How Much Do You think You Need to Retire/What Age Will You/Spouse Retire: General Retirement Issues (Part 2)

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6292

Maybe, but I doubt he saved $12M. It would be very unusual to have $6M left after a divorce unless his ex-wife was independently wealthy (from a job, inheritance etc). She’s probably somewhat younger since he has an 18 year old daughter.

He’s mostly invested in index funds (so presumably no home run tech stock) and he didn’t work so hard that he missed his kids’ sports games in high school. He’s 65 now and has turned down several offers to return to the cockpit, so presumably retired before that. Texas is a community property state.

Speculating here, but it feels like a bit of revenge on his ex to participate in this sort of article. If I were her, and a lot had originally been her money, then I would be pretty annoyed.

6293

Who knows. These articles are kind of braggy, can you imagine even participating in this kind of thing? But I wouldn’t assume that his wife brought absolutely nothing financially to the marriage, and that he had to give her half. Maybe she was a pilot too, and perhaps they split everything 50/50. Or perhaps they divorced long ago.

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6294

Maybe he and his ex had a prenup. It also doesn’t say that his entire savings are in retirement portfolios. Maybe he was lucky with real estate or maybe one of his stocks was a ten-bagger. The article is skimpy on the details but kudos to him for managing it right! :+1::+1:

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6295

I find the statistics in the article a little misleading, because the referenced nest eggs only include assets in designated retirement accounts. Many people hold significant assets available for retirement outside of their IRA’s, 401k’s, etc.

Rental real estate is a perfect example. A family owning an apartment complex generating $100,000/year in net income in addition to their $2M retirement accounts is financially equivalent to the $5M retirement account family.

Similarly, some of the roughly 50% with no “retirement” savings might be more financially prepared for retirement than one would think.

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6296

I believe when the article said ‘tax preferred accounts’ and including Keoghs, it also included 401k and defined contribution plans including pensions. However many hold assets for retirement in other things - for example they downsize into retirement housing and have that extra real estate equity for retirement. And although the ones that have nothing saved for retirement, some may be very young, and some may just decide to keep working until they cannot, and let the chips fall where they may. Some kids take their elderly parents in, while some go to nursing homes or low cost/low income housing. Some people rent all their lives, move around a lot, live with extended family, and some may work as a super for a building where they get housing provided, live in housekeeper, or property caretakers who also have housing provided.

Pretty much everyone now has it where if they are married 10+ years and then divorce, they have to split retirement assets 50-50. IDK if pre-nup has exclusions for that (or may be state specific). I know one gal that got divorced at 9 1/2 years – he got abusive (and had a 2nd love interest that became his 2nd wife) - she should have separated and divorced after 10 years instead of ‘folding’. I just don’t think she had decent legal advice. And her soon to be ex had a ‘plan’ to cheat her on assets.

I like the diversity of examples in those that have the ballpark $5 Million in retirement/assets. The surgeon made a good choice to continue some limited work - and helping out a solo surgeon practitioner while also spending time where son lives; he has excellent cash flow to spend on the world travel he enjoys, and probably wants to leave assets to children/grandchildren. Also he weighed out having long term care insurance due to expected longevity.

I do know that when I get to slower - go than I am now, I will eventually budget for some limited household/cleaning/housekeeping services.

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6297

I would think of it this way if he was only thinking about it in terms of money and money for himself then he never had $5-6M he only ever had half.

I can see why he wasn’t in a happy marriage if he had that line of thinking.

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6298

If I had $5M I would retire tomorrow.

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6299

That WSJ article was quite helpful to me because I was wondering if my assessment of how much my spouse and I will spend annually in retirement was accurate, or reasonable. My number is $200,000, based on what we currently spend after deducting expenses we will no longer have in retirement. I am thinking now that number is pretty accurate. Ideally, I’d like to reach that annual number without drawing down on our 401 K and other assets significantly. That way, we still have those funds if we have unforeseen significant expenses, need to pay for long term care, or want to leave it to our children. The trick is how to generate $200,000 a year in investment earnings and SS, when I don’t expect to have $4-6 million like those in the article.

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6300

Not the case at all. Not that it matters, but I feel the need to defend him … which his ex would do, as well. Their marriage wasn’t happy, but their divorce is very amicable.

6301

Is that pre-tax or after tax? The couples who are spending $200K+ per year have extremely large travel budgets. That level of expenditure seems unlikely to continue indefinitely, at some point they will presumably slow down.

And the best way to fund it is clearly to earn money ($300K per year!!) from per diem work, though perhaps not practical for most people (and certainly not at those levels). My father did consulting work until 75, another friend didn’t stop until he turned 80.

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6302

I have seen divorce cases where each spouse keeps their own retirement accounts and the spouse with the smaller retirement account gets the house. In that case, the retirement assets would not be split 50-50 in the divorce even though the total assets are divided in half. The spouse who gives up the house experiences a reduction in net worth but not retirement account balances.

I would be interested in comparing the lifestyles of retirees of similar net worth over time, some of whom have a greater share of wealth in home equity and some with far less home equity but higher financial asset account balances.

