I have a small pension from a job back in the 80’s. My husband had a pension.
However, the company offered him a buyout a few years ago and he took it (this was after laying him off at 60 years old). The buyout offer was very attractive, more than the value of the pension. Companies do not want these pensions on their books anymore.
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Loved the monkeys.
I’m not sure what you have in mind with respect to the ETFs, but a strategy with timing an ETF with stop loss orders can lose a fair bit in certain periods. It kind of depends upon the rules you have for entry and exit. For example, in a period where the big gains happen the day after you stop out, you can miss the big gains but get most of the losses. So, I’d generally avoid that kind of strategy.
In the old days, when I was active, you could do well with momentum-based timing strategies in commodities.
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I have a dumb question. You wrote your money is managed by others and you have index funds rather than individual stocks. Does this mean you are paying someone to manage your index funds?
I think I’m missing something.
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Index funds are paying to do administrative and trading matters in management, but outsource the stock or other security picking to whoever decides the index.
I understand.
I just read his post as someone was managing his index funds. Like he was paying a money manager a fee to manage his index funds. Obviously I read/interpreted what he wrote incorrectly.
There was a paper I read that was published in the early 1980s that talked about leveraging up the efficient portfolio.
So the idea of using leveraged index instruments has been around for decades.
My husband and I are 13 & 15 years from Medicare eligibility.
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I am sure it is not a novel idea but as I said in an earlier post, it is now available to the masses. The $1 million in a day posts this morning on WSB after NVDA have been rather entertaining today!
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I feel like my generation (age mid-50s) said this years ago. Does every generation say/feel it?
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Yup. And pensions are expensive to administer. I had one at a job back in the mid-90s. It took the company like 3 years to dissolve it (we had the option of an annuity or a lump sum).
A nice pension plan for teachers in my state (DC metro area) was to attract good teachers back in the 70s-ish (?). Paying it out now is hurting the state now.
My husband still has a pension plan where he works - the company also offer a 401-K but does not have any match.
I’m in your generation (early 50s). It’s been a talking point since we entered the workforce in the early 90s that SS would be “bankrupt” by 2035. That date hasn’t moved out any, in fact, it occasionally moves closer.
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Presumably, that means that its revenue from payroll taxes will not cover the promised payouts, and it will have used up any reserves by then. By that time, politicians will have to make the choice to reduce payouts, raise taxes, or subsidize it from the other part of the budget.
In terms of personal financial planning, it is best for those who will be of Social Security age by the 2030s to consider the worst case scenario of the payouts being significantly lower than current promises. Those who will still be in the labor force by then may want to consider the potential increase in taxes at that time.
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At this point I might be happy to get the 75% of current benefits that current taxes will support.
My fear is they will institute much tighter means testing beyond taxing benefits.
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Agree with above. I remember back in college being surprised when I first learned that SS is a pay as you go program, as I was already aware that I had been paying into it since my first job at age 16. At this point, I am hoping that my SS benefit covers all of my medical costs.
IDK how the government will ‘pay’ in the future on the SS when the money going out continues to be much higher than the money coming in. Our financial advisor’s advice was to start drawing SS as soon as retired. I did take my payout at retirement/right at age 65 (my payout was a bit more than if I had taken spousal benefit). We delayed DH’s a bit as we had put money into checking account at the start of his retirement and had not really spent down much before I retired. DH stopped working 8 months before he turned 65, and we started his SS 8 months after he turned 65. His (and my) full SS retirement benefit was at 66 years and 4 months - and neither of us made it until then, but we believed we made the right decision for us. The cash flow was more important with his SS, and not spending down other assets when other assets can be passed on with the estate. It is a ‘gamble’ on deciding the difference in the payout earlier, or payout later – as one doesn’t know when one’s death will occur. However someone in poor health, obviously better to take it as soon as stopped work.
As soon as DH started drawing SS, we also set up drawing off our annuities – that was arranged through our financial advisor…we had penalty free withdrawal amounts/limits and our monthly payments were spread out between the various annuities we hold.
Ours advised the same. I’m taking it as soon as I turn 62. DH will probably work a bit longer …maybe 65 or 66.
I also found this interesting regarding taxation of SS benefits.
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Interesting. I have been reading Get What’s Yours by Laurence Kotlikoff and he recommends waiting until age 70 to collect social security for almost everyone. He says we tend to underestimate how long we will live (or how long at least one spouse will live) and most of us will wish we had max benefits that are automatically adjusted for inflation when we reach our 90s.
Not sure what I think about that and I haven’t asked our financial advisor yet. Like you, I am inclined to spend money that dies with me before spending money I can pass on. But, of course, I might be spending more of the nest egg late in life if I take lower social security at 62 or 65 and then live another 35 years. Mulling it over…
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Does he address genetic predisposition towards dying young vs old in making that calculation? For example, In my family most of my ancestors have died by late 70s/early 80s and I have friends with parents who are living into their 90s. I don’t anticipate living as long as they will.
I intend to take SS as soon as I’m eligible because 1. I’ll be fortunate if I live to 81 or so and 2. I believe SS will become means tested on or before 2034 and I will have my payment reduced or eliminated so I’d like to collect as much as I can before that happens.
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I haven’t finished the book yet, but he stresses that for married couples, there is a good chance that at least one of you will live a long time. Delaying social security can maximize the survivor benefit for that spouse.
The book goes into more detail about special situations, including some where it might make sense to claim benefits younger. The analysis can change some based on things like whether there is a big age difference or very large salary difference between you and your spouse, or whether you are close to retirement age and grandfathered in under previous Social Security laws, for example. None of the special situations have applied to me so far.
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I think it’s hard to predict longevity. Between better lifestyle choices and medical advances, we are living longer and healthier.
My dad thought he wouldn’t live long. No one in his family had. He didn’t exercise and smoked a lot. He made financial decisions based on his perception that he wouldn’t live very long in retirement. He lived 16 years. My dad also didn’t really plan for my mom to outlive him. She’s been without him for 11 years and wasn’t really left with a great plan.
I’m not going to be them.
My husband’s parents are still living in their mid to upper 80’s. My husband however has an autoimmune disease that will shorten his life span they say.
So to me, trying to figure out how long you are going to live seems like it’s a real crap shoot.
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