Posted on 03/19/2024 5:00:06 AM PDT by where's_the_Outrage?
The average American 65 years of age and up earns an annual pre-tax income of $55,335, and that same group spends $52,141 yearly, or $4,345 a month, according to the Bureau of Labor Statistics (BLS).
That income doesn’t leave a lot of extra cash for unexpected expenses or emergencies. The average American aged 65-69 has about $200,000 in retirement savings, according to an analysis of Federal Reserve data, and might still need to work even when they reach retirement age. High expenses often play a role.
These four categories of spending tend to eat into monthly expenses — here’s how you can shave some zeros off them.
1. Housing
Home costs represent the largest expense for retirees, accounting for 36% of their annual expenses, BLS figures show. Retirees who want to gain a leg up may want to consider downsizing as house prices remain high.
2. Transportation
If you aren’t working as much – or at all – you might want to swap the car for public transit or a bicycle. Transportation is the second-largest spending category, making up $7,160 in annual expenses for retirees, according to BLS figures.
3. Food
At $6,490, food expenditures account for over 12% of annual expenses for those 65 and over. Meal planning is one way to avoid overspending since it involves shopping for food items instead of regularly eating out — which can be an expensive habit.
4. Healthcare
Health spending makes up $7,030 in annual spending for retirees. One way to cut costs when health issues arise is to get easily affordable preventative care. That means staying up to date on screenings and vaccinations.
(Excerpt) Read more at moneywise.com ...
“...About others posting to pay off mortgage before retiring, I can see someone choosing not to do that if the interest rate is low and that person instead puts that money into Roth IRA’s and Roth 401K’s. But the trick is to do it with the same intensity as you would if you were instead paying off the mortgage. Just treat that portion of your Roth investments as your mortgage payoff amount.....”
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You nailed it, The Trick is correct my friend.
I think but cannot offer proof but my gut tells me that the individual that pays off his/hers mortgage early to lower retirement costs is much more likely to more than make up for the lost savings in tax advantaged retirement accounts after clearing the debt and prior to retirement compared to the mortgage hanger-oner that uses sheer genius to demonstrate investing savvy for all the world to see.
Question: why do you think the lovers of debt make it sound like 95% of today’s mortgage holders are in at <2% APR and have no other consumer debt eating up potential investing dollars and are actually maxing out their Roth 401K? I think we know the answer.
According to the data, 63% of working age people are actually earning W-2 wages, out of that 63%, 85% of them participate in their company 401K (or eq) and out of that only 4-10% are maxing out annual contributions. So even if the stupid argument that holding on to a mortgage forever leads to more investing time in the market is mathematically correct, the data argues that very few actually do it. Hence The Trick.
I think the average age 65-70 in the USA has about $200K in retirement savings so for many the future is not looking too good for some.
The trick here in NH is to move to one of the low tax towns.
NH does not have an state income or sales tax.
However, we have high property taxes primarily to pay for the local schools. There are some small towns like Tuftonboro that do not have a school system. Their property taxes are much lower than average in the state. As long as you are not on the lake front.
If you combine that, with no sales or income tax it makes that location literally one of the lowest tax burden spots south of Alaska.
You may want to check the IRS rules on selling your primary residence, some of the capital gain is excluded from the tax, up to $500,000 if filing a joint return.
Thanks, forgot about it being 500K, thought it was 250K. Still would owe a few shekels. The government is your partner on the way up but not on the way down!
But that works only if you have enough in investments to keep up with inflation during the decades of retirement. Using a 4% annual withdrawal strategy, that means your investment balance needs to be at least 25 times your cost of living (for the year). And since inflation is high, your investment portfolio needs to be heavy in equities (I say 70%) instead of heavy in bonds. The common strategy of 50% or more in bonds doesn't keep up with inflation IMHO. But being at least 70% in equities means being able to handle huge market downturns. Thus being very diversified. I suggest spreading out in over 30 asset classes in equities alone (and over 10 asset classes in bonds).
I'm currently not in equity mutual funds. I got out of them after the 12 years of low interest rates (Obama years) and 4 years of Trump made my equities grow a lot. But when I get back into them I'll spread it out equally again and not try to pick the winners and losers.
you can cancel cable, the daily newspaper, eat only at home, shop sales, etc but what do you do about property taxes?....
Respectfully, I think you're expecting too much for many people to max out his 401K, especially in much of flyover country where the cost of living is lower (as are wages). For the under 50 workers, the max for 401K/Roth 401K is $22,500 and the max for IRA/Roth IRA is $7,000 ($6,500 for year 2023 since that's still do-able until mid-April).
