Do you ever think about the fact that these txt'ng young people will be the ones running your senior centers, funding your Social Security, and controlling the media in your old age? How does that make you feel?
Do you think names will be spelled fu-net-ickly on pension checks? Breakups, firings, layoffs, death notices, and denial of benefits will be notified via text message. Suspenders will come back in style as today's youth refuse to pull their pants up but discover the hazards of trying to actually accomplish something with baggy pants halfway down their thighs. Roadway lanes will officially be recognized as mere "suggestions" and showing up to work on a "schedule" will be voluntary - even for judges, police officers, ER docs, etc. Oh, yeah - there won't be any primary care docs. The existing med school system won't let go of the brutal academic and residency requirements, so only materialistic young folk will suffer through it - and they ain't doing it for a piddling quarter mil a year.
The Star Spangled Banner will be re-recorded as a rap song, and our grandchildren's generation will rebel against their parents boring rap music - by embracing country music. Teenaged rebellion will end, because teens simply cannot shock their parents anymore with anything short of 1) fiscally and socially responsible behavior and/or 2) killing things. Google's face-recognition technology will be perfected, and Google will make a trillion bucks by searching out your doppelganger and hiring him/her to go out and make friends for you, without you having to suffer the inconvenience of pretending to care about "friends'" stupid lives and boring interests.
Americans will stage a bloodless coup in the entertainment industry, wresting control back from the Canadians. We will discover that 47% of illegal "Mexican" immigrants are actually illegal Canadian immigrants with their first-ever tan.
Naw. I think that the primacy of connection will fade and today's youth will discover the joy of workaholism to avoid dealing with non-work life. But I do think their kids will struggle to rebel musically, and I fear that they will decide to rebel by playing Country and Western music at a polite volume, wearing belts that hold their pants at their waist, and either taking piercing to the next level (pierced ribs, perhaps?) or eschewing piercing altogether. And all of today's citizens complaining about illegals taking American jobs, will find themselves complaining that they can't find home healthcare aids to change their Depends. Yes folks, even today's troubled youth can grow into tomorrow's entitled retirement class, but, first, they've got to kill us off to collect their inheritances. Nighty-night, sleep tight.
Showing posts with label retirement planning. Show all posts
Showing posts with label retirement planning. Show all posts
Tuesday, October 06, 2009
Wednesday, January 14, 2009
Funding retirement's peaks and valleys
As I project our required retirement income, it's not enough to say "we'll need $X a year." Costs will probably rise, and we'll want and need different income levels at different times in our retirement. Early on, we'll probably want to travel. Much later, there's a good chance that we'll need household help and, eventually, specialized medical care. Very early on - whether due to early retirement, job loss with little chance of finding an equivalent job before retirement, or other reasons - we might not have any social security income at all.
Traditional retirement advice says we should save enough so we can comfortably live off of 4-5% of our savings. So for every $10,000/year we want to spend in retirement, we need to save between $200,000 and $250,000. Yowza. But, if we can save enough, we should be able to withdraw 4-5% a year without reducing the principal; or we can give ourselves a raise to keep pace with inflation, and it will whittle our savings down very slowly; or, in the event of catastrophic medical expenses or other major expenses, we'll have a cushion.
I look at our retirement funding in phases. Phase 1, no social security, we live on savings. Phase 2, social security kicks in and, hopefully, we won't have to tap the 401k yet. Phase 3, The 401k gives us a little more money to weather inflation - or to live it up a bit while we still can. Phase 4, perhaps we have medical expenses, or we have difficulty doing our own housekeeping and home maintenance - for whatever reason, expenses rise.
To fund phase 1, our primary plan is to keep working until we can afford to live on savings without jeopardizing our retirement savings for the later years. For phase 2, again, the goal is to save enough/retire late enough to provide adequate funding. Also, careful budgeting - both to accurately predict our income needs and to avoid unnecessary waste - will help. As we enter phase 3, we can breathe a bit easier - since we plan to live without the 401k money for several years, the 401k should just be emergency/fun/inflation money. If we're just taking the minimum withdrawals from the 401k, it should last well into phase 4, when household help and possibly medical expenses increase our costs.
