Approaching a Lower Income Retirement. What's your story?

[LisaThompson]

Happy to become a member. Hi everyone
If anyone is open to share your retirement finances/expected retirement finances- income, expenses, activity costs,
exercise, if you still work, anything you want to share. Your family, friends stories are welcome too

I often wonder how retirees cover these expenses: Food, Mortgage/Rent, healthcare, transportation, fun $.

We are currently searching for a crummy home in Northern California to remodel. No debt. Just started living in our RV
$150k to spend on a very humble dwelling. Husband worked in construction so will handle most of the remodeling.
We have materials for a greenhouse, solar set up, gardening, chickens, canning, preserving, freezing, baking etc.
To be 50%+ self sustaining is our plan
Current combined Income 42k a yr.
No debt. Newer electric vehicle. Older pick up
He retires at 66. I retire at 65. We are 55 & 62.5 yrs old
Expected IRA balance at retirement at 65 yrs- $150-180k+ (100% S&P500)
Expected HSA balance- 15-18K- also invested
Expected Cash locked in Safe- 75k-85K

Expected Retirement Expenses:
Prop Tax- $175
Groceries $625
Animals-$75
Gardening- $100
Clothing, Hair, Toiletries- $125
Trash Service-$50
Tech,Phones,Internet, Subscriptions, Computers-$200
Transportation-$400 (wear & tear/ gas in winter)
Donation-$175
Travel- $125
Health- $250
Unexpected- $100
--------------------------------
Expenses $2450
Social Security: $2450
IRA $300/$3600 yr/or maybe $400/$4800 yr (150k balance, more like 175k+)

He will pay for Part B + a dental plan. Myself- Retiree Indemnity package: Medical, dental, vision, prescriptions at $25 per mo. Whatever Part A & B doesn't cover
3 Months of LTC

LTC Plan
Trade/Rent RV- $650 (power, water, internet incl)
Reduce or eliminate some spending above
---------------------------------------------------
$1025 a month
Place to stay + $400 cash per month ($18.50 per hr) for 2.5 hrs a day/5 days a week of In-home help. Pay is $3 hr above min wage
I'd also give 12 days of PTO off each year and $125 at Xmas & their B-Day. This is how I see it playing out....
Indemnity Plan has to 14 weeks of Long Term Care. Max 2x per lifetime.
This Indemnity Plan while working and again at age 65, for minimal cost, was the main draw to the job.
4 day work weeks were great but paid only min wage w/ 2 hrs overtime per day. Overtime on Federal Holidays

 

[Liberty]

Welcome to the forum!
We've been retired for 6 years but live in Texas. Hard to share much since you live in California. We used to live in California but have lived in Texas since 1977.
Perhaps some California retirees will pop in.

 

[Knight]

The financial planning sounds reasonable. What about health?
You mentioned your husband works in construction. That can be hard on a body depending on the kind of work he does.

 

[Sippican]

You seem a little low on your investment income with the principal you described.
Depending on where those investments live will determine the growth rate.
At both your ages, you should be looking at investments that are principal safe as much as possible.
If you are heavy in stocks, I would think about moving them at this point. The market is very 'fickle' right now and with whats coming up on the horizon, it doesn't look good for stocks/companies.
With the Fed rate in the low to mid 5%, it may be worthwhile looking into a fixed annuity, wither 3,5,7 year term with a 5.50% fixed rate that is interest payable monthly. Don't go for any fancy annuities, they are money traps. A 'Fixed Annuity' is the best bet.
This way your principal is protected, and it will generate a monthly income stream for the duration of the term.
a 175K annuity will generate approx. 9,187$ a year in interest. Thats 765$ a month, going right into your checking account. Very safe.
Seeing as you don't have alot to work with, safety is the key point here.
Just an opinion.

 

[LisaThompson]

Welcome to the forum!
We've been retired for 6 years but live in Texas. Hard to share much since you live in California. We used to live in California but have lived in Texas since 1977.
Perhaps some California retirees will pop in.

Great, glad you live in Texas. Much better than California.

 

[LisaThompson]

The financial planning sounds reasonable. What about health?
You mentioned your husband works in construction. That can be hard on a body depending on the kind of work he does.

The $250 includes his Part B, my Retiree Health Insurance for $25 a month. This includes everything, medical, dental, eye, prescriptions, chiro, accupuncture, etc. $5-$10 co-pays. $50 is the highest payout if I am admitted to an ER

It suffices so I am not forced to buy Part B. I can change my mind later without incurring a fine.

