OT: Seeking good books on how best to plan for retirement.

[sluggo72]

Most people don't think about this, but having gone through a catestrophic medical issue with my wife, some sort of Long Term Care planning should be part of anyone's retirement strategy. How would you pay for LTC if one of you require it?

you know I've been thinking about this as well. I think it depends on several factors. If you are super wealthy, and have $10 million in liquid type assets, do you really need this? You could certainly afford to self fund. If you have no assets, you qualify for LTC under Medicade, so you don't need LTC. Its the middle that needs LTC, and it is more of asset protection for the next generation than anything else (provided there is a next generation) In my case there is no next generation. I really think if I get to the point I need LTC, I would think of getting a divorce, have the judge award everything to my wife, and use Medicade to cover my expenses.

 

[CF LION]

you know I've been thinking about this as well. I think it depends on several factors. If you are super wealthy, and have $10 million in liquid type assets, do you really need this? You could certainly afford to self fund. If you have no assets, you qualify for LTC under Medicade, so you don't need LTC. Its the middle that needs LTC, and it is more of asset protection for the next generation than anything else (provided there is a next generation) In my case there is no next generation. I really think if I get to the point I need LTC, I would think of getting a divorce, have the judge award everything to my wife, and use Medicade to cover my expenses.

A few months before my wife passed, I was working with a lawyer to see how I could make my wife Medicaid eligible. It was clear that she was never going to recover and needed 24/7 care. I had exhausted all insurance options and was now faced with paying out of pocket. I inquired about divorcing my wife, making her financially destitute and getting her on Medicaid, but my lawyer told me that was not feasible. Most judges would see that as gaming the system (which it is) and would not grant the divorce.

The only other option, which I began to pursue, was to liquidate our assets and spend them down to a level where my wife would become destitute, qualify for Medicare and I would become a "communal spouse", allowed to keep certain assets for myself. It sucked as an option but I was being faced with the possibility that my wife may need 10-20 years of 24/7 care, at about $10K a month.

Had I had a LTC plan in place, I would not have had to consider those options.

 

[tmacpolo]

over the last 30 years, 96% of the time American Funds have out preformed the index, doesn't sound too shabby. Again its all who you want to manage your money, someone like American Funds or do you want S&P with their buy high slow low philosophy.

https://www.bogleheads.org/forum/viewtopic.php?t=207688

 

[sluggo72]

A few months before my wife passed, I was working with a lawyer to see how I could make my wife Medicaid eligible. It was clear that she was never going to recover and needed 24/7 care. I had exhausted all insurance options and was now faced with paying out of pocket. I inquired about divorcing my wife, making her financially destitute and getting her on Medicaid, but my lawyer told me that was not feasible. Most judges would see that as gaming the system (which it is) and would not grant the divorce.

The only other option, which I began to pursue, was to liquidate our assets and spend them down to a level where my wife would become destitute, qualify for Medicare and I would become a "communal spouse", allowed to keep certain assets for myself. It sucked as an option but I was being faced with the possibility that my wife may need 10-20 years of 24/7 care, at about $10K a month.

Had I had a LTC plan in place, I would not have had to consider those options.

Sorry for your loss, but you are correct LTC should be part of most peoples retirement plans. If you cash value in a life insurance policy, and don't really need life insurance anymore (kids grown, college paid for etc) you can exchange the cash value into a LTC policy, which you may be able to use.

 

[tboyer]

Just thought of another issue people should be planning for as they approach 60 -- the Social Security "double whammy" tax problem.

When you begin drawing Social Security, your benefits are tax-free unless you have other income. If that other income (say, pension or IRA withdrawals) exceeds certain thresholds, you are not only taxed on that income, it also throws your Social Security benefits into your AGI -- it means every dollar over that threshold is essentially taxed TWICE.

One way people avoid this is to make IRA withdrawals BEFORE Social Security kicks in. You are allowed to make IRA withdrawals without penalty at 59 1/2 and even before that you can withdraw without penalty using an Equal Periodic Payment plan.

Anyway you have to do the analysis (ideally with a tax accountant), but depending on your bracket, it will save you a pile of money getting your money out of the IRA early, paying income tax on it, and then just keeping it in savings until you need it.

(Goes without saying that this doesn't work for the kind of person who can't resist spending it early).

 

[NoVa Lion]

Just thought of another issue people should be planning for as they approach 60 -- the Social Security "double whammy" tax problem.

When you begin drawing Social Security, your benefits are tax-free unless you have other income. If that other income (say, pension or IRA withdrawals) exceeds certain thresholds, you are not only taxed on that income, it also throws your Social Security benefits into your AGI -- it means every dollar over that threshold is essentially taxed TWICE.

One way people avoid this is to make IRA withdrawals BEFORE Social Security kicks in. You are allowed to make IRA withdrawals without penalty at 59 1/2 and even before that you can withdraw without penalty using an Equal Periodic Payment plan.

Anyway you have to do the analysis (ideally with a tax accountant), but depending on your bracket, it will save you a pile of money getting your money out of the IRA early, paying income tax on it, and then just keeping it in savings until you need it.

