How the hell are we supposed to retire?

Fire Lord Jim said:
I bolded Rick's text above.

Break-even is the wrong tool for valuing insurance. Do you have fire insurance? A fire extinguisher? What is your break-even on buying those? When buying insurance, put the break-even tools away. The proper measure for insurance is how much loss can you absorb. Like choosing a deductible. Then pay for whatever coverage you can't absorb. Running out of money when we are too old to work is a loss we can't absorb.

View Social Security as a tax until age 62, then an annuity after that. The question isn't whether I get more money by claiming early or later, but rather are we insuring against running out of money when we are old? Claiming at age 70 pays nearly twice a month what an age 62 claimant gets. Do you really want to be hitting your 60 year old kids up for money to pay your bills? You think you have enough money already? Have you priced assisted living and nursing homes? Do you think that the 9% inflation we just saw will make medical and nursing home prices go down?

I could die before I ever collect. Guess what? In that case, I didn't need the money. But I could live... a long time. Social Security is designed to give the same amount over the average lifetime no matter when we start to collect. If your break-even analysis says different, you used the wrong discount rate, or the wrong number of payments. Now for the fun part. We ride bikes. We live in the Northeast, some of the wealthiest areas of the US. We are not average. Social Security's average lifetime averages male and female, black and white, urban and suburban, rich and poor diabetic and mountain biker. It does not differentiate even though females outlive males, wealthy outlive the poor, healthy and active outlive the couch potatoes. Plus medical intervention continues to get better. We are very likely to be collecting Social Security for a very long time. I will claim at age 70 unless my doctor finds a reason not to.
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I bolded Jim's text above.
That is pure conjecture/wishful thinking. Us cyclists could get plowed over by someone in a car tomorrow. You never know. My friend never smoked, exercised regularly and his mom is 98 and going strong. By the time some of these things exhibit any symptoms, it's too late.

Also, looking at SS as "insurance" is only if you will really need it in retirement. The fact is, we pay into it for decades hoping to get something back in retirement. I don't buy insurance hoping my house burns down so I get some of my money back.

I am very confident we will never run out of money and simply won't need the extra amount when we are in our 70s and have to take RMDs every year.
 
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rick81721 said:
I bolded Jim's text above.
That is pure conjecture/wishful thinking. Us cyclists could get plowed over by someone in a car tomorrow. You never know. My friend never smoked, exercised regularly and his mom is 98 and going strong. By the time some of these things exhibit any symptoms, it's too late.

I am very confident we will never run out of money and simply won't need the extra amount when we are in our 70s and have to take RMDs every year.
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Curious if you've accounted for the possiblility of both of you ending up needing long term health care.
 
rick81721 said:
The counterpoint is obvious. But it's a gamble. You might end up getting more, you might end up getting less, you might get bupkis. I'd rather get something now when I can enjoy it vs potentially more when I don't need it and possibly not be able to enjoy it. Ymmv!
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if you have any decent earned income, SS is reduced before full retirement age.
so double smack -

answer - retire early.
 
Patrick said:
if you have any decent earned income, SS is reduced before full retirement age.
so double smack -

answer - retire early.
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Yes retire early and collect SS early. Trying to argue that SS is insurance is nonsense. We buy home insurance and flood insurance and have never made a claim - and hope we never do. There is no break even analysis there. But SS is something we pay into every year we work specifically to get something back when we retire. If you wait until age 70, keel over and collect nothing, you're a sucker. And it's not like if you collect early you get nothing in your 70s and older, you just get less. If the extra $1500 a month is that critical to your retirement plan, you have bigger problems.
 
Noto bene bolded text of mine below.


SOCI ALDI IMG_20200216_092855-01.jpg


Both Rick and Jim have good points in their posts. However, they are both really old and prolly are suffering from Alzheimers, advanced dementia or stuff like that, so I take what they say with a Fity pound bag of salt. I, OTOH, am about 23 in my mind’s eye, so you can trust me when I say that I am not that smart or any good at all with finance. Therefore, I read books.

One book that I can recommend to you all (except old guys, who may fall asleep reading it and never wake up) is Wade D. Pfau’s “Retirement Planning Guidebook,” Chapter Six on SS is 36 pages long. Page 179 in the paperback edition begins his consideration of delaying claiming SS benefits until age 70 by comparing the decision to an inflation protected annuity. This seems better than analyzing the claiming decision as insurance or whatever @SLIK RICK is flogging. It is compelling reading. Some of the concepts he writes about are discussed in this brief article:

Pfau article

He suggests using software including this free calculator, to help make these potentially important decisions. For example:

FREE calculator

Generally speaking, Dr. Pfau advocates informed decision making, as opposed to just winging it by relying on advice from a MTB forum. A good book on SS is Laurence Kotlikoff’s evokingly titled: “Get What’s Yours.” He has sold a lot of books on this topic and updates this one each time the SS laws change. Both Larry and Wade have great senses of humor, though they don’t display them too often.
 
