I was supposed to be off my blog for a month, not three. I must admit I didn’t go cold turkey on social media. I did read some blogs, watch some videos and follow some friends on Instagram during that time. Although this blog remained silent, I’ve been busy moving forward with completing our Wills, updating our retirement accounts, bagging the concept of long term care insurance (blog post to follow), planning a few trips and generally enjoying the last of summer and beginning of Fall.
I do have a lot to share, especially with regard to some previous post ideas. Needless to say, my opinion has taken a 180 on several concepts, which I will also share soon.
So, if you are still out there, I will be updating. I look forward to talking with you all soon!
$188,000.00 is the amount of money that we would leave on the proverbial table if we waited until our retirement age of 67 to take Social Security. By quickly calculating the difference in the amount we would receive, it would take 12 years for us to break even.
Waiting until 67 allows the benefit to ‘grow’ 8% each year, which financial advisors will tell you is a great rate. (But you all know how I feel about financial advisors) However, the 8% incentive is only good if you live well beyond 74. The operative word being ‘live’. All of the social security benefit goes away when you die. Since we don’t know when we are going to die, it remains the one thing that makes this decision a gamble either way.
I will have to make a similar decision on a pension that I expect to receive in five years. Based on the numbers at this time, I can either take $600 a month for life, or a lump sum of $137,000. If I live another 30 years, the monthly payment would be $216,000.00 in total pay outs but would end upon my death, whenever that may be. However, if I take the lump sum, invest it conservatively (earning 4-5%) while taking $600 a month, after 30 years I would still have $64,000.00. It can continue to grow and be given to my heirs even after I’m gone.
This seems very similar to the decision with Social Security.
If we never spent the monthly checks from social security from 62-67, the $188,000 could be invested (conservatively at 4-5%) until 67. At 67, we would have
Now let’s say I started taking the extra $1,200 a month I would have gotten if I waited until 67, from that investment still earning 4-5% a year. I would be able to pull that money out for another 25 years. If I die before the 25 years is up, that money can go to my heirs as well.
I’ve accounted for taxes and low investment yields. It seems like a no brainer to me. I should take the money the earliest it is offered.
Since retirement is now 4.5 – 5 years away, Joe and I thought it might be time to consult with a financial advisor to find out if we are on the right track with our money.
We started the search for an advisor on Google, and found a fee only advisor in our area. Although his rate was a hefty $300/hr., he did offer a free initial consultation. We made an appointment.
Joe and I felt prepared for the meeting. Armed with a solid base of personal finance knowledge and a list of questions, we anticipated a productive meeting. As it turned out, the meeting was quite a disappointment. Most of the questions we had didn’t get answered, and several other factors led us to the conclusion that this particular advisor was not for us.
His credentials. He was a CPA with Bear Stearns before he became a financial advisor seven years ago. He told us most of his clients were his family.Red flag No. 1.
He was ULTRA conservative(and I don’t mean politically). We told him we had one investment that we didn’t need to withdraw from for at least 12 years. We felt confident, based on historical data, that it could average 8% as long as we left it moderately invested. He looked at us and laughed. He told us we were being way too optimistic. He believed, at best, we could earn 4%. (Hmmm, I’m not sure, but I would bet he got burned big time at Bear Stearns) We told him we had already been averaging 8-10% over the past 15 years (which included 2008), and we felt we were already investing conservatively. He told us we were the exception to the rule, and it was hard for him to believe that it would continue. (Looking at the chart below, you can see the actual returns over the last 13 years.)
NASDAQ Composite – Historical Annual Data
***We didn’t realize how conservative we were investing until 2008, when we lost -12% instead of the -40.54%. It had more than recovered one year later, and we have subsequently taken on a little more risk.
He was upselling multiple services. Besides offering to manage our portfolio (with an upcharge of 1% to do it) he felt we needed an attorney to handle our estate. He had “partnered” with one, and would be more than happy to set up the appointment. Besides his fee of $1,000 to change all of our investments to only realize a 4% gain (3% if we use his services), we could pay another $1,500, to have the attorney ‘dot our i’s and cross our t’s’. Really?
