jjmb

I will be first to admit I have no idea about finances. With his recent birthday, the current situation with covid 19 , my DH has finally turned his head around to the retirement issue. He still has a few years left but obviously its better to know in advance than the day you retire. He will be eligible for both SS from here and an almost full pension from the UK. He had paid fully to the 30 yrs and then they changed it to 35! It will probably, from I have read on here, subject to WEP. On top of that he has 2 or 3 UK private pensions, mostly small plus a healthy 401K ( for now, at least). As to me, I have accrue 24 quarters, so will not be eligible for anything in the US on my own account and a small UK pension if I managed to live until I am 66.3 months. He was pretty cheerful yesterday lunchtime, by the evening though, he was not so happy. Now he is thinking a financial advisor might be worth investing in, due to the tax implications that occur when and how you start collecting on pensions etc. Looking at the internet briefly, it seems that a lot of financial advisors are not be trusted and don't go by all the titles they might have, most mean nothing. Actually that is something he has thought for a long time which is the reason he has got to 62 without one so far. Also, I suspect that there are not many locally that have experience of dual citizens with a complex outlook.

How did you approach retirement?

civilservant

Have neither of you ever paid into a 401k or similar while working?

robin1234

The OP mentions that they have a healthy 401k ..

robin1234

I’m 70, my wife is 69, we’ve both been retired for six or seven years. We have a similar setup to you - healthy 403b, various and sundry company pensions, British state pensions, US Social Security, etc.

So far our plan has been - procrastination. Basically, I started a modest lifetime annuity from part of my 403b, leaving most of the account intact, and we are also taking our SS and British state pensions. We’d always had a deadline of age 70.5 to put a lifetime plan in place, because that was the age you were required to start taking required minimum distribution. Then the IRS just increased this deadline to age 72! Two more years of procrastination!

Basically we’ve found that now retired, we spend no money, so hardly need income. Since March 2020, lockdown, we seriously spend NO money. I’m not recommending this plan, but procrastination is what we’ve done so far.

jjmb

Thanks Robin. That is the approach we have been taking until now and then DH started to look more closely and got spooked by all the tax implications. We are still debating about returning to the UK but that is a few years down the line yet. He was definitely spooked that I didn't qualify for Medicare but then he realised I would get it through his contributions. Definitely a mine field.

lansbury

Not only Medicare but you can claim SS based on his account, if that would give you a higher sum than your own account. What you get depends on the ages you claim. My wife and I have company pensions from the UK, SS, UK State pensions, annuities and in her case Oregon Public Employees Retirement. Not sure what he see as complicated tax issues, we managed quite well without a financial advisor, and using Turbo Tax.

As Robin says, especially now, we are not spending what we are receiving, and our savings are increasing. Our biggest expense is medical, and house maintenance. We retired when I was 58 and Mrs L 56, 14 years ago. The only financial advice we sort was how to invest our cash savings at retirement, and the money we have saved since. One thing we don't think about is dental requirements as you get older, which can be very expensive as dental insurance doesn't really cover very much.

jjmb

Thanks for the reply. I wish our spending was reducing but with this pandemic thing, it only got higher at the moment, with the return of my eldest daughter and her daughter. Unfortunately she was laid off within weeks of Abbott announcing his lockdown and didn't get any unemployment for nearly 2.5 months. Hopefully its a short term thing. Add errant son to the mix who is an apprentice electrician, we feel retirement is still a way off but its not. I think it was just because it the 1st time he had really looked into the situation and he actually had a week off.

robin1234

We have friends up the road whose daughter, SIL and baby escaped Brooklyn and came to live with them in their gorgeous Victorian farmhouse on 160 acres. They (the kids) are lucky, they’re both working from home, so the rural idyll is probably better than the condo in Brooklyn especially with baby! They are planning on staying till at least Christmas.

johnwoo

I couldn't begin to give you financial advice, but my circumstances were similar to yours, including the errant son.
I've been retired for 18 years and manage quite well, which is probably due to owning my own home, which gives one a certain amount of security.
My 401k is invested very conservatively, since I lost a substantial amount in 2008.
I this area of California I am classed as low income, but still able to bale out the errant son and grandson. Bale not Bail

jjmb

Thanks, think retirement is scary anywhere but particularly here.

johnwoo

It can be but you sound like you're well placed, you will enjoy your retirement I don't miss work at all. Live and lead your life to your own drum.
Do what pleases you. Good luck.