Cassinonorth said:
That would be an FSA which does have to be used (some companies allow a small $500ish annual rollover). Still pre tax and nice to have but not nearly as advantageous for retirement.
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Every single year during open season I swear that I'm going to research FSAs and HSAs and every single year I fail to do that. Seems like it would make a lot of sense for me. Next year!
 
ebarker9 said:
Every single year during open season I swear that I'm going to research FSAs and HSAs and every single year I fail to do that. Seems like it would make a lot of sense for me. Next year!
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do you have high medical expenses each year? then yeah, you are leaving money on the table.
if you are terrible at doing paperwork to claim said money after opting in, just don't opt in.
 
Patrick said:
do you have high medical expenses each year? then yeah, you are leaving money on the table.
if you are terrible at doing paperwork to claim said money after opting in, just don't opt in.
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I/we do not, but it does seem like a lot of things qualify. My wife did medical billing for a while so I keep trying to push these decisions off on her, but so far it hasn't stuck.
 
ebarker9 said:
Every single year during open season I swear that I'm going to research FSAs and HSAs and every single year I fail to do that. Seems like it would make a lot of sense for me. Next year!
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I jumped on the company offered FSA about 2 years ago now. Company dental plan sucked and I've been going to the same dentist for a long time. For regular checkups the plan would cover some. As soon as x-rays or some other procedure was included, paid out of pocket. Did the math. Between payroll deduction and out of pocket, it was significantly more overall than just paying 100% out of pocket. Whatever I don't use, up to $500 rolls over and I adjust next year's amount to keep it enough to cover dental and eye exams with a little buffer. Also use it for purchases at CVS or other pharmacy.
 
Huge fan of the HSA. I always present that card first. you never know what may be eligible. The FSA on the other hand has been horrible for me. Too many hoops to jump through, the money is lost if not used by end of year, keeping receipts, etc. so I just list those expenses as deductions come tax time.
 
djm said:
Huge fan of the HSA. I always present that card first. you never know what may be eligible. The FSA on the other hand has been horrible for me. Too many hoops to jump through, the money is lost if not used by end of year, keeping receipts, etc. so I just list those expenses as deductions come tax time.
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I noticed over the past few years that many providers auto verify now when you use the card. it is very rare that I have to submit a receipt the past 2 years.
 
stb222 said:
I noticed over the past few years that many providers auto verify now when you use the card. it is very rare that I have to submit a receipt the past 2 years.
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that's a big step forward. I haven't used a FSA in many years but the HSA has always been seamless. Just takes a few addn. seconds at checkout.
 
djm said:
that's a big step forward. I haven't used a FSA in many years but the HSA has always been seamless. Just takes a few addn. seconds at checkout.
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Problem is HSA isn’t offered at my company unless you have the high deductible plan…
 
thegock said:
Noto bene bolded text of mine below.


View attachment 202236


Both Rick and Jim have good points in their posts. However, they are both really old and prolly are suffering from Alzheimers, advanced dementia or stuff like that, so I take what they say with a Fity pound bag of salt. I, OTOH, am about 23 in my mind’s eye, so you can trust me when I say that I am not that smart or any good at all with finance. Therefore, I read books.

One book that I can recommend to you all (except old guys, who may fall asleep reading it and never wake up) is Wade D. Pfau’s “Retirement Planning Guidebook,” Chapter Six on SS is 36 pages long. Page 179 in the paperback edition begins his consideration of delaying claiming SS benefits until age 70 by comparing the decision to an inflation protected annuity. This seems better than analyzing the claiming decision as insurance or whatever @SLIK RICK is flogging. It is compelling reading. Some of the concepts he writes about are discussed in this brief article:

Pfau article

He suggests using software including this free calculator, to help make these potentially important decisions. For example:

FREE calculator

Generally speaking, Dr. Pfau advocates informed decision making, as opposed to just winging it by relying on advice from a MTB forum. A good book on SS is Laurence Kotlikoff’s evokingly titled: “Get What’s Yours.” He has sold a lot of books on this topic and updates this one each time the SS laws change. Both Larry and Wade have great senses of humor, though they don’t display them too often.
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We all must defer to the board's elder stateschump. Methusela man @thegock waited until 70 to start collecting his SS, and he has been collecting for 20 years now.

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Thing is, it is a deferred annuity with no guarantee. Just math. Since Gock is a centenarian, he has won the SS game. We should all be so lucky.

Following that, if you don't need the money, and are in a reasonable tax bracket, you could invest all of the money before 70 and make up the difference in dividends
 
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