Lastly, he was condescending. This advisor questioned everything we have done to prepare for retirement. And not in the way one questions a person to gather information. He challenged everything we did or are planning on doing as though we have no clue. The best one? “Why would you want to retire so young??” Suffice it to say, I was having none of it, and we will not be calling him back.
Although this first advisor meeting was a bust, we will continue to meet with different advisors (as long as the initial consultation is free). But, if we can’t find one we like, we will continue to read, study and learn all about our own investments, and figure it out for ourselves. After all, you are your best advocate when it comes to your money, right?
If you use a financial advisor or have in the past, please share your experience. I’m all ears. 🙂
P.S. Thank you to all that add valuable information in the comments. Several comments have led me to change my mind on certain things that I was not aware of. If you haven’t already, go back and read some of the comments. There are golden nuggets of information there too!
Do you know how much money actually flows into your life on a daily, weekly or monthly basis? Recently I started watching a YouTube channel, Enjoying Life’s Journey, specifically for her weekly budgeting videos. I often pick up one or two golden nuggets from these types of videos, and this one was no exception. What struck me about this particular channel and her budgeting videos (and there are a ton of them out there) is the fact that Jackie tracks every last penny that comes in and out of her life. I mean every penny.
This past month, I decided to create my own excel spreadsheet and track every penny that came in and went out. I thought I was already doing this, but it appears I’ve been letting money slip out of our budget, especially if it makes its way to me in cash. In the past, I only budgeted the incoming paychecks. I was shocked to see what actually came in, and what I was able to keep.
Here is the extra money that came in May, 2019:
Interest in Ally Bank: $10.59
Sold items: $275.00 (Facebook Marketplace)
Cell phone reimbursement from my husband’s firm: $60.00 (2 mos).
Chase Cash Back rewards: $117.50
Ebates: $37.50 (If you are an online shopper, this is amazing. If you click on the link and sign up, we both get $25.00. This is REAL money. It took me a long time to sign up, but over the past 6 mos I’ve received $97 back.)
Medical Reimbursement check: $23.25
Anniversary gift from my incredibly generous parents: $500.00
Total ‘extra’ money for May: $1,023.84!!!
Normally, I wouldn’t track it and somehow it would be gone. This month every last penny went into my savings account.
Keeping track of every penny allowed me to save an extra $1,000+. I realize not every month will be as lucrative as this month, but I’m sure there will be something every month, and I will be tracking it going forward.
How much money is flowing into your life?
*Ebates is an affiliate link, and is the only affiliate link in this post. Please know that I will never have an affiliate link that I don’t use or 100% endorse.
A big part of our journey to retirement is figuring out what our future costs will be. Some of this is guess work, but we generally have a good idea because there is a short amount of time before we retire. One of the best things I’ve done, in my opinion, was plan our retirement budget and live on it NOW. I initially wrote about it here, but have changed a few things.
Here is our monthly retirement budget with our real numbers. (Instead of HealthCare, we pay a mortgage, HSA, and LTC insurance).
Taxes (Personal & Property)
Insurance (Car, Home, Umbrella)
$ To be determined
*In retirement, $3,000 will come out of a separate investment until Medicare kicks in at 65. We will be taking social security at 62, 67, which will give us another $4,500 a month. This should *hopefully* more than handle the medical portion of our retirement. That leaves a monthly budget of $4,400/mos. or $52,800 a year.
As you can see, I’ve kept in a sizeable monthly amount for travel. It is something that is important to us, and I wanted to budget for it. Of course at any time we may fall short, this will be the first to go.
Retirement advisors will tell you that you need 100% of your present day salary in retirement. I disagree. In retirement, we will no longer be saving for retirement, taking care of children, paying for college, etc. By living off of my ‘proposed’ retirement budget now and not spending more, it’ll be easier for us to make the transition.
This amount may seem high to some, and low to others. I know my parents, who are in their 80’s, live on MUCH less and they are very comfortable. When they were in their early 60’s they traveled a lot, and used up their retirement accounts. But my father worked for AT&T and has a great pension and social security to get them through these years. I believe our spending will go down once we reach our 80’s as well *God willing*.
I will keep evaluating the budget (and our investments) as we get closer to our target retirement date. Based on the numbers today, we are on track.