Mallory

Why do you think retirement is scary here? DH and I are a few years retired, and I don’t see anything scary, it’s a nice life not going to work. Work/jobs are what is scary. When retired you are set!

TexanScot

Uncertain healthcare costs, largely.

It's the single biggest worry that I have about retiring here in the US.

Steerpike

I'd agree that healthcare costs are the biggest concern, especially if, like me, you retire 'early' (before Medicare eligibility). My premiums go up each year and my exposure (deductibles, etc) are not pretty. I'm currently 61 and I just have to plan on spending close to $1,000/ mo in premiums AND anticipate a deductible of circa $7k if I actually need it. (I don't want to turn this into a healthcare debate, though!). My g/f is already 66 and her premiums / costs are much better. LUCKILY my health is good and I've not had to spend anything on health so far, other than premiums. I am very focused on keeping things that way - diet and exercise.

Why do you think you may be affected by WEP? (Windfall Elimination Provision)? I looked into it for my situation and I determined I'm not affected by WEP (worked long enough here in the US). The calculation seemed pretty clear to me. Also - can your spouse not play catchup on those missing UK years to get to the full 35 years? I would think it would be a worthwhile investment if you can. I was pleasantly surprised to see just how much I will get from Social Security; the US system is far more generous than the UK system if you paid in a lot.

How are you with spreadsheets? I built a spreadsheet that contains a column for every year from now till I reach 100. Each year takes the previous year's end balance, then adds in the income sources (Social Security, pensions, an assumption on interest/return on investment, etc) and subtracts what I think my expenses will be for the year. The difference between the fixed income sources and the anticipated expenses is my shortfall, and that has to be made up by withdrawals from my IRA/401Ks. That withdrawal of capital reduces my IRA/401K balance, and thus, the 'gain' for the next year. Once you get a fairly solid set of formulas and assumptions, it's a simple matter to replicate the column for as many years as you like, and then you can see where your balance ends up at age 100. I can vary the assumption on 'return on investment' - but I tend to anticipate only 2% over inflation (I don't try to separately anticipate inflation - I simply reduce my 'return' assumption).

I have a separate spreadsheet for my annual budget, which I've refined over the years. This tells me how much I typically spend on dining out, cable TV, Car insurance, gas, etc etc. This feeds the 'retirement' spreadsheet for the 'expenses' element.

Basically, for me, if I don't get sick and I don't need Long Term Care (LTC), I'm comfortable; my money will never run out as long as I make 2% over inflation, on average. But if you start factoring in LTC, things change in a hurry. I do have a home that is paid for, and I don't factor that in as an asset; if I needed LTC I could sell the home - but not if my partner is still living in it ... so things can get complicated when you factor in this type of thing.

I've done all kinds of 'modeling' over the years, and spoken to several financial planners, but one extremely simple rule of thumb that I've come to think is reasonable as a very rough guide to get you started is the '4%' rule. If you can limit your withdrawals of principle to 4% per year, your money should never run out. So - as described above, first figure out your 'spend' - expenses, budget, etc. Then figure out your fixed, guaranteed income sources (Social Security, pensions, etc). Whatever the difference is, is the amount you need to withdraw from savings (IRA / 401k / etc). If that amount is 4% or less, you are likely OK. If it's a lot more than 4%, you may run out and you should investigate more. Simple numbers to illustrate the point - assume you have $1M saved in IRA/401k/etc. 4% of $1M is $40,000. Assume you get $30,000 a year from Social Security. So that's 40,000 + 30,000 = 70,000 a year 'income'. Subtract taxes from that (say, 20% of the $40,000 from savings, = -$8,000) . Can you live on $62,000?

I'm always interested in hearing critiques of the above as I am now - this year for the first time - actually starting to withdraw money from savings and it's a scary concept! After a lifetime of putting money 'in', I finally had to take money 'out' and I didn't like the idea at all!

lansbury

But that is a fact of life here, retired or not.