How best to prepare for retirement 5 years out

Frwinkley

Mouseketeer
Joined
Jan 10, 2016
I will retire from teaching in 5 years. My DH will retire from the private sector at roughly the same time. We max out my 403b and his 401k. We have not contributed to a Roth IRA since I expect our taxes to be significantly lower once we retire. We will also delay social security until full retirement age. We will be 63 when we retire. I will collect a pension and DH will as well (smaller than mine, however).

We have no debt. House is paid, kids on their own, etc. We have liquid savings, as well as stocks/mutual funds, etc.

Is there something else we should be doing?
 

DLgal

DIS Veteran
Joined
Feb 12, 2013
I will retire from teaching in 5 years. My DH will retire from the private sector at roughly the same time. We max out my 403b and his 401k. We have not contributed to a Roth IRA since I expect our taxes to be significantly lower once we retire. We will also delay social security until full retirement age. We will be 63 when we retire. I will collect a pension and DH will as well (smaller than mine, however).

We have no debt. House is paid, kids on their own, etc. We have liquid savings, as well as stocks/mutual funds, etc.

Is there something else we should be doing?
Purchase long term care insurance policies if you haven't yet.
 

snappy

Survivor
Joined
Apr 15, 2002
Get supplemental insurance when you go on Medicare. I like Plan G. A company that has a lot of insurers on your state for that plan is a good idea, also start with a competitive premium.
 
  • Frwinkley

    Mouseketeer
    Joined
    Jan 10, 2016
    Have not purchased long term care and don't intend to. We will use our assets for such care. We're ok with not leaving assets to our children--they are doing quite well for themselves.
     

    snappy

    Survivor
    Joined
    Apr 15, 2002
    Long term care is best to purchase while young. Otherwise, quite expensive if you go inflation protected. I am delaying social security until age 70. My CFP said to plan to have enough assets in case you live to age 100. I gues 100 is the new 75.
     

    bababear_50

    DIS Veteran
    Joined
    Feb 5, 2007
    Hi
    I am semi retired,,started one year ago. (I still work 1/2 days and love it,Educational Resource Facilitator ).
    Retirement is not completely about financial planning,,,it is a very emotional journey.

    1. I'd say define your retirement,,what are you going to do during your retirement.

    2. Create a retirement budget together.

    3. Stay healthy as possible ,,,take steps now.,,,example ,,,join an active social group.
    *Staying mentally and physically active is so important.*

    4. Protect each other legally should one person die,,or need alternative care.

    This is an old 2012 article by AARP but it is good.


    Have fun planning
    Regards
    Mel
     
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    tvguy

    Question anything the facts don't support.
    Joined
    Dec 15, 2003
    I agree on two fronts on long term care insurance. Everyone should have it, but you have to purchase it when you are young.
    I think we were in our late 40s when were purchased ours. Our Financial Planner last year did check to see what what premiums were for a similar plan for us with a different company, we were 61 at the time. Our current plan is $4,000 a year for my wife and I. A similar plan today, the lowest price came in at $12,000 a year!
     
  • DLgal

    DIS Veteran
    Joined
    Feb 12, 2013
    Have not purchased long term care and don't intend to. We will use our assets for such care. We're ok with not leaving assets to our children--they are doing quite well for themselves.
    I hope you have super significant assets to dedicate to this. Nursing homes and assisted living facilities can cost $5000/month or more. In home care runs about $20/hour. I used to work for a Home Care agency doing the billing and we had many, many clients with round the clock caregivers, paying $3000 PER WEEK for in home care. Those clients were multi millionaires.

    I truly hope you have fully researched the potential costs for this. After working for that agency, and seeing how much this kind of care can cost, I have told everyone who will listen to get LTC insurance. My own parents didn't listen to me and get it while they were young and they how pay $800 in monthly premiums, but it is an absolutely necessary expense, IMO, unless you have literal millions to burn through.
     

    snappy

    Survivor
    Joined
    Apr 15, 2002
    And if you wait too long to apply, you may not pass underwriting for LTC.

    The going rate in the 24 hour nursing care unit at the CCRC facility where my mom lives is currently $300 a day. Doesn’t include supplies or equipment rentals.
     

    OrangeBirdGirl

    DIS Veteran
    Joined
    Oct 3, 2014
    Sounds like you guys are in a pretty good position. And, you thought of a lot of options like delaying ones social security.

