Planning for retirement

[Legatoboy]

Hopefully I'll be out by the end of the year.... been planning for about 5... a lot of ducks to line up and to consider .... more time to consider and play music is the plan. 

[Ed A.]

I retired at 62 (almost 65 now) and didn’t have a 401K or pension because I was self employed most of my working life. I did however, invest in Apple, Google, and Amazon , so things worked out well. Sold off about 2/3 of my stocks earlier this year, paid the capital gains tax, then put the cash in a money market mutual fund currently paying 2.24%.

[bill5]

On 9/19/2022 at 1:38 AM, o0Ampy0o said:

A steady decline is a sign of a steady decline. If you do nothing the value of your money will steadily decline.

It all varies obviously, but generally speaking, if you do nothing, odds are the value of your money (your investments) will increase, as the market over the long haul has always increased, of course with many dips and peaks in between. Again that is very much an oversimplification, and I'm not saying you should never shift from one thing to another, just not to panic in a bear market. This of course also varies with how close you are to retirement. It's very different for someone much younger with many years of investing ahead vs someone closing in on retirement.

[o0Ampy0o]

12 hours ago, bill5 said:

It all varies obviously, but generally speaking, if you do nothing, odds are the value of your money (your investments) will increase, as the market over the long haul has always increased, of course with many dips and peaks in between. Again that is very much an oversimplification, and I'm not saying you should never shift from one thing to another, just not to panic in a bear market. This of course also varies with how close you are to retirement. It's very different for someone much younger with many years of investing ahead vs someone closing in on retirement.

 

Up to this point you have been trumpeting "panic" at the idea of doing something rather than nothing during a steady decline in the market. Panicking is jumping out at the first sign of trouble. Seeing a trend and taking action to cut your losses and perhaps make money instead of losing money is not panicking. It is not something to do without having expanded your awareness, increased your knowledge and monitored current trends and alternative investments.

 

Most people do not pay enough attention to their 401k's. They just periodically look at the statement balance, if even that. The running joke is that everyone's 401ks have become 201ks since the arrival of the Covid-19 pandemic. (edit: I recalled how it unfolded later on after posting this…..initially the market dropped however it responded favorably to various actions taken by the US government and Federal Reserve. It wasn’t until Russia invaded Ukraine that the market took a dismal turn. The pandemic is to have lasting impact, much of which was only delayed, but the invasion of Ukraine has destabilized everything.).

 

If you need to play it safe, ride the losing train to its end and hope it turns around and comes back up. It is a good idea to jump off before the train wrecks if you see that coming. But you can also stay aboard and feel comfortable knowing that in time you will probably recover. You cannot avoid risk but you have history showing the market eventually recovers. That is a ticket for the safe slow boat of hope that has generally paid off in the end. However, the pot of gold is smaller than it could have been if you were informed and cleverly proactive with your investments.

A steady decline is also a good time to make money you would not make unless you took advantage of the situation. But you have to take the risk. Diversified investing can include a mixture of high risk and low-no risk / little growth but stable funds. The size and which portions reflect the range of risk does not have to be consistently one way or another either. Maybe think about designating a portion for navigating money making opportunities? Don't risk it all, just a portion.

[bfields]

14 hours ago, o0Ampy0o said:

 

If you need to play it safe, ride the losing train to its end and hope it turns around and comes back up. It is a good idea to jump off before the train wrecks if you see that coming.

 

Most financial advisors will give the same advice that it sounds ilke you received from whoever you talked to at Vanguard and Fidelity, which is not to try to time the market.

 

By the time you read the headlines and place your order, prices have already adjusted to reflect the news.  Everybody else who is betting on the current market price has read the news too.

 

I'm glad it worked out for you this time.  But I recommend people get their advice elsewhere (ideally, certified financial planners who they are paying to act in their interest).

[bill5]

20 hours ago, o0Ampy0o said:

 

Up to this point you have been trumpeting "panic" at the idea of doing something rather than nothing during a steady decline in the market. Panicking is jumping out at the first sign of trouble. Seeing a trend and taking action to cut your losses and perhaps make money instead of losing money is not panicking. It is not something to do without having expanded your awareness, increased your knowledge and monitored current trends and alternative investments.

