My wife's breast cancer diagnosis was eight years ago this month. Everything has been clear since. We are truly blessed!
We had a loved one in the hospital for over a week, but they're back home and doing well now. Here are some things we learned during our stay:
- Using valet parking is better than searching for a spot.
- Bring a small extension cord so you can have all your chargers and tech devices close by.
- Pack snacks, a blanket, your favorite pillow, your favorite reusable cup with a curved/bendy straw, and your favorite eye mask.
- Plan to pick up food on your way to the hospital. If you have to eat hospital food, request the restricted diet menus.
- Breakfast is still the best meal out of the hospital meals.
- Make sure to compliment and be extra sweet to your nurses and techs, as they are overworked and have so many people pulling on them.
-The best food at SMH can be found in the Oncology Tower cafe.
We've decided that Penny is probably fully grown now, but she's going to be a small dog at just 13 lbs. Our cats are bigger. She was supposed to be 20 pounds. The runt of the little, I guess (but so sweet).
1. Dave, how do you invest your own money?
I maximize my 401k contributions and invest 100% into the stock market. Why? I’m 47 years old and plan on working for 20+ more years. I will have a lower return if I use any other investment vehicle. By maximizing my contributions, I get a big tax break. For every $100 I contribute, I save about $35 in taxes.
I also invest money in a non-retirement brokerage account. If I have more than $30,000 in my checking/savings, I move the rest of the money into a diversified portfolio of stocks and bonds inside the brokerage account. So few people do this, and it is so powerful. The money stays liquid, and over time, the money has grown dramatically.
2. The government requires you to take money out of your IRA at a certain age. How does that work?
Required minimum distributions (RMDs) are the government's tool to collect more taxes. It forces you to withdraw a certain percentage yearly from your IRA once you turn 73. It’s confusing because two years ago, the age was 70 ½, and last year it was 72. It will stay at 73 until 2032, when it will increase to 75.
The amount required to withdraw at age 73 is 3.7%. It slowly increases each year. At 80, you need to withdraw 5%, and it keeps going up each year. Many people think you are required to take out a huge amount at 73. It is actually minimal; many people are already taking that money out anyway. For instance, my clients are taking out 5% already, so they don't even have to think about RMDs.
3. Can I retire if I still have a mortgage?
Of course. Your mortgage payment is no different from a car payment. If your monthly retirement income can afford the mortgage, it is no different from any other monthly debt.
4. Should I pay extra toward my mortgage?
This answer might surprise you, but my answer is a strong "no."
This is the problem: once you put money toward your mortgage, there is no way to get it back out. Now that interest rates are so much higher, second mortgages and home equity lines of credit are very expensive. If you use a good portion of your savings to pay off your mortgage, what happens if a considerable expense arises?
Also, consider the fact that your current mortgage probably has a low interest rate. Right now, you can find a short-term CD for 4%, which is probably more than the interest rate on your house. So, you are actually losing money (and liquidity) by paying off your mortgage.
5. When should I take Social Security?
I’ve taught classes on this stuff for years. More and more, I am noticing that people are taking their benefits much too early. I know it can be hard to wait, but when starting benefits, you need to consider how long you might live.
Believe it or not, if you are a healthy 65-year-old, your life expectancy is 90. If you look it up online, it will tell you that the life expectancy for an American is 80. But, you see, if you've made it this far, your life expectancy is much higher. Things like infant mortality and other factors pull down the overall average.
If you take your benefit at 62, you get 60% of the benefit you would get if you waited until age 70.
Let’s look at someone eligible for $2000 a month at their full retirement age (67 for most of you).
If you take it at 62, you will receive $1644 a month.
If you take it at 70, you will receive $2507 a month.
*All the following numbers assume a 3% cost of living adjustment per year. This is an important variable that most people do not consider when deciding on a timing strategy.
Let’s say you live until 80 in this scenario.
If you took it at 62, you would have collected $396,052.
If you took it at 70, you would have collected $414,569. (pretty even)
Let’s say you live until 85.
If you took it at 62, you would have collected $564,11.
If you took it at 70, you would have collected $670,755. (that's over 100k)
Let’s say you live until 90 (there is a 50% chance you will live this long)
If you took it at 62, you would have collected $785,040.
If you took it at 70, you would have collected $967,340. (around 200k)
Let’s say you live until 95 (there is a 33% chance for women and a 20% chance for men).
If you took it at 62, you would have collected $984,778.
If you took it at 70, you would have collected $1,311,420. (around 330k)
These numbers can be mind-boggling. There may be married couples out there that will collect $2,000,000 of benefits from Social Security during their lifetimes.
It's essential to remember that if one of you passes away, the higher benefit amount will continue to your spouse. Therefore, the timing of taking the lower benefit is not nearly as crucial. In fact, it might benefit the person to take their benefit earlier. However, the picture painted above changes when you factor in the survivor benefit. Instead of only considering how long you will live, you should consider how long at least one of you will be alive. This significant change in the calculation of life expectancies can significantly affect the timing of your benefit payout.
There is a 50% chance that one person will still be living if you are a married couple at 95.
There is a 25% chance one of you will be alive at age 98.
In other words, there is a 50/50 chance that by waiting until 70, you will end up with over $300,000 in additional benefits. And this is all based on someone eligible for $2000/mo. Many of you have closer to a $3000/mo benefit. This means almost half a million dollars of extra cash.
Don’t collect Social Security just because you want that extra spending money in your early 60s. It will really come to bite you later on. I know it hurts, but pushing off Social Security is almost guaranteed to pay huge dividends.
Be Blessed,
Dave