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Author: feydom One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 11198  
Subject: Single Income Retirement Planning Date: 12/4/2005 5:49 PM
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Hello, everyone! I'm glad I found this board! I've been lurking around the boards trying to find where the wealthy women were...the suggested boards were way over my head in terms of discussions and, er...sentiment about wealth, money, and lifestyle.

I'm 48 and a Single Independent(one income) and the fact is, it's a tough row to hoe when you've got to make sure you don't live the life of a bag lady when you are no longer earning income. I won't be inheriting anything from anybody (the first and second generation of savers have all died and the only ones left are the spenders and a couple of us third generation savers/beginning investors), so my sole source of retirement income will be based on what I earn and invest.

I currently contribute to my company's 401(k), 457, and defined pension plan. I also fund my ROTH IRA.

My question: Can anyone advise or direct me somewhere as to how to project or figure out a dollar goal for my retirement portfolio. The consensus in the Fool community seems to be to target for $1 million (TMF Dayana Yochim as even seen $2 million suggested). I can't imagine needing that kind of stash for retirement. I live pretty modestly. I have expensive tastes in some aspects of my lifestyle; but mostly, I live quite comfortably under the low end of the middle-income radar. My current monthly MCOLE is just under $2,200. Next year it will be about $1,500 a month (paying off my first ever car note, eliminating my storage expense, and changing insurance coverage). Although I live in Los Angeles, my living expenses are low because, for now, I choose to rent. My biggest concern is health care in my old age. At some point in my retirement life, I expect to be a resident of a care facility (I refuse to be a financial burden to my Loved ones) and I'm wondering if investing in a HSA or...?, would be something to add as a component to my retirement portfolio.

Any ideas? I need guidance!

Mary
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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11176 of 11198
Subject: Re: Single Income Retirement Planning Date: 12/4/2005 6:21 PM
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I don't know how much help I'll be, but I can tell you what I've been doing for our financial planning.

First, I have never seen any particular number thrown out in terms of how many dollars one needs to retire. In fact, the general sentiment seems to be that if you can live on 4% of your assets per year, which is typically called the Safe Withdrawal Rate, then your money will last forever.

I've been planning my retirement since I was 22 and fresh out of college. At this point, DH and I are looking at retirement in about 8 years when the twins finish college, I will be 55, and he will be 56. Things I have done to help my planning is to make some assumptions on what we will need so that I can figure out the money we'll need to have set aside to be able to live on that 4% per year. First, I have assumed we will need 100% of my income. That's the check we currently live on while we save all of his income. In fact, we save a significant amount of mine also, but I'd rather be a little conservative in my estimates.

I also have a written budget for our retirement years, and I have 2 age points so that I can move money around as I think we'll need it. To get that, I started with our current spending, and made adjustments. For instance, we won't need to be saving for our retirement anymore nor will we need to be saving for the kids' college expenses. In addition, things like our groceries will go down as that bottomless pit we know as our son will be gone, but our dining out expenses will go up, so I've left that as sort of a wash. The mortgage will be paid, but I anticipate our medical expenses to increase both in that we'll have to pay for our own medical insurance and that we'll have more medical expenses as we age, so I have reallocated the mortgage money to medical.

I am not assuming there will be any Social Security income for us, but in all likelihood, there will be something. It may be means tested, so I'd rather not assume it will be there. Even if it is, I can't collect until I'm 67 1/2, at which point I will hopefully have been retired for almost 7 years, so we have to fund that time period anyhow. I did purchase Long Term Care for us, and figure that what we are spending on life insurance now will go away because we won't need to be replacing any income or worrying about supporting children or college costs.

I don't think it matters that you're single or married for retirement planning. I think the planning steps are the same, but the numbers are different. You still need a budget, and you probably still want to assume 100% of your income in retirement as a conservative estimate.

This is what I've been doing to keep us on the road to retirement, and at this point, it actually feels doable, though to be honest, if we have to work another 10 years and not retire til we/re 57 and 58, it won't be the end of the world.

Others on this board are at different stages in their life, so will have other input on what has worked for them in planning for retirement.

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Author: feydom One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11177 of 11198
Subject: Re: Single Income Retirement Planning Date: 12/9/2005 1:02 AM
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Hello, 2gifts!

Thanks so much, for your response. Lots of answers to questions I hadn't even thought about asking! Scary!!!

I'm most anxious about health care expenses. I don't want to buy into Long Term Care insurance too soon; but I definitely need to look into such coverage.

Also, I'm playing catch-up retirement planning (investing) after decades of caring financially for everyone else but....me! Thank goodness I snapped out of that fog of stupidity and started investing in my own financial future!

Mary

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11178 of 11198
Subject: Re: Single Income Retirement Planning Date: 12/9/2005 8:09 AM
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I'm most anxious about health care expenses. I don't want to buy into Long Term Care insurance too soon; but I definitely need to look into such coverage.


Why do you need LTC? You said you were single, so you don't have a spouse to worry about in terms of asset protection. Do you have children that you want to leave a legacy to? In my case, I'm married, so I want to ensure that my spouse has enough to live on and vice versa should one of us need long term care, but the kids are a different story. They already know not to plan on any inheritance as we plan to spend it all, so the LTC insurance we have is not to protect assets for them.

The only real difference in your planning from my planning as a married person is the need for insurance. If you have no dependents, though, there's not a whole lot of reason to have insurance whether that's LTC or life insurance in my opinion.

