OT retirement question - well educated and well employed, why am I still worried about my future?

[JMORC2003]

How many here worked until retirement age or plan on working to retirement? I'm in my mid 30s, married, three young kids, mortgage, no debt other than a small student loan. In my industry I don't find many people in their late 50s, early 60s. In fact, on my daily commute, I don't see too many older folks on the daily grind.

I contribute what I can into a 401k and index fund. My wife and I have savings, and don't really spend like crazy. Still, I'm worried about that last handful of years.

Do I just make and save as much as I can now and hope that it's ok if I'm forced into retirement at 55?

Anyone who's been through it, what did you do?

Trying not to sound paranoid. Just curious.

 

[miketd1]

Similar boat.

2 kids, mortgage, no debt other than modest student and car loans.

We put away about 18-20% and aim to save another 5-10% for kids' college.

The rest we spend. Have to enjoy life too.

Just make sure you've got a decent emergency fund and the right insurance in case life happens.

Good luck.

 

[MadRU]

Having kids is a game changer, you never know what expenses may pop up. Save early and often. But like the above person said, enjoy life also.

 

[vkj91]

save more than you think you should and hope for the best. You have no control over the economy or job opportunities in 20 years. You do have control ver how much you save vs piss away now though.

 

[rutgersal]

no debt other than a small student loan? you're doing alright. just keep staying away from debt and try to save as much as you can.

 

[RUScrew85]

You might feel better if you consider other places in the US to retire.

 

[PaKnight]

You might feel better if you consider other places in the US to retire.

Or at least not NJ, many other cheaper places to live.

 

[Upstream]

How many here worked until retirement age or plan on working to retirement? I'm in my mid 30s, married, three young kids, mortgage, no debt other than a small student loan. In my industry I don't find many people in their late 50s, early 60s. In fact, on my daily commute, I don't see too many older folks on the daily grind.

I contribute what I can into a 401k and index fund. My wife and I have savings, and don't really spend like crazy. Still, I'm worried about that last handful of years.

Do I just make and save as much as I can now and hope that it's ok if I'm forced into retirement at 55?

Anyone who's been through it, what did you do?

Trying not to sound paranoid. Just curious.

Not sure what industry you are in that you don't work with many older people? And I'm not sure that not seeing older people during your commute means anything. Furthermore, I'm not sure that you can tell if someone is in their early 50's or early 60's just by looking at them.

Nonetheless, in answer to your question, yes you should save as much now as you can. You should have a well-diversified investment portfolio developed with 2 goals: paying for your kids' college education, and saving for retirement.

Since you say you are well-employed, I assume you are not living paycheck-to-paycheck. You also say that you and your wife are not extravagant spenders. So you should be able to live comfortably while still putting money into college funds, retirement accounts, and general savings investments.

If you do that for the 20 years from your mid-30's to mid-50's you will probably find that you are able to retire early. That doesn't mean that you have to. But it is nice to have the choice.

 

[DHajekRC84]

no debt other than a small student loan? you're doing alright. just keep staying away from debt and try to save as much as you can.

yup, set a budget to live well below or moderately below your means. What I have burned into my kids thought process is that every dollar you save is like making 1.40% more as those savings are post taxes. In other words you'd have to make 40% more (at least) to replace them in the future threw earnings.

Don't chase after the Jones'. Don't (literally) buy into the hype on new products. Buy VALUE.

You two guys above are doing it right for sure. I'm not out yet myself at 57 but I could have been anytime since 55 with a nice home almost paid off now. Yes some luck, but more so discipline and sacrifice. (and having a wife that gets it too)

BUT..having said all that. I get what you are saying. Even now I continue to work for a number of reasons including the "is it ever enough" fear.

 

[albanyknight]

The thing that is hanging over everybody's head is the potential collapse of the dollar. If that were to happen then all the money that responsible folks have saved could be worth far less or could become totally worthless.

