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Question to retirees... and those about to retire

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Question to retirees... and those about to retire

Old 07-23-15, 11:00 AM
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Pamestique 
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Question to retirees... and those about to retire

OK so I am thinking of retiring. Trying to get my research together but have some silly, initial questions which for some reason I can't get fully answered...

1) Do you have to pay taxes on social security benefits?

2) Do you have to pay taxes on a pension (I get a small pension from my company)

3) Is Medi-care OK for medical coverage? Or would it be better to keep working and use what is provided by my employer? Also does anyone know how coverage will change in 2016? A friend keeps telling me the good coevrage I have know will mandatorily change next year.

4) Are you able to live within your means and not draw from investments?

It's really hard for me to think about giving up a decent paycheck by retiring. I am 64 now and will not start taking SS until I reach 65. For now, I will just live off the pension and my savings.

Any thoughts? The whole thing scares me...
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Old 07-23-15, 11:16 AM
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Originally Posted by Pamestique View Post
OK so I am thinking of retiring. Trying to get my research together but have some silly, initial questions which for some reason I can't get fully answered...

1) Do you have to pay taxes on social security benefits?

2) Do you have to pay taxes on a pension (I get a small pension from my company)

3) Is Medi-care OK for medical coverage? Or would it be better to keep working and use what is provided by my employer? Also does anyone know how coverage will change in 2016? A friend keeps telling me the good coevrage I have know will mandatorily change next year.

4) Are you able to live within your means and not draw from investments?

It's really hard for me to think about giving up a decent paycheck by retiring. I am 64 now and will not start taking SS until I reach 65. For now, I will just live off the pension and my savings.

Any thoughts? The whole thing scares me...
See a financial adviser. A CFP would know all the answers to (1)-(3) and can help you decide on (4).

I'm self employed, and my dream retirement wouldn't be to get the golden watch and head out into the sunset. I'm actually kinda hoping to ratchet things down a bit and work 4 days a week for a couple of years, then 3, then 2, then just take on work as it interests me.

But ... I'll probably be a Walmart greeter sooner or later.
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Old 07-23-15, 11:28 AM
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Originally Posted by Pamestique View Post
OK so I am thinking of retiring. Trying to get my research together but have some silly, initial questions which for some reason I can't get fully answered...

1) Do you have to pay taxes on social security benefits?

2) Do you have to pay taxes on a pension (I get a small pension from my company)

3) Is Medi-care OK for medical coverage? Or would it be better to keep working and use what is provided by my employer? Also does anyone know how coverage will change in 2016? A friend keeps telling me the good coevrage I have know will mandatorily change next year.

4) Are you able to live within your means and not draw from investments?

It's really hard for me to think about giving up a decent paycheck by retiring. I am 64 now and will not start taking SS until I reach 65. For now, I will just live off the pension and my savings.

Any thoughts? The whole thing scares me...
I have had a few semi retirements but fully retired for the last time in 2011. I have to admit, retirement is the best job I've ever had. To answer your questions:

1) Yes! Taxes are taken out of your SS checks if you opt to do so, otherwise, you pay at the end of the year.

2) You will only have to pay taxes on your pension if the money was taken out of your salary before taxes were paid, otherwise no. I receive a state pension and they take a small amount out of that for the IRS.

3) Don't know what type of insurance coverage you have but if you get a good MediCare Supplement, you will have no problems. My wife broke her femur last month. Between the hospital, surgery, doctors and three weeks in a rehab center, out of pocket for us was $00.00. We have United Health Care through AARP.

4) Yes, you can. It's much easier if your mortgage is paid off and you have very little debt, but with two retirement checks coming in, you should do fine as long as you don't go on a big buying binge.

Unless you really can't stand your job, wait until you're 65 and leave your savings/investments alone. Don't need to know how much you have in investments, but if it's substantial, use that for vacations and emergencies. My wife is also retired and we do quite well, financially. I've never worked an upper management position, just had some decent paying jobs. If you're married and your wife is of retirement age, her SS income will also help. A good financial advisor can help with your specific needs. Shop around because they are not all the same.

Don't be afraid of retirement. You've earned it and now it's time to enjoy yourself. You can always do some part time work if the need arises.
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Old 07-23-15, 11:29 AM
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You need to speak to a financial planner so that you get a more comprehensive understanding of your options. Another person is your tax preparer, hopefully a CPA.

Are Your Social Security Benefits Taxable?

