I do two versions (because I am OCD about personal finance and I like spreadsheets, and it is oddly satisfying and amusing). I do a super in-depth one annually. For this one, I include tangible assets like the estimated value of our home, vehicles, and belongings if they were to be sold quickly. If you are wondering why I track larger belongings (anything worth more than $100 usually...furniture, TVs, lawn mower and so on) once a year, it is basically to see if we picked up a lot of material stuff in the last year or sold off stuff (which I love doing). It's more of a minimalism check than anything that requires much immediate action from me or my wife. I also check and track life insurance coverage, health coverage/premiums, and car insurance coverage/premiums once a year. Just to make sure we are covered in case of ill events. Lastly, I track line of credits (personal and HELOC). My wife works at a bank, so the personal personal LOC is free, and the HELOC is $50 a year. They are nice to have in case I find something expensive, I want to flip quickly or want to jump on a used car deal. The HELOC is to give us a month or two to move money around if we were to become unemployed and is only an extreme last resort (or one day, if we have a gap in funding to put a down payment on a home before we sell our current one). Then, I do quarterly checks to see where I check our financial assets ( I just carry over values of tangible assets from the January numbers and delete any large items I sell or add any larger purchases I make). This tracks our retirement accounts, bank accounts, credit card accounts, mortgage, cash, HSA, any medical debt or misc small debts. I also track my kids (ages 5 and 7) Roth IRAs quarterly but do not include the amounts in my net worth. What does this level of tracking do for me? Number 1 is giving me hope and a little peace. My wife and I are 40....retirement is, at best 10 years off, but more likely 14-18 years off. We are close enough to where it is no longer an abstract concept, but it's far enough away that I can't go telling off clients I don't like working with lol. When I have a bad day at work, I plug in our financial networth (not counting home, vehicle and so on) and put in a modest 6% inflation adjust CAGR and dream of when exactly we can be more free. Number 2: helps me identify options. How much money could we free up if we downsized our home and belongings? Somewhere between 49-55 we want to downsize our home and belongings. Kids will be old enough to identify some sentimental things and will make them hope chests and the rest we want to reduce while we have the energy and health to do it all ourselves. Number 3: Helps me make plans for things/stuff in the event of my passing. I have a couple heart conditions that is top of mind always. Having a list of big stuff and all accounts helps me give my wife directions of what to do if I pass. She can ultimately make any decision she likes, but it lays options if she doesn't want to think about what to do with so many things if I pass and gives her a ballpark value of things if she chooses to sell them. Also, having my pulse on our insurance coverages and financials helps me update our "death file" every year (I really need a less morbid name for that). But basically, it lays out what to do with the insurance money and tangible stuff if were to pass or my wife. Much easier to open talk about that once a year and update the game plan together than the living spouse be completely overwhelmed if one of us unexpectedly goes.
Mark, I always love your logic-based, no false sensationalization-styled articles. I fight myself to include international equity exposure too often. Its a great reminder.
People have been complaining about adapting to tech for as long as tech existed. Myself included. Learning new tech is a necessary evil. It is also a personal choice. How would you like it if your doctor or healthcare provider didn't embrace new tech? I don't think any of us would be in favor of that. Tech helps solve CURRENT problems (while unintentionally creating some NEW problems). And some tech is just bells and whistles from modern snake oil salesmen. However, I wouldn't embrace or identify personally with the refusal to adapt to it. Eating healthy, getting physical exercise, or listening to doctors' suggestions can be annoying and bothersome, too. Everyone knows "that person" who proudly touts, "I eat what I want, and I tell the doctors what I will do, not the other way." While that is fine, eventually, that person falls ill. There are two downsides. First, the person is ill when they could have prevented or reduced the severity of the illness. Second, that person indirectly transferred their problem to someone else (caretakers). Now the spirit of this article is likely A LOT lighter than I make it out to be (ios updates and passkey), but I argue against the mentality of "I don't need any new tech." Eventually, the embrace of ignorance will: one, catch up to you and cause you discomfort, and two, transfer your own burden to others. Lets use IOS updates, life wont change much if you miss the LATEST one or two....but if you swear off all update moving forward, you will surely miss very useful tools. Wearable and close proximity tech is already in most smart phone and getting better. Apps and new phone features that can give you input on your sleep habits, blood pressure, heart rate, and more. And this is quickly improving to be more accurate and expand what can be monitored. It won't be long before blood sugar can be monitored in real-time, as you eat. Helping diabetics connect the dots on what changed glucose levels and helping them not have spikes and crashes. Not far behind that will be algorithms that monitor your blood pressure, heart rate and other factors and can help predict when you could likely have heart issues or a heart attack so you can preemptively take an aspirin and get to an ER. I kid you not; I have an app on my phone that connects to my pacemaker and tells me when to send a transmission (saving me a doctor's visit). It also tells my doctor when my heart rate is abnormal. Just this summer, I got a call from a heart surgeon's office about a consult that week. I told the secretary calling me I had never heard of that doctor, nor had I set up an appointment. I called my cardiologist next. Turns out my heart had an odd set of rhythms in my sleep 2 nights before, sent a transmission to my cardiologist and my cardiologist called for a 2nd opinion with this heart surgeon/specialist (and the receptionist accidentally made an appointment for me). But isn't that something!!!! My phone connected my pacemaker to my specialist, who connected me to another specialist BEFORE I KNEW I EVEN HAD AN ISSUE!!!! Luckily, the abnormality was nothing; I didn't have to go to any appointments and I feel great. But talk about addressing a serious issue with some newfound efficiency. Next, you'll eventually get so far behind you will have to rely on children and grandchildren to do things for you that you could have been capable of doing. For years,my wife had to send emails for my father-in-law and sell his old stuff on Craigslist and Facebook marketplace. While she was happy to do it, it drained her time and added chores every time she went to visit (reducing the joy of just catching up when she saw him). Then he retired for good and got a smartphone because his friend had a MLB app with live score updates lol. In a matter of a year, he could send email, use Facebook to see pics of his grandkids out of state, list his own items, find used things to save money, get the weather, book flights and so much more, all on his phone. An IOS update doesn't seem like much (and it isn't). Just like missing an annual check-up, likely won't mean imminent death. Build a habit or identity around missing them though, and you'll pay for it later. I agree that change is a pain. But the pain of adapting often reduces future pain; we just can't connect those dots in the moment.