So if a worker is putting enough in his 401K to get whatever the employee match is, if he's wise he'll put the next portion of his investing budget into a Roth IRA (or IRA if exceeding the income max for Roth IRA's). Only if he's got even more of his budget after that does he invest more into his 401K. For the under 50 crowd that would mean having $29,500 in his budget for investing to max out his 401K (if doing Roths and, therefore, getting no immediate tax breaks). That's a huge portion of a lot of people's income in flyover country, especially for someone who's not "seasoned" and at the height of his career.
Should more people be investing for their retirement? Yes. I agree with that wholeheartedly. But should we expect more than 10% of them to be maxing out their 401Ks? Well, I beg to differ on that.
A senior with a mortgage is in the hole already. Our minimum for medicare insurance now runs over $4,000 a year and the supplement runs another 3,100 with the total for just insurance hitting right at $7,400 a year. Grocery and household goods spending is over a grand a month and my wife is very frugal. House and farm insurance is $5,800 a year. My highway fuel bill alone is nearly $1,500 a year and we don't drive more than 8,000 miles a year combined There is no public transportation where we live.
The article is written by idiots with no experience in reality. Gooberment averages are propaganda.
Whichever school district that the kids attend school at has to get a portion, though, right?
“Well, the taxman would be happy for sure.”
Assuming you are married, there is no tax on the first $500k of capital gains over adjusted basis (purchase price + capital improvements + buy/sell closing costs).
Silly me. I thought decades of paying into Medicare was so healthcare wouldn’t cost ober $7k per year after retirement.
Does the average retiree even have an income of $4,000 a month? I think I am better off than most, and I don’t even make $3,000 per month.
We’re debt free except for our mortgage which is a low payment anyway. In a few months the house will be sold for a large profit and we are building a 981 sq ft 2/2 on our rural property. Then we’ll be totally debt free with a brand new house and one brand new vehicle.
Exactly. Just keep the receipts.
“And, half of those taxes are squandered on a corrupt and utterly dysfunctional school system.”
Not to mention, as a homeowner, you’re paying taxes so others can have a “free” dysfunctional education. I really think they should start charging a fee for the school indoctrination to those who pay no school taxes, but freely take them.
We too are debt free (no mortgage), my wife retires this year and I have at least two years left. Our plan is buy or build smaller where we’re going to retire to (while I am still working) then sell the current house, pay off the retirement “estate” and then bank the equity.
Huh, I spend less than 15k a year total.
I paid off my home and have NO debt at all, I am STILL having a hard time making it!! The house still needs upkeep, groceries are OUT OF CONTROL, I have pet expenses, my doc is now charging me $150.00 a visit even though my insurance is paying him $345.00 and Medicare is paying him $50.00 he is NOW charging $650.00 for an office visit ridiculous!! Medicare paying $50.00 for an office visit is also ridiculous!! I am waiting for the show to drop where docs no longer accept Medicare patients!! Utilities have become OUTRAGEOUS in the summer my electric bill for having AC, is at least $600.00 a month in the winter months I don’t even turn the heat on I put on socks and sweats and I am good to go!! My association fees have increased $200.00 a month over the last 2 years I live in a gated community with guards at the gate so I understand the increase in wages for the staff members of the community!! I decided to go back to work part time but I don’t know how seniors with a fixed income are able to make it!! I thank God everyday I am healthy enough to work part time MANY are not!!!
Yes, but Tuftonboro, NH also has multi million dollar houses on the shore of Lake Winnie. So, they pay the bulk of the taxes in that town. Most of those homes are owned by either rich retirees or rich people from out of state.
So, there are very few kids in the school system.
Also, the town next(Wolfeboro)has a private school that many of the rich kids go to.
Yes but I’m not saying people should be maxing out their 401/403 accounts rather I’m commenting on the thinking behind those who urge that one invest instead of paying off the mortgage early. I think in many cases those who say this are doing neither. Just look at the stats on credit card debt and HELOCs for older workers. I have a friend that is 63 and has a combined $550,000.00 debt and just took out a new 3 year car lease.
Anyway good on you for being a saver. We (Sue and I) are working for one reason and that is to build up our nest egg. That is all. True confession: we were not good at the personal finance thing until about 10 years ago. Overnight we switched gears, paid off all of our debt and have been throwing every cent that is not nailed down into either our 401K, 403B, our taxable brokerage account or our HYSA. I know many are suffering from the economy but for us it’s not a problem and the future looks good because we took drastic steps and turned our sinking ship around and set sail to a different port, the Island of Debtfreeville.
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