Sunday, September 20, 2015

Crunching the numbers

Our mortgage and home equity loan will be paid off the same year that I turn 62 (in about 11 years). The same year I would be eligible for Social Security, if I chose to start at age 62. Obviously we will want to maximize our income, while at the same time balancing my strong desire to BE RETIRED as soon as possible. More than likely the longer working life will have to win that war, in order to have the money we need, but a girl can dream, right?

Based on current SSA estimates, if we take our benefits at age 62, we would be looking at about $26,400 a year. This is both of us combined. With DH not working for several years now, he no longer has enough credits to claim his own social security benefits, so he will have to take the 50% of my benefits, option. And since I got such a late start on my 401k saving, that most likely won't be enough to live on. If we wait until age 67, we will earn about $40,000 a year.  I really don't want to wait that long. I don't know what the amount would be at age 64 or 65 - in the middle, but I'm guess it's in the middle between the 2 amounts, so around $33,000 a year.

We will also have my 401k to draw on. Who knows what that amount will be! This year started out with some decent returns and now is in the negative. Based on what I contribute (and will increase that next year, when I don't have DD to support), what my company matches and also contributes as a profit sharing portion, and on an average historical earnings of 8% a year, we'll probably have somewhere in the neighborhood of $250,000.  Drawing 4% a year would give us $10,000 a year income. I read somewhere recently that 4% is a recommended amount, in order to have enough left in your savings to last all the retirement years.

I look at homes for sale - anywhere out in the country, in the mountains - wherever population is way less than it is where we currently live and neighbors are few and far between. I just want to get an idea of what prices are, for something we could live in for our retirement years, compared to what our home value is.  For estimating purposes, let's pretend, using today's dollars, that it's 11 years later and our house is paid for. It's worth $225,000. I am finding decent homes, with land and a shop, out in the middle of nowheresville, for $135,000-150,000. After estimated selling fees, etc, let's say we clear $50,000 after paying cash for new home. That's 50k we can add to our retirement savings, now bringing us up to $300k and giving us now $12,000 a year to draw out, instead of 10k. Retiring at around 64 or 65 would give us about $45k a year income. I would think we could live on that - with no mortgage payment. We don't plan on living an extravagant lifestyle, that's for darn sure. Just a quiet life, with our animals.

I will definitely have to do some Social Security benefits research in the coming years. Like, say, what if we decided to do this move at age 62, but I found a job (obviously going to make way less than I do here in the big city) until I was 67 and then take Social Security. Will the 5 years of lower income hurt/decline what my monthly SS income will be by the time I'm 67, compared to if we stayed here and I worked my higher paying job until I'm 67? Also, isn't there some rule that at some age you have to start withdrawing out of your 401k?

It's a 2 sided issue - wanting to get the hell out of this place/area, along with retirement looming in the next 11-15 years. I don't want to make stupid decisions, but living here just gets harder and harder....even without the drug neighbors situation, the traffic and overcrowding around here is insane, not to mention the high cost of living. I am so sick of it. It's a good thing I love my job and employer, that and my decent salary is really the only thing holding me around here.


  1. There are other options too - like retiring at 62 then taking very parttime work that helps with your monthly income but allows you to have a very nice life and some time for yourself. Or...what about selling your home now and renting for the last few years before you buy your place out in the country? That would get you away from these bloody druggies.

    1. thank you for the suggestions! that's kind of what I am wondering - do I take the lower amount at 62 and supplement with a p/t job (but I wouldn't want to do that for very many years, so then would lose that income eventually) or do I find a full time job (that will be less than I earn now - I'm assuming not many job options in small town living) - live off that and our 401k until 67 and then take full SS amount...but will that 5 years of less income lessen what I get at 67 compared to keeping my current good paying job?

      Renting this place out isn't really an option for us for many reasons - mainly being that with our mtg and HELOC payment we could not get that much in rent, so would be having to cover the difference until we could sell. Plus, this area has gone to such decline that most likely we'd end up having to rent to "less desirable" folks and I have heard so many landlord horror stories (my boss just went through one and she rented to a supposedly good qualified person) that trying to rent while we live in another state doesn't sound appealing at all.

  2. I highly recommend you check "The 5 Years Before You Retire" out of the library and READ it! Even if you are more than 5 yrs. out it will give you an idea of what you will face ahead.
    There is no "middle" SS income option between taking an early payout or waiting until full age....early at 62, full at between 66 and 67(depending on your birthdate)and late at age 70.

    If you quit this job and work for less money elsewhere before you collect, SS takes the highest earning 35 yrs. to figure your monthly benefit so this won't affect what you get each month, unless if staying at the current job for 5 years means you make more money overall during your work history. They don't take the last 35 years of your employment no matter what you earned to figure your benefit like some people think.