For us and I know many disagree, we have hedged our bets with gold and silver. Right now we have about 20% of our portfolio in precious metals. In a collapse you have an insurance hedge that will help you retain a portion of your wealth. In addition it is portable and in the case of silver can be used to make purchases in a hyper-inflationary situation. The other things we focus on is paying down our mortgage and taking on no debt plus having some cash in a place other than the bank.

We are still in the stock market and playing by all the rules but simply hedging our bets.

 

[jmc11201]

The thing that is hanging over everybody's head is the potential collapse of the dollar. If that were to happen then all the money that responsible folks have saved could be worth far less or could become totally worthless.

For us and I know many disagree, we have hedged our bets with gold and silver. Right now we have about 20% of our portfolio in precious metals. In a collapse you have an insurance hedge that will help you retain a portion of your wealth. In addition it is portable and in the case of silver can be used to make purchases in a hyper-inflationary situation. The other things we focus on is paying down our mortgage and taking on no debt plus having some cash in a place other than the bank.

We are still in the stock market and playing by all the rules but simply hedging our bets.

Mostly in the same situation as the OP. Late-30s, mortgage, almost paid off student loans, feel like I'm on the right track, but still paranoid.

I do have to chuckle at the above a touch. If you have 20% in precious metals and are worried about hyper-inflation and the collapse of the dollar, I would think you would prefer to borrow money today, or at least not pay down your mortgage. If a dollar is worth much less in the future, you would be better off paying down your mortgage with inflated dollars in the future?

 

[phs73rc77gsm83]

A certain measure of worry (or concern/attention) is not a bad thing. Years ago, many people worked for a company over their career and received a defined benefit plan pension with a cost of living increase. That, coupled with their savings and social security, provided a more "know" income stream. With the shift to defined contribution plans, more of the responsibility is on the individual to prepare and fund their own retirement. It's astounding to me how many very bright and well-educated people have so little financial literacy. That is not an area to skip. My advise is to commit to learning and staying on top of personal finance--it's not a bad hobby and is rewarding in many ways. I'm not personally advocating active trading or not, but knowing how to save, where, how to set goals, budget, how to minimize investment fees, understanding taxes, etc is extremely valuable. Like others are saying, start early and save a lot while still living a balanced life. We all have a certain amount of discretionary dollars and we have to individually decide how we want to use them.

 

[wheezer]

I worked for 40 years, the last 28 or so in business for myself..... I retired at the age of 62 a few years ago.

for the last 35 years of work I put what I could into mutual funds and, for the most part, never withdrew money, just added each month.

it is not a bad way to go if you have a strong stomach for the downturns, especially the one around 2008, but I stood fast on that also.

the goal is to hopefully have your funds average around 7 to 8 percent for the long haul, and when you retire you withdraw about
4% yearly, if needed.....

my one mistake was not being concerned about mutual fund fees, I hooked up with several that charged close to 1%....back in the day, that
was not discussed much, today that advice is everywhere......vanguard index 500 is a good example of a low fee fund

my business partner invested in bonds long term, and seems pretty happy with that....

anyway, I am glad I did what I did because the money would never have grown enough to retire at the age I did retire if I just put it in the bank

the key is to allow dividends and gains to reinvest, and let it sit.... with the stock market, time is your ally

but you have to have discipline and just put money in you know your not going to need.... so you have to have a decent reserve, a separate account for kids education, etc

 

[ru66]

better have





better have $3-4 million (in todays money or benefit value) accumulated if you plan on staying in NY area and keeping the relative same lifestyle (assuming middle class) and leaving something to your kids. 401K's are great if the market doesn't crash the day before you retire (or while retired) and you haven't taken loans from the 401k for kid's college or to pay debts .Even though it's really difficult in today's market to accumulate $--I have found disciplined saving and investing on your own in a regular and constant manner over your ENTIRE working career is a necessity--hopefully you're lucky to also have a good DB retirement plan--good luck and prepare for possible long term care issues to confront your family



































43-

 

[PhilaPhans]

I'd suggest paying down your mortgage faster if you have extra savings that don't eat into your emergency fund and necessary savings. Will save a boatload in the long run. Either pay extra each month or convert a 30 year to a 15 year. But then again, I'm in the same boat as the OP.