Short answer, yes social security benefits could be taxable if you reach a certain income level. Yes, pension distributions are taxable and your human resource person should be able to tell you what portion is taxable and what portion might not be taxable.

At age 65, Medicare is the coverage and then there's Supplemental Insurance that covers the portion that Medicare does not. Supplemental like that from AARP or Blue Shield as an example.

With the Affordable Care Act, many solo health practitioners are going out of business. The new business model is the large group practice. Kaiser Permanente is the 800 pound gorilla here in CA. Efficiency is the new mantra for health care. Large group practices are more efficient. The days of Preferred Provider Organization (PPO) are slowly blending into the HMO model. This means your choice of what doctor to see will be limited.

Another good source to gain insight is "Medical Economics". Quite a few physicians subscribe to that publication.

As people have longer life spans, it puts the pressure on the seniors to look at their investments to see how far it would be able to take them. Most people really need to work longer even if its part time.
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Old 07-23-15, 11:56 AM
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I was self employed and sold out and was going to work part time pretty hard to work in your own business for someone else. Medical I was 66 and had part b supplemental ins had a bike accident billed 400,000 paid about 800.00 so my take is, insurance is excellent. (I guess you are un-American if you say that) Have a plan for your retirement and get on with other work hobbies bikes etc. Money wise the last check you write in your life ought to bounce.
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Old 07-23-15, 01:06 PM
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Since some of the taxability issues have already been answered, I'll focus a little more on the benefits side.

First, Medicare is a great program but it's important to understand what it does and does not cover and what choices you'll have to make. Here's a publication by AARP that might be helpful. You'll probably want to supplement standard Medicare with something additional. The two basic choices are between an HMO-type supplement and a more traditional insurance supplement.

In Massachusetts, where I live, we can get Medicare counseling by something called the SHINE program. It is very possible that your state offers something similar. This can help you quantify the risks and benefits of different types of supplement plans.

As for Social Security, if you're currrently 64, you won't be eligible for a full benefit until you're at least 66 and maybe even 66 and a few months. This doesn't mean you aren't eligible at all but your monthly amount might be adjusted down a little bit if you start receiving payments at 65. The longer you wait, the larger the monthly benefit.

I would encourage you to call your local SS office to start learning about both SS and Medicare.
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Old 07-23-15, 01:16 PM
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I do have a financial planner who manages my investments. Guess I need an appointment to discuss retirement further.

As part of my pension (which I believe was taxed) I also get medical coverage. This means if I retire before 65, my PPO remains in force (cost to me $156/mo) until age 65. Then Medi-Care becomes primary and the PPO insurance (which I will continue to pay) becomes secondary. Personally I love my insurance right now (United Healthcare) and even with the fracture and surgery (I paid $600 deductible and than 20% of costs up to $2000 out of pocket), I have paid little out of pocket and can see the doctors I want. I assume with Medi-Care that changes and I will be forced to see doctors who work with Medi-Care? I so hope not to lose the relationship I have now with the PPO doctors. In addition, I heard Obamacare is going to force me to start paying significantly more out of pocket before any insurance kicks in. I can't find anything on that and am going on what a friend is telling me (so I question it).

Thankfully I have no debt and have good but not great savings. I should wait until 66 but just know, I can't/won't be up to working another year and a half. I should try and make it to 65, which was my plan, but with my current injury and needed rehab; I just need to quit and work on getting back to 100%.

I'm scared to take the plunge but know I am better off than most; at least I have savings and investments! There's that...

and WelshTerrier... thank good - good advice (and thank you all)
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Old 07-23-15, 01:20 PM
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See a financial adviser,, yeah yeah do that.

But don't start watching TV, If you do your I.Q. will drop and your body will die faster !

Get Up EVERY SINGLE DAY AT SUNRISE !,, Or your
I.Q. will drop and your body will die faster !

Eat smart and cut the processed food, cut sugar, cut out cokes completely, or,,wait for it,,,,, your I.Q. will drop and your body will die faster !

Properly hydrate every single day or,,,,, see above..

Ride your bike until you can no longer balance it, or it causes pain, then get a recumbent, then a Tadpole trike and ride it every chance you get,,,or,,,,

Say It with me now, "
your I.Q. will drop and your body will die faster !"

I watched the TV kill my dad, It was like a Vampire...
I watched the recliner destroy his body,, we were not made to sit in chairs, we were made to sit on the ground..

Retirement, Ha ! As soon as I retire I will do volunteer work unless I am riding my bike.
No, I think I'll go get some job that makes me sweat, grunt, and need Ben Gay....

