Wednesday, August 27, 2008

Second Thoughts from Early Retirees

Thanks (maybe!) to Boston Gal for steering me toward this article from USA Today titled Some Early Retirees Have Second Thoughts.

I would think that anyone considering imminent retirement might postpone those plans for a year or two to see if the economy recovers, or at least move to part-time employment rather than give up one's income entirely. But what about those who retired a few years ago? Especially, what about those who retired prior to eligibility for Social Security or Medicare?

It is unrealistic to think that there won't be downturns or even recessions after retirement. We can choose not to retire during one of these times (provided our health or a job loss hasn't dictated our retirement) but we will still have to face them at some point during our retirement years.

I haven't completely thought out what I will do. Obviously, I will try to keep my draw from my 401(k) to 3% or less during the lean years. But the catch there is the cost of health care. I was shocked to find that one couple cited in the article is paying in excess of $1300 per month for medical coverage. I haven't done much research, but in my fantasy retirement budget, I've always used the figure of $1,000 and secretly assumed that that was too high and I'd probably get by for less.

Oops! Maybe not.


Anonymous said...

I'm beginning to think that there is really no such thing as full time retirement. The only way to hedge against inflation and devaluation is part time work.

That's the new retirement reality. EVERYBODY I know, rich or poor, young or old is making due with less and less.

When you look over the past 20 years, there have been more down years than up years. Rule of thumb, next time the year is up: save, save, save and not spend, spend, spend like we (plural) have done in the past.

Carol said...

I think, as far as medical insurance goes, that it depends on whether you retire "early" or after you are old enough to receive medical benefits.

My mother (age 79) has Medicare and a Medicare "supplement". She pays about $175.00 a month for her health insurance (sans prescriptions). The supplement also helps with prescriptions. She takes 11 pills a day, and I can say that I know for a fact that she does not spend $1000 a month for those, even when she's in the "donut hole" (the supplement helps with prescriptions to a certain point, then once they've helped to a certain point, then my mom pays full price for her prescriptions until she reaches a certain point again, then the supplement starts helping again--hence, the "donut hole"--the middle part where there is no coverage)

I also think that for people like you and me, we might not need as much to retire on as the "average" retiree. For example, right now, I'm devoting about 99% of my take home pay to bills/debt with virtually no discretionary spending. Which means, that if I am wise enough to pay off the debt as fast as I can, I should be able to live on relatively little. I'm not planning on taking a bunch of cruises, or buying a house in another state for the winter or anything like that....right now I'm managing on very little, and I expect that I will be able to do that in the future, too.

But that's not to say that I'm skimping on my savings any more than I have to. I know I'm saving less than I should (according to the experts), because I'm putting so much towards the debt. I know that inflation is unpredictable, too, and even if I can keep the grocery budget at $75 a week right now, next year that won't be possible. So I'm trying to be as prepared as I can, but recognizing that I might not need 80% of my current income, so I'm not as stressed out about it as I could be.

Shevy said...

It's medical costs like the ones you quoted that make me very very thankful that I live in Canada!

I'm planning (hoping) that we'll be able to manage on $24,000/year in today's dollars. If we had to pay a grand or more per month for medical on top of that, I don't think we could ever retire!

Rita@Goldivas said...

The problem is with people who aren't old enough to be able to work much without reducing their benefits. And of course, people who have lost their jobs and aren't elegible for social security benefits at all. If you have health problems & no insurance, that's a huge issue - I've heard that most bankruptcies are related to medical bills.

retiredebtfree01 said...

Were withdrawals from the retirement savings accounts used to cover emergencies? If it becomes necessary to withdraw amounts from your retirement account to cover emergencies, then it could mean that the amount being added to your emergency fund is inadequate. Financial experts project that at least three months' worth of net income should be maintained in an emergency fund account to cover unplanned expenses. Similar to retirement savings, amounts added to the emergency fund should be treated as a recurring expense, so that it does not create an unanticipated financial burden on the individual.

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