Reader Case Study: Nurses in Oregon Near Retirement

Eva and her husband Patrick live in Central Oregon where they both work as nurses. Their two children are now grown and Eva and Patrick are nearing traditional retirement age. Eva is concerned they may be behind on their retirement savings and would like our help analyzing their assets. A major concern for the couple is a family history of Alzheimer’s on Patrick’s side. Eva would like him to be able to retire sooner rather than later so that he’s able to enjoy retirement for as long as possible. Let’s dig in to help Eva and Patrick map out their retirement!

What’s a Reader Case Study?

Case Studies address financial and life dilemmas that readers of Frugalwoods send in requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide advice, encouragement, insight and feedback in the comment section.

For an example, check out the last case study. Case Studies are updated by participants (at the end of the post) several months after the Case is featured. Visit this page for links to all updated Case Studies.

The Goal Of Reader Case Studies

Reader Case Studies intend to highlight a diverse range of financial situations, ages, ethnicities, locations, goals, careers, incomes, family compositions and more!

The Case Study series began in 2016 and, to date, there’ve been 69 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.

I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight and trans people. I’ve featured men, women and non-binary folks. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland and France.

I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.

The goal is diversity and only YOU can help me achieve that by emailing me your story! If you haven’t seen your circumstances reflected in a Case Study, I encourage you to apply to be a Case Study participant by emailing mrs@frugalwoods.com.

Reader Case Study Guidelines

I probably don’t need to say the following because you folks are the kindest, most polite commenters on the internet, but please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not condemn.

There’s no room for rudeness here. The goal is to create a supportive environment where we all acknowledge we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.

A disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises. 

I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.

With that I’ll let Eva, today’s Case Study subject, take it from here!

Eva’s Story

Eva and Patrick cross country skiing!

Hello Frugalwoods Friends! I’m Eva and I’m 56. My husband Patrick, also 56, and I have two adult children, three cats, and a fresh water tank full of fish. We live in Central Oregon where we both work as RNs. Patrick has a side gig as a medical death investigator, which might have been his primary occupation if it were more lucrative.

We’ve been married for 28 years and have lived in Central Oregon for 20 of those years. We love the area, although not the increase in population. Our son is 23, living on his own, and is nearly finished with his associate’s degree. Our daughter is 20 and is in her 3rd year (of 8!) at a university 2.5 hrs away. She recently started renting, but had previously been in student housing, spending all breaks at home. The fur and fin portion of our family consists of three spoiled cats and 15 colorful fish. Patrick’s mother (his father is deceased) and my parents also moved to Central Oregon in the last 8 years, and we are thankful to have them close by.

Eva’s Career

I work on a Med-Surg/postop unit. Through the pandemic, surgeries have been drastically reduced. Instead, mostly very sick patients struggling with acute and chronic illnesses and trauma surgery patients make up the bulk of my unit. I’ve taken care of only a few Covid patients and definitely count myself very fortunate. Our hospital has grappled with staffing shortages, units filled to capacity, and nurse burnout in the harder hit units. I commend all of the emergency and ICU nurses, physicians and ancillary staff who have been caring for those very sick patients for months on end!

Patrick’s Career

Eva working as a Covid nurse

Patrick is more on the Covid-testing side, having swabbed hundreds of people and vaccinated many as well. In addition, he is a medical death investigator. He goes to scenes (car accidents, exposure deaths, falls from a height, suicides, deaths in homes, and a few in the hospital). He does not go to Covid deaths, but does wear PPE at scenes where the possibility of exposure is unknown. He is paid a flat rate per 24 hrs on-call, a per case rate for decedents who go for autopsy, and also mileage. While I have accompanied him to scenes a few times and joined him at funeral homes when postmortem fluids are needed, this is not a form of nursing that calls to me.

The Lives of Two Nurses

Nursing is a stressful vocation and sometimes hard to turn off after the shift is complete. We consider it a privilege to be able to help when people are feeling their most vulnerable. It’s rewarding to see someone come through a challenging medical event. We’re happy to have chosen our careers and also very thankful to have saved money during the pandemic when so many have struggled financially and/or lost their livelihoods. 

Patrick and Eva’s Hobbies

When we’re not working, we enjoy kayaking on nearby lakes, cross-country skiing in the nearby mountains, hiking to waterfalls around Oregon, motorcycle rides to coffee shops and gardening. I’m more of an introvert while Patrick is an extrovert, but we’ve made it work. I enjoy reading, baking, yoga, rollerskating, drinking coffee and the occasional White Russian! Patrick enjoys riding ALL of his motorcycles (the deal is he can have 1 motorcycle for every cat I adopt), drumming with his band, fishing, playing disc golf, DIYing around the house, and SO much more…

What feels most pressing right now? What brings you to submit a Case Study?

Kayaking on Elk Lake

I’m concerned we’re a bit behind on retirement savings, but, I would like Patrick to retire sooner rather than later. He has a strong family history of Alzheimer’s disease, and is very concerned this will be his legacy as well. His father and grandfather both died from this in their early 70s. They led less-healthy lifestyles, so we’re hoping the odds are in Patrick’s favor.

As of now he hasn’t experienced any difficulties, but because this is a possibility, I would like him to retire from nursing at age 62 (which is 5.5 years from now) to allow more time for his hobbies. The plan is for me to continue working until I’m 65 to grow our savings and cover our health benefits. I have no idea if these timeframes are feasible with our current savings/spending rates.

Patrick listens attentively when I discuss saving more, reducing spending, and planning ahead, but he is also of the mindset that he doesn’t want to do without now when there’s a possibility that he won’t be able to enjoy it later.

I feel overwhelmed when reading about diversified portfolios, taxes, and enough vs. too much insurance. I’m not very tech-savvy, so I have a difficult time finding the information I need regarding our accounts, i.e., fees we’re paying, how and where to transfer funds. As a result, I don’t touch anything and just let it ride. I have no idea how to invest (choosing funds if we do open an IRA — or if it’s too late to see much growth). 

Kids’ College

Because we didn’t start 529 accounts for our children, we’re helping our daughter pay as she goes to offset the amount she needs to obtain in loans. Our deal (for both kids) is that we’ll give them $50,000 over 4 years and then they’re responsible for the rest. Thankfully our daughter is a good saver and has worked throughout college, especially during school breaks. I understand the “put your own oxygen mask on first” approach, but I feel like we owe it to our children to help launch them with the least amount of debt possible. Our son chose a community college, is working, and as of now does not want to go further. If this changes, we would want to help him with any additional education.

We have discussed moving to a low cost of living (LCOL) area after retirement. Our current home is two levels, and it makes sense to look for a smaller single-level home. Central Oregon is a very desirable location, so I don’t think we’ll have much trouble selling our home. But, where to go? We LOVE snow, mountains, and lakes. Do we even consider a move if my husband may have health issues in the next decade or so? Our friends and family are here, at least for now. Seems like this may be a wait and see how things play out situation.

What’s the best part of your current lifestyle/routine?

One of Eva & Patrick’s cats

We love our home and quiet neighborhood, four seasons, our short commute to work/amenities, all the beautiful nature that makes up Oregon, and of course, having family close by. When we’re home, we are relaxed and calm. We enjoy cooking, especially with veggies and fruits from our garden. There’s a brewery that makes great appetizers within walking distance and has outdoor seating year-round (outdoor heaters!).

There’s a river that runs through our town, in addition to lots of parks for leisurely walks and picnics. This sounds silly as a consideration, but our town also has a Costco, which we take advantage of twice a month for staples and good deals on cat litter. 

What’s the worst part of your current lifestyle/routine?

When we moved to our town, the population was 50,000. This has more than doubled in the last 20 years. The surrounding streets and roadways were not built to handle this much growth, and our city government has struggled to keep up with maintenance and increased traffic. It’s not unheard of to sit at a traffic light through three cycles during peak times before it’s your turn. Thankfully, our commutes are off-peak. There are larger cities, about three hours from us, where crime has increased exponentially and we are concerned it is creeping our way.  