Personal belief and it is slightly abstract....I believe retirement is a shift or a glide path, not a point in time or life. Old stigmas will have you believe that you work your 40-50 years, then there is a lackluster "party" in a breakroom with a sheet cake and a gold watch is presented to you. At that POINT, you are retired. You live off a pension (or investments) and social security, complain about fixed income, and putter around your home until you and your spouse pass one day. Literally, one day, you are chipping away at work and the next day, you are home figuring out what in the world to do with your time (maybe golf, maybe gardening). That may be true for some still, and many more in the past, but it will not be for me. I do not dream of a DAY or point in time where there is such an abrupt change, like a light switch getting swiftly flicked off. For me....it will be a slower, malleable and flexible shift. There will be multiple points of inflection. Here are a variety of retirement points on MY glide path. Each point represents a new chapter, a shift in responsibility or opportunity. In essence, something is getting more manageable or less stressful. Sometimes there is a little loss involved or an opportunity ending, but for the most part, life becomes more joyful or manageable at each inflection point. First inflection point - home downsizes - Retirement will START at age 45ish (with my wife and I both still working)...which many will call ridiculous. How can we "retire" and both still work? I reply, "by working less." With a downsize, we will have less to manage (no more inground pool to sap my summer hours), less square footage means lower taxes and utilities, fewer bathrooms to clean, less junk in a basement to manage. And our finances will be more flexible, as we will have no mortgage again, not too mention lower maintenance costs and property taxes. We may even have some extra money after our current home sale to add padding to our retirement savings or take a memorable international, extended family trip of 60-90 days before the kids get too much older. Next inflection point - one spouse COULD stay home and we are coast fi. This will be around 49-51. My wife will be able to shed her increasingly stressful banking career. We won't need her income, and as long as I can provide 60-70k of self-employed income consulting, we will be fine and able to maintain our current life. This is also a super advantageous time to reduce our income. Again, at this point, we are coast fi. The kids will soon be in college, and a reduced income could significantly increase their need-based aid and/or Pell grants. The grants/aid piece could change; we are in NO way banking on it, but it would be a great bonus if that's still around then. We can also 100% afford medical insurance and our lifestyle on 60-70k, so we won't NEED assistance. But I wouldn't turn down Medicaid or ACA subsidies if we qualify. Our state has expanded Medicaid, and at 60k for a family of 4, we would have almost free healthcare (about 1-2k, which would cover ALL out-of-pocket expenses). If that isn't an option, well pick up an ACA plan and use it as a business write-off. Bonus points if we get any subsidy there. So, here we went from 2 spouses working to 1. The other spouse can maintain the house and most of the chores and/or find a "fun part-time gig". My wife talks about being a part-time flipper (buying pallets of returned goods and selling them) or a party planner. Next inflection point - BASIC financial independence (ask work to take 2-4 EXTRA weeks of unpaid leave a year). Age 50-52. We wouldn't have so much money we would want to retire completely, but we would have enough that if I lost my main income or had health issues and couldn't work, we could pay all needed bills. No travel or throwing big parties or eating out weekly or upgrading the family car or paying for kids weddings, JUST the basics. Talk about taking a load off. Day to day, it doesn't seem like much has changed but this is huge. No longer worrying about "what if I lose my career". That freedom will allow me to ask for more flexibility at work. Instead of waiting to be 100% retired, my wife and I could take an extra extended budget trips or two a year. We are experts at stretching our travel dollar and would love to explore Eastern Europe or South America or road trip to national parks, take a month doing humanitarian work, or a month doing a big home project together or take long train rides to less popular cities with cheap amenities. I can afford to ask for special treatment because I wont really care too much if I get let go. Next inflection point - I drop to part-time/and/or side hustle. Age 54-59. At this point, I would keep a handful of ideal clients and work at most 30 hours a week with 8 weeks off annually. With each passing year, I would aim to add a week off until I get to 16 weeks off. If I still enjoy what I am doing, I'll keep going but may drop my hours to 20 max a week. Also, around this time frame, my wife and I have discussed buying a 2-unit home. We happily lived in one for 12+ years in our 20s and early 30s. It was a nice side income; we picked people we enjoyed living alongside, and there was someone to grab our mail and look after the house when we traveled. The extra tax write-offs and lower general cost of living were great perks, too. I look at this phase as a transition to a slowing down phase. Essentially, it is our honeymoon phase. Get out and enjoy the world and our freedom. Go to a movie on a Tuesday afternoon, visit France, take a cruise, join a scooter gang. If things change from 45-59, like big tax code changes, market meltdown, or a spouse gets sick or passes, we move through our phases slower. We COULD stay buckled down and save hard and try to retire at 52-57 