 

[LC-88]

In my experience, you are not seeing older people (50-65) because they got laid off, not due to retirement. I'm almost 52. We cost more than someone in their 20's/30's, or on a work visa.

I know most will disagree with this, but I'm going old school. Making myself destitute on paper now. Only thing in my name now is my house and vehicles. Everything else in trusts for kids. That way I have use of assets, but I don't own them=can't be taken to satisfy debt, etc. I am essentially renting my house from the bank. Two mortgages, no equity. I'll be long dead before it is paid off. As soon as my oldest turns 18 she gets the cars. Doing it now to avoid look-back periods (usually 7 years now). When I get laid off for the last time, I'll sign up for all the free $hit, and get the maximum since I will own nothing, and have no income. I've put well over $1 million into the system over the last 27 years. I have no qualms about getting some of it back while sitting on my a$$. Will live in one of my kid's basements, and spend all day on Rivals making RU posts.

My wife will be taken care of by her Dad's estate when he passes.

 

[ru66]

lc--doesn't seem like a happy retirement---by the way what's really sad is the complete lack of loyalty of corporate America-- undoing of DB plans and the push for 401k's only, is evidence of this--heck- your kid's and mine are facing layoffs through mergers ,etc---unlike the past the current generation will probably need their parent's help to survive financially

 

[rutgersal]

lc--doesn't seem like a happy retirement---by the way what's really sad is the complete lack of loyalty of corporate America-- undoing of DB plans and the push for 401k's only, is evidence of this--heck- your kid's and mine are facing layoffs through mergers ,etc---unlike the past the current generation will probably need their parent's help to survive financially

its a cold, cruel world out there, and its everyone out for themself. get what you can, whenever you can get it. make sure you acquire valued skills which are not so easy to replace. when i was a large pharmaceutical company, they laid off a finance director, who had been there 25 years, and replaced him with someone right out of Cornell Business School. things like this have been happening for a while now.

 

[albanyknight]

Mostly in the same situation as the OP. Late-30s, mortgage, almost paid off student loans, feel like I'm on the right track, but still paranoid.

I do have to chuckle at the above a touch. If you have 20% in precious metals and are worried about hyper-inflation and the collapse of the dollar, I would think you would prefer to borrow money today, or at least not pay down your mortgage. If a dollar is worth much less in the future, you would be better off paying down your mortgage with inflated dollars in the future?

That is not a bad point and in theory I would tend to agree with you.

Except that hyper-inflation and collapse of the dollar is just one scenario and by no means a certainty. Plus I have learned the hard way that I am just not built for having a lot of debt. I also believe that the Comex Market is rigged and that gold and silver are being artificially depressed. And as I said, gold and silver are a hedge, an insurance policy, not a way to become rich. I see it as a no lose situation.

 

[PaKnight]

I'd suggest paying down your mortgage faster if you have extra savings that don't eat into your emergency fund and necessary savings. Will save a boatload in the long run. Either pay extra each month or convert a 30 year to a 15 year. But then again, I'm in the same boat as the OP.

It depends what you are earning with your savings. If you are getting a better return than your mortgage rate, it is better to invest than pay down the mortgage.

 

[jmc11201]

lc--doesn't seem like a happy retirement---by the way what's really sad is the complete lack of loyalty of corporate America-- undoing of DB plans and the push for 401k's only, is evidence of this--heck- your kid's and mine are facing layoffs through mergers ,etc---unlike the past the current generation will probably need their parent's help to survive financially

I'm 38...so a DB is nothing but a fantasy to me. I think everything has changed. You see the younger people in this thread talking about saving, paying off their mortgage early, etc. A lack of DBs and a lack of confidence in social security is, I think, creating a mentality of deferred gratification and saving. Obviously you need to have a good job to do so, but I'm encouraged that my generation seems to get it.

