Retiree's on a fixed Pension....Please read and reply

There are 4,678,284,374,467 topics and discussions on how to prepare for the future, strategies for savings, etc..... Unfortunately, due to circumstances, we were unable to take advantage of all the great advice given, so we have to make due only on government (CPP, OAS) Pensions. We are still using YNAB because it is really working well for us.

We get the pension's once a month and budget as needed. Although the funds are not huge, but the bills are being paid and we have peace of mind. We are taking advantage of Coupons and have now been introduced to Cash Rewards Credit Cards. Every little bit helps.

I would really like to know how my fellow pensioners are making out now that they are done with work. How are you dealing with any shortfalls? Any tips you can give us?

 

Thanks

Ron & Judy

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  • I'm not retired yet.  I plan to retire in 3 years, though.  So, I will be following this thread for tips.  I've been using YNAB for not quite one year.  I sure wish I had discovered it many years ago because in one year it has helped me a lot to be more efficient with my money.

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  • It's amazing how much our life has changed since we retired.  Because of circumstances, we do not have the financial means to do much traveling or vacationing  but that is ok because YNAB has enabled us to other things:

    • We still travel but it is pre-planned. Think locally not Europe. 
    • A new house is not as important as before.

    A new car also is not as important as before.   We get up every morning with peace of mind knowing that our bills are paid. When there is something that we want to do that requires any finances, we plan it. 

    We are living on Canadian Government Pensions that give us around $39,950 a year and we are making it happen.

    Ron & Judy

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    • keyboard  Sounds like you are pretty successful at retirement.  So nice to have peace of mind.  That's what I've found since using YNAB.  Prior to YNAB I spent about 17 months paying off all credit cards, using the zero balance budgeting method of Dave Ramsey, just using a spreadsheet for my "envelope" system.    Once paid off, I searched for a more feature rich budgeting software and settled on YNAB.  Combined with all the free training they give, this has been quite a journey to even more financial awareness and building a nice bit of savings along with always having the money to pay bills and upcoming gift giving occasions.  I'm even happier about still working since I'm in a position now that I could retire if I wanted to, as in I could make it.   However,  I want to work until I get full social security benefits and even beyond as long as my work is still interesting and as long as management isn't too ridiculous.  I'm in the U.S.A., so I must pay a good deal for better healthcare insurance than what Medicare would provide alone.

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      • keyboard
      • keyboard
      • 3 yrs ago
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      Cornflower Blue Filly (35a9d699c640) Yes, we are making it work, but we could have been more financially successful if we could have had our present-day wisdom when we needed it most, 40 years ago.😀

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 3 yrs ago
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      Cornflower Blue Filly (35a9d699c640) Health insurance in the US is insane.  As a retiree under the age of 65, I pay full freight; and it appears that as a single person living in a blue state, I get a better deal than many other people do.  In 2017, I paid about $4000 in health insurance premiums.  The insurance policy covered about $200 of services consisting of an annual physical, part of the associated lab work, and one flu shot.  I paid about $2200 from an HSA for qualified medical expenses, and I didn't fill my deductible.  For 2018, the premium went up and I will pay about $4350 for similar coverage.

      I conclude that, in a normal year, health insurance is really insuring my asset base against a catastrophic medical situation with the side effect of giving me the tax benefit of an HSA.  Other than that, I just have to pay for my medical care.

      For me the bottom line is, health care is just an expense like any other budget expense.  I can quantify it, I can budget it, and I can deal with it.  The absolute level of health expense isn't such a big deal; it's the rate of inflation in health expense that's scary.

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      • keyboard
      • keyboard
      • 3 yrs ago
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      Patzer   Jeez !   How much does an average American have to pay for Health Care? .... In all my 67 years, here in Canada, I have never worried about Health Care. I get sick and see my Dr and he either gives me a script or sends me to the hospital. No monies are passed at all.

      I do not know what its like to worry about Health Care.  I hope that all of our Southern Neighbors  make a ton of money to pay for all of this.