but, we don't crave a SINGLE point in time to be done. Also, that feels riskier to us, the odds of delays from market factors are higher, and there are fewer income sources for diversification. Next inflection point - being FULLY financially independent (can cover all basics AND lives extras). Age 60-62. We can let go of any part time work or side gigs or income properties and still travel as we like and have money for activities and meals out now and then. I may still choose to keep working part-time or a fun gig like financial coaching but I don't have to.Extra money will go towards giving the kids early "inheritance" to start them off in life more OR save a little if we need to relocate to a higher cost of living city to be near adult children (if they move away) or maybe save a little to move to a senior centric community (I read they have pretty high HOA fees). Next inflection point - being a grandparent - (First grandkid at age 62-67) - This may be the time when I quite consulting for good. Also, we will slow down our travels a little. We want to offer support taking the grandkids SOME. I do not at all desire to be full time daycare, but taking them 1 or 2 days a week for 4-6 hours would be great. Or watching them after school / helping pick up or drop them off to daycare, and having everyone stay for dinner a few times a week would be awesome to us. Also, around this point the lower-earning spouse will start taking social security, so that will replace some consulting/part-time gig income and give us another source of income. Next inflection point - Higher earning spouse takes social security. Age 70-73 (if the age gets bumped up). At this point, I never worry about where the markets are at again. Good chance we decide to simplify around now as well. If we still have a multiunit, we will consider selling and relocating to a senior-centric community. May also look to set up a qlac annuity to simplify my wife finances in the event I pass early. If all the grand kids are in school, we may try to up our cruises to more exotic places like an Alaskan cruises or Mediterranean cruises for easier travel (health permitting). Next inflection point - the slow go years - Age 74+ or later (god willing). Keep build friendships at a senior community, get a small dog, cook for our family as much as we can while we can and host as much as we can. Enjoy slower paced hobbies. Gift while we are alive (set up the grand kids a bit).
Also...there are a few things missions from the original post. Diversity of income and tax preference are 2 things that come to mind. SS (to my knowledge) has never defaulted. It is as close to risk-free, inflation-adjusted income as we can get. By having more SS income....we lower the risk profile of our retirement income. This can do (2) things....smooth out income and make us stress less in economic downturns. OR if we are ok with our risk level....it could allow us to take MORE risk and gain more return long term....because a nice chunk of income is risk free. Next is federal tax treatment......at most we are taxed on 85% of ss income....some people at 50% and a few at 0%. A nice little perk. Make sure to factor federal (and maybe state) tax savings into your math on when its optimal to claim.
The BIG "x" factor here on a HIGHLY personal choice is life expectancy. I love that you use the SS Admin life expectancy tables, but that isn't enough for YOU to decide. YOU have one unfair advantage here that no actuary or personal finance expert has....a better idea of your health. Life expectancy increases as we age. Also, the odds of dying in the next 1, 2, 5, or 10 years increase as we age. Dying is also a very personal matter, which means it is emotionally charged and can be blurring. The number of people saying my grandma lived to 95 or, more commonly, my dad died at 58 of XYZ can greatly blur your personal view of your life expectancy. My wife and I (both age 40) have both lost our parents. Mine passed at age 33 for my father and 58 for my mother. Hers passed at age 56 for her mom and 78 for her dad. Does that mean we will pass at an average age for our parents (45.5 for me and 67 for my wife)? NOT AT ALL....we have different habits and even a different mix of genes. All 4 of the above parents smoked for a decade or more, a couple drank and a few ate/drank far more sugar. They all likely slept less. They didn't have as sophisticated science to support their healthcare as we have had. DON'T assume you are destined for the longevity of your other family members. There are shared genes, but there is more to it than that. Next, we have to look at the social security mortality table averages and understand what is NOT explicitly stated. New technological advancements is not stated. If you are 70, those advancements may be limited in your lifetime. If you are 60 or younger with 20+ years on the horizon, they could be large. Weight loss pills (semaglutides), wearable tech for early detection of heart attacks, better meds to reduce heart plaque and buildup, better cancer screening and early treatment and so on....they are all getting better every 2-3 years and getting better fast (relative to the last 200 years of modern medicine). Also...what else is not laid out in those SSA mortality tables....lifestyle....are you a smoker or were you? It's likely that many of those people will live under the stated average (remember, 50% will not live to that life expectancy number). Do you now have high blood pressure or cholesterol? Have you been consuming huge amounts of sugar for decades (I did from age 4-30...and didn't cut out soda and juice until I had kids at 33). Do you eat the rainbow in produce each week? Do you exercise daily/weekly (sadly, I still do not, I just let the kids run me around)? Are you married or live with someone