Financial milestones that feel good

[bearishgurl]

[quote=flyer]That’s good to know that some believe Boomers as a whole are better prepared than they have been in the past, but, imo, those numbers are still dismal for a comfortable retirement long term (depending on how you want to live) and, based on the small percentage of those with a high net worth, (stats reveal only about 8% of US households–of all ages, not just Boomers–have over a million in net worth, excluding primary residence) they are hardly predictive of a huge transfer of wealth among generations across the board.

Granted, as I mentioned before, 10% of us will do extremely well in retirement across all generations, but there is still concern, as a society, about the 90% who won’t.[/quote]

flyer, do you think an individual or couple needs $1M in investable assets (not incl equity in principal residence) in order to retire? And would they need less than $1M if one or both of them had DB pensions?

With a paid-off residence with a $3-$5K annual tax bill and no HOA dues, what do you think is an adequate monthly income for a retired couple in SD county? How about a single retiree? Assume that the oldest member of the household or the single retiree is wishing to retire at 62 years old.

[FlyerInHi]

[quote=flyer]

I do think this will be a “silent crisis” for many reasons, so we may never really know the true outcome, but the stats speak for themselves.[/quote]

By definition a crisis is something that the government will have to step in and do something about.

The “silent crisis” that I predict is a health care crisis where we have to import many more Filipino nurses to take care of chronically sick Americans.

Yes, boomers are better prepared than past generations. But they will spend their money on healthcare. And that will affect the wealth of future generations of Americans relative to the rest of the world.

I say “relative to the rest of the world” because health care spending by some is income to others, and represents economic growth. But that means proportionally less money spent on other sectors of the economy that make us competitive.

[SK in CV]

[quote=bearishgurl]Flyer, it doesn’t seem like you’re taking into account defined benefit pensions paid monthly to boomer-and-beyond households. The vast majority of the over-55 cohort that I’m acquainted with have at least one DB pension coming into the household. And about 3/4 of those households ALSO paid into Social Security (whether or not they are currently collecting any). With one or more DB pensions combined with SS paid to one or more persons of a household, certainly this is enough money for a 1-2 person household to live relatively comfortably and indefinitely …. especially if their primary residence is paid off.

I realize that most boomers came from families with 3-6 kids and that any inheritance from the last parent who died would likely be split up among the heirs which would account for smaller inheritances in a large portion of families (don’t know the percentage). This is assuming the last remaining parent didn’t use a lot of long term care or avail themselves of LT care on Medi-Cal in their final years (which would cause a MC lien to be placed on any real property they owned).

[/quote]

Perfect example of why anecdotes are not the same as data. For the last 35 years, fewer than 30% of workers were covered by DB plans. Even among those with some kind of plan, fewer than half had DB plans, and those numbers are much lower today than they were 35 years ago. Today, that number is less than 10%.

There is no period of time over the last 60 years when average families had 3-6 kids. And we have to go back 100 years since more families had more than 2 or more children than fewer than 2.

The people that surround you are not representative of the rest of the population.

[flyer]

[quote=bearishgurl][quote=flyer]That’s good to know that some believe Boomers as a whole are better prepared than they have been in the past, but, imo, those numbers are still dismal for a comfortable retirement long term (depending on how you want to live) and, based on the small percentage of those with a high net worth, (stats reveal only about 8% of US households–of all ages, not just Boomers–have over a million in net worth, excluding primary residence) they are hardly predictive of a huge transfer of wealth among generations across the board.

Granted, as I mentioned before, 10% of us will do extremely well in retirement across all generations, but there is still concern, as a society, about the 90% who won’t.[/quote]

flyer, do you think an individual or couple needs $1M in investable assets (not incl equity in principal residence) in order to retire? And would they need less than $1M if one or both of them had DB pensions?

With a paid-off residence with a $3-$5K annual tax bill and no HOA dues, what do you think is an adequate monthly income for a retired couple in SD county? How about a single retiree? Assume that the oldest member of the household or the single retiree is wishing to retire at 62 years old.[/quote]

BG, my general comments were made based upon the analysis of experts and the stats they provided, and they, of course, are analyzing the status of all Boomers across the board, and that information does not paint a rosy picture.

To get specific–I will start by saying the comments I am about to make are strictly my opinion.