(Goes without saying that this doesn't work for the kind of person who can't resist spending it early).

BS, Social Security benefits are NOT taxed twice (I assume you really meant you are being taxed on benefits that are already taxed which is true) but the way you presented it is VERY misleading. If you have enough other taxable income up to 70% (and never more) of Social Security benefits can be subject to Federal Income Tax.

 

[LemonEars]

Most of the responses to this post are as I expected: everyone looks at the financial aspect of retiring with the thought that if you can make a go of the finances you should certainly retire. I think this is a bit naive.

I retired in 2012 at age 62 after 41 years working as an engineer at a large company. I did just what these posts suggest. I made a massive detailed spreadsheet and convinced myself that I would be OK financially. I had a decent pension, SS, and some money in a 401K. The finances looked sufficient so I pulled the trigger and retired.

The first month of retirement was heaven. No need to get up early in the morning. No fighting traffic. No pain in the ass boss beating me to go faster.

By about the third month I had second thoughts. I was becoming intellectually dull. I missed my friends at work. I missed the challenges to produce good work. My kids and my friends were taking advantage of me: "Hey, your retired. You have nothing to do. Here fix my computer. I work and don't have time." "Hey, you can babysit the grandkids all day. You don't work and I do."

After a year I decided I made the wrong decision. I then started my own company and got hired as a consultant at an engineering firm. I'm been back at work for over 5 years and am happy as a lark. There is no pressure since I can quit any time I want. I don't have set hours and can come and go as I please. I have a lot of say in my assignments. I have lots of old friends and a lot of new ones too.

Bottom line: There is a lot more to retirement than money. I actually found that the money part of it was easy. My wife and I spent a lot less than I planned and the money was not a problem. The issue with retirement for me was psychological. I wasn't able to cope without the adrenaline rush of a challenging job and I wasn't able to fill the void of leaving my work friends. If you are going to retire make sure you think hard about these aspects of retirement.

 

[katchthis]

over the last 30 years, 96% of the time American Funds have out preformed the index, doesn't sound too shabby. Again its all who you want to manage your money, someone like American Funds or do you want S&P with their buy high slow low philosophy.

Saving for retirement and how much you ultimately have- 3 Factors. 1. When you start putting money away ( Obviously, the earlier the better) 2. How much you put away (Obviously, the more the better, especially in the early years). 3 Your return and expenses. No one can really guarantee a return rate in most things we choose to invest in. Expenses should be a paramount consideration.

 

[katchthis]

If healthy and financially able to, delay SS as long as you can. I think the return is something in the range of 7%/year increase in payments with each year waiting to collect.
Part-time employment or switching into another career is a consideration for time and mental stimulation as Lemon stated.
LionJim, I see teachers in Luxembourg get about $120k/yr. Hmmmmmmm.

 

[tboyer]

BS, Social Security benefits are NOT taxed twice (I assume you really meant you are being taxed on benefits that are already taxed which is true) but the way you presented it is VERY misleading. If you have enough other taxable income up to 70% (and never more) of Social Security benefits can be subject to Federal Income Tax.

I'm not misleading anybody and I stand by what I wrote.

Here is a nice clear explanation on the Social Security site: https://www.ssa.gov/planners/taxes.html

This is something people should plan for if they can. It is EFFECTIVELY a double tax situation, because you pay income tax on income and IN ADDITION you trigger income tax on up to 85% of your SS benefits.Not only that, but adding the benefits can push you into a higher bracket so you really get slammed. (this happened to a relative of mine when he cashed out a relatively small stock investment)

For many people, the effective tax rate of non-SS income becomes so high that it would be better to take IRA distributions early (particularly if you're at the 15% bracket) and put the money into a savings account. As I said, this only works as a strategy if you don't SPEND the money!!

For a couple, non SS income between $32k and $44 k triggers 50% of your SS benefits becoming subject to income tax. Over $44k in outside income (and this includes IRA disbursements, pension, wages, investment income, anything), and 85% of your SS benefits are subject to income tax. And it's a simple, not graduated threshold. So if you are close to the $44k you want to do everything in your power to stay below it.

 

[tboyer]

Most of the responses to this post are as I expected: everyone looks at the financial aspect of retiring with the thought that if you can make a go of the finances you should certainly retire. I think this is a bit naive.

... I'm been back at work for over 5 years and am happy as a lark. There is no pressure since I can quit any time I want. I don't have set hours and can come and go as I please. I have a lot of say in my assignments. I have lots of old friends and a lot of new ones too.

Bottom line: There is a lot more to retirement than money. I actually found that the money part of it was easy. My wife and I spent a lot less than I planned and the money was not a problem.

Great post.

I think it is probably impossible to know ahead of time how you'll react. I have known some really busy people who retired and I expected them to go stir crazy with nothing to do, but they LOVED it. I know a couple who sold their company for a pile of money so they retired early, and they mostly watch TV (him) and shop (her) and walk their dog and they're very happy. But plenty of others really need to stay engaged and challenged.

