explaining how to retire poor

[LivingAlmostLarge]

So I have been trying for over year to explain to my friend Ms I how her Mother in Law can retire already at 73 with no savings. That she keeps on working because it's the best job ever but Ms I and Mr M don't get it and neither does the MIL that she's fine. Here's the thing she is working so she's paying taxes. She is colleting SS because she has to. All three of them are thinking they need X amount of money to retire. Ms I and Mr M tried to help his mom by taking her to a CFP. But I explained it doesn't matter. They need to tell her it'll be okay. why?

Because she doesn't make a ton working in the kitchen of the university. Yes she has "health" insurance which is primary and medicare is secondary. But she makes so little that if she retired she'd likely qualify for Medicaid. She would probably be living about the same amount of money now that she makes and pays taxes on. I tried to explain again this weekend to Ms I and she threw up her hand and said "she (MIL) just needs to work until she dies." So Mr M they do give his mom money but I think it's that they are all aren't into "money" so they can't wrap their heads around retiring without any savings.

I don't know how to change this I guess because we all go on about "saving" for retirement. But in truth, isn't there a lot of people who can and do retire with just SS? And they manage fine? And they haven't saved? A lot of it stems from people who just don't make much to begin with so SS makes up a large if not all of their income they were making working?

I only know this because of my grandmother. I mean by normal standards $900/month is not a lot of money. But she can manage. And my great grandmother made $560/month but her "rent' was $85 and she had medicare/medicaid. She worked until like 65 (cleaning musuem and homes) and no savings, no house, etc. And yes her kids did give her money but I know it's totally possible.

I guess it's just hard to explain to people that you can retire with pretty much nothing. It's not pretty but it's not impossible. I guess it just makes me question what are we saving for?

[disneysteve]

I guess it's just hard to explain to people that you can retire with pretty much nothing. It's not pretty but it's not impossible. I guess it just makes me question what are we saving for?

I make it a point to stay out of other people's finances unless they specifically ask me for advice (and even then it doesn't generally go well).

About 45% of single retirees get at least 90% of their income from SS, so yes, it's pretty common.

What are we saving for? That's an entirely different question. I don't want to work until I'm 67 or 70. I save so I can retire early. I hope to be completely done by 60 and possibly earlier. And I certainly don't want to be among that crowd that gets most or all of their income from SS. We save so we can maintain our current lifestyle in retirement and have enough money to enjoy ourselves in our later years.

[LivingAlmostLarge]

No it's more that my friend was panicking if they had to support her. She kept saying my MIL is poverty striken. What are we going to do? She can't ever retire. It was sheer panic. There was no helping her work through it'll be okay. That MIL will be fine. I think in some cases we have made such a big deal out of retirement that if you have nothing saved people think you have to work forever. Never realizing you really don't need as much when you never have had as much. That you don't need $100k saved or $1M.

I think the media overblows a lot of it. My mom also thinks she doesn't have enough for retirement. but she has. She hasn't really tapped what they have saved because all her needs have been meet. But my mom also took SS at 62, I was explaining that to my friend. It was a bad idea but my mom couldn't wrap her head around mentally not taking it the moment she could because what if something happened. It's hard with all this news media to realize when you actually have enough.

[disneysteve]

I think in some cases we have made such a big deal out of retirement that if you have nothing saved people think you have to work forever. Never realizing you really don't need as much when you never have had as much.

That's true, and the less you earned while working, the more SS will replace for you. The other thing that people often don't realize is how many discounts and benefits you qualify for if your income is low. My mom's AGI last year was about $26,000. But she lives in a subsidized apartment, she gets a discount on her phone bill and electric bill. She gets prescription assistance. She can use Access Link transportation for a fraction of what Uber or Lyft would cost. There are probably various other discounts she gets, too.

[disneysteve]

For those of us who are saving, one fact often overlooked is that your portfolio doesn't stop growing after you retire. Many retirees find that years after retirement, they have more money than they started with, often by 6 or even 7 figures. That means that in reality, they probably could have retired sooner with less saved.