I guessed at his dental plan for $30 per month but that might be a little low.
He also has a small HSA account of 20k invested in the S&P. He plans on using that to pay for anything else

 

[LisaThompson]

You seem a little low on your investment income with the principal you described.
Depending on where those investments live will determine the growth rate.
At both your ages, you should be looking at investments that are principal safe as much as possible.
If you are heavy in stocks, I would think about moving them at this point. The market is very 'fickle' right now and with whats coming up on the horizon, it doesn't look good for stocks/companies.
With the Fed rate in the low to mid 5%, it may be worthwhile looking into a fixed annuity, wither 3,5,7 year term with a 5.50% fixed rate that is interest payable monthly. Don't go for any fancy annuities, they are money traps. A 'Fixed Annuity' is the best bet.
This way your principal is protected, and it will generate a monthly income stream for the duration of the term.
a 175K annuity will generate approx. 9,187$ a year in interest. Thats 765$ a month, going right into your checking account. Very safe.
Seeing as you don't have alot to work with, safety is the key point here.
Just an opinion.

Thank you for this. I was very conservative with how much I expected to have in the IRA just in case the markets tank.
We should also have more in cash than I listed too. I'm currently earning $25 an hour x 48 hrs a week which is the best job I've ever had.
We can live off of that and his meek salary with his small seasonal business.
I included $100 unexpected expense. I am reminded the prop tax is probably $175 a month but likely more due to taxes and other things California adds onto the bill.
I'll check into a fixed annuity, thank you Good thinking

 

[Sippican]

Thank you for this. I was very conservative with how much I expected to have in the IRA just in case the markets tank.
We should also have more in cash than I listed too. I'm currently earning $25 an hour x 48 hrs a week which is the best job I've ever had.
We can live off of that and his meek salary with his small seasonal business.
I included $100 unexpected expense. I am reminded the prop tax is probably $175 a month but likely more due to taxes and other things California adds onto the bill.
I'll check into a fixed annuity, thank you Good thinking

Remember, your IRA is as only as safe as what is IN the IRA for investments. It could be a traditional 60/40 split. Meaning 60% is in equities (stocks). If the market tanks, you may incur higher losses with a 60/40 vs a 40/60 (40 stocks 60 safe investments)

As you get older, you need to think in terms of going from wealth accumulation to wealth preservation. Take lesser risk as you age with the priority on preserving your initial investment.

People with a comfortable cushion (800K-1mil ) can afford to take a hit in a down market. The less you have you need to be more cautious.

Your allocations are very tight. Depending on income in retirement, you may pay taxes on some of that Social Security.
Transportation seems light. That 100 a month extra will quickly be eaten up by higher than expected costs in other areas. You may want to relook at those numbers. Entertainment/Dinners/takeout, that all adds up

 

[LisaThompson]

Remember, your IRA is as only as safe as what is IN the IRA for investments. It could be a traditional 60/40 split. Meaning 60% is in equities (stocks). If the market tanks, you may incur higher losses with a 60/40 vs a 40/60 (40 stocks 60 safe investments)

As you get older, you need to think in terms of going from wealth accumulation to wealth preservation. Take lesser risk as you age with the priority on preserving your initial investment.

People with a comfortable cushion (800K-1mil ) can afford to take a hit in a down market. The less you have you need to be more cautious.

Your allocations are very tight. Depending on income in retirement, you may pay taxes on some of that Social Security.
Transportation seems light. That 100 a month extra will quickly be eaten up by higher than expected costs in other areas. You may want to relook at those numbers. Entertainment/Dinners/takeout, that all adds up

Thank you Sippican The IRA is 100% invested in the S&P w/ a planned a conservative 6% return for the next 5 yrs then the plan is to go conservative-60/40 sounds good. Transportation is light, yes, due to E-Bikes we ride for a little over half the year. We also Mtn Bike but not as much since I started working 48 hrs a wk. I already know we prefer to stay home from Dec- Mid April except going to church then shopping afterwards. We are like bears who hibernate during winter whether it's necessary or not. That's when we also have people over more often for dinner. Watch Movies and TV.

Husband will likely continue working p/t until age 70. He only works Summers for 4 months bringing in about 16K a year. The reason this is not factored in is he is in construction so any injury can stop him working at any time. I am always really nervous about it. He's already slowing up but he's steady working. He seems to just want to go to work for 4 hrs a day from 7 or 8am until Noon over the summer then he gets tired. He works longer if there is no sun, the heat is what affects him most. Also he has some health issues which do affect his abilities.

 

[Sippican]

Thank you Sippican The IRA is 100% invested in the S&P w/ a planned a conservative 6% return for the next 5 yrs then the plan is to go conservative-60/40 sounds good. Transportation is light, yes, due to E-Bikes we ride for a little over half the year. We also Mtn Bike but not as much since I started working 48 hrs a wk. I already know we prefer to stay home from Dec- Mid April except going to church then shopping afterwards. We are like bears who hibernate during winter whether it's necessary or not. That's when we also have people over more often for dinner. Watch Movies and TV.

