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Planning a retirement?

We have pension expectations of 50000 a year, 401K over 200,000, raw land valued at 165000, and home equity of about 100,000. Our living expenses including health care will be around 75000 a year incl mortgage. We have rainy day funds available. What do I do with the rest of the leftover 16000 a year, starting next year. (we are 56 and 54). We have life insurance on both of us. IRA? or additional life insurance? or what?

Apr 11, 2012 by C from Foristell, MO in  |  Flag
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4 votes

That is great information, but a few key specifics are missing. Your emergency fund should be 6-9 months of total monthly expenses, so if it around $45,000 it should be fine. Secondly, is the pension amount an aggregate for both of you, including Social Security? $50,000 each? Not including Social Security? But I personally believe the short answer you are looking for is Long-Term Care Insurance. I would suggest a single premium option(Lincoln MoneyGuard, for example). These type of products help protect your retirement resources from the biggest risk you face, but do not drain your liquidity(if you opt for the "guaranteed return of premium" option.

Comment   |  Flag   |  Apr 12, 2012 from Columbus, GA

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4 votes

I agree with Brice. I'm confused by the math in the question; but, I can tell you from personal experience that caring for someone with Alzheimer's can amount to $70K per year, and can last seven years or longer. If - and, like I said, I'd need a clearer picture of your numbers - you do have $16K extra, as well as sufficient assets to secure your future going forward, an LTC policy makes perfect sense; and, as Brice pointed out, you can do this without draining liquidity.

Comment   |  Flag   |  Apr 17, 2012 from Moorpark, CA

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2 votes

I recommend investing in the creation of an individualized comprehensive financial plan. From first glance, it looks like you will successfully complete your goal of maintaining your desired lifestyle based on the facts provided. But sometimes looks can be deceiving. I made a few assumptions - you both receive maximum Social Security benefits and you invest in a diversified portfolio of 60% equity and 40% bonds. I used historical returns to estimate an average return going forward. I further assume you sell the raw land in four years with 2% annual appreciation. I assume your pension does not adjust for inflation (often the case). Your expenses will increase with inflation. You live until your early nineties.

Given the limited assumptions listed above, a financial planning program measures the likelihood of reaching your goal. You do not achieve 100% success based on the limited input provided. This scenario does not include any further expenses such as home repairs or vehicle repairs.

Don’t get me wrong, the probability of you reaching your goal is very good, but in order to better increase your likelihood, you might consider investing some of the “leftover” money into a comprehensive financial plan. With a plan in hand, you will be in a better position to determine what actions add the greatest value. Without more specifics, no one (potentially including you) have enough information to provide your best solution.

Admittedly, I do not have all your information and this response could be incorrect. My suggestion is that you gather the information needed to make informed decisions going forward. Good luck. Thanks for the thought provoking question.

1 Comment   |  Flag   |  Apr 17, 2012 from Phoenix, AZ
C

Thank you, I think the LTC is an excellent option for me (wife). Other ideas were life insurance so more $ can be turned over to the kids tax free. We do have a financial plan in place - just wanted a second opinion on additional ideas for maximizing the extra. House is new and we have a ton of cars.....so no needs there, except to sell a few. The suggestion of a "single premium option(Lincoln MoneyGuard, for example). These type of products help protect your retirement resources from the biggest risk you face, but do not drain your liquidity(if you opt for the "guaranteed return of premium" option" is solid to go on. All three answers were appreciated and useful.

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Flag |  Apr 18, 2012 near Foristell, MO

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