who can call an ambulance if they notice something wrong with you? Do you have social interactions daily and purpose? What are your sleep habits like? Do you get all needed checkups and do your specialist visits? Do you take your meds as prescribed? And THEN....whats your family genes pool look like? There is a saying "genes load the gun, but lifestyle pulls the trigger." We can't change our genes but we have more opportunity to manage them than any other population of people in history. And the opportunity to manage them is only getting better year by year. The average reader on this site is likely above average in all the things I laid out above.BUT you know yourself. What I suggest.....as INACCURATE as they are...take some life expectancy quizzes.....be painfully honest. Then review your life expectancy at age 66 (NOT 70) when you will FIRST need to decide to take SS payments now or delay until 70. Evaluate results from 2-3 life expectancy quizzes VS life expectancy tables from SSA and make a guess...will you likely live less than average life expectancy (if so...reduce it by 3 years)....OR live an average life expectancy (stay the same)......OR think you have above-average habits (add 3 years). FIGURE OUT THE MATH on the adjusted life estimates based on (after you take some quizzes) do you have below, average or above-average health). 3 years is a "somewhat average" adjustment....if it feels like too much, do plus or minus 2 years, too little, plus or minus 5 years (I wouldn't adjust more than 5....then we are getting on the fringe of the standard deviation). This is what I do....is it perfect....absolutely not!!! But it helps me make a better broad and far-out estimate. Lots can change for my wife and I before we hit 62....67...70...or whatever ages SS benefit may change to before we get there....our health can change, our ability to supplement retirement income with part-time work or side hustle can change, one of us could pass, we could have to support kids or grand kids.....but JUST figuring out for now....above, below or average helps us be confident to plan to take SS for my wife at 70 and me at 62 (unless I am consulting a good amount).
@R_Quinn Great post. Just one minor flaw (doesn't change the spirit of the post but the blind spot bothers me. "For example, the MIT living wage calculator shows for a family of four in Adair County, Kentucky – 1 working adult – the living wage is $35.39 and hour or $73,611.2 per year. The actual median household income is $49,690. "The MIT Study is based on living wages for 4 people. The MEDIAN income is $49,690Is the media household size 4? No, it is not. A quick google search showed me it is 2.51.What should the living wage for 2.5 be..... you could argue 2.5 / 4 * $73,611.20 = $46,690. you actually have $3k left over.That is very likely to simplistic. There are economies of scale with a home. You essentially buy the same heat, use almost the same electricity, pay the same property taxes, and maybe even the same mortgage amount. So it would likely fall somewhere in the middle....but still, maybe not as drastic of a shortage as the two figures above in the original post. Still any shortage is not good. Just being nit picky here.
One thing that is worth noting in the debate is simplicity. I am 40, most of my peers and myself included, don't have pensions. I will reply on withdrawals from my retirement accounts for the lion share of my retirement income. And I am ready for the challenge that withdrawals brings. Figure out the absolute earliest we can withdrawal based on certain assumptions and our withdrawal method. It excites me to a degree. It is fun for ME being in spreadsheets...too fun. However, it is not fun for my wife. And at 40, I have had 3 heart surgeries (all stemming from a birth defect), 2 in late 2022 and 1 back in 2011. So while I hope and plan for a good 40+ years left on this Earth, that may not be reality. Whats that have to do with when to take social security? Well...enter my wife.My wife is is NOT AT ALL interested in comparing withdrawal strategies, finding hidden risks (either investment or life), weighing the pro's and cons of glide paths to asset allocations, scheming new options to reduce risk, get more time back, reduce expenses and so on. My wife would like a number each month. Then pre-pay all the bills she can and do what she pleases with whats left over. She'll do best when the number is roughly the same every year. But 401k / IRA investments don't work entirely like that. Sure, I could get an annuity and likely will heavily evaluate QLAC's when that time comes in our early 70's. But ya know what else is an annuity....social security. That is why I drive home, "hey if I croak, leave social security alone until you are 70" (unless you develop new health concerns between the time I croak and you turn 70). If she lives past 86 (and I think she will...shes 40 and looks 28) she "wins" the "lifetime benefit social security bet" but it is not about that FOR US. It is about her having a GUARANTEED, inflation-adjusted, tax-benefited (for now at least) amount of income that she doesn't have to do anything for or worry about. Yes, we could start collecting at 62 (and I plan too as the lower income earner...unless I am working for fun still). And yes, we could collect that money and reinvest it and build our own annuity or buy an annuity...but that is more complicated for my wife and less efficient for our investments (for now). When I am 65, I may grow tired of the withdrawal models or feel the need to simplify life for my in the event I pass and can set up more annuities or dividend-paying stocks or bond ladders then. FOR NOW....just going to delay her social security and relish that she'll have enough income from that to cover property taxes, utilities and healthcare.