From a company perspective, employers and employees are less committed to each other and a defined benefit plan makes no sense. Let's be honest...companies are in the business of providing products and services...not trying to sort through employee life spans, making long term investment decisions, interest rate calls, etc. I like the flexibility that a cash plan provides in the sense that I'm not tied down to a specific company forever, and I'm sure they like the fact that when I leave, their financial obligation to me ends.

 

[mdk01]

If you have sons teach them to be long snappers. [winking]

 

[albanyknight]

Here is a really sobering statistic that you will not see in the main stream media. According to John Williams of Shadow Stats (you can google his website) 23% of ALL working Americans between the ages of about 23 and 55 are either unemployed, stopped looking for work or working in the service sector.

Where we live because of state government and the nano-technology sector boom we aren't seeing it and all my friends in the NY metropolitan area aren't seeing it either because the economy in that area is still doing well. But we are more the exception than the rule.

 

[jmc11201]

Here is a really sobering statistic that you will not see in the main stream media. According to John Williams of Shadow Stats (you can google his website) 23% of ALL working Americans between the ages of about 23 and 55 are either unemployed, stopped looking for work or working in the service sector.

Where we live because of state government and the nano-technology sector boom we aren't seeing it and all my friends in the NY metropolitan area aren't seeing it either because the economy in that area is still doing well. But we are more the exception than the rule.

Does that include stay-at-home parents?

 

[rutgersdave]

How many here worked until retirement age or plan on working to retirement? I'm in my mid 30s, married, three young kids, mortgage, no debt other than a small student loan. In my industry I don't find many people in their late 50s, early 60s. In fact, on my daily commute, I don't see too many older folks on the daily grind.

I contribute what I can into a 401k and index fund. My wife and I have savings, and don't really spend like crazy. Still, I'm worried about that last handful of years.

Do I just make and save as much as I can now and hope that it's ok if I'm forced into retirement at 55?

Anyone who's been through it, what did you do?

Trying not to sound paranoid. Just curious.

Well, most of my family members, siblings are retired and have been since their mid fifties. You're on the right track in saving in your 401k but need to increase your contribution rate as your income increases. If you work for some of the best companies, Fortune 100, it's extremely competitive and unless you become VP or CEO, you probably will be let go before 55 or 60. There is age discrimination out there but it only means they need the room for the superstars. You will get bad reviews for a couple of years and you'll know it's coming even if you doing a good job. If you are doing a great job, you would be one of the VP /CEO. At my last company, almost 95% of the employees are under 55 and most are in their 30-40's. If you are with these great companies, you would have accumulated enough bonuses and stock options that you should be comfortable by 55. Even CEO's don't have job security depending on the company.

On the other board, I mentioned that people need to have their retirement money by about 55. You don't want to be in the situation where you need to work and looking for a job in your 60's. My sibling had an accident when visiting the hospital and had brain injury at 56 but everyone expected him to work till 65. Luckily he saved enough that he didn't need to worry about money. Your kid's education come behind your retirement saving especially if your kids can go in state but they want out of state.

Did you read this article yesterday?

http://www.northjersey.com/news/kelly-is-this-the-end-of-the-american-dream-1.1537357

Everyone that I know that worked for a top company got laid off before 60 and when you do get another job it will be 30-50 % less than your last job with no benefits. They want to get the experience and expertise for a fraction of what you are worth.

 

[RBS05]

I'm not worried so much about inflation or the collapse of the economy but if we have the good fortune of good health, combined with better medicine, making retirement last 20 years beyond what has been beaten into our heads for a long time.

 

[rutgersdave]

yup, set a budget to live well below or moderately below your means. What I have burned into my kids thought process is that every dollar you save is like making 1.40% more as those savings are post taxes. In other words you'd have to make 40% more (at least) to replace them in the future threw earnings.

Don't chase after the Jones'. Don't (literally) buy into the hype on new products. Buy VALUE.

You two guys above are doing it right for sure. I'm not out yet myself at 57 but I could have been anytime since 55 with a nice home almost paid off now. Yes some luck, but more so discipline and sacrifice. (and having a wife that gets it too)

BUT..having said all that. I get what you are saying. Even now I continue to work for a number of reasons including the "is it ever enough" fear.