Eva and Patrick’s Retirement Budget

I went ahead and figured out our anticipated Social Security income:

Eva:

  • age 65: $1,853 per month
  • age 67: $2,217 per month
  • age 70: $2,887 per month

Patrick:

  • age 65: $2,583 per month
  • age 67: $3,014 per month
  • age 70: $3,797 per month

Patrick’s benefit at age 62 is $2,058, but we don’t plan on taking his benefit until age 65. I would also like to hold off until age 67 to take my benefit, but am unsure how our finances will look to gauge whether this would be feasible.  I have read that SS is in dire straits and our benefit could be reduced by 30%.

I also made this rough estimate of our expenses in retirement, not knowing how much costs will increase over the next 9 years:

Item Amount Notes
Medical/Rx/dental $800 I have no idea how much Medicare costs, and don’t think it covers dental?
Fun/travel $750 Travel in the US
Food $600
House (taxes and insurance) $500 smaller house in lower COL town?
Insurance/maint. (car/MC) $300
Gas/Electric $250
Long-term care insurance $240 A big guess, maybe reasonable if it’s acquired now as opposed to at age 62?
House maintenance $200
Restaurants $200
Clothing/shoes/personal $200
Fuel $150 Would like a new-to-us car in 9 yrs…hybrid? EV?
Water $150
Cats (2) $150
Internet/Netflix/Hulu $130 Currently we don’t pay for Hulu–we use our daughter’s account
Misc. (toiletries, etc.) $100
Cell phones $100 perhaps less with an MVNO?
Gifts $100
Donations 50 also plan to continue volunteering
Trash $40
National Parks pass $15
TOTAL: $5,025

Realistically, I think we’ll be spending at least $5,500 month/$66,000 year.

Where Eva and Patrick Want to be in 10 years:

  • Finances: We would like to be retired with enough saved to sustain us without worrying that our children might need to help us at any point. “Enough” sounds so vague.
  • Lifestyle: Living in a smaller, LCOL town, possibly in Montana? We’re hoping our kids will stay somewhere in the PNW, so that we’re within a day’s travel from them.
    • We have one big bucket list item: a trip to Ireland either prior to retirement or right at the beginning of retirement that we’ve been talking about taking. Then, smaller trips around the US during retirement.
    • Perhaps we could spend the first year of retirement looking for our last home? Having water close by for kayaking and fishing close by for Patrick would be ideal. Continuing our current outdoor hobbies with more time to pursue them as our health allows. We’ve both spent time volunteering, and would enjoy continuing to give back in that way to our community.
  • Career: If needed, very part-time work would be okay in both our minds, perhaps 15 hours a week. Patrick plans to continue being a medical death investigator until age 65. After that, getting those calls in the middle of the night will probably be too much.

Eva and Patrick’s Finances

Income

Item Amount Notes
Patrick’s net income per month $4,211  P’s net salary, minus medical, dental, vision insurance for family, 403b (24%) contributions, and taxes
Eva’s net income per month $3,337  My net salary, minus 403b (29%) contributions, union dues, and taxes.
Patrick’s net income side hustle per month $900  This varies monthly, so this is the average. No deductions – we pay estimated quarterly taxes
Monthly subtotal: $8,448.00 Based on 26 paychecks annually
Annual total: $108,898.00 Based on 26 paychecks annually

Mortgage Details

Our home is paid off! We purchased it for $206k in 2002 and Zillow now says it’s worth $619k.

Debts: $0

Assets

Item Amount Notes Interest/type of securities held/Stock ticker Name of bank/brokerage Expense Ratio
Eva’s 403b $126,175 Current employer Mix of stocks and bonds “2030 fund” Fidelity No idea
Patrick’s 403b $121,258 Current employer Mix of stocks and bonds “2030 fund” Fidelity No idea
Savings $90,000 Emergency fund.

I put $2,000 into savings every month, without fail.

Negligible US Bank No fees
Eva’s rollover 403b $55,214 Previous employer Mix of stocks and bonds “2030 fund” Fidelity No idea
Eva’s 403b $11,728 Previous employer Mix of stocks and bonds, I really have no idea. Lincoln No idea
Individual stock $7,840 Costco
Checking account $3,500 Monthly bills Negligible US Bank No fees
US savings bonds $2,267 Maturing in next 2-4 years
SEP IRA $1,020 Opened this thinking we could deduct it and lower our AGI (apparently not if we already contribute to 403b) 50/50 mix stocks and bonds, randomly chosen
Total: $419,002

Vehicles

Vehicle make, model, year Valued at Mileage Paid off?
Toyota 4Runner, 2016 $33,000. These values are crazy, nearly what we originally paid. 59,800 Yes
Toyota 86, 2017 $26,000. The used car market is unbelievable right now! 9,755 (yes, this low) Yes
BMW 1000R, 2020 $17,650 13,400 Yes
Honda XR, 2015 $4,800 4,300 Yes
Honda Shadow, 2001 $2,700 36,300 Yes
Total: $84,150.00

Expenses

Item Amount Notes
Daughter’s college tuition $1,042 Wish we had started a 529 years ago. This ends in June 2023.
Grocery store/Costco $619 Includes household supplies (TP, toothpaste, cat food, laundry soap, etc). Our daughter was at home for 4 months in this average.
Insurance (cars, motorcycles, kids’ cars, life) $505 4 vehicles – daughter in college, son pays his college tuition and we pay his insurance – ends in 2/2022. 3 motorcycles. Term life insurance for both of us – ends when Patrick turns 62 & daughter graduates (State Farm). This should reduce quite a bit in retirement… 1 car, 1 motorcycle and no life insurance.
Quarterly tax payments $500 Side hustle, in addition to no deductions. When Patrick retires from nursing, we’ll be in a much lower tax bracket.
Property Taxes paid annually for small discount $298
Home improvements $292 Xeriscaped front yard this year, planning a new fence next year, roof the year after that, other home maintenance
Restaurants $210 The cost of dining out keeps getting more and more $$.
Vacation $167
Cell service for 4 (Verizon) $155 We continue to pay this for kids as well. Patrick requires 100% reliability for side gig. This is unlimited data. This should be cut in half by retirement, maybe even less if we can go with an MVNO.
Gifts $148 Christmas is a big part of this number.
Fuel for vehicles $145 Includes 2 weeks of solo MC vacations for Patrick annually.
Water $116 May decrease after recent xeriscaping front yard
Entertainment $90
Internet $85 Upgraded to best package when our daughter came home for online college in 3/2020 and we never reduced it back.
Cats/fish tank (litter, vet, fish food, filters) $76 One cat gets a dental cleaning each year.
Electricity $71 Mostly A/C in the summer.
Alcohol $62
Home insurance paid annually $59 State Farm
Gas $53
Clothing/shoes $52 Includes annual scrubs for work.
Vehicle/MC maintenance/registrations $41 Oil changes, air filters. Should decrease quite a bit in retirement.
Annual 2 cords firewood (wood stove) $37 This supplements our heat from October to March
Medical/Dental copays/uncovered $36 Mostly lab work
Subscriptions $31 Netflix, Amazon Prime, Hallmark
Personal care (haircuts, color) $31 Patrick colors my hair for me every 3 months.
Medical prescriptions $25
Trash/Recycling/Yard debris $22
Household repairs/maintenance $19 Toilet flapper, air filters, things that break.
Charitable donations $17 We also volunteer at the food pantry 9 hours/month
RN license renewal x2 $13 Every other year. This will be gone in retirement.
Starbucks $10 Majority of this is during the holidays.
Annual national/local parks passes $10
Monthly subtotal: $5,037.00
Annual total: $60,444.00

Credit Card Strategy

Card Name Rewards Type? Bank/card company
Citicard* Cash rewards
Discover Cash rewards
Target 5% off purchases
Kohl’s Only used in combination with 30% off coupon 3-4 x year.

*affiliate link

Eva’s Questions for You:

  1. If we rein in our spending, does it look feasible for Patrick to retire at 62? If he doesn’t take SS benefits until 65, what happens during those three years? The benefit amount stays stagnant? Decreases from current estimates?
  2. One of Eva & Patrick’s cats

    Since we’re getting older, is it too late to funnel money that has been accumulating in our emergency fund into ETFs instead? Or, would opening IRAs be a better idea, funding them with some of the money in our EF currently? Is there a rule against continuing to add money to the IRA from my previous employer?