    If you work once you start collecting SS you are penalized beyond earning a specific amount-if you collect at 62 you lose $1 of SS benefits for every $2 you earn of income from working, if you earn over $15,120 a yr. from that job. Once you reach your full benefit year you get they only penalize you $1 for every $4 you earn at a job. So it's possible to apply to collect early but not actually get any SS if you earn too much. Once you hit the month of your birthday the year you turn whatever age is full SS for you then they stop penalizing you if you are still working.
    This penalizing you for working thing makes many retirees consider working for "under the table" pay so that their SS benefits aren't held.

    Your DH will not lose his SS benefit if he no longer works....he only needs 40 credit units(10 years of work history)total to collect. Of course every year he doesn't work is a $0 in his tally which will bring his benefit down so that collecting 1/2 of yours may be higher than collecting his own.

    But if he doesn't have 40 credit units of work during his lifetime he will have to pay for his Medicare part A and it won't be free....current cost is $441 a month......if he doesn't have enough SS work credits. If he has between 31 and 39 credits the cost you pay per month is $104.90(as of 2013). Then add on Medicare part b and any of the other supplements to pay for each month for the both of you. Once you hit Medicare healthcare is FAR from free as many think it is.

    And although CA doesn't tax SS on the state level(as of now, this could always change), the Federal Govt. taxes your SS benefits anything above $32K a year for a married couple. There is a complicated formula so get that book and read Chapter 6.

    As for RMD(required minimum distributions)you must start withdrawing monies from IRAs/401Ks/etc. when you reach 70.5 years old. If you don't the Feds penalized you 50%!!! of the money you should have taken out. ouch. And once you start withdrawing IRA/401K funds get a good accountant so you don't screw up the formulas for paying the funds on those monies to Uncle Sam. Remember, the money wasn't taxed when it went it but they will get their pound of flesh when you cash out!

    Again, get that book and memorize it! lolz
    You won't be sorry.

    1. THANK YOU FOR ALL THE INFO!! I am heading to my online library website to get this book checked out/reserved. I'm glad to hear that taking a less paying job from 62 to 67 wouldn't lower my benefit amount. (Staying at this job wouldn't mean I'd make more overall). As always Sluggy - you rock!

    2. and we aren't in CA - and our state doesn't have a state income tax - just high sales tax rates :/ We all pay in some form or another, eh?

    3. I can't believe my library doesn't have this book! Guess the $10 cost to download it to my ipad wil be worth it.

    4. you are right - DH does have SS benefits - I think I got confused about this from several years back when I we were trying to get disability. Apparently those credits are different. I just logged into his SS account and while he doesn't have enough credits for disability, he does for his own SS benefits...which are just a tiny bit lower than half of mine. So, I'm assuming he won't have to pay the higher Medicare part A, you mentioned above?

    5. Yes if he has 40 credits his Medicare part A is free but you will have to pay for Part B and any of the other Part C/D/E/F/etc. if you elect to take those.

      Now why did I think you were in CA? lolz At any rate, ALL SS benefits are taxed on the federal level no matter where you live. ;-)

      Glad I could help. Everyone should go into retirement knowing their options.

    6. Actually Slugmama is not correct when she says "There is no "middle" SS income option between taking an early payout or waiting until full age....early at 62, full at between 66 and 67(depending on your birthdate)and late at age 70. The monthly amount increases for every year you wait to collect Social Security from age 62 to age 70.

    7. Julie - very good to know -thanks for the input!

    8. Julie is right.....every month you delay after age 62 you will see an incremental increase in your benefit. At 62 your benefit will be 70.8% of what it would be at full age retirement, at 62 & 1 mo. your benefit will be 71.3% of your full age retirement benefit, etc.
      There is a chart here with the exact %s ....
      Just click on your birth year to se the chart that applies to you.
      Sorry if I put misinformation out there. 8-)

    9. Ok, the %s I gave are for people born my birth year so yours may be a tad different. lolz

  3. As a note to anyone who takes soc sec at age 62, like I did......I wasn't prepared for the sticker shock when I turned 65 and the govt automatically deducted Medicare out of my social security check. That meant that my already reduced pay out from collecting at age 62 is lowered even more by $105 per month PLUS part d and a medicare supplement for like FOREVER. For me, it was true that because of my low earnings over the year the diff between 62 and 65 wasn't that much BUT it would have made up the deficit. Because of this my hubby is going to wait till his FULL retirement age (66.5) to get a bigger social security check AND make up my difference. That's 7 long years away.
    Live and learn. You wouldn't have found this out in any of the books I read. Sluggy is very correct: Five Years To Retirement is an excellent, eye opening book!!!!!