      Like 1
  • @ We would love to hear how others are handling their retirement and what they are doing to make their dollars stretch a bit more...

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  • My pre-retirement thinking was that I would be living on reduced means in retirement.  I embraced the YNAB philosophy that I should budget whatever money I have coming in and figure out how to live on that, so I wasn't terribly worried.  I figured that I would have to cut some things out, but I'd get used to doing without them.

    Well, after eight and a half years of using YNAB, my employer changed working conditions in a way that annoyed me.  I went home, looked at the numbers, and decided to retire at age 60 + 8 months.  I still use a YNAB budget, though I deferred starting to use web YNAB until after I figured out how I was going to budget in retirement.  It looks different than it did while I was working.

    As things turned out, a small frozen pension (based on 6 years' service and my salary as of 1996), plus US Social Security as the surviving husband of my deceased ex-spouse, plus investment income, gave me a margin of safety over and above my initial desired retirement budget.  I ended up increasing that budget because I found I wanted to do some things I didn't have time for when I was working.

    Now, my major financial focus is managing the investments and ensuring the income grows enough to give my budget a raise for inflation each year.  Part of my process each month is to identify underspent budget categories and salvage excess funds; I use these funds to reduce my required draw from investments in the following month. 

    I still habitually control expenses, as trained by YNAB for a decade.  That's part of who I am.  I still use the budget to accrue for nice-to-have stuff instead of just spending down the investments.  And I am mindful that part of the reason I am in this position is that starting to use YNAB in 2008 enabled me to actually save money at a time when my aspiration was simply to avoid dis-saving.

    And if inflation outpaces the growth of my investment income . . . well, there's always the budget.  I can figure out where I need to cut to make it work.  Next expected major budget challenge:  A larger tax bill when RMDs start at age 70.  It's a good problem to have.

    Like 4
  • To Chime in from the US. I am retired at 63, actually on disability.  I receive Social Security Disability and Long term Disability.  Having a stroke at the age of 50 leading to heart surgury from an undiscovered annurysm, I am lucky to be alive.  My stroke was caused by infection.  Having spent upwards of $500,000 buty only paying $1,000 - I would say I have great health insurance.  When I retired I went on COBRA and was able to extend my COBRA 18 months due to the disability.

    I don't kow what will happen when Long term disability stops, another 3 years.  But the mobile home is paid off,  Credit Cards I pay off each month, and the new car (our last one), should be paid off by then.  The lot fees can only go up 3% a year.

    So I am just starting to use YNAB, realizing I go on the Amazon buying addiction.  Also realezing we are on a fixed income, that will reduce over time.  Spending has to reduce!!

    I am hoping with YNAB I will have better insights to accomplish this.  Now the 401K has to last the rest of 2 lives,  there are no second chances.

    That's where I sound down in California.

    John

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  • We are just about to retire.  I have used YNAB for a few years. I still prefer YNAB 4 but have transitioned to the subscription YNAB.  It took a lot of time and learning to be able to use it.  I'm at the point of creating the budget based on the CPP, OAS and our retirement investment funds.  I am not sure how to set things up.  There aren't any videos or real help with doing that through YNAB.   If we use tracking accounts we mess up the budgeting.  If we use the retirement fund for income, it's a transfer.  Does anyone have suggestions??  Thanks 

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 3 yrs ago
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      Joan Bowley 

      I have been retired for 2 years.  Defined-benefit income flows into my budget as budget income.  Investment accounts, including defined-contribution retirement accounts are off-budget.  Dollars flowing from these accounts into the budget are recognized as budget income for YNAB purposes.

      This lets me control how much income I am budgeting (by choosing how much to draw from retirement accounts and other investments) and cleanly manage the investment portfolio (a mix of tax-advantaged and plain vanilla accounts) external to YNAB.