I had that fear " is it ever enough" when I retire at 55 but after 4-5 years , I know I'm fine and don't worry about it anymore.

 

[rutgersguy1]

In my experience, you are not seeing older people (50-65) because they got laid off, not due to retirement. I'm almost 52. We cost more than someone in their 20's/30's, or on a work visa.

I know most will disagree with this, but I'm going old school. Making myself destitute on paper now. Only thing in my name now is my house and vehicles. Everything else in trusts for kids. That way I have use of assets, but I don't own them=can't be taken to satisfy debt, etc. I am essentially renting my house from the bank. Two mortgages, no equity. I'll be long dead before it is paid off. As soon as my oldest turns 18 she gets the cars. Doing it now to avoid look-back periods (usually 7 years now). When I get laid off for the last time, I'll sign up for all the free $hit, and get the maximum since I will own nothing, and have no income. I've put well over $1 million into the system over the last 27 years. I have no qualms about getting some of it back while sitting on my a$$. Will live in one of my kid's basements, and spend all day on Rivals making RU posts.

My wife will be taken care of by her Dad's estate when he passes.

I get what you're doing by putting some stuff in your kids' names but is that really making the assets "untouchable" or possibly putting them in "less safe" hands? I'd guess younger people are more likely to possibly make poor decisions, get in accidents, etc that could possibly put their assets under threat. Also there's future marriage to look to and possible divorce and splitting of those assets. Unfortunately, some kids also neglect their parents and again have influences from spouses so again your assets might not be in hands as safe you think.

I don't know that there's really any magic bullet. Keep them in your hands and debt or sickness can become problems as you age. In your kids hands the future is unknown as to what your "assets" may be exposed to as they mature.

 

[rutgersguy1]

Not sure what industry you are in that you don't work with many older people? And I'm not sure that not seeing older people during your commute means anything. Furthermore, I'm not sure that you can tell if someone is in their early 50's or early 60's just by looking at them.

Nonetheless, in answer to your question, yes you should save as much now as you can. You should have a well-diversified investment portfolio developed with 2 goals: paying for your kids' college education, and saving for retirement.

Since you say you are well-employed, I assume you are not living paycheck-to-paycheck. You also say that you and your wife are not extravagant spenders. So you should be able to live comfortably while still putting money into college funds, retirement accounts, and general savings investments.

If you do that for the 20 years from your mid-30's to mid-50's you will probably find that you are able to retire early. That doesn't mean that you have to. But it is nice to have the choice.

I agree with this but I'd add if you ever have to choose between your kids college education and them taking out loans versus your retirement savings always prioritize your retirement savings first. If you don't have that you'll have nothing or very little to fall back on as you get older. While taking out loans isn't ideal being a destitute old person is likely worse.

Other than that, just live well below your means, save as much as you can, don't worry about what the neighbors or anyone else is spending and do what you need to do for yourself. You hear about those stories about the "millionaire next door" where people are shocked because no one would have suspected. In the end that's all that counts. First good health and then that you're taken care of when you age, all the fancy this and that doesn't really mean much of anything in the end if those 2 criteria aren't met.

 

[patk89]

Couple of points:

Mortgage is debt. Saying that you have a mortgage and no debt other than a small student loan is not correct. Many, many otherwise intelligent people stretch to buy homes that they cannot afford and spend a lifetime choking on that debt and not being able to save sufficiently. Sure, if you have the unusual career with no layoffs and continued advancement/raises, you would be better off stretching to buy that house when you were younger, but that path is very uncertain and loaded with risk.

Once you hit 50, if you have not been continuing to develop yourself professionally, you become a target during the inevitable economic downturns. Tough to move to another career at that age and earn competitive income. But the company that hired me out of college did not assume responsibility for me until I turned 65. Employees leave for better opportunities all the time, if management can replace an under-performer, they will do it. If I am not contributing more than my cost, I'm out. That is the deal and not unnecessarily unfair.