 

Most people do not pay enough attention to their 401k's. They just periodically look at the statement balance, if even that. The running joke is that everyone's 401ks have become 201ks since the arrival of the Covid-19 pandemic. (edit: I recalled how it unfolded later on after posting this…..initially the market dropped however it responded favorably to various actions taken by the US government and Federal Reserve. It wasn’t until Russia invaded Ukraine that the market took a dismal turn. The pandemic is to have lasting impact, much of which was only delayed, but the invasion of Ukraine has destabilized everything.).

 

If you need to play it safe, ride the losing train to its end and hope it turns around and comes back up. It is a good idea to jump off before the train wrecks if you see that coming. But you can also stay aboard and feel comfortable knowing that in time you will probably recover. You cannot avoid risk but you have history showing the market eventually recovers. That is a ticket for the safe slow boat of hope that has generally paid off in the end. However, the pot of gold is smaller than it could have been if you were informed and cleverly proactive with your investments.

A steady decline is also a good time to make money you would not make unless you took advantage of the situation. But you have to take the risk. Diversified investing can include a mixture of high risk and low-no risk / little growth but stable funds. The size and which portions reflect the range of risk does not have to be consistently one way or another either. Maybe think about designating a portion for navigating money making opportunities? Don't risk it all, just a portion.

As I did, you are also way oversimplifying a complex thing. The devil's in the details. When to cut and run vs when to stay the course varies. I suspect we're more in agreement than it sounds.

 

[cphollis]

I fully retired this May at 62, but my story is the exception.  My wife and I have always been interested in financial planning, being of the belief that there was no magic to any of this, just discipline .   I did the 401k thing aggressively, it was a good move.  If you are self-employed in the US, you should investigate a Roth IRA.  

 

Financial markets don't always go up, and it's nice to have a hedge against the usual portfolios of stocks, bonds and so on.  Accordingly, we went long on single family rentals years ago (now my wife's part-time business), and that fortunately has done quite well.  Everyone's got to live somewhere ...

 

Back to something more OT?  As a result of retiring,  I am now able to spend endless hours on music stuff, and I've never been happier! 

 

May you all have a pleasant retirement!

[LarsHarner2]

With the dip I am trying to squeeze more into my 401k and elsewhere any time I get a chance- this is going against the wave of balancing with getting music items and concert tickets.

[bill5]

Annuities....anyone bought into one or considering it? My funds have traditionally been pretty aggressive, so this might be a way to hedge against that. 

 

FWIW there is an annunity calculator here to run numbers:  https://www.investopedia.com/simulator/?inv_to_sim=ito

[cphollis]

16 hours ago, bill5 said:

Annuities....anyone bought into one or considering it? My funds have traditionally been pretty aggressive, so this might be a way to hedge against that. 

 

FWIW there is an annunity calculator here to run numbers:  https://www.investopedia.com/simulator/?inv_to_sim=ito

 I don't do annuities for the same reason I skip on most insurance: I don't want to pay someone to hold my risk -- I'd rather do it myself.  With insurance, you're paying someone to hold the bag if something bad happens.  With annuities, you're paying someone to hold the financial risk so you can get a predictable income stream.

 

If you value things that run on autopilot most of the time, it might be attractive in the same way Social Security is attractive.

 

Just keep in mind

- Rampant inflation can erode the purchasing power of your annuity.  Money ain't worth what it used to be, and that will likely continue.

- The company providing the annuity can change the rules of the game, and periodically will do so depending on business conditions.

- Once you money is tied up in an annuity, you can't easily use if for other purposes.

 

Also, I started taking SSI at an early age, my thinking being that there is no real guarantee about the future of the program, so get the money now when I can use it.

 

One of the advantages of a residential rental income stream is that rents can be adjusted periodically, preserving your purchasing power.  It's also a bit of work.  The asset is also liquid, we can sell a property if there's something splashy we want to do.

 

You mileage may vary.