Comments:
I do two versions (because I am OCD about personal finance and I like spreadsheets, and it is oddly satisfying and amusing). I do a super in-depth one annually. For this one, I include tangible assets like the estimated value of our home, vehicles, and belongings if they were to be sold quickly. If you are wondering why I track larger belongings (anything worth more than $100 usually...furniture, TVs, lawn mower and so on) once a year, it is basically to see if we picked up a lot of material stuff in the last year or sold off stuff (which I love doing). It's more of a minimalism check than anything that requires much immediate action from me or my wife. I also check and track life insurance coverage, health coverage/premiums, and car insurance coverage/premiums once a year. Just to make sure we are covered in case of ill events. Lastly, I track line of credits (personal and HELOC). My wife works at a bank, so the personal personal LOC is free, and the HELOC is $50 a year. They are nice to have in case I find something expensive, I want to flip quickly or want to jump on a used car deal. The HELOC is to give us a month or two to move money around if we were to become unemployed and is only an extreme last resort (or one day, if we have a gap in funding to put a down payment on a home before we sell our current one). Then, I do quarterly checks to see where I check our financial assets ( I just carry over values of tangible assets from the January numbers and delete any large items I sell or add any larger purchases I make). This tracks our retirement accounts, bank accounts, credit card accounts, mortgage, cash, HSA, any medical debt or misc small debts. I also track my kids (ages 5 and 7) Roth IRAs quarterly but do not include the amounts in my net worth. What does this level of tracking do for me? Number 1 is giving me hope and a little peace. My wife and I are 40....retirement is, at best 10 years off, but more likely 14-18 years off. We are close enough to where it is no longer an abstract concept, but it's far enough away that I can't go telling off clients I don't like working with lol. When I have a bad day at work, I plug in our financial networth (not counting home, vehicle and so on) and put in a modest 6% inflation adjust CAGR and dream of when exactly we can be more free. Number 2: helps me identify options. How much money could we free up if we downsized our home and belongings? Somewhere between 49-55 we want to downsize our home and belongings. Kids will be old enough to identify some sentimental things and will make them hope chests and the rest we want to reduce while we have the energy and health to do it all ourselves. Number 3: Helps me make plans for things/stuff in the event of my passing. I have a couple heart conditions that is top of mind always. Having a list of big stuff and all accounts helps me give my wife directions of what to do if I pass. She can ultimately make any decision she likes, but it lays options if she doesn't want to think about what to do with so many things if I pass and gives her a ballpark value of things if she chooses to sell them. Also, having my pulse on our insurance coverages and financials helps me update our "death file" every year (I really need a less morbid name for that). But basically, it lays out what to do with the insurance money and tangible stuff if were to pass or my wife. Much easier to open talk about that once a year and update the game plan together than the living spouse be completely overwhelmed if one of us unexpectedly goes.
Post: How Often Do You Calculate Your Net Worth And Why
Link to comment from December 5, 2024
Mark, I always love your logic-based, no false sensationalization-styled articles. I fight myself to include international equity exposure too often. Its a great reminder.
Post: Misleading Indicators
Link to comment from November 26, 2024
I am always impressed that you take the time for your readers still. Thank you for your precious time.
Post: Advice for the Kids
Link to comment from November 12, 2024
Amen
Post: Dealing With Tech Changes
Link to comment from November 5, 2024
People have been complaining about adapting to tech for as long as tech existed. Myself included. Learning new tech is a necessary evil. It is also a personal choice. How would you like it if your doctor or healthcare provider didn't embrace new tech? I don't think any of us would be in favor of that. Tech helps solve CURRENT problems (while unintentionally creating some NEW problems). And some tech is just bells and whistles from modern snake oil salesmen. However, I wouldn't embrace or identify personally with the refusal to adapt to it. Eating healthy, getting physical exercise, or listening to doctors' suggestions can be annoying and bothersome, too. Everyone knows "that person" who proudly touts, "I eat what I want, and I tell the doctors what I will do, not the other way." While that is fine, eventually, that person falls ill. There are two downsides. First, the person is ill when they could have prevented or reduced the severity of the illness. Second, that person indirectly transferred their problem to someone else (caretakers). Now the spirit of this article is likely A LOT lighter than I make it out to be (ios updates and passkey), but I argue against the mentality of "I don't need any new tech." Eventually, the embrace of ignorance will: one, catch up to you and cause you discomfort, and two, transfer your own burden to others. Lets use IOS updates, life wont change much if you miss the LATEST one or two....but if you swear off all update moving forward, you will surely miss very useful tools. Wearable and close proximity tech is already in most smart phone and getting better. Apps and new phone features that can give you input on your sleep habits, blood pressure, heart rate, and more. And this is quickly improving to be more accurate and expand what can be monitored. It won't be long before blood sugar can be monitored in real-time, as you eat. Helping diabetics connect the dots on what changed glucose levels and helping them not have spikes and crashes. Not far behind that will be algorithms that monitor your blood pressure, heart rate and other factors and can help predict when you could likely have heart issues or a heart attack so you can preemptively take an aspirin and get to an ER. I kid you not; I have an app on my phone that connects to my pacemaker and tells me when to send a transmission (saving me a doctor's visit). It also tells my doctor when my heart rate is abnormal. Just this summer, I got a call from a heart surgeon's office about a consult that week. I told the secretary calling me I had never heard of that doctor, nor had I set up an appointment. I called my cardiologist next. Turns out my heart had an odd set of rhythms in my sleep 2 nights before, sent a transmission to my cardiologist and my cardiologist called for a 2nd opinion with this heart surgeon/specialist (and the receptionist accidentally made an appointment for me). But isn't that something!!!! My phone connected my pacemaker to my specialist, who connected me to another specialist BEFORE I KNEW I EVEN HAD AN ISSUE!!!! Luckily, the abnormality was nothing; I didn't have to go to any appointments and I feel great. But talk about addressing a serious issue with some newfound efficiency. Next, you'll eventually get so far behind you will have to rely on children and grandchildren to do things for you that you could have been capable of doing. For years,my wife had to send emails for my father-in-law and sell his old stuff on Craigslist and Facebook marketplace. While she was happy to do it, it drained her time and added chores every time she went to visit (reducing the joy of just catching up when she saw him). Then he retired for good and got a smartphone because his friend had a MLB app with live score updates lol. In a matter of a year, he could send email, use Facebook to see pics of his grandkids out of state, list his own items, find used things to save money, get the weather, book flights and so much more, all on his phone. An IOS update doesn't seem like much (and it isn't). Just like missing an annual check-up, likely won't mean imminent death. Build a habit or identity around missing them though, and you'll pay for it later. I agree that change is a pain. But the pain of adapting often reduces future pain; we just can't connect those dots in the moment.