The goal posts continue to move. At 45 you might say that if you acquire X assets by the time you are 55, you will exit. Then you turn 55 and say it makes sense to continue to 60 because you will be able to save much more that will give you a better quality of life in retirement and/or support your children/grandchildren/etc. Next thing you know you have reached 65.

This is not a new phenomenon. There have always been business cycles and defined benefit pensions were becoming rare in the private sector by the last 80's. We were worried about the solvency of SS for decades because the excess collected was being spent by the govt and not invested unlike a properly funded pension plan. Demographics pointed to funding shortfalls in the future. The biggest change is the massive amount of student debt outstanding.

 

[albanyknight]

Does that include stay-at-home parents?

I don't believe so.

 

[rutgersdave]

But the company that hired me out of college did not assume responsibility for me until I turned 65. Employees leave for better opportunities all the time, if management can replace an under-performer, they will do it. If I am not contributing more than my cost, I'm out. That is the deal and not unnecessarily unfair.

You don't have to be an underperformer, your cost may be higher due to pension and health care cost and salary. My company changed their pension plan and health care expenses for new employees which made it advantageous to let the older employees go. They also transferred the jobs down south to Texas.

 

[heygents]

To the OP...

Sounds like you are on the right track.

I would also recommend a few things:

1. Make sure that you have a will and that you update it periodically
2. Make sure that you and your spouse have adequate life insurance (10X salary). Even if your spouse is a stay at home parent they should have some life insurance.
3. Make sure that you have adequate long term disability insurance either through your employer or buy it yourself. It is a little expensive but you are much more likely to become disabled and unable to work than you are to die.

 

[FastMJ]

In my experience, you are not seeing older people (50-65) because they got laid off, not due to retirement. I'm almost 52. We cost more than someone in their 20's/30's, or on a work visa.

My wife will be taken care of by her Dad's estate when he passes.

She's not going to share any of the proceeds with you? Or are you divorced?

 

[vkj91]

To the OP...

Sounds like you are on the right track.

I would also recommend a few things:

1. Make sure that you have a will and that you update it periodically
2. Make sure that you and your spouse have adequate life insurance (10X salary). Even if your spouse is a stay at home parent they should have some life insurance.
3. Make sure that you have adequate long term disability insurance either through your employer or buy it yourself. It is a little expensive but you are much more likely to become disabled and unable to work than you are to die.

To add to this. I'm 40 and I have friends who are balking at the idea they need this much life insurance. I look at it like this:
Whoever the primary bread winner is needs to have enough to support their family at the same exact level of lifestyle until the kids are 18 and wife/husband is dead.
For the non bread winner: they need enough to pay for education and babysitters/nanny's etc while the living parent works.

 

[Cabana Man]

One other item to buy now is LTC insurance (Long Term Care). The younger you are when you buy it the cheaper it is. I'm 54 and I started LTC at 52. I should have started it much earlier. With seeing my mom and my mother-in-law go through Alzheimers, it is a safe bet to have LTC to use when you need to go into a facility when your kids can no longer do it emotionally and physically. Its well worth the cost to get LTC.

 

[Local Shill]

In my experience, you are not seeing older people (50-65) because they got laid off, not due to retirement. I'm almost 52. We cost more than someone in their 20's/30's, or on a work visa.

I know most will disagree with this, but I'm going old school. Making myself destitute on paper now. Only thing in my name now is my house and vehicles. Everything else in trusts for kids. That way I have use of assets, but I don't own them=can't be taken to satisfy debt, etc. I am essentially renting my house from the bank. Two mortgages, no equity. I'll be long dead before it is paid off. As soon as my oldest turns 18 she gets the cars. Doing it now to avoid look-back periods (usually 7 years now). When I get laid off for the last time, I'll sign up for all the free $hit, and get the maximum since I will own nothing, and have no income. I've put well over $1 million into the system over the last 27 years. I have no qualms about getting some of it back while sitting on my a$$. Will live in one of my kid's basements, and spend all day on Rivals making RU posts.