  3. We’re putting quite a bit into our 403b’s annually (approx. $24,000 for me and $25,000 for Patrick), but not the max. Should we max these before considering opening or adding to any other accounts?
  4. Watching families at the hospital struggle with where to place a grandparent who has been living independently, and suddenly can no longer live independently, has me wondering if we should be looking into long-term care insurance now while we’re young enough to qualify for a lower premium?  I originally thought we would do this when our term life insurance ended in 6/2027 (replace one bill with another).
  5. What, if anything, should we do with the Sofi account we opened?
  6. Our US savings bonds are nearing maturity. It’s not a substantial sum, but is there anything we can do with that money to ease our tax burden? Should they be redeemed as soon as they mature? Could they be used to pay our daughter’s tuition (again to reduce tax on gains)?
  7. How do we ensure the security of our personal information online? I really want to track spending, especially as a method for Patrick and I to realize our wasteful spending, but am very wary of using Personal Capital (or any software tool like this) because of the potential for hacking…all our account info in one location, YIKES! 

Liz Frugalwoods’ Recommendations

Eva and Patrick are doing incredibly well! I appreciate the thoughtful mapping of their retirement and think they’ll be pleasantly surprised to hear they’re in great shape. I’m grateful to Eva and Patrick for dedicating their lives to helping others and want to thank them for these lifetimes of service. Now, let’s hop right onto Eva’s questions!

Eva’s Question #1: If we rein in our spending, does it look feasible for Patrick to retire at 62?

I will not leave you hanging: YES.

To help Eva and Patrick visualize their retirement, here’s a chart outlining their upcoming years of partial and full retirements and their respective Social Security-taking years. I will email this chart to Eva so that she and Patrick can change any of the variables they’d like.

Income

Income Amount
Eva’s Current Income $3,337
Patrick’s Current Income $4,211
Patrick’s Side Hustle Income $900
Eva’s projected Social Security at age 67 $2,217
Patrick’s projected Social Security at age 65 $2,583

Breakdown by Year

Year Eva’s Net Income (Annual) Patrick’s Net Income (Annual) Expenses (Annual) Net (income minus expenses) Notes Patrick & Eva’s Age (this is easy because they’re the same age!)
2022 $40,044 $61,332 $60,444 $40,932 57
2023 $40,044 $61,332 $60,444 $40,932 58
2024 $40,044 $61,332 $60,444 $40,932 59
2025 $40,044 $61,332 $60,444 $40,932 60
2026 $40,044 $61,332 $60,444 $40,932 Patrick retires from full-time nursing at the end of this calendar year; continues death investigation side hustle 61
2027 $40,044 $10,800 $60,444 -$9,600 This reflects Patrick’s income from the death investigation side hustle; does not include taking any Social Security 62
2028 $40,044 $10,800 $60,444 -$9,600 63
2029 $40,044 $10,800 $60,444 -$9,600 64
2030 $40,044 $10,800 $60,444 -$9,600 Eva retires at the end of this calendar year; Patrick retires from his side hustle at the end of the calendar year as well 65
2031 $0 $30,996 $66,000 -$35,004 Patrick starts taking Social Security at the start of this calendar year 66
2032 $0 $30,996 $66,000 -$35,004 67
2033 $26,604 $30,996 $66,000 -$8,400 Eva starts taking Social Security at the start of this calendar year 68
2034 $26,604 $30,996 $66,000 -$8,400 69
2035 $26,604 $30,996 $66,000 -$8,400 The difference between their planned spending and their Social Security will be roughly $8,400 per year. 70

I find it really helpful to see a breakdown year by year to understand what’s going to happen with all the variables in their plan. As we can see, when it all settles out and they’re both fully retired and both taking Social Security (starting in 2033), I project they’ll have a shortfall of about $8,400 annually (that’s the difference between their projected spending and their anticipated Social Security payments). But this is not a problem because they have retirement savings in addition to Social Security. Way to go, Eva and Patrick! Let’s take a look at those investments now: 

Eva and Patrick’s Retirement Investments

Item Amount
Eva’s 403b $126,175
Patrick’s 403b $121,258
Eva’s rollover 403b $55,214
Eva’s old 403b $11,728
Sep IRA $1,020
TOTAL: $315,395

If Eva and Patrick took a 3.5% annual rate of withdrawal from their overall retirement assets today, they’d have $11,038 annually. This is fantastic because:

  1. They shouldn’t need to withdraw anything from these accounts until 2027 when Patrick retires from full-time nursing.
  2. They’re still working and still saving into these accounts, which means they’ll continue to grow.
  3. According to their projections–and my chart above–they’ll only need circa $8,400 annually to make up the difference between Social Security and their expenses.
  4. Additionally, Required Minimum Distributions (RMDs) will kick in for these accounts when they turn 72. I’ll address those specifics in a moment.

This means that, according to all of these calculations, Eva and Patrick are set up for a smooth, fully-funded retirement, assuming they continue to save and invest at their current rate for the remainder of their working years. This doesn’t even take into account their massive amount of cash–over $95k–IN ADDITION TO their paid-off house. Eva and Patrick, you’re in a position many folks would envy. Far from being “behind” on retirement, I’d say you’re ahead!

Eva’s Question #2: Since we’re getting older, is it too late to funnel money that has been accumulating in our emergency fund into ETFs instead?

Eva’s correct that they have a pretty large emergency fund at this point: $95k plus a paid-off house.

  1. On one hand, it’s nice to have this much of a cash cushion. Who doesn’t like cash?
  2. On the other hand, there’s a large opporunity cost to not investing this money.

Table and chairs on Eva & Patrick’s deck

Looked at from one angle, Patrick and Eva are nearing retirement. Looked at from another angle, they’re only 56 and are both active and healthy–their lifespans could be another 40+ years!

There’s a lot to weigh in deciding what to do with this money and it boils down to their risk tolerance. The safest, least-risky thing to do is to keep this money in cash. The most aggressive potential for higher returns (and higher loses) would be to invest all of it. I imagine a middle ground between the two will feel most comfortable. I’ll outline some options in a minute.

To chime into Eva’s third question, I don’t think there’d be anything wrong with fully maxing out their 403bs for their remaining working years.

That being said, we established above that their retirement is already in great shape. However, more money invested for retirement could mean a larger retirement spending budget and more travel, more hobbies, etc. Plus, it’s not like they need to save more cash and so investing more into retirement would be great. If it sounds like I’m not really answering this question, it’s because I’m not. There’s not really a right or wrong answer here, just different options that’ll fluctuate based on: their risk tolerance, their projected longevity, and their overall tax picture.

The first order of business with this $95k is for Patrick and Eva to determine how much they feel comfortable keeping in cash as an emergency fund. If they go by the six-month-of-expenses rule, that’d be $30,222 to keep in cash as an emergency fund. In that scenario, they’d have $64,778 leftover.

Here are some options for that leftover $65k:

1) Open a taxable investment account with a brokerage, such as Fidelity or Vanguard.

For my own personal taxable investment account, I’ve selected low-fee, total-market index funds. Understanding the fees–also called “expense ratios”–on these funds is critical. Eva noted she’s unsure how to determine these fees, so I’ll do a little tutorial. I will tell you that I personally was SO confused about this until I finally sat down, read through my fund worksheets and realized, “Oh! it’s just a little percentage right there! Voila!” 

Tutorial Sidenote: How to Find a Fund’s Expense Ratio

Eva, we’re going to use one of my investment funds as an example today.

I first log into my account on Fidelity.com, then I click on “Taxable Investment” and then “Positions.” Now I’m on a screen where I can see my “Symbols,” which are the acronyms for the funds I own. Today we’re going to look at my FSKAX, which is Fidelity’s Total Market Index Fund. I click on “FSKAX,” then select “research” and “research” again, which brings me to this screen, which is an overview of the fund.

To be honest, it’s actually probably easier to just google the fund in question…. either way, here’s what you’re looking at.

I took the liberty of circling “Exp Ratio (Gross),” which as you can see is 0.015%. What this means is that this Index Fund, FSKAX, offered by the brokerage firm Fidelity, has an Expense Ratio–also known as a fee–of 0.015%. Ok but what does that actually mean?!