Post: Dealing With Tech Changes
Link to comment from November 5, 2024
Personal belief and it is slightly abstract....I believe retirement is a shift or a glide path, not a point in time or life. Old stigmas will have you believe that you work your 40-50 years, then there is a lackluster "party" in a breakroom with a sheet cake and a gold watch is presented to you. At that POINT, you are retired. You live off a pension (or investments) and social security, complain about fixed income, and putter around your home until you and your spouse pass one day. Literally, one day, you are chipping away at work and the next day, you are home figuring out what in the world to do with your time (maybe golf, maybe gardening). That may be true for some still, and many more in the past, but it will not be for me. I do not dream of a DAY or point in time where there is such an abrupt change, like a light switch getting swiftly flicked off. For me....it will be a slower, malleable and flexible shift. There will be multiple points of inflection. Here are a variety of retirement points on MY glide path. Each point represents a new chapter, a shift in responsibility or opportunity. In essence, something is getting more manageable or less stressful. Sometimes there is a little loss involved or an opportunity ending, but for the most part, life becomes more joyful or manageable at each inflection point. First inflection point - home downsizes - Retirement will START at age 45ish (with my wife and I both still working)...which many will call ridiculous. How can we "retire" and both still work? I reply, "by working less." With a downsize, we will have less to manage (no more inground pool to sap my summer hours), less square footage means lower taxes and utilities, fewer bathrooms to clean, less junk in a basement to manage. And our finances will be more flexible, as we will have no mortgage again, not too mention lower maintenance costs and property taxes. We may even have some extra money after our current home sale to add padding to our retirement savings or take a memorable international, extended family trip of 60-90 days before the kids get too much older. Next inflection point - one spouse COULD stay home and we are coast fi. This will be around 49-51. My wife will be able to shed her increasingly stressful banking career. We won't need her income, and as long as I can provide 60-70k of self-employed income consulting, we will be fine and able to maintain our current life. This is also a super advantageous time to reduce our income. Again, at this point, we are coast fi. The kids will soon be in college, and a reduced income could significantly increase their need-based aid and/or Pell grants. The grants/aid piece could change; we are in NO way banking on it, but it would be a great bonus if that's still around then. We can also 100% afford medical insurance and our lifestyle on 60-70k, so we won't NEED assistance. But I wouldn't turn down Medicaid or ACA subsidies if we qualify. Our state has expanded Medicaid, and at 60k for a family of 4, we would have almost free healthcare (about 1-2k, which would cover ALL out-of-pocket expenses). If that isn't an option, well pick up an ACA plan and use it as a business write-off. Bonus points if we get any subsidy there. So, here we went from 2 spouses working to 1. The other spouse can maintain the house and most of the chores and/or find a "fun part-time gig". My wife talks about being a part-time flipper (buying pallets of returned goods and selling them) or a party planner. Next inflection point - BASIC financial independence (ask work to take 2-4 EXTRA weeks of unpaid leave a year). Age 50-52. We wouldn't have so much money we would want to retire completely, but we would have enough that if I lost my main income or had health issues and couldn't work, we could pay all needed bills. No travel or throwing big parties or eating out weekly or upgrading the family car or paying for kids weddings, JUST the basics. Talk about taking a load off. Day to day, it doesn't seem like much has changed but this is huge. No longer worrying about "what if I lose my career". That freedom will allow me to ask for more flexibility at work. Instead of waiting to be 100% retired, my wife and I could take an extra extended budget trips or two a year. We are experts at stretching our travel dollar and would love to explore Eastern Europe or South America or road trip to national parks, take a month doing humanitarian work, or a month doing a big home project together or take long train rides to less popular cities with cheap amenities. I can afford to ask for special treatment because I wont really care too much if I get let go. Next inflection point - I drop to part-time/and/or side hustle. Age 54-59. At this point, I would keep a handful of ideal clients and work at most 30 hours a week with 8 weeks off annually. With each passing year, I would aim to add a week off until I get to 16 weeks off. If I still enjoy what I am doing, I'll keep going but may drop my hours to 20 max a week. Also, around this time frame, my wife and I have discussed buying a 2-unit home. We happily lived in one for 12+ years in our 20s and early 30s. It was a nice side income; we picked people we enjoyed living alongside, and there was someone to grab our mail and look after the house when we traveled. The extra tax write-offs and lower general cost of living were great perks, too. I look at this phase as a transition to a slowing down phase. Essentially, it is our honeymoon phase. Get out and enjoy the world and our freedom. Go to a movie on a Tuesday afternoon, visit France, take a cruise, join a scooter gang. If things change from 45-59, like big tax code changes, market meltdown, or a spouse gets sick or passes, we move through our phases slower. We COULD stay buckled down and save hard and try to retire at 52-57 but, we don't crave a SINGLE point in time to be done. Also, that feels riskier to us, the odds of delays from market factors are higher, and there are fewer income sources for