      IMO, trying to put the investment accounts on-budget would add considerable complexity and also reduce clarity.  Do the exercise to determine how much of the investment accounts you can afford to spend, and use only that much as budget income.  This is much cleaner than trying to call the entire investment a budget asset and dealing with how much is budgeted to groceries for the rest of my life.

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    • Patzer  great !  thanks for the advice.   When you talk about "off budget" you are not tracking your investment accounts?  I tried tracking them in YNAB and as you say... very complex and too time consuming to the little benefit I gained.  So to be clear.  You are treating all income as income from the off budget.... as if getting a pay check ... so to be budgeted?  

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 3 yrs ago
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      Joan Bowley I track my investment accounts in Quicken, and on my broker's web site.  I use a self-designed Excel spreadsheet for some of the analysis and planning.  The investment accounts do not exist in YNAB because I see no benefit to putting them there.

      Income in retirement is a conceptual leap away from income while working.  When I was working, the majority of my income was from my salary.  Income for budget, economic income, and income for my tax return were pretty closely correlated.  They became much less correlated in retirement.

      So, to be explicit:  The tax return uses dividends and capital gains that happen in the taxable brokerage account; interest earned in the brokerage account and in the various on-budget interest bearing accounts; a small pension; Social Security; and any withdrawals from tradtional IRAs (including Roth Conversions), whether I spend the money or not.

      Budget income is what goes into the budget to be budgeted and later spent.  This includes the small pension, Social Security, interest earned in the various on-budget interest bearing accounts, and the amount I choose to transfer from investments to checking in order to have enough money to budget.  The transfer from investments is about 60% of my budget income, but it is neither a taxable event nor economic income.  Budget income is vital for managing the budget, but totally worthless for any other purpose.

      I use economic income for planning and for surveys and applications that want my income but don't define income.  For me, "economic income" includes interest and dividends earned in all the investment accounts, whether distributed outside the accounts or not; Social Security; the small pension; and interest earned in the various on-budget interest bearing accounts.  I exclude capital gains (which are taxable, but more a phenomenon of investment management than true income at the moment they happen), and I exclude distributions from traditional IRAs (which are taxable, but are not directly budget income.)  I don't sweat about economic income being terribly accurate; I usually only need to peg it into a broad range for a multiple-choice answer.

      There are a lot of piece parts, but they are familiar piece parts.  There is stuff to manage in the budget, and stuff that is easier to manage outside the budget.  Conceptually, the role of my investments is to produce budget income sufficient to last the rest of my life.  Making sure this happens is what most of the non-budget management of investments is about.  The budget plays a supporting role, ensuring that I actually live on what I planned to live on.

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    • Patzer 

      Thanks for the response!  I don't see the benefit of tracking investment in YNAB either.

      I'm breaking down your answer a little bit so I'm sure I understand.  Please let me know if I'm missing something.
      1. Budget income ($ from SS, IRAs etc) for YNAB doesn't reflect the taxable income.  In YNAB identified as "to be budgeted"?  This is just to cover bills that need to be paid?
      2. Economic income (SS, interest etc) are identified separately for tax purposes? but in YNAB as "to be budgeted"?  You mention for planning purposes so I'm not sure I have this clearly understood.

      just curious why you would distinguish between the two since neither really identifies completely the tax implications.  Am I missing something?

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 3 yrs ago
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      Joan Bowley 

      I think I may have tried to cram too many thoughts into my previous replies.  That happens sometimes, because I'm a budget geek, a tax geek, my own investment manager, and my own tax advisor.  If you don't want to wear all those hats, you won't care about some of the details that look important to me.

      1.   Correct.  Budget income is what flows from off-budget to on-budget accounts, whether it's new-to-you money (e.g., Social Security payment) or existing money (e.g., transfer from off-budget IRA to on-budget checking account).

      2.  Economic income is the least important concept in my prior posts.  I'm interested in it, but if you don't pay any attention to it neither the world nor your budget will be dramatically impacted.