Deschutes River, Bend

According to Forbes:

An expense ratio is an annual fee charged to investors who own mutual funds and exchange-traded funds (ETFs). High expense ratios can drastically reduce your potential returns over the long term, making it imperative for long-term investors to select mutual funds and ETFs with reasonable expense ratios (source)

Forbes goes on to explain how these fees are calculated:

Expense ratios are calculated with the following equation:

Total Fund Expenses / Total Fund Assets Under Management = Expense Ratio

For example, if it costs $1 million to run a fund in a given year and that fund held $100 million in assets, its expense ratio would be 1%.

Ok now I feel like I’m just quoting this entire Forbes article, but, they do a really good job explaining this! So, here’s more from Forbes:

Over time, expense ratios can have a significant impact on your returns from mutual funds and ETFs.

While an expense ratio may look like a small, one-time annual expense, your investment portfolio is actually hit with a double whammy. First, you’re charged the annual expense ratio on your current fund investment. Then, your lower returns are magnified by the smaller amount of money you have to compound over time.

Here’s how that might play out with two hypothetical funds:

You make an initial $1,000 investment in a fund with a 0.63% expense ratio, and then invest $6,000 a year for 30 years. The expense ratio would be equivalent to $6.30 per $1,000 invested. Assuming your fund earns an 8% average annual rate of return for 30 years:

  • Before fees, your investment would be worth $744,137.86.
  • After accounting for fees, it would be worth $659,029.93.
  • The total expense ratio cost would be $85,107.93.

What if you choose a fund with a slightly lower expense ratio? With the same contributions and performance over time, a fund with an expense ratio of 0.31%, or $3.10 per $1,000 invested:

  • Before fees, your investment would be worth $744,137.86.
  • After accounting for fees, it would be worth $700,850.36.
  • The total expense ratio cost would be  $43,287.50.

Redwoods 2021

YIKES! I feel like the most broken record on earth when I parrot, “Look for low fees, Polly. Look for low fees!” But this is why. It really and truly adds up over time. And, much like with MVNOs, you can get the same product for less. It is very, very, very worth the 15 minutes it’ll take you to google a fund and find its expense ratio.

If a fund is cagey about sharing their expense ratio? I’m willing to bet that’s because it’s higher than it should be. If a fund proudly displays their expense ratio? That’s probably because it’s nice and low. I would also like to point out that the example fund above, FSKAX has a lower expense ratio than Forbes’ example of a low-fee fund. Just saying.

And Fidelity is not the only brokerage to offer low-fee total market index funds: Vanguard’s VTSAX has an expense ratio of 0.04% and Charles Schwab’s SWPPX is 0.02%. If anyone has any other questions about expense ratios, please feel free to bring it up in the comments section and we’ll workshop it together.

Back To Eva’s Question

I hope everyone enjoyed that rather long sidenote about fund expense ratios. Let’s get back to the rest of Eva’s question on what to do with their $95k chunk of cash. As noted above, after designating some amount for their emergency fund, they could:

  1. Invest the remainder in the stock market:
    • This would be the most aggressive approach with the highest potential for growth OR loss.
    • In my opinion, the best primer on investing is the book, The Simple Path To Wealth by JL Collins, a version of which is in his blog’s “Stock Series” (affiliate link).
  2. Salt Creek Falls

    Keep all of it in cash:

    • This is the least aggressive approach with essentially zero potential for growth OR loss.
  3. Open a Roth IRA (Individual Retirement Account):
    • A Roth IRA is a retirement account that’s post taxes.
    • This means you pay taxes on the money you put into a Roth IRA, but you don’t pay taxes when you withdraw the money in retirement.
    • A Roth IRA grows tax free.
    • You must be age 59.5 before you can withdraw money penalty-free (although there are exceptions).
    • Your eligibility to contribute to a Roth IRA depends on your income and your particular tax situation.
    • I like this Nerd Wallet article on Roth IRAs if you want to read more.
  4. Open a Traditional IRA (Individual Retirement Account):
    • A traditional IRA is a retirement account that’s pre-tax.
    • This means you don’t pay taxes on money you put into an IRA, but you do pay taxes when you withdraw the money in retirement.
    • There are no income limits. Anyone can contribute to a traditional IRA.
    • You need to be age 59.5 before you can withdraw money penalty-free (although there are exceptions).
    • More about traditional IRAs here.
  5. Do some combination of the above.

Eva and Patrick’s current retirement vehicles–their employer-sponsored 403bs–are pre-tax, which means you don’t pay taxes on the money you contribute to these accounts, but you will pay income taxes when you withdraw money in retirement. In light of that, if they wanted some tax diversity, a Roth IRA would offer them the opposite scenario: paying taxes now as opposed to later. We are verging into tax theory here, which is NOT my specialty, so I encourage Eva and Patrick to consult with an accountant about which tax strategy would make the most sense for them. The other thing to keep top of mind are…

Required Minimum Distributions

Also known as RMDs, these are amounts you are legally required to take out of various retirement vehicles once you hit certain ages. You’re not allowed to keep money in retirement accounts forever–at some point, the IRS requires you to start withdrawing money from them. In general, you have to start making withdrawals when you turn 72 (it used to be 70.5, but a law in 2019 bumped it up to 72). To be precise, “If you reach age 70 ½ in 2020 or later you must take your first RMD by April 1 of the year after you reach 72” (source). The exception are Roth IRAs, which you don’t have to take from until after the account owner is deceased.

According to the IRS:

The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s “Uniform Lifetime Table source: IRS.

Kitty close-up!

What’s the “Uniform Lifetime Table”? I’m so glad you asked! The IRS provides it for us in this publication under the header, “Appendix B. Uniform Lifetime Table.” Per this table, the Distribution Period for age 72 is 25.6.

If Eva and Patrick begin RMDs when they’re legally required–at 72–the math they’ll do is the account balance of their 403bs and the account balance of their SEP IRA at the end of the 2036 calendar year (assuming they turn 72 in 2037), divided by the Distribution Period as listed in the above table.

Since we can’t know what those account balances will be at the end of 2036, let’s do the math using their current balances:

  • Eva’s 403bs (all of them combined): $193,117 / 25.6 (the Distribution Period for age 72) = $7,543.63 per year
  • Patrick’s 403b: $121,258 / 25.6 (the Distribution Period for age 72) = $4,736.64 per year

Since Eva has several old 403b accounts rolling around, the IRS notes:

…a 403(b) contract owner must calculate the RMD separately for each 403(b) contract that he or she owns, but can take the total amount from one or more of the 403(b) contracts (source).

Eva, you might want to roll all of these accounts together to simplify things.

Patrick has a SEP IRA, which is subject to the same RMD rules*, so he’ll do this math:

  • SEP IRA: $1,020 / 25.6 (the Distribution Period for age 72) = $39.84

*I spent hours on the IRS website trying to definitively confirm that RMD rules for SEP IRAs are identical to those of 403bs and regular IRAs and…. I’m still not 100% certain. In some places on their website, the IRS makes it sound like SEP IRAs are governed by a different Distribution Period, but that period is not defined anywhere (trust me, I checked). Therefore, I decided to go with this:

The RMD for each year is calculated by dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy. Use the Tables in Appendix B of Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) (source).

Hiking in Canada

If anyone has a SEP IRA from which they’re taking RMDs–or if anyone knows this definitely–and can confirm that the Distribution Period is the same, I will be VERY grateful.

The total amount they’ll be required to withdraw annually (using this year’s account balances) when they turn 72, is: $12,320.11.

The required amount increases each year, so they’ll be withdrawing more with each passing year. Be aware of that Uniform Lifetime table and the fact that the Distribution Period changes each and every year, correlated with your age.

Additionally if Patrick and Eva decide to open an IRA, that will also be subject to RMD rules; although a Roth IRA would not be (until after the death of the account owner).

Let’s Put It All Together Now

To recap, once Eva and Patrick begin taking Social Security and once they turn 72–the age when Required Minimum Distributions kick in–they’ll have a total annual income of  $69,920.11. They can also choose to take out more than the RMDs if they’d like to have a larger budget. They can begin taking money from their 403bs penalty-free when they turn age 59.5.

These are estimates using today’s account balances and so Eva and Patrick will need to do the math at the time RMDs kick in for them. Laws change and the best way for them to stay on top of this is to read the IRS website. I prefer to use primary sources (such as the IRS and the Consumer Financial Protection Bureau) due to the changing nature of these laws. But, these estimates give Eva and Patrick a rough sense of the income they’ll have in retirement.