Just saying, Every single old man In my family was healthy Until they sat down and started watching TV

Yeah I got a TV, my wife likes to watch it,, she Is not doing well at all...
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Old 07-23-15, 01:23 PM
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Worry about your health,, the money, the system will take all you have anyway so relax and go ride your bike....
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Old 07-23-15, 01:27 PM
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I'll be 64 at the end of the year and the location where I work is closing at the same time. I'm not sure of my future with the company, but either way I had already planned to retire at 65. Fortunately I will be getting a pension and I'll probably take SS at 65. You do have to check the numbers, but my opinion is that if you are not going to work until 66 and you need SS, the money has to come from somewhere. It is pretty simple math to figure out the point where the extra year of SS is eclipsed by the larger monthly payment.

Not having a mortgage is pretty essential, for me the house is paid off when I turn 65. I think a more important aspect is lifestyle. You will be the only one that can determine if you have a low or high cost lifestyle. Country club, expensive vacations, motorhome, vacation home, a lot of expensive bikes, etc. all cost money and that has to figure into it. My wife and I are pretty conservative with how we spend our money so I am not too worried.

From a biking perspective, in the last year or so I have been buying up parts and maintenance items... a couple of wheelsets, cassettes, shifters, derailleurs, etc. Riding older bikes makes it pretty easy not to be tempted by the latest hype (although a nice vintage steel high end road bike would be nice). So I have my stash of parts pretty much there so I won't have to track down something and pay a premium some time from now.

John
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Old 07-23-15, 01:27 PM
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Originally Posted by osco53 View Post
Worry about your health,, the money, the system will take all you have anyway so relax and go ride your bike....
Thanks... sortof my thoughts exactly...
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Old 07-23-15, 02:38 PM
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Good advice all around.

My situation: My wife recently started Medicare with Plan D and G supplements; I start the same plan soon, even though I still qualify for employer-provided health coverage. I currently run my own one-man electronic and environmental engineering consulting practice and work part-time (40% during the summer, 75% during the school year) at a local university. We also provide day care for our 4-month-old grandson while his parents are at work. (My wife contributes more to this effort than I do, but I solo two mornings per week while she takes ballet classes.) Although I can afford to retire now, I plan to work at least five more years, because I enjoy academia, including dropping in on interesting lectures and coaching Master of Advanced Study students on their capstone projects. However, I do not miss the 50-60 hour/week (or longer) work load that came with full-time employment in the semiconductor industry.
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Old 07-23-15, 02:52 PM
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Originally Posted by Pamestique View Post
Thankfully I have no debt and have good but not great savings.
I am better off than most; at least I have savings and investments!
Go ahead and post your net worth statement here for all of us to give you better advice... you're among friends.
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Old 07-23-15, 03:09 PM
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Take us all on a bike vacation, and we can talk it over.
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Old 07-23-15, 04:34 PM
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There are still seven states that do not tax your pensions. However you still have to pay federal taxes.
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Old 07-23-15, 04:55 PM
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75 yo here

A number of docs take medicare - they have to if they want to stay alive, given the great numbers of folks who are now medicare eligible.

But, we have a medicare HMO plan that coordinates with medicare and supplements the payments. We have never been refused a doctor with that benefit (just about every doc is on the plan), and, around here at least, there are MANY docs who are still independent of agencies like Kaiser.

We also have eye/visual insurance, dental. a miniscule bit of life insurance, all through my last employer (the state plan) from whom I officially "retired." We pay dearly for all the coverage, but, we have come out way ahead, given our high dental needs and medical needs that we have experienced. Not only does it pay almost all, but it gets the MD's and hospitals under the medicare rate, reducing bills from - recently, for me, $17,000 to $1,700, and me paying a $30 co pay.

Some folks say, forget the ACA, give everyone medicare. It is one of the most efficient health care models around, but still needs to be put on a better actuarial footing. This could be easily done if congress - - - well, you all know about congress . . .

We also have a stop-loss (max out of pocket) of $2,500 per year per person.

We also get free 24 hour fitness supersport memberships.