Just something else for you to think about.

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Author: feydom One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11179 of 11198
Subject: Re: Single Income Retirement Planning Date: 12/10/2005 3:52 PM
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Hello, 2gifts!

Why do you need LTC? You said you were single, so you don't have a spouse to worry about in terms of asset protection.

No children, spouse, significant other, not a future heir of anything or anyone, etc. LTC is of interest to me because if/when I need to be in a care facility I want to be able to afford it.

...I want to ensure that my spouse has enough to live on and vice versa should one of us need long term care,..

If in my later years of retirement my $1,800 (as an example) a month pension won't cover the $650 a month medical prescriptions and supplies and the $2,600 a month assisted living care fee, I will be forced to make decisions I won't want to make about the quality of my living and care conditions. This is what I was referring to about not being a burden (financial) to my Loved ones. With the astronomical and unchecked continuous rise in health care costs, and especially quality assisted living care costs, I'm concerned that my retirement portfolio may not meet the ever rising cost demands of health care for me when I need it. Also, because I live in a volatile, overpriced, and speculator-driven housing market, I won't be depending on my home fetching top dollar just because I need it to pay for residential and health/medical care expenses.

I don't think this would be a major concern for me if I had not been involved with senior service agency programs where the elderly clients were challenged with this very issue. I can't pretend that my company pension's so called lifetime medical benefit will take care of all of my health care expenses. It won't. Every year we pay more and more for less and less benefits! It pays to read the quarterly newsletters they send to us instead of just throwing it in the junk mail pile to be trashed.

Currently, my company pays burial insurance. I pay disability/disabled insurance for about $6 a month. I am considering insurance for my apartment.

BTW, I found some LTC articles on the Fool, and when I have more time, I'll read them.

Mary

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Author: WarriorNurse Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11180 of 11198
Subject: Re: Single Income Retirement Planning Date: 12/14/2005 9:07 AM
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The only real difference in your planning from my planning as a married person is the need for insurance. If you have no dependents, though, there's not a whole lot of reason to have insurance whether that's LTC or life insurance in my opinion.



Long Term Care Insurance is for paying for a nursing home or similar type of home. If you have no spouse or children, and do not have a large nest egg, how would one pay for it? I know Medicare/Medicaid kicks in at some point, but just at the minimum level right? If you want to live in a half-way decent facility, wouldn't you have to have some type of funding?

Thanks.
Jen


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Author: WarriorNurse Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11181 of 11198
Subject: Re: Single Income Retirement Planning Date: 12/14/2005 9:09 AM
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At what age should a person start a LTC plan? I've always heard mid 50's, around 55 y/o.

Jen

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Author: feydom One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11182 of 11198
Subject: Re: Single Income Retirement Planning Date: 12/14/2005 1:01 PM
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Hello, Jen!

At what age should a person start a LTC plan? I've always heard mid 50's, around 55 y/o.

Here's the Fool's LTC information link:
http://www.fool.com/insurancecenter/longterm/longterm.htm

As usual, the information is mostly focused on the financial and retirement scenarios of couples (frustrated long-winded sigh).

If you are a single independent (one income), like me, here are some key point excerpts from the link that I believe makes sense when deciding on buying LTC insurance:

*Inflation protection (5% compounded) is expensive but almost always worth it.

*Look at how many activities of daily living (ADLs) the policy recognizes and how many you need help with to qualify for benefits.

*Make sure that the policy covers in-home care and assisted living facilities.

*Nobody is guaranteeing premiums yet (they could be raised across the board in the future), so be sure you could handle a 30% increase.


TMF's David Braze article, The Issue of Long Term Care Insurance
(http://www.fool.com/retirement/care/03.htm) includes information about how to decide if LTC is a cost-effective expense:

The United Seniors Health Council, a nonprofit consumer organization devoted to the issues of the elderly, maintains that long-term care insurance is appropriate provided it costs no more than 7 percent of your retired income and:

1. You have $75,000 or more per person in assets, excluding a home and a car.
2. You have a retirement income of at least $35,000 per person per year.
3. You can pay the premium without adversely affecting your lifestyle.
4. You could absorb up to a 30% increase in future premiums if necessary.


The article also included some sobering and disappointing references about hoped-for benefits of past LTC policy holders:

"...until recently the industry has had a sorry record on benefit payments". In his book "Beat the Nursing Home Trap -- A Consumer's Guide to Assisted Living and Long-Term Care," author Joseph Matthews notes that for the decade ending in the mid-1990s:

1. About 50% of all policies lapsed before benefits were paid.
2. About half of policyholders who entered a nursing home never collected a dollar.
3. When benefits were paid, they were far below actual cost.

Yes, things have improved since then, but caution is still in order.


Ooooooooooooooouuuwccchhhhhh (and a hiccup)!

Planning and investing for, ever hopefully, a respectable retirement portfolio on one income is fast becoming a crap shoot! I don't wanna still be on someone's payroll at 65 or 70 plus, unless I get a notion and feel like it!

Arrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrgh!!! The older I get, the closer I come to retirement age, and the more senior age living challenges I realize I will have to deal with, the tougher it seems to be to prepare for and save up enough Go-To-%#__-Money!

At least I've got somewhere to go (TMF) to get some solid reliable answers!

Mary (who's a lifetime teetotaler, but wouldn't mind a stiff shot about right now!)

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