Husband will likely continue working p/t until age 70. He only works Summers for 4 months bringing in about 16K a year. The reason this is not factored in is he is in construction so any injury can stop him working at any time. I am always really nervous about it. He's already slowing up but he's steady working. He seems to just want to go to work for 4 hrs a day from 7 or 8am until Noon over the summer then he gets tired. He works longer if there is no sun, the heat is what affects him most. Also he has some health issues which do affect his abilities.

Yes, working part time will be a big help.
Not so sure on the 6% returns 'planned' for the next 5 years.
We are going to see some headwinds in the ecomney later this year into 2024 because of three main thing. 1) The Trump tax cuts will be going away. This will increase payroll tax on all Americans, 2) The student loan forgivness is going away 4 qtr 2023, it may not affect you but it will affect millions of Americans. Putting a strain on existing household budgets, this in turn will lead to less purchasing power, leading to lower corporate returns, leading to reduced stock values, 3) Increased corporate taxes being setup for Fall of this year.
Your 60/40, the 60 side will take a hit so I would be surprised of you can get 6% return.
Good luck, hope it works out for you

 

[Brookswood]

California is definitely a higher cost of living state. Yes, you can find less expensive housing in some desert community East of the Sierra Nevada range, but it’s still not cheap. And gasoline is just plain expensive.

I would consider moving to some lower COL state like Arkansas.

 

[RadishRose]

 

[ElCastor]

Welcome to the forum!
We've been retired for 6 years but live in Texas. Hard to share much since you live in California. We used to live in California but have lived in Texas since 1977.
Perhaps some California retirees will pop in.

We live in California, north of San Francisco. Great weather, 50’s at night so air conditioning is unnecessary And afternoon walks very pleasant. Housing in this area is admittedly very pricey, but definitely not when we moved here. Cost of living? Groceries and Amazon about the same as anywhere else. Property taxes probably higher, but all in all we love it.

My wife just returned from a week visit to relatives in San Antonio. She hated it. 105 degrees and cooped up in a house that is only livable by virtue of air conditioning. On the other hand Texas housing is far less expensive than California, often nicer, and parts of California can rival Texas heat wise. But we love California and won’t be moving to Texas.

 

[Naturally]

Welcome !!!

 

[HoneyNut]

Expected Cash locked in Safe- 75k-85K

Whoa, I wouldn't think cash in a safe is a good idea, I'd bet it would increase your home insurance costs, and inflation would eat down the value of the money.

Have you looked into Treasury i-bonds? They are inflation protected (the $ value grows with inflation) and even though their terms are long (30 year bonds?) you can get the money out after only 1 year by giving up three months of interest, and you can withdraw tiny amounts if that is all you need. The only wrinkle is you are limited to buying only up to $10,000 dollars worth per year, but since you are starting so early perhaps that would not be a problem. Much safer than cash and maintains its purchasing value.

Of course using the money to buy CDs in a bank is also a good option (grows in value and is insured).

Welcome to the forums! Did you include home and auto insurance in your budget? It is so great that you are planning already 10 years ahead of time. I waited too long to start planning so really had to struggle to be ready, and I was woefully uneducated about investments (still constantly finding out how much I don't know).

My last three years before retirement I tried living on my retirement budget (which left me money available to put into my IRA). Those years helped me find the budget items I'd forgotten about (I forgot about property taxes the first year of my budget, but I see you have those included).

I am one and a half years into retirement now and I'm still anxious about my budget, though I'm starting to relax and be less crazy-frugal. Thank goodness for Social Security.

I downsized after I retired and got a small condo in a gated 55+ community that turns out to be a very economical choice, and is perfect for aging in place (after watching my mother's aging experience, I knew I should have a place with no stairs and with transportation if I couldn't drive, as well as activities inside the same building without having to go outdoors - my mom got so that she couldn't go outside if it was a windy day!).

Your plans sound like fun with the garden and chickens, but don't forget it is a lot of work and you will be aging. My mom and I shared a property and she had a lot of chickens (she sold eggs - as a hobby, not profitable I suspect), then her health failed in her 70s (she suddenly developed rheumatoid arthritis) and the chicken chores became mine.

Chickens are a lot of work! The food and water attracts mice and rats, the chickens themselves attract predators, etc. I loved our chickens but was glad when they finally all died off of old age. I recommend leghorns, they lay eggs often and seem to have shorter lifespans which is convenient since chickens don't lay many eggs after a couple years, then you are stuck with them as just pets for many more years.

 

[Lawrence00]

Am still working, turn 65 in about a week.

Looks to me like rural Missouri, Arkansas, Kentucky, or Tennessee are good choices for retirement and the best bang for the buck.

Smaller cities have hospitals, colleges, and even indoor plumbing.

Escape California while you still can

 

[Remy]

I'm in Ca. Fires have caused a lot of problems with housing and pricing. You don't want to get me started.