Although my comfort zone requires a much higher figure (lifestyle also has a lot to do with the funds you will need in retirement) I do believe that (based upon many factors) most Boomers will need at least $1M in investable assets (not including equity in the primary residence) or the equivalent in pensions, etc., as you mentioned, to retire comfortably, from approximately age 65 forward. This assumes they are no longer generating income from any other sources, passive or otherwise, and is another reason we plan to keep our investment properties for most of our lives.

With the state of Social Security and Medicare, I believe younger generations may need to double that figure.

Many people make a lot of money between 25-45, or even into their 50’s, but, in many cases that gravy train dries up for one reason or another–job loss, illness, divorce, etc.–that’s why I also think it’s very important to carefully plan at a young age exactly how you and your family plan to survive financially for the duration. Believe it or not, many just let the mega-bucks slip through their fingers during the “flush” years, which never ceases to amaze me. Making the money is one thing, keeping it for the duration is what will make or break you.

Again, these last comments are just my opinions based upon lots of research, as well as our personal goals, and I respect that everyone is free to plan as they choose.

FIH, I agree there may also be a healthcare crisis, but I’ll let you fill us in on that one.

[CA renter]

[quote=scaredyclassic]a million cash probably wouldnt feel all that secure. one good nursing home bill will probably clean you out. i guess you can get long term care insurance.

real financial security requires ability to put a bullet in ones head at the appropriate time on the downhill slide, assuming networth less than say 3 million or with adequate insurance.

Im pretty sure I could feel inssecurewith just 1 or 2 million in the bank. I think id probably worry a little less about money over 3.5 million. but then again, given my worrying tendencies that number would probably seem small once i got there. there is no number at which i can rest.

incidentally did you see this research asking the question, do smart people worry more?

http://www.slate.com/articles/health_and_science/science/2015/04/do_smart_people_worry_more_iq_is_correlated_with_anxiety.html%5B/quote%5D

That article makes sense to me.

[CA renter]

[quote=SK in CV][quote=bearishgurl]Flyer, it doesn’t seem like you’re taking into account defined benefit pensions paid monthly to boomer-and-beyond households. The vast majority of the over-55 cohort that I’m acquainted with have at least one DB pension coming into the household. And about 3/4 of those households ALSO paid into Social Security (whether or not they are currently collecting any). With one or more DB pensions combined with SS paid to one or more persons of a household, certainly this is enough money for a 1-2 person household to live relatively comfortably and indefinitely …. especially if their primary residence is paid off.

I realize that most boomers came from families with 3-6 kids and that any inheritance from the last parent who died would likely be split up among the heirs which would account for smaller inheritances in a large portion of families (don’t know the percentage). This is assuming the last remaining parent didn’t use a lot of long term care or avail themselves of LT care on Medi-Cal in their final years (which would cause a MC lien to be placed on any real property they owned).

[/quote]

Perfect example of why anecdotes are not the same as data. For the last 35 years, fewer than 30% of workers were covered by DB plans. Even among those with some kind of plan, fewer than half had DB plans, and those numbers are much lower today than they were 35 years ago. Today, that number is less than 10%.

There is no period of time over the last 60 years when average families had 3-6 kids. And we have to go back 100 years since more families had more than 2 or more children than fewer than 2.

The people that surround you are not representative of the rest of the population.[/quote]

Bingo.

Not only that, but retiree healthcare was available to a number of workers (still the minority) in both private and public sectors just a few decades ago. Today, that benefit is almost unheard of in the private sector, and the public sector began phasing it out decades ago, too. This is going to be one of the biggest issues going forward, IMHO, as most people might be able to scrape together some sort of retirement funds, but will not be able to pay for healthcare and long-term care in old age.

[The-Shoveler]

My Mother has “SCAN” seems pretty good.

I think this Crisis is way overblown anyway my two cents.

I don’t think the previous generations situation was any better.

[(former)FormerSanDiegan]

[quote=AN]So, 2 people so far with net worth in the 7 figures and it seems like both are biz owners. Any 7 figures net worth out there as a W2-er?[/quote]

In our case not a business owner, primarily W-2 super-saver and RE investor, but stock options helped put us over the top.

But I agree with the that $10 Mil is the new million.

