<p>
</p>
<p>Why would I need that much if we’re living off ~30% of income now? The “financial folks” have a conflict of interest. </p>
<p>I think discussion about social security being available in the future really is apolitical. It’s purely a matter of resources. I hope it’s available, but it’s worth considering the possibility that if your retirement income is high, it may not be there for you. Just a consideration. On another note, can you really know that your LTC policy will be intact 30-40 years from now? Seems safer to self insure, unless you think it’s extremely likely you’ll use it for a long time.</p>
<p>I know, I’m the Grinch.</p>
<p>IxnayBob, no, I think the models are speaking to the “typical” person preparing for retirement. Their point is that people spend more in retirement than they think they’re going to. In your case, if you’re truly living long term on 30% of your current income, the models would indicate that you should expect to live on the same percentage but of your expenses rather than your actual income. </p>
<p>Busdriver: I read somewhere that the average stay in a nursing home is 2.7 years. </p>
<p>@mom2collegekids, you mentioned life insurance as an expense in retirement. I have no intention of paying for life insurance in retirement – my assets will certainly be enough to cover funeral costs, and it is generally ridiculously pricey as you get older. I have a large policy now that would cover college and living expenses for my kids if I died, but my current premiums end in about 5 years (I will be 56, kids out of college). I see no reason to purchase life insurance after that. </p>
<p>@bromfield, for some reason I thought it was only 2-3 months. I must have really gotten my facts wrong. But doesn’t Medicare pay anything for nursing homes?</p>
<p>When my parent went into a nursing home…we were told that either the patient died within six months, or acclimated to the place and lived there 3 years or more. My parent made it four months.</p>
<p>Medicare ONLY pays for skilled care homes IF you have been discharged from a hospital and are undergoing some kind of rehab. They do not pay for nursing home care otherwise.</p>
<p>I’ve been following this thread since it started and I’ve never thought more about retirement then I have in the past few days. :)</p>
<p>We’re 25 to 30 years away from retirement. We invest in our 401(k)s and he’ll have a pension from the military (retiring at the end of the year) but we’ve never really made a plan or discussed it much. We were young parents so our youngest is starting school in the fall. For the next four years or so, getting the kids through college is our primary financial focus but after that I want to focus more on saving for retirement. It’s all a little overwhelming. </p>
<p>My poor husband . . . this morning I just out of the blue started telling him that I think we need to save even more than we are now and we need to think about LTC insurance and come up with an estimated retirement date and think about how long we’ll probably live after that. He must think I’ve lost my mind. 
</p>
<p>If you have a good handle on your current income & expenses and project the best you can near future income, investment returns and expenses, then you can figure out what portion of your assets you will need to fund any shortage in living expenses. </p>
<p>Have read estimates that about 4% should be a safe withdrawal rate! that could supplement any income sources you expect in the future/retirement. If you buy LTC insurance and / or a single premium immediate annuity, you need to be sure the company is as financially sound as possible, so it will be around when you need it, for full payment of all your benefits. </p>
<p>I’ve really been enjoying this thread, thanks all! I hope to retire in my mid 50s and travel while I can. We save a lot and live frugally, so it should work out, but I am concerned about all the unknowns. Luckily I’ll get some pension money and we have rent control on our apt, so I can predict some stuff. It’s the crash of stocks or illness that leave me scared.</p>
<p>@hayden, I think more people live on 30-50% of their current income than you’d think. You really shouldn’t count a number of things as part of “what you’re living on.” For example, I don’t count:
- my current savings for retirement
- the principal that you’re paying towards a house (we no longer have a mortgage, but if we did, the principal payments would be savings)
- my savings for kid’s educations</p>
<p>You should add up consumption and I think you’ll find that it’s lower than you think.</p>
<p>I thought the rule of thumb, Very general, of course is about 85% of the income needed for the last 5 years is what one should have for retirement income. Of course, any catastrophe and all bets are off. The sky can be the limit then, it’ll take all you have and more.</p>
<p>When assets are depleted to a certain point, Medicaid can pay for nursing homes, those that take it and have spots open for it. But there is a 5 year look back on assets so that they cannot be disbursed in anticipation of this unless one has the foresight to do it 5 years ahead of time. </p>
<p>Few people ;plan to to go into a nursing home. Even as they move into certain assisted care places that do have transitions to nursing homes, they don’t really believe they’ll end up there. My MIL could not. She felt that when the need arose, she’d find someone to care for her in her own home, but she never got anyone long past the time when she needed it. Didn’t know anyone who was suitable and didn’t want anyone she didn’t know. Take a good look at the assisted living places and nursing homes and note the prices of them. Around here, they run a good $10-14K a month. Makes college,even the highest priced ones look like bargains. </p>