    I'd reconsider Roth though. DH & I never did it and we just do our 403B and 401K. However, we met with a financial planner in June and he changed our mind. While we invest in our work retirements we keep a lot of money in CDs. It is money we can't afford to lose in the market. That money is set for things like large home repairs (we knew we needed a roof in a couple years but lucked out and just had it replaced through insurance for storm damage) or if one of us lost our job it would afford the ability for us to take the time to look for a job we want vs just getting any job to pay the bills. I expressed that concern to our FP and he said how our little interest that we are getting on CD is actually losing money as we can't keep up with inflation. If we wanted to be safe, we could still do a Roth CD. But by doing a Roth we aren't paying taxes on the interest we receive each year. We invested the max for each of us in June in a Roth. We went through Vanguard and they have mixed funds that are for targeted retirement age with the safer ones being closer to retirement. And, the fees are very minor. Since it was money we wanted to keep relatively safe we invested in a fund that was targeted for people who were in their mid 50's (we're in our early 40's).

    As for long term care as a lot have mentioned, that is a tough one for us. We're in our early 40's I checked into it after meeting with the FP and our annual cost now is about $2400. I understand the benefit of buying now to get lower rates while still young. But honestly the coverage was just way too confusing to understand how much you needed as it's not cut and dry to the point of "you'll have $300k a year in coverage". It is something that just isn't a top priority for us now so I didn't bother meeting with an agent or checking further into it. And, for the little research I did online there are equal number of articles (from reputable sources) that say you must have it so you don't lose everything and the articles that say the coverage really may not give you what you need and you are paying so much per year just to find out you don't have coverage for what you intended to use it for.
     
    Last edited:

    Frwinkley

    Mouseketeer
    Joined
    Jan 10, 2016
    I’m with you—LTC covered/not covered expenses was vague. I also read many articles both for and against it.

    My mother is in memory care in Texas to the tune of $9000 a month. It is paid using she and my father’s pension (he is deceased), her SS, and the proceeds from the sale of her home. She also has a 401k that has done very well. She is only 76, but her money can take her well into her 90s.

    The remarkable thing is that my parents had nothing—my father had 100k in is 401k when he retired and he thought he was a millionaire. My mother worked a secretarial job for the state of NJ (hence the pension), but only when my youngest sibling turned 16. We all (4 of us) kids went and paid for college ourselves (to the tune of $32 a credit—my goodness how that expense has climbed). Neither of my parents went to college. I’m not saying they didn’t struggle financially, because they did. Yet every year, they took us on vacation.

    Without the pensions that both my parents had, things would be much different looking. Fortunately for my DH and I, we will have a steady stream of income through our pensions that will exceed our expenses, No second home, fancy cars or anything like that. One or 2 nice vacations during the year and that’ll be it for us. We’re pretty simple folk.

    I think my point is this: an awful lot depends on your income post retirement, your lifestyle and whether you plan to leave any of your assets to your children. My parents will have nothing left to leave us—and that’s perfect. Their wish was to never be a financial burden on their children, and they won’t. We are all so thankful for that. That’s our goal for our DD as well.
     
  • QueenIsabella

    DIS Veteran
    Joined
    Jan 17, 2016
    It sounds like you have a lot of bases covered. The main thing I'd be thinking about is planning your post-retirement time--do you want to travel? volunteer? start a business? visit grandkids, enjoy a hobby, fix up the house, learn some fun skills? It looks like you have the resources to do some or all of these as you choose. But, you want to be thinking about what you're going to do with your new-found free time.

    As to LTC insurance--I'm not a fan. I find the whole industry to be sketchy, and it seems like the plans change all the time as to what's covered for how much and for what length of time. Premiums keep rising, but I'm not convinced there's value there. We plan to self-insure. We told the kids, if things break their way, they'll inherit. If not, well, hopefully we won't have to move in with them.
     

    MillauFr

    Buzz & Woody
    Joined
    Aug 5, 2011
    Long term care seems like a scam to me. Too many loopholes and many of the companies will go bankrupt leaving you high and dry.
     

    kymom99

    DIS Veteran
    Joined
    May 24, 2008
    Long term care seems like a scam to me. Too many loopholes and many of the companies will go bankrupt leaving you high and dry.
    My mother in law had long term care insurance. It covered very little. And she was sick for a very long time before she passed away. They paid on it for years and I think they paid out about $3500 total.
     