[bearishgurl]

[quote=SK in CV][quote=bearishgurl]Flyer, it doesn’t seem like you’re taking into account defined benefit pensions paid monthly to boomer-and-beyond households. The vast majority of the over-55 cohort that I’m acquainted with have at least one DB pension coming into the household. And about 3/4 of those households ALSO paid into Social Security (whether or not they are currently collecting any). With one or more DB pensions combined with SS paid to one or more persons of a household, certainly this is enough money for a 1-2 person household to live relatively comfortably and indefinitely …. especially if their primary residence is paid off.

I realize that most boomers came from families with 3-6 kids and that any inheritance from the last parent who died would likely be split up among the heirs which would account for smaller inheritances in a large portion of families (don’t know the percentage). This is assuming the last remaining parent didn’t use a lot of long term care or avail themselves of LT care on Medi-Cal in their final years (which would cause a MC lien to be placed on any real property they owned).[/quote]

Perfect example of why anecdotes are not the same as data. For the last 35 years, fewer than 30% of workers were covered by DB plans. Even among those with some kind of plan, fewer than half had DB plans, and those numbers are much lower today than they were 35 years ago. Today, that number is less than 10%.

There is no period of time over the last 60 years when average families had 3-6 kids. And we have to go back 100 years since more families had more than 2 or more children than fewer than 2.

The people that surround you are not representative of the rest of the population.[/quote]

SK, are you factoring in military retirees? Military pensions are akin to DB pensions and I included them in my assumptions. Also, I am referring to about 60% seniors (those currently 70 and older) and 40% boomers (those currently 51 to 69 yrs old who are already “retired.”). The bulk of senior households DID and DO HAVE at least one DB pension coming in, incl military retirements. The bulk of those collecting DB pensions also have guaranteed health coverage for life or a guaranteed healthcare allowance for life or both (single or couple).

It is the generations UNDER the boomers (almost all still working) who have lost DB pensions or healthcare coverage/allowance in retirement. Most of these changes were made in all levels of government ~2001-2002. At that time, the boomer cohort was already long-vested and most of the (now) senior cohort was already retired.

Some areas of SD County are flush with well-established military and govm’t-retiree households (from all levels of govm’t) and my area is one of those. It most certainly IS HIGHLY REPRESENTATIVE of San Diego County retiree demographics residing just ~6 miles from the main SD NAVAL BASE (32nd St) privileges such as commissary, exchange, gas and auto repair, etc and just slightly further from military privileges at NASNI Coronado, and, to a lesser extent, Ream Field (IB). Likewise, military retiree-residents are in abundance surrounding Miramar MCAS and other large bases elsewhere in the state. There are also many retired sworn staff (collecting more generous “Class C” DB pensions) around here, who have guaranteed health coverage for life beginning from date of retirement, as part of their pension pkgs. Military retirees (from active duty, NOT reserve) automatically get Tricare Standard (similar to a PPO) for themselves and their immediate families from their retirement date onwards (retired reservists receive the coverage at age 60). Most younger military retirees use Tricare Standard as secondary coverage (to their coverage from employment) because it only covers 75% of its allowable charge (or 80% if the provider is a “Tricare Extra” provider or “in network”). Tricare Standard has a low $150 deductible per individual per year for a max annual deductible of $300 per family. If a military retiree or their family member must rely on Tricare Standard, a private Tricare supplement is not too costly (~$25 – $75 mo, depending on age).

http://www.tricare.mil/Costs/HealthPlanCosts/TSE/RET.aspx

A military retiree and/or their family members may also sign up for Tricare Prime (an “HMO”), for a low annual enrollment fee and low copays but a beneficiary cannot self-select specialists with this plan:

http://www.tricare.mil/Costs/HealthPlanCosts/PrimeOptions/EnrollmentFees.aspx

Upon eligibility for Medicare, a military retiree (and their spouse, if/when eligible for MC) are automatically covered by “Tricare for Life” for their MC Part B & D coverage. TFL beneficiaries DO NOT PAY A DIME for healthcare coverage (as long as they use “network” providers, which, in SD, includes the entire Scripps Health system)! They also get almost all their prescriptions free from the military, mailed free of charge to their homes.

