Thoughts on retirement budgeting

[C&G in FL]

Originally Posted by Carol H

Here in Canada you would be hard pressed to be able to obtain more than that if you simple do your investments with the over the counter options offered at the bank level. You normally need to use the services of a detached investment company/advisor to do better. If your wanting to play it safe but do better than a savings plan - long term 5 to 10 year corporate bonds are a farily popular option.

Actually, I do have the services of a financial planner available, and do keep some of my money in a credit union. I wasn't asking because I was looking for something that paid 3%; it was a rhetorical question because I was aware that 3% from a bank is unrealistic in today's world. If I were relying on getting 3% to have a comfortable retirement I would be in trouble. And I don't think Canada has a monopoly on being hard pressed to obtain higher savings rates. It is the same south of the border here. I doubt interest on savings will ever climb to what it once was. :<)


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[Carol H]

Originally Posted by CPW

Actually, I do have the services of a financial planner available, and do keep some of my money in a credit union. I wasn't asking because I was looking for something that paid 3%; it was a rhetorical question because I was aware that 3% from a bank is unrealistic in today's world. If I were relying on getting 3% to have a comfortable retirement I would be in trouble. And I don't think Canada has a monopoly on being hard pressed to obtain higher savings rates. It is the same south of the border here. I doubt interest on savings will ever climb to what it once was. :<)


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Sorry Carl, my comment wasn't intended as a personal slight to your investment knowledge, simple an answer to what apparently theoretical question.

[C&G in FL]

Originally Posted by Carol H

Sorry Carl, my comment wasn't intended as a personal slight to your investment knowledge, simple an answer to what apparently theoretical question.

I didn't take it as a slight at all Carol. I was aware that you were using figures previously used in the thread. Originally, I was trying to point out that no bank I know of is offering anything approaching 3%. Believe me, I am not offended and I'm sorry if I gave you the impression that I was.


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[Jon Vermilye]

One point that hasn't been mentioned on retirement spending - You may not need as much as you did while working. With a combination of a pension, Social Security & saving interest, my current income is 76.9% of my last year at work (2002) and without job related expenses, I have more to spend. I travel more, and seem to be able to buy more "toys" while still adding to my savings. While your lifestyle may not match mine, it is something to consider.

[trumpetguy]

Check out Lendingclub.com

A peer to peer finance company with over 5 billion in outstanding notes. It is not too difficult to get a net return of 8% or more with a maximum risk of $25.00 per note purchased. You receive monthly P&i payments on the notes you purchase.

If you want some Arbitrage take out a 3% mortgage and loan it out at 10%. That's exactly what banks do.


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[Carol H]

Originally Posted by CPW

I didn't take it as a slight at all Carol. I was aware that you were using figures previously used in the thread. Originally, I was trying to point out that no bank I know of is offering anything approaching 3%. Believe me, I am not offended and I'm sorry if I gave you the impression that I was.


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No problem, I BTW only mentioned Canada as I am well aware that the banking practices are VERY different to those in the US especially when it comes to large ticket items such as mortgages & retirement savings plans as well as small stuff such as certified cheques .... so was not totally sure as to what the practices in the US banks are/where in regards to what investment services one can get directly over the bank counter.

[Mark J]

....."The DAY you retire (he said it twice!).....will be FIVE YEARS too late.".....

I am afraid that may be true! As a person gets closer to that final working day it becomes an issue - when should I retire? Will I have enough? I also need to remind myself to careful of that OMY syndrome.