[bill5]

First off DOH I gave the wrong URL before; this is it: https://www.schwab.com/annuities/fixed-income-annuity-calculator

 

All valid points. It's a risk vs reward thing. I ran some numbers on the (correct!) link above and in my example:

 

- The money required to set up the annunity (lump sum) is the same amount I'd get back from them in 10 years. After that, I'm coming out ahead and the longer I live, the more that is true.

- Of course, that assumes that lump sum sits somewhere making 0%, which it wouldn't if I instead invested. Realistically, I'd make more. How much more is of course unknown, and downturns could happen at critical times later in life, hence the risk part.

 

[Delaware Dave]

17 hours ago, bill5 said:

Annuities....

 

Annuities???  You must have meant this ..

 

 

[D. Gauss]

Regrettably, I put all my money into CD's.  

 

[zxcvbnm098]

For those that have a lot of equity in a home but are not necessarily well positioned for retirement, a reverse mortgage might be a good option to consider.  There is a lot of anecdotal misinformation out there, but it's worth investigating.

 

My mother-in-law and her husband were not well positioned whatsoever for retirement; neither had well paying jobs through their careers, so their SS checks were pretty low. They had, however, purchased a home about 10 years ago that had appreciated considerably.

 

After my father-in-laws passing, my MIL would not have been able to keep the house based only on her now deceased husbands SS income. I had brought up the possibility of a reverse mortgage with my wife's siblings, but they rejected it out of hand based on the above mentioned anecdotal misinformation. Thankfully after a bit of time they listened, and it has been the best thing for all involved. My MIL has been able to stay in the house with no house payments now, and no needed contributions from the children to keep her there. 

[bill5]

5 hours ago, D. Gauss said:

Regrettably, I put all my money into CD's.  

 

You joke but if that is a real pic, hang onto them; one day they'll be collector's items   

[stoken6]

23 hours ago, zxcvbnm098 said:

reverse mortgage

Is that where the equity in the house is used to secure a loan where the interest compounds up and is only due when you die? Yeah that can be the right solution in some circumstances (sounds like you fit that!) but in other cases the exorbitant interest rates can wipe out much of the estate.

 

Cheers, Mike.

[CowboyNQ]

3 hours ago, stoken6 said:

Is that where the equity in the house is used to secure a loan where the interest compounds up and is only due when you die? Yeah that can be the right solution in some circumstances (sounds like you fit that!) but in other cases the exorbitant interest rates can wipe out much of the estate.

 

Cheers, Mike.

Yes that’s exactly what they are.  I agree it is an excellent idea for the right person.  
 

I worked in banking and finance for 27 years before I left to start my own business and also focus on music.  The biggest problem with reverse mortgages is the disgusting behaviour they sometimes engender in the mortgagor’s children, who can feel “disinherited”.

[bill5]

Yeah because parents "owe" their kids money when they die.

 

Not. 

 

[bill5]

Offhand I lean away from them myself (having SS and a military pension coming as basically annuities already) but buying into annunities is not an "unsophisticated" thing and quite disagree that they are terrible choices for all people in all circumstances as you imply.

 

No idea why you think AI enters into this or why you think it means these annuities or life insurance will ever go away. They aren't. 

[bill5]

Certainly no need to apologize for having an opinion. A drama queen I am not.   

 

But comparing life insurance (of any kind) to annuities is apples and oranges, and again implying either is "sold by sharks" as if either is some kind of scam has no basis in reality. They have their pros and cons like anything else. 

[Notes_Norton]

My mortgage is paid off. I have no debt. I have savings in the bank, Social Security income, and I'm gigging 15-20 times per month.

 

Why retire?

 

I don't have luxury items, and I drive an old car. I have no jewelry, a small 19" TV that only goes on when a DVD is in the player, and nothing that a thief would want. But I'm having a happy life by making a living doing music and nothing but music.

 

Mrs. Notes and I spend all our money on experiences instead of possessions. We've traveled to every continent but Antarctica.

 

If I decided to retire, what would I do? Playing music is the most fun I can have with my clothes on, so I may as well get paid for it.

 

Of course, I'm weird—definitely not normal.