    DLgal

    DIS Veteran
    Joined
    Feb 12, 2013
    Long term care seems like a scam to me. Too many loopholes and many of the companies will go bankrupt leaving you high and dry.
    People think that about EVERY kind of insurance. Like any other industry, there are reputable and non reputable companies. There are several companies that do this and have been in business a long, long time. This is why you do your research. This kind of attitude will end up biting people in the end when they find themselves needing care with no way to pay. Sure, you can burden your children with your care, but should you?

    When I worked as a billing manager for a home health company, we had numerous clients using LTC and they paid out huge amounts of money and I never had an issue with collecting payments from any of them.
     

    kymom99

    DIS Veteran
    Joined
    May 24, 2008
    Long term care is best to purchase while young. Otherwise, quite expensive if you go inflation protected. I am delaying social security until age 70. My CFP said to plan to have enough assets in case you live to age 100. I gues 100 is the new 75.
    Dave Ramsay says to purchase when you are 60
     

    Darcy03231

    DIS Veteran
    Joined
    Nov 1, 2006
    Don't spend your next 5 years waiting to do what you want to do until you retire. We learned yesterday that a close family friend passed away suddenly yesterday morning. He and his wife were in "we're going to do that when we retire" camp. He was set to retire at the end of this month.
     

    HopperFan

    "It's a bug-eat-bug world out there, princess."
    Joined
    Sep 6, 2003
    I’m with you—LTC covered/not covered expenses was vague. I also read many articles both for and against it.

    My mother is in memory care in Texas to the tune of $9000 a month. It is paid using she and my father’s pension (he is deceased), her SS, and the proceeds from the sale of her home. She also has a 401k that has done very well. She is only 76, but her money can take her well into her 90s.

    The remarkable thing is that my parents had nothing—my father had 100k in is 401k when he retired and he thought he was a millionaire. My mother worked a secretarial job for the state of NJ (hence the pension), but only when my youngest sibling turned 16. We all (4 of us) kids went and paid for college ourselves (to the tune of $32 a credit—my goodness how that expense has climbed). Neither of my parents went to college. I’m not saying they didn’t struggle financially, because they did. Yet every year, they took us on vacation.

    Without the pensions that both my parents had, things would be much different looking. Fortunately for my DH and I, we will have a steady stream of income through our pensions that will exceed our expenses, No second home, fancy cars or anything like that. One or 2 nice vacations during the year and that’ll be it for us. We’re pretty simple folk.

    I think my point is this: an awful lot depends on your income post retirement, your lifestyle and whether you plan to leave any of your assets to your children. My parents will have nothing left to leave us—and that’s perfect. Their wish was to never be a financial burden on their children, and they won’t. We are all so thankful for that. That’s our goal for our DD as well.
    I hear you and agree that every situation calls for a different plan. We went through moving MIL into assisted care while FIL was still alive, and organizing his finances.

    Just thinking out loud, if your father was about the same age as your mother and still alive .... would your father had been able to live comfortably for the next 15 years AND pay all that money for your mother's care?

    I think that LTC policies are taken with assumption both spouses are alive long term with at least one needing care. It keeps the other spouse from being drained of retirement funds.
     

    DLgal

    DIS Veteran
    Joined
    Feb 12, 2013
    I hear you and agree that every situation calls for a different plan. We went through moving MIL into assisted care while FIL was still alive, and organizing his finances.

    Just thinking out loud, if your father was about the same age as your mother and still alive .... would your father had been able to live comfortably for the next 15 years AND pay all that money for your mother's care?

    I think that LTC policies are taken with assumption both spouses are alive long term with at least one needing care. It keeps the other spouse from being drained of retirement funds.
    Yes, exactly! The other scenario is both spouses live a long time AND both need long term care. This is the "worst case scenario," but it does happen pretty frequently. Can you imagine needing to pay $18000 per month for years on end?
     

    TwoMisfits

    DIS Veteran
    Joined
    Feb 21, 2002
    Yes, exactly! The other scenario is both spouses live a long time AND both need long term care. This is the "worst case scenario," but it does happen pretty frequently. Can you imagine needing to pay $18000 per month for years on end?
    Only thing...I'm seeing a lot of LTC policies limiting payouts to 3-5 years and having payout total caps (like $300K)...they are getting tighter now that they realize how long people can live, so the question of LTC vs separately saved fund won't be so cut and dried probably by the time those in their 30s/40s retire...
     


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