[srblanco7]

For those of us who are saving, one fact often overlooked is that your portfolio doesn't stop growing after you retire. Many retirees find that years after retirement, they have more money than they started with, often by 6 or even 7 figures. That means that in reality, they probably could have retired sooner with less saved.

I certainly hope that’s the case! And yes, it may mean I could have retired earlier, but I’m trying to manage not being overly optimistic with retirement returns as well as a sequence of returns risk calculation. The future, as we all know, is somewhat unpredictable.

[Petunia 100]

So I have been trying for over year to explain to my friend Ms I how her Mother in Law can retire already at 73 with no savings. That she keeps on working because it's the best job ever but Ms I and Mr M don't get it and neither does the MIL that she's fine. Here's the thing she is working so she's paying taxes. She is colleting SS because she has to. All three of them are thinking they need X amount of money to retire. Ms I and Mr M tried to help his mom by taking her to a CFP. But I explained it doesn't matter. They need to tell her it'll be okay. why?

Because she doesn't make a ton working in the kitchen of the university. Yes she has "health" insurance which is primary and medicare is secondary. But she makes so little that if she retired she'd likely qualify for Medicaid. She would probably be living about the same amount of money now that she makes and pays taxes on. I tried to explain again this weekend to Ms I and she threw up her hand and said "she (MIL) just needs to work until she dies." So Mr M they do give his mom money but I think it's that they are all aren't into "money" so they can't wrap their heads around retiring without any savings.

I don't know how to change this I guess because we all go on about "saving" for retirement. But in truth, isn't there a lot of people who can and do retire with just SS? And they manage fine? And they haven't saved? A lot of it stems from people who just don't make much to begin with so SS makes up a large if not all of their income they were making working?

I only know this because of my grandmother. I mean by normal standards $900/month is not a lot of money. But she can manage. And my great grandmother made $560/month but her "rent' was $85 and she had medicare/medicaid. She worked until like 65 (cleaning musuem and homes) and no savings, no house, etc. And yes her kids did give her money but I know it's totally possible.

I guess it's just hard to explain to people that you can retire with pretty much nothing. It's not pretty but it's not impossible. I guess it just makes me question what are we saving for?

Does the MIL have a pension? Does she want to retire, or is she happy working?

[Like2Plan]

I don't know how to change this I guess because we all go on about "saving" for retirement. But in truth, isn't there a lot of people who can and do retire with just SS? And they manage fine? And they haven't saved? A lot of it stems from people who just don't make much to begin with so SS makes up a large if not all of their income they were making working?

I don't know. What happens if she needs to buy dental implants (or false teeth) or hearing aides--would that be covered by medicaid? Does she really net zero after paying her taxes? Does she has a car? Does she own a house?

Does she like working?

[disneysteve]

Right now she lives on SS plus her income. The question is can she manage on just SS? None of us can answer that. We don’t know the numbers.

[Snicks]

I would be a bit leary of telling someone "oh yeah you can retire on nothing and get Medicaid". There are all kinds of expenses in life. Could she do and it survive? I suppose. Maybe she LIKES working. It gives her purpose, something to do, a way to contribute, etc. If she is getting health insurance as well, that is a big plus and a lot of value.

[LivingAlmostLarge]

I think she would like to retire but they took her to their CFP who scared her into she could never retire. Truth is that she lives so simply that she doesn't need much. She doesn't earn much or spend much. She does own her home and have a car. I don't think she earns much is they imply but she lives super simply. And I know that dentures and hearing aides have been covered by medicaid (grandparents had both). I dont know what she nets but they worry about her so much and I really wonder what for?

That's my point. The CFP has an expectation of a middle class lifestyle so she can never retire. But she doesn't live middle class now. She lives very "poorly" but more than enough for her now so why does she need more? I bet what she makes in SS would cover how she lives now.

My point is that we make retirement this huge deal of saving but in some ways retirement is like college. Does everyone need the same amount? Does everyone have the same wants and needs? How are some people able to retire and live on so little? Is it they just live cheap? Where they live? Or is it that retirement is really dependent on what you expect of it? Like college. Does everyone have to go? What happened to people not going and still doing okay?