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Old 07-23-15, 05:03 PM
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I have heard/read that something like 70% of your current annual income is what is required to maintain your current lifestyle. I have always thought that sounded high. I have never put pen to paper to figure it out, just my gut feeling.
I know that if I were in your shoes and lived in CA or NY or other tax hell-holes, I would look like the Clampets loaded up and moving (away from) Beverly--Hills that is. SoCal is a beautiful place to visit, but I don't see how ya'll deal with the cost of living and taxes. I think that's why places like Florida is filled with really old people and their parents.
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Old 07-23-15, 05:41 PM
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I reached full retirement and am still working full time. At full retirement, your SS is not reduced by the income you make but it can put you in another tax bracket. In any case, only 85% of your benefits are taxable under any circumstances. State taxes on SS vary by State. In Minnesota, we tax social security.

As far as insurance goes, that socialized medicine is the bomb! I have a fairly low premium on my supplemental insurance and even get an annual gym membership for $25/year.
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Old 07-23-15, 05:46 PM
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Since the discussion seems to be about defensive financial thinking, I see you are in California. Besides the pending water crisis, isn't it expensive to live there? I have discovered "Globe", a little town in Arizona, super cheap (real estate), the gateway to the mountains. hundreds of miles of what I call 5 star (four foot wide) bike lanes in the area, with little traffic.
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Old 07-23-15, 07:50 PM
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I think fear of what I have accumulated might not be enough, and fear of the unknown, was what was keeping me from retiring. The fact that I like my job and don't need to retire kept me from thinking about it earlier.

I took myself and wife to an independent financial advisor. Or at least, semi-independent - we did buy some long term care for the wife through her. Anyway, it was worth every bit of the money we paid her (over $500) because it answered all the questions you posed and then some. We found ours through a neighborhood couple I knew well who were selling their home and retiring at 60. The recommendations our advisor gave were reassuring, and set both our minds at rest. We were given various projections of income and expenditure for decades ahead, under various scenarios.

Find one who specializes in retirement and taxation, and ask up front if the advisor has financial products to sell. if yes, ask what they are.

You should give your self time to get all your ducks in a row before going to an advisor- SS earnings, pay stubs, savings, investments, pension, all assets, the works.

Peace of mind is money well spent IMO.

Good luck, friend.
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Old 07-23-15, 08:05 PM
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Federal taxation of SS depends on total income - low income, little or no tax on SS. Higher income, higher tax. IIRC, 15% of SS income is tax free, although there may be a cutoff for the tax break - see http://www.irs.gov/pub/irs-pdf/p915.pdf.

Also, your Full Retirement Income age for SS is probably 66+ - it was 66 for me, and I was born in '44.
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Old 07-23-15, 08:09 PM
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As to 3)...I'd recommend a Medicare Supplement. Medicare alone can be kinda iffy, cost wise, in case of something major and easier to find a new doctor if that be necessary. I have TriCare backing up Medicare and I'm happy with that. 4) I can, but that means nothing wrt you and your needs and financial circumstances.
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Old 07-23-15, 09:33 PM
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in addition to all of the financial advice I would suggest you get How to Retire Happy, Wild and Free by Ernie Zelinski. Author of The Joy of Not Working. I'm reading it now. Really good stuff on the psychological side of adjusting to retirement and on how to decide when to retire. I just turned 62 and am debating early retirement. My biggest stumbling block is the medical insurance.
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Old 07-23-15, 11:18 PM
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Originally Posted by Pamestique View Post
....... 4) Are you able to live within your means and not draw from investments?

It's really hard for me to think about giving up a decent paycheck by retiring. I am 64 now and will not start taking SS until I reach 65. For now, I will just live off the pension and my savings.

Any thoughts? The whole thing scares me...
I worked as a (debt) collector at one point in my life. I know there are lots of people who can NOT live within their "means". And that the amount of "means" is of the least importance. If you are able to adapt... and to live on a budget you should have no problems. But certain habits and/or addictions (booze, gambling, drugs, etc.) can escalate costs above most retirements.
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Old 07-24-15, 02:33 AM
  #25  
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Join Date: Jul 2010
Location: NC
Posts: 173

Bikes: Schwinn Suburban (35 years old, the bikes not us), 2 Trek 7000, T900 (Tandem), 2 EZ Sports

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Lots of good suggestions and answers to your questions already.

Here's something you might have fun with: search on "retirement calculators" and look at a couple of them. I like the ones at aarp.org and schwab.com. You input your current and desired retirement age, annual income, current savings, pension amount, social security, and desired retirement income or lifestyle, and the calculators will show you if you have enough saved to cover your expenses or if not, how much more you need. Since you don't have any more time to save, you can play around with your retirement spending to see what you need to do to not outlive your savings.

Whether or not you can retire without tapping into your savings really depends on how you want to live.

Good Luck!
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