Here’s an abbreviated version of the above spreadsheet, now including their RMDs:

Item Amount (Annual)
Eva’s RMD from her 403bs (begins at age 72) $7,543.63
Patrick’s RMD from his 403b (begins at age 72) $4,736.64
Patrick’s RMD from his SEP IRA (begins at age 72) $39.84
Eva’s projected Social Security at age 67 $26,604
Patrick’s projected Social Security at age 65 $30,996
Total: $69,920.11

Year Eva’s Net Income (Annual) Patrick’s Net Income (Annual) Expenses (Annual) Net (income minus expenses) Notes Patrick & Eva’s Age (this is easy because they’re the same age!)

2037 $34,147.63 $35,772.48 $66,000 $3,920.11 This is the year that Required Minimum Distributions (RMDs) from their 403bs will kick in. 72

More About Social Security

Let’s go back to the second part of Eva’s question on social security: If he doesn’t take SS benefits until 65, what happens during those three years? The benefit amount stays stagnant? Decreases from current estimates?

Kayaking Hosmer Lake

The amazing thing about Social Security is that it’s inflation-adjusted in perpetuity (source: Social Security Administration)! This is great news and it means your benefit amount won’t reduce. The other thing to know about Social Security is that the longer you wait before claiming your benefits, the bigger those benefits will be.

Eva discovered this in her research and it’s evident in the charts she included. You can figure out your anticipated Social Security benefits by following these instructions on how to retrieve your earnings tables from ssa.gov (the government Social Security website).

Patrick’s benefit amount will be larger the longer he waits to claim it, and, it’ll be larger than today’s estimates because it is inflation adjusted. I’m a primary source nerd, so I recommend the Social Security Administration website for further research.

Eva’s Question #4: Watching families at the hospital struggle with where to place a grandparent who has been living independently, and suddenly can no longer live independently, has me wondering if we should be looking into long-term care insurance now while we’re young enough to qualify for a lower premium?  I originally thought we would do this when our term life insurance ended in 6/2027 (replace one bill with another).

I don’t really know the answer. It seems that a lot of longterm care plans don’t actually cover all that much. Plus, there’s no way of knowing whether or not you’ll ever use it. One option is to self-insure, which essentially means to save and invest money that could be used for longterm care if need be. The advantage of self-insuring is that the money isn’t tied up in an inaccessible account with restrictions on it. The disadvantage is that you might not save enough. If Eva and Patrick are interested in this, I suggest they research it and potentially speak with an insurance broker. 

Eva’s Question #5: What, if anything, should we do with the SoFi account we opened?

I don’t see a SoFi account listed under assets. What type of account is it and how much money is in it?

Eva’s Question #7: How do we ensure the security of our personal information online? I really want to track spending, especially as a method for Patrick and I to realize our wasteful spending, but am very wary of using Personal Capital (or any software tool like this) because of the potential for hacking…all our account info in one location, YIKES! 

The first thing to know is that your personal information isn’t secret to begin with and unless you do something grossly negligent, the chances of you being specifically targeted is miniscule. It’s much more likely a person will lose money by falling for a scam via email, text, or phone. Life is full of risks. Using online banking has risks as does walking across the street. For me, it’s a risk that’s well worth the convenience, much like using a credit card.

Here are some basics for staying safe on the internet, courtesy of my (now retired) software developer husband:

Snoozy kitty

1) Always be a human firewall.

  • Never, ever, ever reply to any email, phone call or text message asking for your personal information.
  • Never turn your account numbers and passwords over to anyone else.

2) If someone calls (or texts or emails) you and says they’re from the IRS or your bank, etc, hang up.

  • Do not give out personal information to such a caller, even if the phone number (or email address) appears to be legitimate.

3) After hanging up the phone, call your bank using the number on the back of your bank card to ask if there’s anything going on with your account.

4) Do not reply to requests for money or gift cards from anyone. Ever. If your cousin emails asking you to wire them money, don’t respond to the email. Call your cousin and ask them what’s going on. Chances are? Their email was hacked.

5) Do not click on weird links. Ever. 

6) Have secure passwords and use a password manager. We use the password managing service 1Password and it is awesome (affiliate link).

I personally would worry much more about getting scammed than about having your information stolen from an online banking platform. In the event of a massive data breach, you’re in good company and it’s not you fighting to get your money back–it’s the corporation doing the legal work. Again, the biggest risk comes from you yourself voluntarily giving away your passwords, social security number, etc. That being said, don’t do anything you’re not comfortable with. I like and use the free expense tracking software from Personal Capital and for me, it’s worth the minimal risk, which is the same risk we encounter every time we open our computers and do things on the internet (affiliate link).

Other Stuff

A few final thoughts before we close:

Blue River Falls

1) High interest savings accounts: I suggest Eva and Patrick move their cash to a high-yield savings account. Interest rates are low across the board right now, but it’s still a good idea to move to a higher-interest account, even if it is a low percentage. One option that I like is the American Express high-yield savings account (affiliate link).

2) MVNOs: Eva is correct that they’ll save a ton of money if they switch to an MVNO. MVNOs (Mobile Virtual Network Operators) re-sell name brand cell service, so it’s the exact same service, just cheaper. It’s the TJ Maxx of the cell phone world! I use the MVNO Ting and I wrote this post detailing a bunch of different MVNO providers as well as a how-to guide (affiliate link).

3) Moving to a LCOL area: Eva mentioned a few times that they might want to move, but I’m left wondering why. They’ve paid off their house, they love their neighborhood and community, and their family and friends all live nearby. I know they’re concerned with the population growth of their town, but a larger town also offers more resources, which could be key as they age and particularly if Patrick’s family history of Alzheimer’s comes to bear. Perhaps moving will make sense for them from a financial standpoint, but I also think it’s important to love where you live–especially once you’re retired and spending more time at home and in your community.

4) Medicare: The monthly estimate Eva provided ($800) seems really high to me. I encourage them to spend time researching what their premiums are likely to be. And maybe $800 is correct, I just would want to back that up with research. Their retirement budget is fine either way, but gaining clarity on that huge line item will brings things into sharper focus.

Summary:

  1. Forest walk

    Read the book The Simple Path To Wealth by JL Collins (affiliate link). Eva mentioned a few times that she feels uncertain when it comes to investing and this book is hands-down the best primer (in my opinion). JL Collins also writes the blog JL Collins and is close in age to Eva and Patrick, so he offers a valuable perspective that’s different from mine.

    • I will also note that Eva, you know A LOT more about finance than you give yourself credit for!!! You and Patrick have done an AMAZING job managing your money over the years! Feel confident that you’ve got this.
  2. Consider rolling over Eva’s old 403b’s so that they’re all in one place. This will both simplify things from an administrative standpoint once RMDs kick in and will give Eva more control over what she’s invested in (remember to check those expense ratios).
  3. Tinker with the spreadsheet I made breaking down their retirement income and expenses by year. Everything appears to be on track for their planned retirement years and this spreadsheet should help guide their decisions should their income or expenses change.
    • Be mindful of when RMDs kick in as you’re responsible for taking those withdrawals yourself.
  4. Check on the expense ratios for all of their investments to ensure they’re at a rate Eva and Patrick are comfortable with. Make adjustments as needed.
  5. Consider maxing out their 403bs for their remaining working years to provide extra retirement cushion.
  6. Decide what they want to do with their $95k in cash:
    • Portion some out for their emergency fund. Move this to a high-yield savings account, such as this one from American Express (affiliate link).
    • Determine if they want to invest the rest or keep it in cash.
    • As noted above, investment options include (but are not limited to): taxable investments, an IRA, or a Roth IRA. Note the risks and tax implications of each choice.
  7. Research longterm care insurance to determine if it’s advisable.
  8. Consider paying for a password service, such as 1Password, to manage and keep secure all of their online passwords (affiliate link). Be aware that it’s much more likely/dangerous to be scammed by an individual than to fall victim to a data breached. Nothing is impossible and everything is a risk, but be aware of what’s statistically more likely to happen. Be a human firewall in all things!
    • Also, your kids may be able to help you out with some of these tech things. Don’t be afraid to ask them for help! In many instances, it’s a question of setting something up once and then continuing to use it in perpetuity.
  9. Investigate transferring to an MVNO to start saving big buck$ every month.
  10. Contemplate why moving to a LCOL area feels important. It’s not strictly necessary from a financial standpoint because you’re on track for retirement AND your home is paid off. 
  11. Feel really, really good about the excellent financial position you’re in. You’ve done an exemplary job and should feel confident and proud!