diversification. Next inflection point - being FULLY financially independent (can cover all basics AND lives extras). Age 60-62. We can let go of any part time work or side gigs or income properties and still travel as we like and have money for activities and meals out now and then. I may still choose to keep working part-time or a fun gig like financial coaching but I don't have to.Extra money will go towards giving the kids early "inheritance" to start them off in life more OR save a little if we need to relocate to a higher cost of living city to be near adult children (if they move away) or maybe save a little to move to a senior centric community (I read they have pretty high HOA fees). Next inflection point - being a grandparent - (First grandkid at age 62-67) - This may be the time when I quite consulting for good. Also, we will slow down our travels a little. We want to offer support taking the grandkids SOME. I do not at all desire to be full time daycare, but taking them 1 or 2 days a week for 4-6 hours would be great. Or watching them after school / helping pick up or drop them off to daycare, and having everyone stay for dinner a few times a week would be awesome to us. Also, around this point the lower-earning spouse will start taking social security, so that will replace some consulting/part-time gig income and give us another source of income. Next inflection point - Higher earning spouse takes social security. Age 70-73 (if the age gets bumped up). At this point, I never worry about where the markets are at again. Good chance we decide to simplify around now as well. If we still have a multiunit, we will consider selling and relocating to a senior-centric community. May also look to set up a qlac annuity to simplify my wife finances in the event I pass early. If all the grand kids are in school, we may try to up our cruises to more exotic places like an Alaskan cruises or Mediterranean cruises for easier travel (health permitting). Next inflection point - the slow go years - Age 74+ or later (god willing). Keep build friendships at a senior community, get a small dog, cook for our family as much as we can while we can and host as much as we can. Enjoy slower paced hobbies. Gift while we are alive (set up the grand kids a bit).
Post: Dream Retirement – Is it fading away?
Link to comment from November 1, 2024
Also...there are a few things missions from the original post. Diversity of income and tax preference are 2 things that come to mind. SS (to my knowledge) has never defaulted. It is as close to risk-free, inflation-adjusted income as we can get. By having more SS income....we lower the risk profile of our retirement income. This can do (2) things....smooth out income and make us stress less in economic downturns. OR if we are ok with our risk level....it could allow us to take MORE risk and gain more return long term....because a nice chunk of income is risk free. Next is federal tax treatment......at most we are taxed on 85% of ss income....some people at 50% and a few at 0%. A nice little perk. Make sure to factor federal (and maybe state) tax savings into your math on when its optimal to claim.
Post: Let’s do the math on Social Security- my simplistic math not guaranteed and possibly flawed, but with a good end result for us – I hope. RDQ
Link to comment from October 23, 2024
The BIG "x" factor here on a HIGHLY personal choice is life expectancy. I love that you use the SS Admin life expectancy tables, but that isn't enough for YOU to decide. YOU have one unfair advantage here that no actuary or personal finance expert has....a better idea of your health. Life expectancy increases as we age. Also, the odds of dying in the next 1, 2, 5, or 10 years increase as we age. Dying is also a very personal matter, which means it is emotionally charged and can be blurring. The number of people saying my grandma lived to 95 or, more commonly, my dad died at 58 of XYZ can greatly blur your personal view of your life expectancy. My wife and I (both age 40) have both lost our parents. Mine passed at age 33 for my father and 58 for my mother. Hers passed at age 56 for her mom and 78 for her dad. Does that mean we will pass at an average age for our parents (45.5 for me and 67 for my wife)? NOT AT ALL....we have different habits and even a different mix of genes. All 4 of the above parents smoked for a decade or more, a couple drank and a few ate/drank far more sugar. They all likely slept less. They didn't have as sophisticated science to support their healthcare as we have had. DON'T assume you are destined for the longevity of your other family members. There are shared genes, but there is more to it than that. Next, we have to look at the social security mortality table averages and understand what is NOT explicitly stated. New technological advancements is not stated. If you are 70, those advancements may be limited in your lifetime. If you are 60 or younger with 20+ years on the horizon, they could be large. Weight loss pills (semaglutides), wearable tech for early detection of heart attacks, better meds to reduce heart plaque and buildup, better cancer screening and early treatment and so on....they are all getting better every 2-3 years and getting better fast (relative to the last 200 years of modern medicine). Also...what else is not laid out in those SSA mortality tables....lifestyle....are you a smoker or were you? It's likely that many of those people will live under the stated average (remember, 50% will not live to that life expectancy number). Do you now have high blood pressure or cholesterol? Have you been consuming huge amounts of sugar for decades (I did from age 4-30...and didn't cut out soda and juice until I had kids at 33). Do you eat the rainbow in produce each week? Do you exercise daily/weekly (sadly, I still do not, I just let the kids run me around)? Are you married or live with someone who can call an ambulance if they notice something wrong with you? Do you have social interactions daily and purpose? What are your sleep habits like? Do you get all needed