      3.  Income for taxes is totally different from income for budget, and must be managed separately.  How complex this is depends on what your retirement income looks like.  A few examples, to give you the flavor of things:

      Social Security payments are budget income when they hit my checking account.  On the tax return, SS must be identified, and is partially taxable (0% to 85% taxable on the federal return, not taxable on the state return.)

      Pension payments are budget income when they hit my checking account.  On the tax return, they are ordinary income for the federal return, and subject to a pension exclusion of up to $20K on my New York return.  Other states will have their own rules for pensions.

      Transfers from investment accounts to budget are budget income when they hit my checking account, but the transfer is not a tax event.  If the funds come from my brokerage account, I'm simply moving money from an off-budget pocket to an on-budget pocket with no tax implication.

      Withdrawals from the Roth IRA are reported on the tax return, but are not taxed.  It does not matter whether the withdrawal from the Roth is transferred to checking (and becomes budget income) or is transferred to my brokerage account (and does not affect the budget).

      Withdrawals from a traditional IRA are ordinary income, taxable on my federal return and subject to the pension exclusion on my New York return.  For tax purposes, it does not matter whether the funds coming out of the traditional IRA are transferred to checking (becoming budget income), used for a Roth IRA conversion (no budget impact, and future growth is tax free), or transferred to my brokerage account (no budget impact.)

      Activity within my plain vanilla brokerage account generates tax events.  Dividends and interest are taxable income reported on the tax return, regardless of whether I reinvest them, let them sit in the brokerage account and earn interest, or transfer them to checking.  It would be the transfer to checking that creates budget income, not the dividends and interest that generate a tax obligation.  Capital gains generate a tax obligation but have no impact on the budget.  For example, a while back I sold some Microsoft (MSFT) and used the proceeds to buy some Broadcom (AVGO).  I had held Microsoft for several years, so I have a long term capital gain to report on my tax return; but this investment activity causes no budget income.

      The budget impact of investment activity is, I must pay income taxes.  To the extent I don't have withholding, I must make estimated tax payments and/or pay something by April 15 after filing my return.  Understanding my tax obligation is necessary so I know how much to budget for income taxes; so I tend to look at the budget and the taxes as one big holistic picture.

      For a retiree with a simpler setup, a regular payment from an IRA could be structured to have taxes withheld just as they would be from a paycheck.  Get the withholding right, don't be active with investments in taxable accounts like I am, and you don't need to worry much about budgeting for income taxes. 

      If you don't want to be a tax geek, you should have a tax advisor to help you understand the implications and at least set up tax withholding at an appropriate level for your situation.  But I'm a geek, so I tend to get absorbed with the details and forget that not everyone wants to do that.

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    • Patzer Thanks!  I'm Canadian so some of the tax stuff IRA etc are not the same... but similar.  Thanks again for your post and replies.  You have been Very helpful.

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      • casner
      • Now retired, and figuring out transitions
      • casner
      • 3 yrs ago
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      Patzer You must enjoy spending time analyzing investments and figuring out how to keep taxes in line. I assume you do most of this yourself rather than paying someone else?

      I will be retiring next year, and am trying to figure out how my YNAB budgeting will change. So far, I have been tracking (not budgeting) everything in YNAB so I keep a handle on my net worth. I use the on budget for everything budget worthy and tracking accounts for investments etc. Your frequent mention of taxable tracking is both a challenge and interesting sidelight. I have some taxable accounts, some IRA, some 401k, some pension, and will wait until 70 for my SSA if everything works as planned. I do worry about the initial drawdown of my iRA implied by waiting on SSA, but view it as investing in an annuity with built-in partial COLA.

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 3 yrs ago
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      casner Yes, I enjoy analyzing investing, taxes, budget, and the interactions between them.  I do talk to an investment consultant, but she tends to be locked into standard advice based on Modern Portfolio Theory.  My world view is a bit more nuanced.  So I do my own analysis and use other resources for ideas and sanity checks.

      Like 2
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