Here is another quote I've read about when its time:
when you have enough
when you've had enough

[Franswa]

glad it's working for you...but personally, I wouldn't go near that thing with a "ten foot pole" !....it raises LOTS of red flags in my book....and it's not that I am super "risk averse" either

(ALL of my nest egg is invested in the stock market....my decisions, my choices, using the "discount brokerage" model....a fair amount of work to keep up with it all... but satisfying and intersting as well)

The Clubs customers are basically people who banks would not lend to....that does not give me a nice warm feeling....no matter how far and wide you spread the risk around...BTW wasn't that the recipe the mortgage market used from 2000 to 2007 ? I can only wonder what would have happened to the Lending Club if it had been around in 2008?

on the other hand, we hear a lot about banks in the US not lending to anybody these days (once burned, twice shy and the consequence of ridiculoously cheap money from the Fed)....so maybe this is just the "new normal" and there is nothing to be worried about.....flip a coin

For me, I think that at this point in time it is "better to be an owner than a lender" and that's what I'm going with....good luck to all of us

[trumpetguy]

What works for one does not for the other. I would not trust the crooks manipulating the stock markets with one cent. I have been extremely happy with Lending Club for three years now. Only a total collapse of the financial system that put EVERYONE out of work could put my notes at risk. And yes these may be folks that cannot get bank financing, but by using the screening model you can restrict note purchases to only A credits with 750 FICO scores if you are happy with 6% yields.


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[drstock]

In May 2015, I am taking early retirement at age 59 1/2 years which is allowable with my employer's retirement plan. I've crunched the numbers many times, and it's doable. I am very fortunate in that my retirement benefits include a decent health care plan at minimal cost to me. This may not last forever, as many employers are changing the health care benefits for retirees, but I'll take it as long as it lasts. Hopefully, I'll continue to have this benefit until age 65 when I become Medicare eligible. If not, I'll have to adjust my budget accordingly.

One of the reasons why it is doable is because I have had a lifelong habit of living below my means and not taking out loans other than to mortgage a home. Members of this forum seem to be a frugal lot, so I think I am among like-minded company. Another reason why I am able to do this is because my children have achieved comfortable and stable lifestyles without needing much help from me. This has been a great blessing, and I am very grateful to them.

I have been prepping for retirement for the past two years. My action plan includes the following: 1. Paid off mortgage. 2. Sell second home to minimize expenses. 3. Sell my boat, a 1985 Albin pocket trawler (a BIG expense item). 4. Consolidate all taxable investments into a single account and choose a modest withdrawal rate for income to supplement employer's monthly pension. 5. Be on the lookout for a fiberglass trailer so that I can spend the winter months down south.

I cannot imagine that I will spend, in inflation-adjusted dollars, as much as I spend while working. I have a small, modest summer cottage in Michigan on Lake Huron which is very inexpensive to maintain during that time of year. I hope to spend 5 or six months per year in warmer weather using the trailer to travel to different places, maybe interspersed with one-month condo rentals through VRBO (vacation rentals by owner) rental units. These can be found in places like Hilton Head Island and Gulf Shores for $1000 per month, including utilities.

I am looking forward to this next phase of my life, and May cannot come soon enough.

[Franswa]

from their website, in a bold box, illustrating how the concept works, typically:

"borrowers pay 13%.... minus defaults 4%... minus fees 1% = 8% to lenders/investors"

4% sounds low and resonable until you realize that that is a percentage of a percentage, backwards.....4% loss of revenue is 30% of the business....that's a scary number...to me anyways....

I'm glad it's working for you....now that you have essentially become a loans officer...to safeguard your capital

the whole concept is intriguing....sort of downloading the loans officer function/expense to the capital providers.....but like I said I don't want to be a lender (or a landlord either BTW) anymore.....so it's not for me

an unleveraged stock investor who would have just "sat on his hands" in the fall of 2008.....would be ahead by a good margin today

[trumpetguy]

I have been in the lending business for all my career so this feels familiar to me. We all must find our comfort level.


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[AbdRahim]

Don't forget to factor inflation into future retirement income needs. Even three percent inflation over 20-40 years is astronomical, in terms of what things will cost down the road in a few decades. I think a good financial planner is a must, in order to keep your money growing faster than your need to spend. Also, don't forget to budget for unforeseen out of pocket medical and dental expenses.