Ok Frugalwoods nation, what advice would you give to Eva? We’ll both reply to comments, so please feel free to ask questions!

Would you like your own case study to appear here on Frugalwoods? Email me (mrs@frugalwoods.com) your brief story and we’ll talk.

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95 Responses

  1. Jen says:

    I have no financial advice to offer. I’m just here to say how sweet and adorable it is that Patrick colors her hair every three months.

  2. Tracy says:

    Hi Eva and Liz! Lovely write up – I do find the case studies fascinating. I am wondering, since Eva’s kids will be in school for another few years, if it still makes and sense for them to start a 529 plan (before the end of the year!) and get the benefits of Oregon’s tax credit and some potential interest/returns. My kids are younger (10, 8, and 5) but the plan we use (different from our state, but our state doesn’t require use to use their plan for the tax benefit) has tiered levels based on age, so it’s a less aggressive investment depending on age (less risky). Just something to consider. I just scheduled my end of the year contributions for my kids and it was on my mind. Best of luck, Eva! I hope to be as prepared when I reach retirement age as you are.

    • Eva says:

      Thank you for the great idea! I’ll look into a possible tax credit we might be able to take advantage of over the next year or two if we open a 529 even this late in the game.

  3. Debbie says:

    Question #6 about Savings Bonds: If you don’t need the money, they continue to earn interest for 30 years after the purchase date. I’d keep them until you need them and use as mad money for a future purchase or fun item. Spreading out the cash-ins means less taxing on the interest.

    • Eva says:

      Most are maturing at around the same time, but spreading them out as much as possible might help with the taxes. Thanks Debbie!

  4. Belinda says:

    I’m not sure if this was figured into the Social Security estimates above, but when Social Security gives you an estimated amount for a certain age, they assume you will keep working at your current income until that age. So if you retire at 62 and do not take benefits until 70, your benefit at 70 will be less than if you had worked from 62 to 70.

    The Social Security website has a calculator that allows you to enter any annual income for future years (rather than your current income) and will adjust estimates accordingly.

    According to that calculator, in our case, if my husband stopped working at 62 and then collected benefits at 70, the monthly amount would be reduced by 20%, compared to working until age 70.

    • Eva says:

      This is exactly what I was concerned about. It makes sense that it would be based on continuing to earn. And if the predicted reduction in SS comes to fruition, the two could equal a substantial reduction. I appreciate your input Belinda!

    • Anne says:

      Just wanted to add clarification that social security is actually based on the highest 35 years salary. So if you have been working at the same inflation-adjusted salary from 25-60 you won’t get a reduction for fewer years, just based on what age you start claiming benefits. If you have lower earning years or time you took off for raising children, then you could end up with less than 35 full salary years, and continuing to work longer will increase your high-35 for social security. The SSA website assumes you will be working the next calendar year from when you check, but I haven’t seen anything that indicates it assumes you work another 10 years etc.

      • Belinda says:

        Yes! Thanks for clarifying that! I thought of that after writing my comment. In our case it makes a difference, but for someone who already has 35 years of solid income, they should be good.

        Re. the website calculator, I think they assume you will work until you collect benefits and there is a box in which you can specify an average future income. It appears to me that they calculate with all future years at that figure. But once again, it won’t matter to folks who already have 35 good years paid in.

    • Anne says:

      If you’re looking up your social security benefits (especially near retirement), you are much better off signing in to the SSA website and downloading a copy of your statements. This will give you a real prediction of what you will earn at different ages based on what you have paid in so far during your working life. Calculators on their website are not accurate and don’t take into account changes in work history and income throughout a potentially 40+ year working career. Hopefully the statements are where Eva is getting her numbers from! If not it is pretty easy to sign up for an account and download your information.

  5. SJ says:

    Mrs. Frugalwoods gives the great advice so mostly I just say “yeah, do what she says!”. So I guess I will give my own situation… I understand where you’re coming from completely. I’m not a rockstar nurse, but I’m on the other side of 40 with fledgeling adults thinking about my long term future. I’m also in the PNW and have watched our community grow 25% in the last 10 years. Our local independent coffee shop has become unbearably packed all the time and I think this fact alone warrants relocating out of state (I think I’m serious on that). For several years our plan was to stay in the state but move more rural like maybe south Sound or even the Islands (Oregon is great too but your state taxes income). The issue is that our older son is mildly autistic and he’s going to need more support than a typical young adult. We can’t just disappear some place hours away from society like, for example, the Olympic Peninsula. He has just recently picked electronics technologies as an associate’s degree and the program centers around biomedical applications so at least this opens up lots of options for future employment. For the last year we’ve been considering what our younger son might do. He’s the type that will go to a 4 year flagship university and maybe finish off with a graduate degree in something like law or business. But it could be anywhere and it’s dangerous for me to try and plan my retirement around his life. He loves California and his girlfriend loves Florida. Neither would work for us… instead I would give them enough cash to get an extra bedroom for grandma’s extended visits. 😉 The way we are different from you is that even though we have ten years here in the region, this has not become my home state. We don’t have the friends and family that you do. I would have a hard time giving that up, especially as I get older. In fact our plan is to move to the midwest where my parents’ families were from. Also, I sell one of our west coast homes and I can buy three in cash there, including a wonderfully restored Tudor for my husband and I. So despite the similarities in our situations the differences result in a different equation. If we had family here I would try to stay. We’d deal with the increase in population and COL. But as it is we are in a pretty good position to take advantage of geo arbitrage, especially since our older son has agreed to come with us. On the subject of investments… have you heard of Boogleheads? It’s an investment forum/philosophy that’s based on simplicity. There are people there that have 2 or 3 fund portfolios. Not entirely different than Mr. Money Mustache back in his day. In any case, I’m not a tech or investment person but I’ve found reading some of the information on that site helpful. I’m about to get an inheritance that goes beyond our savings and investment plans and I’m trying to figure out if I want to manage it myself or have Vanguard do it for me. It’s .3% which is pretty cheap, but in all honesty if it’s simply setting up index funds in an allocation and staying on top of it, well, I can probably do that myself. Decisions, decisions! Enough about me… if I were you I’d stay put. Not having a house payment, a nice pot of assets and friends and family means you’re set up pretty well. You’re in one of the most desirable areas in the entire country so if, for whatever reason, you do leave, depending on where you go you will reap the advantages of going from high COL to lower COL. You can think of it as an additional insurance policy for life.

    • Eva says:

      I was concerned my husband wouldn’t be able to retire at 62 unless we took advantage of some of the equity in our home. Hence, we were thinking of LCOL locations. What you’ve mentioned about staying in an area where we already have friends and family is very true. I’m feeling less like we need to plan on moving after Mrs. Frugalwoods’ help : ). Thank you for sharing your insights!

    • Dani says:

      Did you mean Bogleheads? I have heard of the Boglehead forum and their philosophy, but not Boogleheads.

  6. Emily U. says:

    We took a vacation out to central Oregon in 2019. The scenery in a few of your pictures look familiar! It’s absolutely breathtaking out there!

    One thing I wonder is if you’re looking at getting a one-story house eventually, if you could just keep your eye on the market over the next few years. With all the capital you have in your house, I would think you’d be able to find a new house that will suit your future needs and still keep you in the area you love with your support network. Yes, the population increase is not ideal, but in my opinion, being close to a support network is worth so much.

    • Eva says:

      I agree, and am feeling some relief after our case study that perhaps we can stay in our area, and like you mentioned, look for a single-story home here – YAY! Thanks Emily.

  7. Belinda says:

    Have you considered retirement expenses and income after one spouse dies? The survivor will not continue to get both Social Security checks. Expenses may not go down a proportionate amount, especially if the survivor lives in the same house. Since one spouse could die decades before the other (in any couple), it’s worth checking the numbers for that scenario.