Maybe we don't need to save as much as people think. I constantly think of MonkeyMama saying they save less than what others do because they turbo charged in 20s. They also live on less so they need less, so the amount needed seems a lot smaller. I'm coming to that realization even for myself. Before a year ago I would have said I definitely need a lot. Now I'm seeing that it's not that hard to live on less. And need for less taxes because we live on less.

[disneysteve]

I bet what she makes in SS would cover how she lives now.

You said that she is working and collecting SS and has no savings. That implies she is spending all that she makes. If she loses the work income and only has SS, how do you know that would be enough?

My point is that we make retirement this huge deal of saving but in some ways retirement is like college. Does everyone need the same amount? Does everyone have the same wants and needs? How are some people able to retire and live on so little? Is it they just live cheap? Where they live? Or is it that retirement is really dependent on what you expect of it?

Maybe we don't need to save as much as people think.

Certainly how much you need depends on how much you want to have. That's the point of the 25x expenses estimate. If you want to be able to spend 100K/year, you need $2.5 million. If you only want to spend 10K/year, you only need 250K. And both of those numbers get adjusted for SS and any other income sources.

Before a year ago I would have said I definitely need a lot. Now I'm seeing that it's not that hard to live on less. And need for less taxes because we live on less.

This is a great point. I think COVID "broke" a lot of us and fundamentally altered our concepts of how much we need to live happily. In 2019, our average monthly spending was around $7,000. In 2020, 9 month of which was "COVID time", our monthly spending was about $6,000. In 2021 YTD, all "COVID time", our spending has been just over $5,000/month. We are now spending $2,000/month less than we did 2 years ago. Are we unhappy? Not at all. Yes, I miss dining out. Yes, I miss traveling. But not nearly as much as I thought I would. If I had to live the rest of my life like this, that wouldn't be all that bad. The $24,000/yr difference in spending means $600,000 less needed in savings to support our lifestyle. That's a big deal and could clearly alter retirement planning.

[Like2Plan]

And I know that dentures and hearing aides have been covered by medicaid (grandparents had both). I dont know what she nets but they worry about her so much and I really wonder what for?

It looks like this might vary from state to state.

https://www.chcs.org/media/Medicaid-Adult-Dental-Benefits-Overview-Appendix_091519.pdf

Anyway, I wouldn't wish retiring poor on anyone. I know why the kids are are concerned. Are there safety nets in place if you don't have any choice in the matter? I believe there are. But, is it a comfortable retirement?

[myrdale]

No retirement savings is only part of the picture.

Is she debt free or is there $50,000 in credit cards and car payments? Is she renting or does she own her home? Does she have money in savings, or is she completely broke living paycheck to paycheck?

[Snicks]

I think she would like to retire but they took her to their CFP who scared her into she could never retire. Truth is that she lives so simply that she doesn't need much. She doesn't earn much or spend much. She does own her home and have a car. I don't think she earns much is they imply but she lives super simply. And I know that dentures and hearing aides have been covered by medicaid (grandparents had both). I dont know what she nets but they worry about her so much and I really wonder what for?

That's my point. The CFP has an expectation of a middle class lifestyle so she can never retire. But she doesn't live middle class now. She lives very "poorly" but more than enough for her now so why does she need more? I bet what she makes in SS would cover how she lives now.

My point is that we make retirement this huge deal of saving but in some ways retirement is like college. Does everyone need the same amount? Does everyone have the same wants and needs? How are some people able to retire and live on so little? Is it they just live cheap? Where they live? Or is it that retirement is really dependent on what you expect of it? Like college. Does everyone have to go? What happened to people not going and still doing okay?

Maybe we don't need to save as much as people think. I constantly think of MonkeyMama saying they save less than what others do because they turbo charged in 20s. They also live on less so they need less, so the amount needed seems a lot smaller. I'm coming to that realization even for myself. Before a year ago I would have said I definitely need a lot. Now I'm seeing that it's not that hard to live on less. And need for less taxes because we live on less.

That is a good point. A CFP is probably always going to tell someone "oh you don't have enough".