 

Good luck in your retirement, I hope it's all you want it to be, and more.

 

Notes ♫

 

 

[stoken6]

7 hours ago, Notes_Norton said:

My mortgage is paid off. I have no debt. I have savings in the bank, Social Security income, and I'm gigging 15-20 times per month.

 

7 hours ago, Notes_Norton said:

I don't have luxury items, and I drive an old car. I have no jewelry, a small 19" TV that only goes on when a DVD is in the player, and nothing that a thief would want. But I'm having a happy life by making a living doing music and nothing but music.

That's the way it's done. Live relatively frugally, and live a fulfilling life. Congratulations for getting a bullseye on that particular dartboard.

 

Cheers, Mike.

[bill5]

It's different for everyone; the trick is finding out what works for one's self. 

[KenElevenShadows]

8 hours ago, Notes_Norton said:

My mortgage is paid off. I have no debt. I have savings in the bank, Social Security income, and I'm gigging 15-20 times per month.

 

Why retire?

 

That sounds fantastic. And the gigging is just tons of fun. Way to take care of it all.

[Notes_Norton]

Some people get great enjoyment out of purchases. I have friends with big boats, luxury cars, designer clothes, jewelry, giant TV sets and whatever. And they enjoy that. It's cool.

 

I live frugally, and spend my money on experiences. I've been to every continent except Antarctica. This includes 19 US states, Much of Mexico and Canada, Caribbean Islands, Australia (5 weeks in a camper van), China, Great Britain, Italy, Spain, Austria, Netherlands, northern Africa, and quite a few more. That's what Mrs. Notes and I enjoy most of all.

 

We were planning a trip to Madagascar when COVID reared its ugly head. It's still on the list, but they just had a huge cyclone, and they need to recover before we go.

 

I've worked 2 real Monday to Friday jobs in my life while testing out what normal was, and I decided that wasn't for me. The price I pay is no company sponsored health insurance or retirement plan, no holiday or vacation pay, and no sick leave. Without that company contributed retirement plan, and living on musician's wages, I haven't a huge IRA to support me through my 'golden years'. But with no mortgage or other dept, I could live on my Social Security if I needed to, plus I have savings and I can still pull enough audience to gig all year.

 

So to me, the sacrifices of not being a 'worker bee' are paid off by doing what I really like to do in order to make a living.

 

Some would think I'm living the dream, others would not like to live this way at all. Fortunately, I stumbled into what works for me. I have no plans to retire.

 

Notes ♫

[KenElevenShadows]

I know so many people who say that they won't be able to retire at 60 or 65 or whatever, and that due to their finances, the market, the pandemic, housing costs, or whatever (always having to do with money), they will need to keep working. 

 

But I feel this is in contrast to what you've got going. You don't have to keep gigging. You are financially doing well. You are happy.

[Notes_Norton]

On 6/10/2023 at 10:17 AM, Notes_Norton said:

I live frugally, and spend my money on experiences. I've been to every continent except Antarctica. This includes 19 US states, Much of Mexico and Canada, Caribbean Islands, Australia (5 weeks in a camper van), China, Great Britain, Italy, Spain, Austria, Netherlands, northern Africa, and quite a few more. That's what Mrs. Notes and I enjoy most of all.

I meant to say 49 US States (the 1 key is next to the 4 key). The only US state I haven't been to is Hawaii, and it's on the list. I've been to a few US territories, Puerto Rico (great music) and all the US Virgin Islands. I like St. John the best. Been to a number of other Caribbean Islands plus the Bahamas, Bermuda, and the Caymans (not technically in the Caribbean).

 

When visiting places with great orchestras, I like to plan our trip around hearing them in their home concert hall. I've done this in Spain, England, Prague, Vienna, Budapest, Montreal, Sydney, and others, and would love to do this in Moscow if the US and Russia ever learn how to get along. The orchestras are very comfortable in their home auditoriums, so the balance issues have been worked out.

 

For those who paid the price of a day job and looked forward to retirement, I hope you have a wonderful retirement.