    When I plan for retirement, I don’t even include my estimated Social Security benefit since either one of us on our own would receive my husband’s amount only. If we do both live to a ripe old age together (and Social Security continues to do its thing), we’ll have my checks as a cushion against surprises, but I don’t run numbers with it in mind.

  8. Sally Mangan says:

    I would encourage you to start looking into Medicare now. It is a confusing system with penalties if you postpone applying for certain portions (part B & D) because you think you don’t need them. You will get a lot of pressure to sign up for a Medicare Advantage Plan, but please be aware that with your husbands family history, you may be denied traditional Medicare which he will need for the best coverage at a later date if you take the Medicare Advantage initially. This is a good FB group to get a better understanding of your options. https://www.facebook.com/groups/BoomerBenefits. Also, Liz is correct about Long Term Care Insurance. It is really not that good. I worked many years as a Patient Advocate (LTC Ombudsman) in Long Term Care facilities, so I have seen them all. It sounds like you have really done well in saving for your retirement and I don’t feel qualified to make other recommendations but wanted to give you a heads-up on the Medicare part.

    • JD says:

      Sally, I’m not arguing, I’m genuinely asking about being denied Medicare due to Patrick’s family history – I’ve never heard of that before. My husband had no issue getting Medicare, and his mother died of Alzheimer’s and he is a Type 1 (juvenile) diabetic. I was accepted without a problem and I have a pretty serious autoimmune condition. Can you expand on possible denial a little more, please ?
      Thanks!

      • Karen A Eyrich says:

        Sally, I was confused at first as well. Then I reread it. Someone will not be denied a supplemental policy when they first enroll in Medicare. However, if someone enrolls in an Advantage plan, and later (after the first year), wants to enroll in a supplemental plan, they might have to undergo medical underwriting and could be denied. They would still be able to go back to traditional A&B, but won’t necessarily have the option to purchase a supplemental plan, such as Plan G or N.

    • JAB says:

      As a Nurse Case Manager, I agree with this. Stay away from Medicare Advantage Plans, even with their smooth advertising. Traditional Medicare will be a better choice when you need services, even if the costs are initially higher. You have to requalify for Traditional, health wise, if you leave it and it can be denied.

    • Sarah says:

      As a long term care nurse I agree don’t give up Medicare A even though Medicare advantage plans may offer dental you’ll get screwed if you need skilled nursing care. Long term care insurance is something that used to be great but insurers took a bath in the 90’s and don’t offer good coverage now.

    • Eva says:

      We’ll definitely be applying for Medicare at 65 when I retire and no longer have employer-provided benefits. I’ll make a note of your information re: Medicare Advantage, and will also look at the FB group — thank you so much for the link!

      • Eva says:

        Wow, interesting to hear all the thoughts on long-term care insurance! Sounds like saving move in a dedicated account, as suggested by Mrs. Frugalwoods, may be the route to go for this. I appreciate the insight.

  9. Edit says:

    Regarding help with retirement savings and investment ratios, both Fidelity and Vanguard associates are a great resource. Give them a call, and they will walk you through how to find any information, and ask them for suggestions for alternative investments. A free resource for being an account owner with them!

    I would also add to long term care planning that speaking with an attorney specializing in elder law is a great idea. What is and is not allowed (such as creating trusts to shield assets from Medicaid clawback) are state-specific. However, these attorneys are a great resource for what is best in anyone’s personal and family situation. This has been immensely helpful for about $200 cost per hour with my aging in-laws in their 70s.

  10. pauline says:

    I just want to say you’ve done a great job saving for retirement and thinking things through, planning how much you’ll need, etc. I took care of my dad the last 4 years of his life. He had Alzheimer’s at least 15 years, and passed away at 84. He and mom traveled, moved an RV up to Colorado to stay in during summer, and traveled to Canada and parts of the USA after he retired at age 58. There is no guarantee who will or who won’t get dementia (I’m sure you know this) so I think you should enjoy life and plan on having to help take care of each other in old age whether either of you gets dementia or not. Families everywhere are grappling with how to take care of the folks. The best thing to do is be prepared to pay for in-home care which is less expensive and better quality than in a facility. Enjoy the last few years of working, and then enjoy retirement even more!

    • Eva says:

      Yes, I care for many folks with Alzheimer’s at work. There are predisposing factors, but as you stated, you never know who will or won’t get it. Thank you for sharing your personal experience and the heart-felt advice Pauline!

  11. Erika Wilson says:

    You have a high income similar to what ours was; only my husband was working due to my ill health in the last few years before he retired. As an associate head of a large university library he brought home, the year before retirement in 2012, $5,938 net per month. I still gave occasional lectures for The National Association for the Humanities , which brought in maybe $350 more pr month.
    We socked away ca $2,000 a month into a private annuity. I am older than my husband and took out social security when he retired as this raised my SS to a higher amount.

    Now that we are both retired our current income is pretty much the same = $%5,971. , This breaks down to State of Delaware annuity i$2,600 a month. Private annuity $830 a month. SS 2131 a month SS 990 a month.

    WE kept ready savings at between 10 and 25 thousand, for big expenses –new roof, new bathrooms, part new kitchen. ( Tile floors in all 3) All of which we have done since reTirement.

    Medicare covers all doctor visits, all hospital stays with any surgeries. I have had heart stents, appendix removed, and hip replacement.
    My husband has had 2 knee replacements and carpal tunnel surgery. All free. We do have additional Blue Cross Blue Shield insurance, paid by the university, and this pays most of our medical prescriptions ( We pay 20%) We are very lucky in this .

    here is recent talk that Medicare may start covering eyes and teeth. Buy not yet. The University gives us some insurance for thes conditions–not good for eyes and better for dentistry. We pay nearly $60 off husband’s annuity for these. I have hd serious dental problems due to malnutrition as a child, ,in Eastern Europe. I go to a famous dental school at Temple University.. Philadelphia. Graduate students work on me with close supervision from the school’s professors, who sometimes take over. I have never had a higher charge from them more that $80 ( Partial dental plates) If where you move to `has a dental school this is the way to go.

    Look out for State taxes before you consider moving elsewhere. Some States are very high. Although Delaware is expensive living–property especially, we pay no taxes as retirees. Every tax time we receive back $6,000+ which goes strait into savings.

    This is a very long reply but I hope that you can pick out some useful ideas from it.
    I wish you the very best, I really enjoyed your openness and life style–more so because we moved here, in 1992, from Corvallis, OR.
    Erika W.

    • Eva says:

      So funny, we were just in Corvallis TODAY, which is why I am so late in reading these very thoughtful comments. There is a dental school 3 hrs from us; I hadn’t even thought about it as a possibility for care. So much to think about surrounding retirement. I appreciate your input!

      • Tracy says:

        I’ve been thinking about dental insurance as well as I’ll be retiring next March at the age of 55. Another source of dental insurance is through AARP ($99/month for one person for comprehensive coverage in Massachusetts). I’m still working on the calculations about whether it’s worth it or not. I’m considering self-insurance instead and I love the idea of nearby dental schools – I’m going to looking into that.

  12. Erika W. says:

    Sorry, I meant I took out SS before he retired. Changed it to working of his SS when he retired ,because this raised mine.

  13. Katie says:

    You life sounds lovely – I really enjoyed reading about the many things in life that being you joy! I don’t want to be a major downer, but I do think you should consider the cost of long term care as your husband has dementia in his family tree. When we were trying to find a facility for an aging family member with early dementia, assisted living was punishingly expensive, and nursing home care was completely unaffordable. We were caught in a difficult position as he had too much income to qualify for aid, but nowhere near enough money to afford the care he needed. I think this is true for many middle class people, and it’s why so many families end up really struggling with providing in-home care for people who need 24 hour a day care and supervision. (I’ve also seen this, and it was incredibly hard for everyone.) It’s also why so many people end up on Medicaid – Medicare doesn’t cover long-term care, while Medicaid does. The problem is that to get Medicaid coverage, you have to first spend down all of your assets. Women obviously often live longer on average than men, and this is one reason why elderly women often struggle financially – the family has spent all of their assets on care for the first person to become ill. I’m not sure what the answer is here – I don’t know much about long-term care insurance, but my understanding is that it often doesn’t cover much. When my husband and I are getting nearer to retirement age, we plan on talking to either a lawyer or a fee-based financial planner with expertise in elder care so we can discuss the best way to be sure we’re both financially protected in old age. I was really horrified to realize how little support there is for middle class people who can’t afford long-term care. It is not something most people can reasonably save for (we certainly can’t – think potentially $100k per year for skilled nursing home care), so I would expect Medicaid to be part of the picture at some point if anyone develops dementia. The thing to look into is making sure that the surviving partner is financially protected. Hopefully this is never an issue, but dementia is so common that it’s worth exploring as part of planning for the future. I don’t think you should try to save for this – I just think you should talk to someone with expertise in elder care and financial planning to be sure you’re both financially protected.

