I enjoy theorizing tax rates, who should pay how much, what fraction of revenues should come from what kind of earners.
That brings to mind these distinctions.
These are legal and generally pursued by almost everyone: tax reduction and tax avoidance
This is criminal: tax evasion
Itās interesting what notions some taxpayers (and perhaps the term is used a bit too broadly in this article) have about taxes:
http://www.financial-planning.com/news/tax_planning/taxpayers-craziest-misconceptions-2692453-1.html
Hereās a Kitces article about how to value SS benefits in oneās balance sheet:
How is the economy in New Zealand? DD has some shares of Capped ETF in her Roth - ENZL. iShares MSCI New Zealand Capped ETF. Currently running a little negative, but YTD is slightly positive. Just invested some more money in her Roth IRA and her younger sisās first year of Roth IRA based on their earnings. They have a long time for their funds to grow with mom overseeing until they learn.
Have to be wise about tax free growth. I told H that in the 1990ās (when both of us were employed), we should have pulled back on our contributions into 401k and put money into Roth. However had a lot on our plates with work and home life and just didnāt have the energy to go the next step. At least we can be smart now. Hated the Federal taxes paid in with converting IRA to Roth IRA this year, but hope to benefit down the road. Have to take a break, then look at how much to pay into federal with remaining money IRA to Roth IRA conversion.
I am looking at the benefits of more āfrugalā living. Terrible taste in my mouth with taxes this year. Will feel better with more money in the bank.
Great article about valuing SS. We have a defined benefit plan that should pay DH full salary for life, with no COLA, when we retire at 62/63. I will start receiving a defined benefit at 57 from one employer, and then from another when I retire at 63, though mine will only end up paying about 2/3rds of salary in total. All the income from my first retirement will go into ROTH savings when it begins in 2 years. And we just paid off our mortgage. (YEAH!) From the article, it looks like we should consider both the SS and defined benefit plan as if they were bonds, and keep most of our ROTH in stocks and more risky things. We havenāt really paid attention to our ROTH in the past, since there is only about 60K total in there. But now that the house is paid off, we can begin to max out a 457 ROTH with our employee, and I realize we are going to need to pay attention to how we allocate those investments! Thatās kind of scary!
@anxiousmom, your SS and pensions will cover your living expenses very easily, especially if inflation continues to be tame. You have no need to take risk, but the ability to do so. One could make equally good arguments for 80/20, 50/50, or 20/80 AA; itās a matter of personal preference. Congratulations. Thereās nothing scary unless you do something bizarre ā donāt do that 
Nope. Wonāt do anything bizarre with the ROTH, but it is time to pay attention to which funds we are in and the expense ratios etc. Once we retire, we might do something fun and crazy like lease out the house and take off for a yearlong tour of the USA in a converted minivan or old ford shuttle bus conversion. (And yes, weād do the rustic conversion ourselves so as not to incur too many expenses. Figure the lease income would cover travel and campsite rental!) Our incomes are teeny compared to many on this forum, but we know how to do frugal, and we have always felt wealthy and lucky!
Full salary for life?? Sweet!
@anxiousmom, Vanguard has Total Stock Market and Fidelity has a similar fund, or perhaps itās only S&P 500, with expense ratios somewhere around 0.05%. Thatās very low, and as a practical matter, itās not worth searching for lower ones.
The New Zealand economy is apparently humming along. I read an article that it has the fastest growing economy of the 34 OECD nations.
The minimum wage is almost 15 NZD, so service employees make decent money, although there is no tipping.
However, everything is quite expensive. Food is twice as expensive as home, and some things like soda are crazy, like $5 for a one liter bottle. Donāt know how much of this is the result of the high minimum wage. Housing is east-coast expensive, even in the boonies.
Unemployment is low, under 5% in the cities, I was told. Thereās only 4 million people or so in the whole country. The sheep outnumber the people by 10-1!
@anxiousmom glad you have some nice retirement plans. Does Hās pension have surviving spouse benefit? How about yours?
I think H and I need about $5,000+ each month to have the life we want in retirement. I plan to retire in the next year or two, before I am 60. H will be 62. We want to have time to travel, spend time with family and friends, and volunteer more while we still have good health. We also hope we will be spending time with a grandchild or two. We tell our ākidsā that we will transfer the family cell phone plan to them when we retire. =)
I will not be able to rely on my pensions from my previous company. The payout is just too small. We therefore need to rely on the defined contributions plan, i.e., 401K.
After we had paid DSās college expenses, we aggressively paid into our retirement account. But the time is not on our side. There is some possibility that we will have to move to a much cheaper area in this country, and maybe even move to another country after retirement. I have recently learned from an article in Money Magazine that people could live (financially speaking) comfortably in many ānot so badā countries with an income stream of only $2000 to $2500 a month, including the housing cost.
