Unfortunately, those who relied on the promises of politicians for their livelihood or income in retirement were fools. The handwriting was already on the wall a third of a century ago that the 'boomer generation was going to stretch and likely break the retirement mold enjoyed by the WWII generation. It's been increasingly clear since then that government was not going to pay all those bills in real money.

The government cut Medicare reimbursement rates to healthcare providers to the bone in the early 1980s, and cut Social Security by raising the retirement age and subjecting Social Security benefits to income taxes. They've done other things to cut the amounts they pay out and increase costs to retirees (means testing Medicare is on the front burner right now).

People shouldn't be surprised.



Seattle Pioneer





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Author: mmmgr2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1079 of 1488
Subject: Re: Parents Nearing Retirement Date: 8/9/2007 10:04 AM
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If Social Security alone isn't enough they can get part time jobs making up to $12,500 each before any reduction in their Social Security
payments.

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