There are also Indian Health Services (IHS) eligible individuals (and their families) and VA-eligible individuals who never pay a dime out of pocket for healthcare. In addition, legally disabled individuals under the age of 65 are eligible for Medi-Cal/Medicaid, AND, in some cases, Medicare. And don’t forget PacBell, AT&T and utility retirees!

You’re skipping over a boatload of people, here, SK.

And yes, shoveler, I do know seniors on the SCAN Medicare Advantage program. Their premiums are lowish and they pay NOTHING out of pocket but the problem I have seen with this program is that the patient cannot choose their providers, rehab centers or skilled nursing facilities. SCAN chooses them for them. And they must go through their PCP for any referrals to a specialist. They can’t self-select any providers. For those reasons, it’s not the best Medicare supplement out there, IMO, despite its cheaper monthly premium.

I’ve already decided that I’m going with a MC Part B/D program (NOT a MC Advantage Plan) and will go with United Health or Aetna carriers (or Cigna if I leave the state) plus their brand-name drug options for Part D when my time comes to sign up for MC. Like many thousands of people in this county, I will have an even more generous healthcare allowance upon eligibility for MC. I’ve helped a few seniors get off their el-cheapo absolutely useless, pay-nothing, fly-by-night “MC Advantage programs” during the fall and sign up for part B and D coverage. I highly recommend Part B & D coverage over Advantage Plans like SCAN, especially if you will retire in an area more than 30 mins drive from a hospital. Again, you pay for what you get in this life.

I just talked with two local govm’t workers over the weekend who will retire from SD’s (City’s) DROP program at the age of 55. The City’s DROP was one of the most generous retirement programs in the nation (now taken off the table) and these individuals are currently only 52 and 54 years old! Not only are their houses paid off, but they will each retire with 29 and 30 years service respectively with all of the above and more benefits and perks and are essentially set for life!

I don’t see a healthcare crisis at all (except maybe with the 10-25 yo set due to the childhood obesity epidemic). Am I missing something here??

As to long-term care, I do see an issue here as this can easily cost $5-$10K month in SD County, depending on facility. I don’t know anyone who has long-term care insurance and yes, the cost of LT care could ostensibly “clean someone out,” assuming they couldn’t move in with kids and/or didn’t quitclaim any CA real property they own to kids/heirs FAR in advance (8+ yrs?) of a perceived need to avail themselves of LT care on Medi-Cal (which would likely be a “substandard” facility, anyway). They would also have to spend down the bulk of their liquid assets LONG before using Medi-Cal to cover long-term care. It’s going to be interesting to see how all this pans out for the “heirs” of those who go into LT care. And yes, I agree with FIH’s post. The US will have to import more nurses if our colleges aren’t cranking out enough of them at all levels to address this future need.

All but one of the boomers I know who lost both parents had to split their “inheritance” with 2 or more siblings (and/or the heirs of a deceased sibling). SK, you’re a boomer who grew up in SD, no? How many siblings do/did you have? Are both of your parents still alive?

[dumbrenter]

I’m gonna hit that number in 2 months… about a year late, thanks to an investment decision that cut my IRA in half. This is with $0 in real estate as my name indicates. With some help from capital gains, stock options and in being a good w-2 slave.

It is simple math, but if you are age 25 and in the tech business, it is very easy to hit a 7-digit net worth before your 40th birthday in addition to raising a family; in San Diego; on a single income. But that requires you to have a savings goal which is at least 40% of your income… i.e. no expensive vacations, no ‘nice’ cars in return for ability to retire early. And you can still have a good life.

But I can already feel that this is still middle class number… getting to an 8 digit net worth might feel good.

[bearishgurl]

[quote=dumbrenter]I’m gonna hit that number in 2 months… about a year late, thanks to an investment decision that cut my IRA in half. This is with $0 in real estate as my name indicates. With some help from capital gains, stock options and in being a good w-2 slave.

It is simple math, but if you are age 25 and in the tech business, it is very easy to hit a 7-digit net worth before your 40th birthday in addition to raising a family; in San Diego; on a single income. But that requires you to have a savings goal which is at least 40% of your income… i.e. no expensive vacations, no ‘nice’ cars in return for ability to retire early. And you can still have a good life.