6303

I’m sure that depends hugely on where you live. Being saddled with a $3M house in the SF Bay Area vs $3M in financial accounts seems like a bad deal, especially if it’s expected you’ll stay there to be close to a job and/or kids.

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6304

Yes, there are many women that do not want the house, for a variety of reasons.

Some of these women who find themselves getting divorced have either stopped out of work, their career suffered with relocations of H’s work, taken on PT work – and they are actually working harder than FT spouse because of expectations of managing life/kids at home while often having PT work that is physically demanding versus managerial. Rarely is there a stay at home non-working woman w/o children, and usually I have seen this where the man is earning really excellent money and is OK that his wife has a lot of free time w/o a job/career.

In many cases, the woman comes out of a divorce with much declined financial situation, and often wants to purchase or rent something more price friendly for their new situation. And sometimes they will relocate for their better career, or to be near family/friends/support system.

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6305

I attended the two-night Retirement Planning University I referenced a couple of weeks ago. Definitely learned some things. And confirmed much of what I already knew. We get a free 45-minute consult with the guy next week. I don’t think we are the kind of client he wants so I think we won’t get a hard sell.

If anyone is interested:

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6306

Do you mind sharing the new info you learned?

I wonder if these sessions are similar to the college sessions I attended at my children’s HS. By the second child, 95% of the material covered was review but occasionally I would hear something new.

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6307

For instant, because some of it didn’t apply to us I hadn’t bothered to learn SS strategies around spousal benefits, but it was interesting. We are pretty equal in lifetime earnings so it doesn’t make a lot of sense for us to use this strategy.

I may not be using the correct word here, but I didn’t know that there was a 12-month window where you can start taking SS but then decide you want to go back to work.

He was a little skeptical of Monte Carlo analyses. Just wants people to understand their limitations.

Anyway, for me, I like to just sharpen what I think I know and then to get another person’s perspective.

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6308

Thanks for the info. I did not know about the 12 month SS return to work window either.

I share his skepticism of Monte Carlo and prefer my own back-of-the-envelope (basic Excel).

Thank you for sharing.

6309

After tax. Believe me, I’d like to be spending less than that in retirement. Just trying to plan conservatively. I think we’ll have enough in 401k, with SS added. But yes, one of us may work part time after 65 or 67. I’m 55 now.

6310

Key in retirement is the cash flow - replacing income by obtaining some cash into your checking account, from SS, from retirement pension if you have one, from other things set up - like we purchased some annuities (from 401k, so these annuities are also part of pre-tax), and have cash flow from them - and we pay taxes on that money (typically after 1 year of annuity, have non penalized withdrawals).

We have the choice to take money directly from 401k, and we have been moving some money from 401k into Roth IRA to level off some on when we have to take required minimum withdrawals, RMDs (using ‘Roth Roll Out Strategy’) – keeping our overall taxes each year w/o a big increase once we have to take required minimum distributions. With that transfer, I also have a certain amount out of 401k to go directly to pay federal taxes. We also pay state taxes on a quarterly schedule (or one time pay to state prior to tax return time).

We started working with our Financial person when we were in our mid to late 50’s, primarily to reduce our risk numbers (he did a risk assessment). Neither of us have pensions. We first worked to consolidate the many loose ends we had, as we learned more over a series of meeting. The purchase of annuities has been the item that has reduced our risk level on investments.

It took us a little bit of time with getting all our insurance changed over - with Medicare, with Supplement, with drug plan for each of us. I took SS right at 65, and DH started taking it closer to age 66 (our ‘full retirement’ was for those born in 1956 which is 66 and 8 months, but the time value of money in our investments had it be better that we started SS as soon as we needed it for our cash flow in). Setting up the annuity cash flow right before taking out DH’s SS. My wealthy brother (13 months older than me) is waiting until age 70 for SS because he likes the guaranteed increase in his SS. Each person has to decide what is best for them.

We had two annuities mature, and now with the two new annuities have to wait a year before can set up cash flow from them w/o penalty. We now have adjusted more cash flow from our other 3 annuities (w/o penalty) through our Financial Advisor, to have our monthly money into our checking account be what we want.

We are not ‘high enough’ earners to have us pay more on Medicare B (this also is something to be aware of).

The more informed you are, the better decisions you can make on your retirement financial planning.

We watch our overall Balance Sheet (Financial Advisor software), and also see how our assets will play out to where we are 100+.

We do have Long Term Care Insurance Policies, but have limited coverage there – however we hope to avoid being in a care facility. One daughter is a nurse, and we will live close to her if and/or when we develop failing health. I am a retired nurse, and my sunset career was working in skilled care and rehab - and my last year was doing admission nursing assessments with rehab, so I have a pretty good idea on how everything could play out.

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6311

While I want to have 401K, SS, & my wife has a pension which will produce income I am also looking at the expense side of retirement.

Our goal will be to go into retirement with a house fully paid off. We will downsize and probably move to a state with cheaper property taxes. I should be able to cut my property taxes by 75%. We plan to start retirement with two paid off cars that have low miles on them. We of course won’t have the expenses centered around children. We won’t have the expenses that come with work as well.

All that adds up quick and you sure don’t need as much income as we do now.

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