I am so conservative where money and spending is concerned that I was super nervous with dh quitting, which is why I insisted on meeting with a FA. I knew dh was too optimistic and I was too pessimistic so we needed a neutral third party. And, yes, enjoying life more while he can is one reason I wanted dh to be able to retire. He’s the youngest of four – the oldest sibling died at 62, the next oldest has had a kidney transplant and the one only four years older than him has had a heart attack. I am working with dh to maximize his health. Pickleball, anyone?
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We like going on walks. Pickleball can cause lots of painful injuries, especially among us who are older and not well-conditioned.
We had meant to track our spending before retirement but ended up just looking at categories of spending and gross amounts.
We figured we wouldn’t have to pay mortgage any more because it would be paid off and no more tuition or school fees nor being able to contribute toward H’s retirement. With those major adjustments, it appeared we would have plenty of pension to meet our required spending plus more for fun stuff. We turned out to be correct and have traveled & done lots of dining out.
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Yea, that could work as long as you can get along on your low income, with a good savings buffer so no need to tap into any taxable investments/401K for unexpected expenses. Looks like there are some websites where you could see estimates on MA insurance exchange rates.
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H just turned 62, isn’t planning to retire before 67.5. Paid off the mortgage six months ago, no car payments (but will need to replace at least one car before he retires), no credit card balances. We used to keep micro-level details on expenses in Quicken, but haven’t the past few years. We (read: I) should get granular again. We throw almost everything on the credit card rather than cash (FF miles, cash rebates). Makes it easier to see where we’re spending.
If his agency allows, I could absolutely see him going to PT after retirement, esp since he has become comfortable with WFH (thanks, Covid).
For us, the risk factor is my medical expenses. OOP in five figures every year. He gets retiree medical, but we may do ‘boots and suspenders’ and get Medicare AND the retiree med plan, which covers my very, very expensive meds.
H is not ready to contemplate any of this. I’ve tried. Many times. We have no financial advisor, and he has zero interest in finding one. We are somewhat limited in what we can buy in stocks anyway due to conflict of interest/sector restrictions related to his job.
We both grew up in families that struggled financially, so we have always squirreled away the nuts. Learning to spend it will be a real challenge. We should be fine in most use cases – it’s just the edge case that worries me.
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Having Medicare plus good medical insurance is very helpful belt and suspenders, if the pricing works out. Medical expenses can definitely be a wild card.
Having a policy with large network, that caps out of pocket expense expenses and great RX coverage, with reasonable premiums is the holy grail.
Oh one more thing we forgot to account for was lower state taxes after retirement, since our state doesn’t tax pensions. We also didn’t account for Medicare premiums but the tax savings and SS benefits more than offset the Medicare premiums for both of us.
We are continuing to fully support our D’s expenses as she remains medically disabled. Those expenses are still lower than they were with college tuition & fees added to that total.
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We are drawing down our IRA money and waiting until 70 for SS due to the guaranteed growth. I’m surprised at how many people don’t want to touch their retirement accounts. I guess if you have pensions, that is fine … but if you don’t, and many of us don’t, you shouldn’t be afraid to actually use the money saved for retirement in retirement.
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I think people don’t do that for several reasons. First, they don’t want to spend “their” money. Second, and probably more important, they want to start taking it to guarantee a maximum payout in the event of an early death.
I look at it quite the opposite. The biggest risk is actually living too long and running out of money. Delaying SS until 70 is effectively a guaranteed annuity with COLA to offset that.
Of course this presumes good health and thus a presumption that average lifespan or better is the more probable outcome, plus having enough money to not have to rely on SS early.
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The trick is living frugally.
Repairs and replacement of household infrastructure can deplete emergency funds.
How long should one try to make retirement funds last if aged 85 or older?
Here is a scenario: a friend in stable health may deplete funds in five years at current rate of spending and asks me for advice.
Doesn’t like my response: pause unnecessary expenses to get credit card debt down.
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Your advice is spot-on. My MIL is 96 and will probably live forever. I see that & plan for living until at least 95. I don’t want to run out of money.
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For situations with big 401K balance(s), spending it down can lower the possibility of RMD (Required Minimum Distribution) concerns down the road. I’ve heard complaints from older retirees due to RMD taxation/IRMAA surprises.
It can be useful to have FA help plot out an optimized plan. Of course there are guesses about future tax rates, rules etc….but it is still good to have a plan.
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That probably depends heavily on other sources of income. They have to assess whether they can live off of SS alone. They may also pivot their Medicare secondary to Medicaid if they haven’t already. At the end of they day, when the money is gone, they’ll be forced into the choices, like it or not.
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They cannot live on ss alone, but could sell assets or downsize home instead of continuing current rate of spending of retirement funds.
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This is great advice, and something we’re going through right at the moment.
If all of savings is held in qualified accounts, having SS and RMDs kick in simultaneously, can cause a big tax surprise.
Spending down qualified accounts, or if you have the luxury, doing Roth conversions, helps reduce RMDs as Roth accounts aren’t subject to them. They also pass to heirs tax free.
We also used HSAs differently than most. We max them out, invest them and never use the money. We save healthcare receipts. You can pay yourself back anytime in the future, and you can use HSA funds for Medicare. It’s one of the few ways, along with Roth when earnings are very low, to avoid taxes completely.
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Reverse mortgage is also a possibility if they own outright, or at least have a large equity position.
It’s surprising that they rejected your solicited advice to cut expenses and eliminate debt. They must feel that the proceeds from downsizing will fund their gap.
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How does someone aged 85 or older have credit card debt? Do they not understand the difference between the interest rate paid on their credit card vs the interest rate earned on their savings? If this was my parent I’d want to be more directly involved in managing their financial affairs.
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Sorry, didn’t mean to hijack the pre- retirement aspect of the thread.
This is interesting to me and haven’t considered it before. Now onto reading more about it and talking to our FA.
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I agree, I’ve learned some new things from this thread. And @eyemgh communicates things so clearly…thanks to him (I think a him?)
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He’s a very friendly and knowledgeable dude. Got great advice over the years. My main thing is what to do when retired. I have been semi retired working part time for years, I guess and 62 now. I can’t see doing nothing and not sure I want to work for someone once I sell our practice. Or maybe I do with less headaches? Yes, I have taken up pickle ball 
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DH and I are also in the pre-retirement phase, and thinking thru all these issues too. I also see myself always working, at least part-time. But DH is getting close to done, after running his own business and working a lot of hours (like you) for 25 years. Good luck with the pickle ball!
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