I agree, work is SO much better when you don't need the paycheck and you could quit any time.

 

[sluggo72]

Great post.

I think it is probably impossible to know ahead of time how you'll react. I have known some really busy people who retired and I expected them to go stir crazy with nothing to do, but they LOVED it. I know a couple who sold their company for a pile of money so they retired early, and they mostly watch TV (him) and shop (her) and walk their dog and they're very happy. But plenty of others really need to stay engaged and challenged.

I agree, work is SO much better when you don't need the paycheck and you could quit any time.

that's called an 'employment optional' retirement or lifestyle.

 

[Nittany Ziggy]

I suggest reading "Fear and Loathing in Las Vegas" on the very first day of hour retirement. That'll set the mood just right.

 

[sluggo72]

Saving for retirement and how much you ultimately have- 3 Factors. 1. When you start putting money away ( Obviously, the earlier the better) 2. How much you put away (Obviously, the more the better, especially in the early years). 3 Your return and expenses. No one can really guarantee a return rate in most things we choose to invest in. Expenses should be a paramount consideration.

so if a mutual fund returns 10% and has expenses of 0.9%, while another returns 9.5% but had expenses of only 0.30%, you are better off with the latter?

 

[LionJim]

I suggest reading "Fear and Loathing in Las Vegas" on the very first day of hour retirement. That'll set the mood just right.

That's too weird a suggestion for me to ignore. Check back with me here in five years.

 

[Nittany Ziggy]

That's too weird a suggestion for me to ignore. Check back with me here in five years.

Sorry - wasn't trying to be weird/flippant. Just trying to be funny. You know what they say about when you have to explain a joke...
Seriously, you are in a good spot. The advice here is good. I am only a few years behind you. We looked into long term care and, since we don't have children, the advice given above is how we went. LTC is basically expensive life insurance. It is a great tool to protect a nest egg but it can also eat away at one if you don't use it.

 

[tmacpolo]

so if a mutual fund returns 10% and has expenses of 0.9%, while another returns 9.5% but had expenses of only 0.30%, you are better off with the latter?

So you know what the returns will be ahead of time?

 

[sluggo72]

So you know what the returns will be ahead of time?

no, but does that answer the question?

 

[LionJim]

Sorry - wasn't trying to be weird/flippant. Just trying to be funny. You know what they say about when you have to explain a joke...
Seriously, you are in a good spot. The advice here is good. I am only a few years behind you. We looked into long term care and, since we don't have children, the advice given above is how we went. LTC is basically expensive life insurance. It is a great tool to protect a nest egg but it can also eat away at one if you don't use it.

No worries, Zig. Yeah, a lot of good advice here. I got what I asked for.

 

[Nittany.Lion]

A few months before my wife passed, I was working with a lawyer to see how I could make my wife Medicaid eligible. It was clear that she was never going to recover and needed 24/7 care. I had exhausted all insurance options and was now faced with paying out of pocket. I inquired about divorcing my wife, making her financially destitute and getting her on Medicaid, but my lawyer told me that was not feasible. Most judges would see that as gaming the system (which it is) and would not grant the divorce.

The only other option, which I began to pursue, was to liquidate our assets and spend them down to a level where my wife would become destitute, qualify for Medicare and I would become a "communal spouse", allowed to keep certain assets for myself. It sucked as an option but I was being faced with the possibility that my wife may need 10-20 years of 24/7 care, at about $10K a month.

Had I had a LTC plan in place, I would not have had to consider those options.

Medicaid has a 5 year look back period at a person's finances to see if anyone is trying to "hide" money.

 

[sluggo72]

Medicaid has a 5 year look back period at a person's finances to see if anyone is trying to "hide" money.

In theory true accept here in WV they don't look back. That said assets surrendered via a Qualified Domestic order (divorce) I would suspect would not be subject to the look back

 

[tboyer]

Most people don't think about this, but having gone through a catestrophic medical issue with my wife, some sort of Long Term Care planning should be part of anyone's retirement strategy. How would you pay for LTC if one of you require it?

I wonder how you handle a catastrophic medical issue that lasts longer than a year if the political party who must not be named brings back pre-existing conditions? That could make things really, really interesting for people with serious illnesses. Like, deciding between bankruptcy and death kind of interesting.

 

[Doc-M]

Interesting discussion! Wow everyone let their steam out!!
Here my two cents anyway. Invest in stocks, learn to do it yourself. However, start by investing in an index fund. I took risks when I was working. I investing most of my retirement account in Fidelity Sel. Med. Equipment Fund. which retired me.

I read Peter Lynch's books. There are many of them but they are similar. I read, Beating the Street. This little book changed my financial life. Now I invest in stocks and ETFs. Mathematics comes in handy in analyzing stocks.

 

[LionJim]

Mathematics comes in handy in analyzing stocks.

Hopefully this is where my graduate course in differential topology will pay off.

 

[ILLINOISLION]

Hopefully this is where my graduate course in differential topology will pay off.

"Differential topology" sounds like an area that 'ro or ericstrattan-rushchairman would be able to discuss quite easily!