But I can already feel that this is still middle class number… getting to an 8 digit net worth might feel good.[/quote]

Congrats, dumbrenter! I guess you haven’t been so “dumb” renting all these years! Owning their personal residence isn’t ideal for everyone, due to property taxes, maintenance costs, higher utilities and the illiquid nature of home equity. Also, some homeowners have too low of an income to take advantage of a tax write-off of all or part of their annual mortgage interest (MID). A soon-to-be-retiree also has to gauge the correct time to sell their primary residence for the maximum price if they want to relocate and the amount they can recover from that sale at any given time is contingent upon many variables of which they have no control over. In short, homeowners can’t always relocate for retirement purposes at precisely the time they want to.

It sounds like you have handled your household income very wisely thus far, dumbrenter. How far away are your kid(s) from attending college?

[SK in CV]

[quote=bearishgurl]
SK, are you factoring in military retirees? Military pensions are akin to DB pensions and I included them in my assumptions. Also, I am referring to about 60% seniors (those currently 70 and older) and 40% boomers (those currently 51 to 69 yrs old who are already “retired.”). The bulk of senior households DID and DO HAVE at least one DB pension coming in, incl military retirements. The bulk of those collecting DB pensions also have guaranteed health coverage for life or a guaranteed healthcare allowance for life or both (single or couple).

HEALTH CARE BLAH BLAH BLAH

You’re skipping over a boatload of people, here, SK.

All but one of the boomers I know who lost both parents had to split their “inheritance” with 2 or more siblings (and/or the heirs of a deceased sibling). SK, you’re a boomer who grew up in SD, no? How many siblings do/did you have? Are both of your parents still alive?[/quote]

I was referring to private sector employees. But since public sector has never made up more than 10% of the population, it doesn’t change things much. There has never been a time during baby boomer’s working lives when “the vast majority” were covered by DB plans.

I didn’t skip over anyone or anything. I never mentioned anything about health care. Only your assertion that “the vast majority” of retirees have some sort of DB pensions. They don’t.

I had 5 siblings. One is dead, and the other oldest aren’t/weren’t boomers. But that’s the difference between us BG. You think that the entire world is like your world. I don’t, because it isn’t. None of my close friends had more than 2 siblings. One of my siblings has DB pensions that pay he and his wife over $170K a year. Another will have $7K a month when he’s 65 for 5 years of work in the ’70’s. The other two also have DB plans. Until 10 months ago, I’ve never worked for en employer with a DB plan nor even a 401K. Until 6 months ago, I’ve never been eligible to participate in any kind of employer plan.

You know a lot of retired military and retired civil servants. I don’t. I know one retired civil servant. I don’t know a single retired career member of the military. (I did know a guy that was a career Coast Guard. He’s probably retired now. I haven’t seen nor heard from him in 15 years, since he moved to Alaska.) But none of that is important, because what I’ve experienced is nothing more than a single data point among millions. So I look at that data for the millions. And it says that you’re wrong.

[bearishgurl]

[quote=SK in CV][quote=bearishgurl]
SK, are you factoring in military retirees? Military pensions are akin to DB pensions and I included them in my assumptions. Also, I am referring to about 60% seniors (those currently 70 and older) and 40% boomers (those currently 51 to 69 yrs old who are already “retired.”). The bulk of senior households DID and DO HAVE at least one DB pension coming in, incl military retirements. The bulk of those collecting DB pensions also have guaranteed health coverage for life or a guaranteed healthcare allowance for life or both (single or couple).

HEALTH CARE BLAH BLAH BLAH

You’re skipping over a boatload of people, here, SK.

All but one of the boomers I know who lost both parents had to split their “inheritance” with 2 or more siblings (and/or the heirs of a deceased sibling). SK, you’re a boomer who grew up in SD, no? How many siblings do/did you have? Are both of your parents still alive?[/quote]

I was referring to private sector employees. But since public sector has never made up more than 10% of the population, it doesn’t change things much. There has never been a time during baby boomer’s working lives when “the vast majority” were covered by DB plans.

I didn’t skip over anyone or anything. I never mentioned anything about health care. Only your assertion that “the vast majority” of retirees have some sort of DB pensions. They don’t.