 

[LisaThompson]

We live in California, north of San Francisco. Great weather, 50’s at night so air conditioning is unnecessary And afternoon walks very pleasant. Housing in this area is admittedly very pricey, but definitely not when we moved here. Cost of living? Groceries and Amazon about the same as anywhere else. Property taxes probably higher, but all in all we love it.

My wife just returned from a week visit to relatives in San Antonio. She hated it. 105 degrees and cooped up in a house that is only livable by virtue of air conditioning. On the other hand Texas housing is far less expensive than California, often nicer, and parts of California can rival Texas heat wise. But we love California and won’t be moving to Texas.

Wow that is heavenly having weather in the 50's during summer!! Most of this summer for us, it's been in the mid-late 80's. Cools down at night around 9am. We sleep outside.

 

[LisaThompson]

I'm in Ca. Fires have caused a lot of problems with housing and pricing. You don't want to get me started.

PG&E caused a fire right near our house once. Our plan is a Metal roof and to have endless water somehow via a spring or pond.

 

[LisaThompson]

Am still working, turn 65 in about a week.

Looks to me like rural Missouri, Arkansas, Kentucky, or Tennessee are good choices for retirement and the best bang for the buck.

Smaller cities have hospitals, colleges, and even indoor plumbing.

Escape California while you still can

Congratulations on your retirement! Our son is here, I cannot leave him. Otherwise I agree 100%, we'd be out of here.

 

[LisaThompson]

@HoneyNut Yes, chickens are a lot of work but they made us so happy. Leghorns r great! Our 2 we were good layers too. Good idea. My favorite are the escape artists, the Barred Rocks. Our 2 would fly out of the fence with all other 15 chickens following suit. Cops at the corner gas station asked if my hens were walking down busy Dry Creek road. I replied no, not my chickens. 2 wks later, the same Cop informed me a neighbor identified my chickens as belonging to us. I replied similarly. Cops tried, unsuccessfully, catching the hens to return them to our yard.

A week later, I came home early to see 18 chickens all lined up marching like military vets down the busy road with the Barred Rocks in front LOL! I realized that's probably how my chickens look too following me around but wait, they are my chickens! Doing this ritual for months. Oyster shells + more greens didn't help.

Plentiful nutrition free ranging on 1/3 acre w/ a huge compost pile. They just wanted to walk 1/2 mile to the corner &&; back for daily exercise. None got eaten, thankfully. So glad your mom &&; U shared property and she sold eggs. That socialization is so nice and people love free range eggs! The safe, i will think about Treasury Bills. I like the idea of cash in a safe though.

 

[ElCastor]

Wow that is heavenly having weather in the 50's during summer!! Most of this summer for us, it's been in the mid-late 80's. Cools down at night around 9am. We sleep outside.

We moved here because of the commute to San Francisco. No regard for the weather, but times and climate have changed, even if our local weather hasn’t.

I never slept outside, except maybe on a fishing trip with my dad, but we did have a famous master decoy carver a few miles north of here called Fresh Air Dick. He got his name from his earlier life as a merchant seaman when he always slept on deck.

 

[Liberty]

We live in California, north of San Francisco. Great weather, 50’s at night so air conditioning is unnecessary And afternoon walks very pleasant. Housing in this area is admittedly very pricey, but definitely not when we moved here. Cost of living? Groceries and Amazon about the same as anywhere else. Property taxes probably higher, but all in all we love it.

My wife just returned from a week visit to relatives in San Antonio. She hated it. 105 degrees and cooped up in a house that is only livable by virtue of air conditioning. On the other hand Texas housing is far less expensive than California, often nicer, and parts of California can rival Texas heat wise. But we love California and won’t be moving to Texas.

Yes, so agree on San Antonio...there are many different climates in Texas like California. We live at the base of the famous Texas Hill Country - have 12 treed acres and love it. The canopy of trees makes all the difference in the world when heat comes. We have beautiful mornings and hot afternoons and evenings in the summer months. Cool winters and normally beautiful springs and long autumns with leaf coloring - nice change of seasons. Nature abounds in our own back yard.

 

[Timewise 60+]

Congratulations on your retirement! Our son is here, I cannot leave him. Otherwise I agree 100%, we'd be out of here.

Is your son a teenager or younger? Take him with you? If not, he can live without you next-door. We raised 3 and they are now scattered all over the country. We still see them often and the quality of our time together is great. Even better since we do not live close together...

 

[Muskrat]

You have enough time to make a real difference. Find mr money mustache website and start reading. Do not forget car and house insurance…they add up. I live pretty darn cheap most of the time as a habit. I started at about 40…then single with about 10000. Today at 66 I am fine. How you look at money today affects tomorrow. Simple things like bottled water, Starbucks and eating out can totally make or break you . Decide what retirement looks like. Welcome and good luck.