I have the impression from somewhere that the retirement system (and the healthcare system) in countries like Australia is much better than the system in US for AVERAGE citizens. If it were not for the Medicare which so many people in US complained about, the rank for US, as perceived by most people in the developed countries, could be dropped further in the rank of major developed countries as far as the retirement and healthcare system for the retirees is concerned.
āI think H and I need about $5,000+ each month to have the life we want in retirement. I plan to retire in the next year or two, before I am 60. H will be 62. We want to have time to travel, spend time with family and friends, and volunteer more while we still have good health.ā
You will be able to live the way you want, including being able to travel, for as little as 5K per month? Iām assuming that amount will increase every year for inflation. That is impressive.
AttorneyMom, the Ayres and Nalebuff book āLifecycle Investingā makes exactly this point - that asset allocation is made a lot more tilted towards bonds for most people because SS should be classified as an investment with low risk, and kind of gives me justification to keep bond holdings lower than I probably ought to.
busdriver11 - Our home is paid for. H and I donāt need much in the way of material things. We learned to live simply when we decided to send our kids to private schools and private colleges. We buy used cars and do our own cooking, cleaning, yard work, home maintenance, etc. We donāt go to Starbucks or out to lunch very often. As we age, we will probably downsize. We will have a little more than $5,000 each month without touching Hās 401K and other investments, so if/when we need more money, it will be there. My retirement benefits can be accelerated until H and I collect Social Security. We used a similar list to the one mom2collegekids posted early in this thread for expenses. What amount do you think you will need?
hr - That would be great if you can make it work. Do you have a retirement plan that covers pre-65 medical expenses? We donāt, so we estimate payments somewhere between $1k and $2k per month (for the two of us). Weāll check into it more when closer.
ābusdriver11 - Our home is paid for. H and I donāt need much in the way of material things. We learned to live simply when we decided to send our kids to private schools and private colleges. We buy used cars and do our own cooking, cleaning, yard work, home maintenance, etc. We donāt go to Starbucks or out to lunch very often. As we age, we will probably downsize. We will have a little more than $5,000 each month without touching Hās 401K and other investments, so if/when we need more money, it will be there. My retirement benefits can be accelerated until H and I collect Social Security. We used a similar list to the one mom2collegekids posted early in this thread for expenses. What amount do you think you will need?ā
@hrh19, Iām embarrassed to admit the amount I think Iāll need. Iām also a little paranoid that Murphyās Law will hit us in every direction. I am afraid that we will have a large mortgage for many years into retirement, plus my husband is dreaming about some of the things he wants to get, and Iād love to do plenty of travel all over the world. We do most of our own maintenance, yard work, cooking and cleaning also, unfortunately, but my husband is a project man, and he always has plenty of costly projects going on. Like colorado_mom mentioned, I suspect we will pay 1-2K/month for medical, plus plenty more for my crappy teeth. Property taxes are very high, and car and insurance expenses sure add up. We could do a drastic slash/move/cut back if we had to, but I hope to not have to plan for that.
@Dadof3
I agree that SS, especially if taken after FRA, can be characterized in that manner. For those with defined benefit pensions (which does not apply in our case), the case is doubly so and the remainder of the retirement pot can be invested more aggressively.
TBH, I am having a difficult time asset allocating any meaningful amount back into bonds, even with something like the Vanguard Total Bond Index fund readily available. I probably have too much in cash equivalents, so that is my next bit of homework.
Iāll look into the book you cited.
SOSā¦ yes DH and my pension both have surviving spouse benefits if we choose that option, and we will be able to purchase health insurance through the city plan at a discounted rate. I get little knots in my stomach when I see all the cities going bankrupt and trying to abandon their retired employees - but our city is funding the retirement system agressively now so should be fineā¦ said hopefully.
In full disclosure; DH plus my defined pension per year s/b 120K or more, we should have 350K+in a Roth by then, if all goes as planned, and we will not need to draw Soc Security until age 70, assuming Soc Sec is still around. We would like to retire at 62 DH/ 63 me - so at the same time, but could continue to work longer if need be. Or we could quit and scoop ice cream 10 hours a week! We can sell the house, which is now worth 400K, and move into a manufactured home. Inflation is the issue that could change all this, as could ill health or raising grandchildren or any other of where life takes us. There is no Cost-of-living adjustment in the defined pension, but we can draw on the Roth and take Social Security later on when neededā¦
Honestly, this thread has been great for causing me to actually lay out where we are financially, where we want to be, and what we need to do to get there. Hubby and I hadnāt discussed targeted retirement dates, but now we have! This thread also pushed me to have him start a 457 ROTH through work, AND encouraged me to pay off our house. (Done last week!) THANK YOU, ALL, for the info (3/4 of which I donāt even understandā¦ haā¦) and for the encouragement.