My wife will be taken care of by her Dad's estate when he passes.

I like the way this guy thinks!

 

[Knight Shift]

better have
better have $3-4 million (in todays money or benefit value) accumulated if you plan on staying in NY area and keeping the relative same lifestyle (assuming middle class) and leaving something to your kids. 401K's are great if the market doesn't crash the day before you retire (or while retired) and you haven't taken loans from the 401k for kid's college or to pay debts .Even though it's really difficult in today's market to accumulate $--I have found disciplined saving and investing on your own in a regular and constant manner over your ENTIRE working career is a necessity--hopefully you're lucky to also have a good DB retirement plan--good luck and prepare for possible long term care issues to confront your family
43-

Not sure $3-4 million cuts it with the cost of housing, taxes, and health insurance in the NY/NJ metropolitan area if you retire at or near 50 years old.

Best thing we did early on was to invest in 2 family rental properties. One is paid off, and the other will be by retirement, and they will be throwing us a lot more $ than if we had invested in mutual funds.

 

[rutgersguy1]

One other item to buy now is LTC insurance (Long Term Care). The younger you are when you buy it the cheaper it is. I'm 54 and I started LTC at 52. I should have started it much earlier. With seeing my mom and my mother-in-law go through Alzheimers, it is a safe bet to have LTC to use when you need to go into a facility when your kids can no longer do it emotionally and physically. Its well worth the cost to get LTC.

I'm in my 30s and I've thought about this but in my little bit of research in the past it sounded like they aren't made the same way they used to be. They were money losing propositions for the insurance companies so they reduced how much and what they covered. The premiums were higher and it didn't sound like premiums were fixed either like life insurance where if you buy it younger the lower premium is fixed for the life of the policy. So that stuff gave me pause and I thought maybe it's not the good planning vehicle it may have been 10-15 years ago. Are your premiums fixed and does it cover everything you expect it to cover and whatever duration that may be or is it more of a short term thing?

 

[Upstream]

Or at least not NJ, many other cheaper places to live.

But if he does a good job saving his money, cost of living becomes less critical. He can choose where he wants to retire based on factors other than cost of living.

For example, a lot of people from NJ retire in North Carolina. The cost of living in the Charlotte, NC, area is about 22% lower than the cost of living in central NJ. But the bulk of that difference is because of the cost of housing. The OP already owns a house (and presumably the mortgage will be paid off by the time he retires), so the cost of housing is not a critical factor here. Once you take housing out of the equation, the cost of living in the Charlotte area is only about 8% lower than central NJ.

Certainly 8% is a big difference if you are struggling to make ends meet. Plus if you are struggling to make ends meet, you can sell your house in NJ and buy a cheaper house in NC, and then spend the extra cash from the liquidated real estate.

But if the OP has saved enough to live comfortably in retirement, the 8% difference in cost-of-living is probably not something that is going to drive his decision on where to retire.

Likewise when you look at taxes. If the OP and his wife have taxable income in retirement of about $105K, their NC income tax would be about $3000 higher than their NJ income tax. (If their retirement income is $55K, they pay about $2000 more in NC income tax than NJ.) Of course that difference is offset by property taxes which average about $4000 more in NJ than NC. So the total tax burden (income + property) is about $1000 more in NJ if they earn $105K. (It is actually less than that, because the additional tax in NJ is deductible from Federal income tax.)

Again, if they have managed their investments so they have retirement taxable income of $105K they are living comfortably enough that they don't have to worry about the extra $1000 in NJ taxes or the 8% higher cost of living. They can make their decision about where to retire based on other factors like location of family, climate, recreational activities, health care, etc. They may still decide to retire in NC, but it would be a decision based on quality of life, not economic forces.

That is why the consistent advice in this thread is to comfortably live a modest lifestyle and save as much as you can toward retirement. Then in retirement, you can afford to continue to live your lifestyle and you can afford to make your own decisions rather than be forced into them.