Coffee heat rising

Retirement Planning for Gen X

JestJack replies to Wednesday’s post, in which I held forth on the new formal budget and revealed how much I need to live as a retireee in nominally “middle class” but in fact pretty modest circumstances.

The sad thing is I see no glaring evidence of living beyond one’s means in your or my lifestyle for that matter. But yet I seem to get the feeling you feel, like me, that you are “living on the edge” despite a pretty nice “safety net” to fall back on. I share your concerns on many levels. With poor returns on savings it seems the Fed in their efforts to prop up the economy are doing so at the expense of “savers” …i.e…..seniors. As you aptly point out, there is no substitute for “a paid for home”….that peace of mind is priceless. BUT today’s environment is very tempting. I can borrow money in the form of a mortgage for 10 years at 2.25% with no points and may even get some help with closing for the effort. I just wonder sometimes how folks WITH rent, a car payment, cell phone bills, student loans, utilities and child care make it….

The answer is, of course, that they can’t: not without a decently paid full-time job and a side gig or two.

I’m sure JestJack and I are looking through the same lens that confounded our parents at retirement age: inflation. Though it’s not nearly as rampant as it was during the 1970s, inflation will never go away. So to minds like ours, thirty grand a year looks like a LOT of money. The realization that one can barely get by on it — and only if one doesn’t have a house or car payment — is startling.

And it’s horrifying to understand that one’s “real” income — $14,400 in Social Security benefits — is well below the poverty line. Drawing down from a finite amount of savings is not creating “income”: it’s just using up your resources until such time as no more resources remain.

Thirty thousand dollars — the net amount I need to live on, not the amount I can, realistically, afford to disburse from my funds (assuming my doc’ is right that I’ll live into my 90s — or even if I make it to my early 80s), is untenable. If the entire gross RMD from my savings is consumed by taxes and living expenses each year, in 20 years I will be utterly destitute: I will have nothing left to live on but Social Security.

“Twenty years” assumes I don’t get warehoused in a nursing home, which will eat up $4,000 to $6,000 a month. That will impoverish me a whole lot sooner.

For anyone in their right mind, this represents a HUGE psychological disconnect. If you are a young person, it means the amount you will need to support you in comfort through retirement is far more than you can realistically expect to earn and save over your lifetime.

Net Social Security — $14,400 — is nothing like enough to live in a safe neighborhood, with decent food, adequate clothing, and independent transportation.

It’s poverty level.

Yet it’s almost $2,500 more than my boyfriend in college regarded as the income he hoped to have when he was “set”: a target he figured would support him and a family quite comfortably (at a time when most women didn’t work). I can remember young men, including my young lawyer husband, remarking that they would have “arrived” when they could earn $12,000 a year. Twelve grand in 1969 would be worth $78,551.28 today.

In that light, the numbers we’re looking at in Wednesday’s post don’t compute.

Even an income of twice what a young man in 1969 regarded as comfortable affluence would support a retiree, today, just barely. It might not support two people at all. Certainly not in middle-class circumstances.

If I were going to advise young people planning, very long-term, for retirement, I’d say “Figure out what you think you’ll need per year, and then multiply that figure by three. That’s how much you’ll need as a net annual drawdown from retirement savings, since there’s a good chance the Republicans will cut Social Security or make it go away.”

So. If a man in his late 30s thinks he’ll need $30,000 a year, exclusive of Social Security, to live in the splendor I enjoy just now, then in another 30 years, he should figure he’ll need enough to DRAW DOWN at least $90,000 net per year.

Gross, that’s probably about $100,000 per year, after taxes and Medicare. Let’s say he retires at 70 and he hopes to make it to about 90.

Let’s suppose Social Security survives and increases with inflation. In 2046, my $14,400 net annual Social Security benefit will have bloated to $30,205. That leaves “only” $69,800/year for our Nimrod to come up with by way of keeping a roof over his head in retirement. To maintain that between retirement at age 70 and death at age 90, he’ll need $1,396,000 in savings at the time he quits or is forced out of his job.

That’s a bare minimum. It means…

No eating out in restaurants
No travel
No entertainment that costs anything
Purchasing all clothing in second-hand stores
Purchasing any needed furniture or household appliances second-hand
No car purchases
No mortgage payments
Not even cable TV or a cell phone

And that figure doesn’t account for inflation over the 20 years of his retirement.

To retire in what most Americans regard as near poverty, today’s young men and women will need almost $1.4 million in savings. In cash dollars.

That’s assuming they plan to leave nothing to their children.

Time for a retread!