checkups and do your specialist visits? Do you take your meds as prescribed? And THEN....whats your family genes pool look like? There is a saying "genes load the gun, but lifestyle pulls the trigger." We can't change our genes but we have more opportunity to manage them than any other population of people in history. And the opportunity to manage them is only getting better year by year. The average reader on this site is likely above average in all the things I laid out above.BUT you know yourself. What I suggest.....as INACCURATE as they are...take some life expectancy quizzes.....be painfully honest. Then review your life expectancy at age 66 (NOT 70) when you will FIRST need to decide to take SS payments now or delay until 70. Evaluate results from 2-3 life expectancy quizzes VS life expectancy tables from SSA and make a guess...will you likely live less than average life expectancy (if so...reduce it by 3 years)....OR live an average life expectancy (stay the same)......OR think you have above-average habits (add 3 years). FIGURE OUT THE MATH on the adjusted life estimates based on (after you take some quizzes) do you have below, average or above-average health). 3 years is a "somewhat average" adjustment....if it feels like too much, do plus or minus 2 years, too little, plus or minus 5 years (I wouldn't adjust more than 5....then we are getting on the fringe of the standard deviation). This is what I do....is it perfect....absolutely not!!! But it helps me make a better broad and far-out estimate. Lots can change for my wife and I before we hit 62....67...70...or whatever ages SS benefit may change to before we get there....our health can change, our ability to supplement retirement income with part-time work or side hustle can change, one of us could pass, we could have to support kids or grand kids.....but JUST figuring out for now....above, below or average helps us be confident to plan to take SS for my wife at 70 and me at 62 (unless I am consulting a good amount).
Post: Let’s do the math on Social Security- my simplistic math not guaranteed and possibly flawed, but with a good end result for us – I hope. RDQ
Link to comment from October 23, 2024
@R_Quinn Great post. Just one minor flaw (doesn't change the spirit of the post but the blind spot bothers me. "For example, the MIT living wage calculator shows for a family of four in Adair County, Kentucky – 1 working adult – the living wage is $35.39 and hour or $73,611.2 per year. The actual median household income is $49,690. " The MIT Study is based on living wages for 4 people. The MEDIAN income is $49,690 Is the media household size 4? No, it is not. A quick google search showed me it is 2.51. What should the living wage for 2.5 be..... you could argue 2.5 / 4 * $73,611.20 = $46,690. you actually have $3k left over. That is very likely to simplistic. There are economies of scale with a home. You essentially buy the same heat, use almost the same electricity, pay the same property taxes, and maybe even the same mortgage amount. So it would likely fall somewhere in the middle....but still, maybe not as drastic of a shortage as the two figures above in the original post. Still any shortage is not good. Just being nit picky here.
Post: What is the most significant fiscal issue facing the American people?
Link to comment from October 21, 2024
One thing that is worth noting in the debate is simplicity. I am 40, most of my peers and myself included, don't have pensions. I will reply on withdrawals from my retirement accounts for the lion share of my retirement income. And I am ready for the challenge that withdrawals brings. Figure out the absolute earliest we can withdrawal based on certain assumptions and our withdrawal method. It excites me to a degree. It is fun for ME being in spreadsheets...too fun. However, it is not fun for my wife. And at 40, I have had 3 heart surgeries (all stemming from a birth defect), 2 in late 2022 and 1 back in 2011. So while I hope and plan for a good 40+ years left on this Earth, that may not be reality. Whats that have to do with when to take social security? Well...enter my wife.My wife is is NOT AT ALL interested in comparing withdrawal strategies, finding hidden risks (either investment or life), weighing the pro's and cons of glide paths to asset allocations, scheming new options to reduce risk, get more time back, reduce expenses and so on. My wife would like a number each month. Then pre-pay all the bills she can and do what she pleases with whats left over. She'll do best when the number is roughly the same every year. But 401k / IRA investments don't work entirely like that. Sure, I could get an annuity and likely will heavily evaluate QLAC's when that time comes in our early 70's. But ya know what else is an annuity....social security. That is why I drive home, "hey if I croak, leave social security alone until you are 70" (unless you develop new health concerns between the time I croak and you turn 70). If she lives past 86 (and I think she will...shes 40 and looks 28) she "wins" the "lifetime benefit social security bet" but it is not about that FOR US. It is about her having a GUARANTEED, inflation-adjusted, tax-benefited (for now at least) amount of income that she doesn't have to do anything for or worry about. Yes, we could start collecting at 62 (and I plan too as the lower income earner...unless I am working for fun still). And yes, we could collect that money and reinvest it and build our own annuity or buy an annuity...but that is more complicated for my wife and less efficient for our investments (for now). When I am 65, I may grow tired of the withdrawal models or feel the need to simplify life for my in the event I pass and can set up more annuities or dividend-paying stocks or bond ladders then. FOR NOW....just going to delay her social security and relish that she'll have enough income from that to cover property taxes, utilities and healthcare.
Post: Quinn asks himself, Is delaying Social Security to age 70 the right decision?
Link to comment from September 23, 2024