I had 5 siblings. One is dead, and the other oldest aren’t/weren’t boomers. But that’s the difference between us BG. You think that the entire world is like your world. I don’t, because it isn’t. None of my close friends had more than 2 siblings. One of my siblings has DB pensions that pay he and his wife over $170K a year. Another will have $7K a month when he’s 65 for 5 years of work in the ’70’s. The other two also have DB plans. Until 10 months ago, I’ve never worked for en employer with a DB plan nor even a 401K. Until 6 months ago, I’ve never been eligible to participate in any kind of employer plan.

You know a lot of retired military and retired civil servants. I don’t. I know one retired civil servant. I don’t know a single retired career member of the military. (I did know a guy that was a career Coast Guard. He’s probably retired now. I haven’t seen nor heard from him in 15 years, since he moved to Alaska.) But none of that is important, because what I’ve experienced is nothing more than a single data point among millions. So I look at that data for the millions. And it says that you’re wrong.[/quote]

Well, then, if I’m understanding your post correctly, SK, four of your siblings (2 seniors and 2 “boomers”) have DB pension plans and all are presently collecting benefits (typical). You are finally working in a job which will provide you with a DB pension. And I will surmise that most of all of your siblings have health benefits (or a healthcare allowance) attached to their DB Plans.

The reason I brought up healthcare is because there were at least two posts on this thread which forecasted a “healthcare crises” among the aged as another reason why this cohort (seniors and boomers) are going to run out of money to pay their healthcare costs. Nothing could be further from the truth … at least in this region of the country.

And I don’t think the “entire world is like my world.” I didn’t discuss the “entire world” here. I discussed San Diego County, CA and those areas close to military bases which have a very large population of military retirees and civil-servant retirees from of all levels of government, including Federal (incl thousands of DOD employees), state, county and municipal employers, including teachers and college professors. It also has a large contingent of DOD Contractor retirees (who provided generous DB pensions to retiring workers in past decades) and retired airline, phone and utility employees.

As a Native? San Diegan, SK, you must admit that in past decades, there weren’t very many large employers here in SD who weren’t gov contractors or the government itself. Most of their former workers never left SD County, and, if still alive, still reside here.

There are a LOT of military and Federal DOD retirees in East SD County as well, which is not that close to military bases. I can only attribute that to its lower cost to buy homes and land (compared to SD and close-in suburbs) and so a lot of enlisted families and lower-paid DOD workers bought property there while still working. Possibly those of all income brackets who had horses as well.

Public sector workers may not make up more than 10% of the population in the entire country … I don’t know. But in SD County, it is much more than that … especially when you count in the military active-duty residents, military retirees and public sector retirees, all of whom aren’t going anywhere. They were ALL “government employees” at one time.

While a portion of new retirees of every stripe from other parts of the country may typically relocate upon retirement, they tend to “retire in place” here. Along with the weather, Proposition 13 made/makes this decision a no-brainer.

[SK in CV]

[quote=bearishgurl]Well, then, if I’m understanding your post correctly, SK, four of your siblings (2 seniors and 2 “boomers”) have DB pension plans and all are presently collecting benefits (typical). You are finally working in a job which will provide you with a DB pension. And I will surmise that most of all of your siblings have health benefits (or a healthcare allowance) attached to their DB Plans.

[/quote]

Typically, you’re not understanding my post. Three of the four are boomers. Two are collecting. The oldest (that is still alive) and the youngest. Two are not. My oldest brother died at 65. He had no DB plan. Only one has any healthcare benefits attached to their plans. I do not have a job with a DB pension. I have a job with a 401K with no matching.

[bearishgurl]

[quote=bearishgurl]…I just talked with two local govm’t workers over the weekend who will retire from SD’s (City’s) DROP program at the age of 55. The City’s DROP was one of the most generous retirement programs in the nation (now taken off the table) and these individuals are currently only 52 and 54 years old! Not only are their houses paid off, but they will each retire with 29 and 30 years service respectively with all of the above and more benefits and perks and are essentially set for life!…[/quote]

btw, folks, these individuals were both females and both sworn staff. I predict they will both retire with $92-97K each in annual pensions their first year of retirement with benefits and perks added on to equal in the low-mid $120K’s annually. And btw, they both reside in Chula Vista …. along with many of their brethren 🙂

That’s how the DROP worked and that’s why it is no longer an option for City employees.

https://www.sdcers.org/Member-Benefits/Retired/Unified-Port-District/DROP.aspx

[Author]

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