What a beautiful few days we’ve had! Incredible weather in the 60s and 70s, peace and quiet, and now an unexpected holiday (the State of Arizona, because of the legislature’s deep and abiding resentment at being forced to approve Martin Luther King Day, took President’s Day away from its employees, but the County abides no such scantily veiled bigotry). The young classmates and I don’t have to reconvene until Wednesday, o mirabilis!

Now that the racket of the three-ring circus that is the COBRA, Social Security, and Medicare bureaucracies has died down for a while, I’ve finally had a chance to relax, unwind, catch my breath, and think a few thoughts.

And here is what I think:

My face is beginning to show my age. This is not surprising, since I was born in the early Pleistocene.

My face is showing the effects of too much ultraviolet light. Also not surprising: born in an early Pleistocene desert, I grew up in one of the harshest deserts on the planet during a time when sunshine was supposed to be good for you (can anyone else remember the phrase “a healthy tan”?), and then I spent my entire adulthood in one of the most biologically diverse deserts on the planet. I am, in short, a creature of the sun.

I am fat.

I am boring as Hell. This is probably because…

I am stuck in a rut.

There’s gotta be some changes made.

First, I need to get out from in front of the computer and put my body in motion. More exercise…lots more exercise! In addition to meeting La Maya whenever we can get together on weekday mornings for an hour’s walk, I need to walk the dog at least a mile a day, and I must get off my fanny and onto the mountain! There’s a very fine mountain with several quarter-mile vertical hikes just to the north of my house. Need to go there and do that. Ideally, every day; as a practical matter, no less than three times a week.

I have a gaudy pink beach cruiser of a bicycle. It sits in the garage while its tires decompose in the heat. I need to get on the bicycle every day and explore my neighborhood and nearby enclaves.

I have a perfectly fine, athletic little sheep dog. I need to let her take me for a run every day. Not a walk: a run.

At the age of 65, dear friend Garnett Beckman (scroll down that page!) started hiking Phonix’s North Mountain Park several times a week. Just retired from a lifetime of teaching, she decided that no grass would grow under her feet. She was 84 the last time I walked to the bottom of the Grand Canyon with her. And yes, I’m afraid she did get out before I did. She’s 102 now. She still has all her marbles, and she’s still going strong.

Role model! Listen: can you hear that voice saying, “What are you waiting for, dear?” That would be, yes, Garnett.

A close second: I need to lose about ten or fifteen pounds. It should come naturally if I manage to drag myself away from the endlessly fascinating Internet and start walking. But I also need to eat better. I eat too much pasta, too many sugary treats, too few green and orange veggies. And, let’s face it: I drink wayyy too much for an old lady: two beers a day, down from half a bottle of wine. A day.

Yesh. Sixteen years of working at ASU earned me a mighty fine drinking habit. If it’s any excuse (it’s not), I’m not alone: hardly any of my friends and former colleagues arrive home from a day at that place without craving a drink or two or three. Some of them crave a lot more booze than I can ingest, and that is plenty. One recently lapsed from AA; the others…don’t ask.

I must stop drinking. Really stop drinking. Not reduce drinking. Knock it off.

After a day of gallivanting with M’hito, in which we visited many venues and spent not very  much money, I came home not even faintly interested in a drink. Clearly, one thing that will help is to fill my days with something other than counting shekels and clicking on Web sites until my eyes glaze over. I think more exercise and an organized diet program will help a lot.

Other strategies: Use the neat new refrigerator-door-sized glass bottles to make sun tea. Prepare a lot of ginger-pinapple drinks and frescas. Have plenty of pleasing things on hand to drink other than wine, beer, or whiskey.

In the horrible face department: it’s time to get serious about maintenance. Tomorrow it’s off to Costco to buy some “mineral” makeup. Not that I expect any miracles, certainly not on sagging jowls and hide as convoluted as the surface of Mars, but I’m beginning to suspect L’Oréal liquid foundation is a bit passé. Time to try something new, develop a few fresh techniques.

And it doesn’t take much reading of Une femme d’un certain age to get the clue that it’s time to update the wardrobe. I’m starting with red and red. I’m also going to follow Frugal Scholar‘s and SDXB’s advice to shop in thrift stores by way of upgrading the wardrobe. At the very least, I must have some new tops to disguise the Costco jeans. New tops, new sweaters, new jackets, new vests, new skirts, new dresses, new whatever else that comes along. I have got to start dressing better!

New (to me) clothes, fresh make-up, more exercise, better food: these should jump-start the project to get a life. Who knows? Maybe once a little momentum builds up, I’ll have the nerve to do what Mary has done; drop it all and embark on a whole new existence.

Onward!