Housing plays an important role in our retirement plan. If we plan well and buy well, our home will be paid-off by phase 4, when we our expenses rise fastest. Now, some folks say that a paid-off house is just trapped equity, but that's certainly not true in retirement. The more income you need to support your lifestyle, the higher your tax bracket. In retirement, higher income means giving up a big chunk of social security benefits to taxes. So a penny saved is 1.33 pennies earned, or more. Plus, a paid-off house will give us an emergency backstop - we can borrow against the house if we need cash (though only as a last resort).
Investment property plays a part in our plan, too. Experts say an average couple needs to save $300,000 just for medical expenses in retirement. My goal is to acquire rental properties with a combined total of $300,000 in mortgages - with a very strong likelihood of appreciating at market rate over 30 years. As the tenants pay the mortgage down, we'll be building up $300k in equity for our twilight years, and the properties' values should (roughly) keep pace with inflation. Ideally, we'll acquire these properties by the time we're 45 - or else buy properties that can cash-flow with 15-year mortgages. Ideally, rents will increase faster than expenses, so the rental properties will provide some income during retirement, but the primary goal is simply to have properties with an inflation-adjusted, after-sales-expenses net value greater than $300k.
That's our plan in a nutshell. We may not hit every goal, but the closer we get, the better our odds of enjoying a retirement free from major financial stress.
Traditional retirement advice says we should save enough so we can comfortably live off of 4-5% of our savings. So for every $10,000/year we want to spend in retirement, we need to save between $200,000 and $250,000. Yowza. But, if we can save enough, we should be able to withdraw 4-5% a year without reducing the principal; or we can give ourselves a raise to keep pace with inflation, and it will whittle our savings down very slowly; or, in the event of catastrophic medical expenses or other major expenses, we'll have a cushion.
I look at our retirement funding in phases. Phase 1, no social security, we live on savings. Phase 2, social security kicks in and, hopefully, we won't have to tap the 401k yet. Phase 3, The 401k gives us a little more money to weather inflation - or to live it up a bit while we still can. Phase 4, perhaps we have medical expenses, or we have difficulty doing our own housekeeping and home maintenance - for whatever reason, expenses rise.
To fund phase 1, our primary plan is to keep working until we can afford to live on savings without jeopardizing our retirement savings for the later years. For phase 2, again, the goal is to save enough/retire late enough to provide adequate funding. Also, careful budgeting - both to accurately predict our income needs and to avoid unnecessary waste - will help. As we enter phase 3, we can breathe a bit easier - since we plan to live without the 401k money for several years, the 401k should just be emergency/fun/inflation money. If we're just taking the minimum withdrawals from the 401k, it should last well into phase 4, when household help and possibly medical expenses increase our costs.
Housing plays an important role in our retirement plan. If we plan well and buy well, our home will be paid-off by phase 4, when we our expenses rise fastest. Now, some folks say that a paid-off house is just trapped equity, but that's certainly not true in retirement. The more income you need to support your lifestyle, the higher your tax bracket. In retirement, higher income means giving up a big chunk of social security benefits to taxes. So a penny saved is 1.33 pennies earned, or more. Plus, a paid-off house will give us an emergency backstop - we can borrow against the house if we need cash (though only as a last resort).
Investment property plays a part in our plan, too. Experts say an average couple needs to save $300,000 just for medical expenses in retirement. My goal is to acquire rental properties with a combined total of $300,000 in mortgages - with a very strong likelihood of appreciating at market rate over 30 years. As the tenants pay the mortgage down, we'll be building up $300k in equity for our twilight years, and the properties' values should (roughly) keep pace with inflation. Ideally, we'll acquire these properties by the time we're 45 - or else buy properties that can cash-flow with 15-year mortgages. Ideally, rents will increase faster than expenses, so the rental properties will provide some income during retirement, but the primary goal is simply to have properties with an inflation-adjusted, after-sales-expenses net value greater than $300k.
That's our plan in a nutshell. We may not hit every goal, but the closer we get, the better our odds of enjoying a retirement free from major financial stress.
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