 

I've been gigging at retirement communities since 1985, and my advice is this: don't let the TV get you (it's the modern update of 'don't let the rocking chair get you'). Get out and do fun things, exercise to keep your health up, and don't go around with other seniors comparing your illnesses and doctor's appointments. Think healthy instead. Illness conversation competition will make you sicker.

 

I talked to a guy who started with “the phone company” when he was 18 and retired at 48. He is in his 90s and has been retired longer than his working career. He had a great retirement package, back in the days when “Ma Bell” gave great retirement packages. Not everyone is that lucky, but this guy knows how to do it. To look at him and the way he gets around on the dance floor, you would think he is in his late 60s.

 

There is more than one right way to go through life. The most important thing in life is to enjoy it.

 

Notes ♫

[KenElevenShadows]

One of the great "joys" of retirement is trying to figure out what Medicare program sucks less.  

 

At some point, I will probably try to meet with a consultant or else heavily research this for when that day arrives!

[Notes_Norton]

1 hour ago, KenElevenShadows said:

One of the great "joys" of retirement is trying to figure out what Medicare program sucks less.  

I'm not retired and i play that game.

 

I'm on my 4th plan already, and I'm not sure if I'm going to stay here next year.

 

Fortunately, I'm very healthy and don't need it much.

 

We need nationalized medicine. Example:

 

In Australia, while hiking, Mrs. Notes fell and broke her arm. We have no insurance cooperation with Australia, so we had to pay full price. Regular doctor, bone doctor, anesthesiologist, nurses, emergency room charge, anesthesia, setting the bone, painkillers, cast, sling, and everything else came to a little less than $550 USD TOTAL. When we got home, we went to a USA doctor, who said nobody here could have done it any better.

 

I wear ear plugs on the gig when the volume is too loud. One night, a little silicon dome broke off in my ear canal. I went to the emergency room because I didn't want it in there all night. One doctor, who used one pair of tweezers. My Co-Pay was $100, and they charged Medicare over $2,500.

 

Obviously, our medical system is price gouging us. Tell me it takes over $2,000 to pull a silicon disk out of an ear than to fix a broken arm.

 

Sorry for the rant.

 

Notes ♫

[AnotherScott]

On 9/17/2022 at 1:56 PM, SoundEngine.com said:

Consider this. Let's say (completely false) my scheduled monthly payout at age 62, which is early, is $1000 per month, $12K per year. If I wait a year, my payout will be $1080 per month - great. So, with that increased $80 per month, it will take me 150 months to break even with the $12K I passed up for a year. That is a bad choice for me

 

The "problem" is, you don't know how long you'll live. 150 months past the age of 62 is 74 1/2. If you don't live at least that long, yeah, you may have been better off starting collecting at 62. But if you're "unlucky" enough to live until 90 or 100, the equation shifts (even if you have other resources and so you're not living off the money but instead investing the $1k per month for 150 months, vs. investing the $1080 per month for the latter 138 of those 150 months, which covers the period or time up to breakeven, with obviously all parameters favoring the higher monthly payment once you pass that breakeven point). Which is why, lacking a crystal ball, there's no correct answer. I suppose you can factor in your own level of health, how long your parents lived to (or may still be living to) and other family history, to try to take a guess at the odds, but of course, no one really knows. It remains a question of short term benefit vs long term benefit, without knowing how much long term benefit you'll be around to enjoy. My own inclination, thinking optimistically about my own long term health prospects, is to defer taking it for as long as I don't absolutely need it. (And I'm a sucky investor anyway.)

 

2 hours ago, KenElevenShadows said:

One of the great "joys" of retirement is trying to figure out what Medicare program sucks less.  

 

"Medicare Advantage" isn't Medicare per se, it's a privatized alternative, and often for-profit rather than non-profit (which you may or may not care about), and more limited in your choice of doctors... Like everything else, I'm sure there are situations where it will end up being the better alternative, but again, that pesky inability to predict the future really gets in the way. But if you google "why not medicare advantage" you'll have your pick of articles from sources of all stripes where you should find a more balanced analysis than you can get comparing the stuff that comes from the companies selling those plans.