<p>As for moving in with the kids, we are seeing kids moving in with the parents, and it’s not just that parents need them around. I know a number of folks who are older than we are, whose kids are pushing middle age and through some events are now living back with parents. </p>
<p>
Likewise, I have term life that will expire in 2 years when my youngest graduates. I have no need to be paying premiums after that. I also believe in cremation and my family knows my wishes and that will save on a lot that goes toward funeral expenses.</p>
<p>Ixnay, the models which use 80-85% of current need may seem too high to you, but I think you might not be taking inflation into account. The models assume total cost over a whole retirement, while your approach appears to look only at present value dollars. </p>
<p>If the market crashes but you have enough to ride it out until it recovers, you should be fine. The key is to have an appropriate asset allocation, so you never have to sell anything at a low price. For health, all we can do is have good insurance and/or Medicare and some luck. </p>
<p>We got a nice “raise” after we were done paying for private Us, retirement accounts and mortgage. We are spending less than expected in retirement, even with travel, lots of dining out and supporting while she is job hunting. </p>
<p>
</p>
<p>I’m with you all the way except for the LTCi part. LTCi was a bargain a decade or two ago; enough of a bargain that the companies who offered the insurance for the most part no longer do, and companies are petitioning their state insurance commissions for large premium increases. They seriously underpriced the policies.</p>
<p>Google around to see some of the problems that people are having collecting on their policies.</p>
<p>Finally, I think that given the limits on what they’ll pay (a few hundred dollars a day), I’d rather have enough savings to handle it out of regular assets (i.e., self-insure).</p>
<p>
</p>
<p>No, I’m well aware of the effects of inflation. Inflation, in our conversation, really affects income and expenses both, so it’s not really material. My real (pun intended) difference of opinion is regarding basing retirement need on income rather than expenses. If I make $1 million a year but spend $100k, which of those numbers should I factor into what I will need in retirement? Obviously $100k is my baseline need, and then I can add and subtract whatever spending changes will occur in retirement, but basing anything on my income doesn’t make sense.</p>
<p>Let me remind you that you originally said 80-85% of final year’s salary (“What the financial folks say is that you should expect to need between 80 and 85% of your final year’s salary every year after your retirement.”) which is what I had a problem with; 80-85% of current need (i.e., your current expenses) is a fine first approximation of what you’ll need after retirement. My preference is to calculate it specifically by budget category, but that’s because I’m anal and have years and years of records in Quicken.</p>
<p>I’ve been keeping track of our expenses and I think about 60-70% is more like the retirement income vs pre-retirement income. I guess my husband and I save lots of money from our paycheck to fund 401k, so that is not going to be a problem. We also have a lot of slacks in our spending, like we eat out everyday but Sunday. We also spend freely on everything, Starbucks coffee and etc for breakfast, eat out a lunch that usually costs in $40 for 2(yeap, we love Counter burgers), we also fly comfort class for long fight(not first class), we shop at Costco for convenience, one stop shopping, but they are in bulk and some of them are going to waste, so these items will be definitely be reduced.
We also plan to age in place, no need for nursing home, my mother-in-law never did move to nursing home despite my SIL urging, I think it was more to SIL’s convenience than MIL’s preference. MIL had care takers came in 3 times a day for a year and a half, she died 4 days later of a stroke, so it was what she would have wanted and she did.</p>
<p>I have no intention of leaving any money for my kids but I won’t waste it.</p>
<p>This thread is reminding me why I need to move out of my high-cost, high-tax state after my youngest graduates from high school. I am spending WAY too much on housing relative to my income. That money is not going into retirement like it should. It’s depressing.</p>
<p>Our D had her friend who is an occupational therapist who told D that our home is perfect for aging in place, which H and I plan to do! :). I know quote a few people who successfully age in place in their own homes, with caregiver visits and outings scheduled. It CAN work, especially if you have the resources to make it work. </p>
<p>H has two small life insurance policies. One doesn’t need any more premiums and pays $2K+ dividends every year. The other has a fixed premium that is quite reasonable for the size of the policy and guaranteed not to increase for the rest of H’s life. I have never had any life insurance and still don’t. If I were to die, H’s pension would increase about 10% (if he predeceases me, it decreases 45%). </p>