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[cpaharley2008]

Over the past 35 years I have been exposed to just about every financial arrangements possible, most of them risky and shams. We used to say if it smells fishy......When I retired I was working on the Enron scheme. We all know about that one. Then there was the guy on Wall St that took friends and relatives for billions. It goes back to the making gold from lead idea and the Matchlight king who started the first pyramid idea.
Paying someone else to do your thinking and handling your money has inherent risks. They will do what they can to obtain your money. Trying to get it back becomes very hard.
Stick with known variables, stay with insured investments.

[honda03842]

It's difficult if not almost impossible to see the future. Significant financial disruption is always a possibility, disruption that most of us would find difficult. Assuming regular financial change, normal levels of inflation, most people will survive.

After 14 years of RV travel, mostly living off personal resources, we are surprised how little it takes to live comfortably on the road. Certainly during this period our costs have increased, both fuel and food have increased dramatically.

When we started we were 58, with no government or industry pensions and no insurances. We survived just fine and believe we had our happiest years traveling North America. We have not for a single moment regretted the changes in our lives.

Though we were spending well less than half we did when working we did not feel deprived at all. It turned out that we actually needed a lot less than we previously had needed.

We have changed the way we live, we are spending less and enjoying life more. Our previous life was grand, our present life is different and better. We have joyfully scaled back.

Scaling back suggests that you are giving something up, I suppose that's true. Is what you've given up missed? Is what you've given up been replaced by something less expensive but better?

As we enter year 15 we are hoping for 10 more road years. Our model in our Escapee park is Gordie, 92 years old. He has a large Dutch Star diesel motorhome and a smaller Rialto class C motorhome. He's always going out for a week or two, camping around Florida. Recently he tool a summer long trip up to the Maritimes and New England. Obviously not a normal situation but a possibility.

As an example of cost containment, we are about to sell our home in NH and have created a less expensive home base here in Florida. The difference in investment is close to 10 to 1, a reduction that provides an actually more comfortable living situation with dramatically lower operating costs while freeing of capital.

There are ways and we have been beneficiaries of a new life style.

[Franswa]

"Stick with known variables, stay with insured investments."

yeah sure...except all the "insured investments" I can think of offer a negative rate of return after inflation these days.....so just a bit better than putting cash in a coffee can and bury it in the backyard

and what's a "known variable"?? is that like a "known unknown"??? like a trend is a trend until it ends??...

the only "sure thing" investment I can think of is life insurance....but you don't get to enjoy it

these days it is really easy and inexpensive to invest on your own and in everything under the sun if you so choose....very time consuming for sure (research) but time is something I have a lot of...and it's turned into an interesting hobby of sorts......you win, you win....you crash, you crash......nobody to congratulate/blame but yourself....I like that

there is certainly no size fits all in this business...to some leaving a sizable legacy is high on the priority list....some like to travel in style ("Honey, if we don't go first class our kids will") then there's the ultimate financial plan outcome: The very last cheque you write is to the government and it bounces!

good luck to all of us

[Weinel, Alan]

GREAT THREAD!!! Lots of interesting subtopics. Michele and I (Alan) retired 5 1/2 years ago. Planned for it and it is working so far. We were socking away the max in 401(k) ##AND## 457 plans the last 10 years or so. So, we were already living on a severely reduced income. Shrug. In any case, retired when the NET cash flow from pension alone exceeded net cash (after funding 401/457) working. Admittedly we are no longer funding, but neither are we drawing. We are pretty much living on our income. The 401/457... We DID draw $30k THREE years ago and still have 2/3 in hand. So we ARE **slightly** deficit spending every month, but we also are enjoying the heck out of life. GRIN. I, too, am a retired CPA (Hi Harley), and so I do a fair amount (i.e. WAY TOO MUCH) analysis work. ORIGINALLY I had anticipated deleting the 401/457 pot by age 85. Figgered by then we would be ready for a more sedentary life, and would be WILLING to live on just pension and SSA. SO FAR, we are not drawing NEAR what I projected. So we either have to step up the spending OR plan that the kids just might get some buckage from mom and pop when we are gone.


PLAN for tomorrow, but LIVE for TODAY!!