    • Eva says:

      Good advice. I have heard all the things you mention from the families of my patients and it is frightening. I also saw it firsthand with my father-in-law. Thankfully, he was able to stay home until he passed, but my mother-in-law could have used more help than we were able to provide. Thank you for sharing your insights!

  14. Nancy says:

    First, let me say kudos on all the thought you have put into making the big step to retirement and your commitment to save $2K every month. I have a few comments to share that are based on personal experience. We retired in the last 2 years at 62 and 59.
    * SS benefits continue to go up the longer you wait. If possible, one person should wait until they are at full retirement age to take SS benefits. That way even if that person dies first, the spouse can starting taking the higher amount.
    * I am a strong believer in a large savings account that is readily accessible. So I would keep the $95K in saving. I know this is not the popular view, but I have a number of reasons for this. 1) You know you have this amount to fall back on. It isn’t going to go up or down with the stock market. Last year we found a bank offering 2.5% and moved a large amount of our savings to that bank. It only lasted for 12 months, but they are now paying .6% (still much more than any other bank) and we are still making money on our money. 2) If you retire before 65 you will need to pay your own health care. We don’t live in California so it may be different in Oregon, but Covered California (the system put in place for the ACA that is still in place) is based on what you earn, not what you have in the bank. So, we are able to live on our savings and only take a small amount out of retirement accounts (considered income for Covered CA), and get no cost health insurance and very low cost dental. The savings on health and dental insurance is likely more than we would make on an investment if we moved our savings to a investment fund. Plus there is no risk to our money, so we know it won’t go down. 3) We know that no matter what happens, we have available cash to cover it. If our car breaks down, we have the money to buy a new one. If we get stuck some place on vacation and have to spend a few extra days, we have enough money to cover it without stressing. 4) Having enough money to live for a few years is a huge piece of mind.
    * Long Term Care decisions – in my experience with friend’s parents, LTC insurance does not pay for a lot of expenses and it only pays for 3 years total. Do your research, but you may decide it is a better financial decision to put the money in an account that you can use for LTC if needed.
    * Motorcycles – It looks like you have different types of motorcycles that are used for different purposes. Is it possible to consolidate and only have one? This would save you money on monthly insurance as well as having money from selling off the other (or selling them all and buying one that your husband is happy with).
    * Moving to an area with a lower cost of living – You may want to think about doing this when your husband retires instead of waiting until you retire. This would allow you to live more easily on one salary and invest the money you will have left over after selling your current house and buying a smaller one in a cheaper market. I am retired from administration at a large health care system and was privy to the hourly pay of RNs coming from other states so I know there is a huge difference in what an RN makes in different states and locations. You would want to make sure that your pay would not go down significantly if you move and what you would need to do to get licensed in the new state.
    * National Park Pass – good news is when your husband turns 62, he can buy a life time pass for $80. So this will be a one time expense. The pass allows for 5 people to enter the parks. When we go with friends that don’t have a pass, they often offer to pay for lunch or buy us a drink because they benefited from our pass. So we get a double win!

    • Heidi S. says:

      Hi Nancy,
      Would you please share the name of the bank that in now paying six percent interest on your emergency cash fund?
      Thanks

    • Anne says:

      This is a really good point on SS. It may work out much better to take Eva’s at 62 or 65 and then Patrick’s at 70. Then at 70 Eva can switch here to 50% of Patrick’s. It would make things a lot more financially stable in case one of the predecessors the other, and it wouldn’t have a large financial impact over those few years since their finances are in such good shape.

      Regarding the very large emergency fund – what about investing some of it now and then building it back up when they are closer to 62 and want to build a buffer for the years between stopping work and collecting social security? Their work seems stable and their savings are high, so they don’t need to have the large cash cushion so far in advance in order to have one for retirement.

  15. CPJC says:

    Agree with staying in your house/community. My parents have lived in one town since the 1970s. They have a huge social network – but now they are in their 80s and are considering moving to a retirement community to be closer to my brothers family. All change is difficult – but this is especially daunting.

    It’s a blessing to be near family, in an area you like, and in a home that’s paid off.

  16. Diane says:

    If you think you might want to move, maybe consider buying some land. The price of real estate keeps increasing. Maybe it makes sense to purchase now rather than later (5-10 years) when it might be more expensive?

  17. JD says:

    Medicare premiums for part B are based on income at 65. Most people pay around $150 per month, from what I can see. My own premium (I am still working) is $145 per month, and I hear some others say theirs is about the same. Once a person starts collecting SS, the premium is withheld out of the SS checks. Part A is free to most people, but does not cover much at all. Medicare part B will not cover everything, either, so also consider the cost of a supplemental policy. An agent can help you with this, but a lot of it is online as well. Part B doesn’t currently cover prescriptions, and has a yearly deductible as well as co-pays.

    Also to be aware of – many health insurers use age-banded policies. Once a person is in his or her sixties, the premiums for a health policy, even one through work, can go through the roof. My monthly health premiums jumped to almost $1200 a month, while my younger co-workers’ were $350 – $550 a month. My employer paid a portion of it, but I had to pay the rest, until my employer decided to cover the entire premium for all employees’ health insurance. They now reimburse me for my Medicare premiums, which I pay myself.

    Again, depending on total annual income, SS income is taxed on a percentage of the income, rather than the entire SS income, for most people. The IRS has a formula to figure that and tax software figures it for you when doing your taxes. This is just an FYI for thinking about your tax burden later.

    I applaud Eva and Patrick for taking a hard look at this, and I’d like to offer this encouragement — heredity is not destiny. Patrick should be aware of the possibility of disease, of course, but not live as if it is inevitable. It’s absolutely not! I have seen that in my own family and among acquaintances. Live positively, live strong, and carry on.

    • JD says:

      I should add that when I am talking about health policy premiums being age-banded, I mean for “regular” insurance policies, both individual and company-sponsored, NOT Medicare.

    • Eva says:

      Wow, $1200 a month in healthcare premiums, that’s incredible! Thank you for the information on Medicare, especially the costs. Perhaps with a supplemental policy, our costs will be closer to $500/mth. I love the “heredity is not destiny,” and will remind Patrick of this.

  18. Tessa says:

    Hello! I share your concern about tracking my financial expenses and income online. Three years ago, I discovered Vertex42 and have been using it ever since. It’s an Excel spreadsheet that you download to your computer. You can also customize it to a large extent though this will require some very basic Excel knowledge. I’ve tried several different approaches over the years and this has been this best for me. Here’s the link: https://www.vertex42.com/ExcelTemplates/money-management-template.html

  19. Tamar says:

    There are some tests that can be done to determine the probability of getting Alzheimer’s. Especially if it runs in the family.
    Also, changes from Alzheimer’s can be detected in the brain even before the symptoms begin. Early detection could mean a slower progress of the desease if it is treated early.

    Eva and Patrick, I know not everyone wants to know ahead of time, but in case you do, there are things you can do now that could help if worse comes to worst.

    Best of luck!

    • monica says:

      I work directly in this field, doing research on the genetics of Alzheimers disease, and strongly advise against getting these tests, UNLESS the people in your family are diagnosed at ages less than age 60-65. If family members had onset before. age 60/65 they may have the very, very rare form of the disease that is inherited in a 50/50 fashion (called early-onset familial Alzheimers disease) and he should get involved with a genetic counselor to figure this out. I would be very sad if no one had told them this until now. If the age of onset for the father/grandfather was post 65ish years, that is more typical Alzheimers and there is no definitive test for that at this point. Currently, the reliable early detection tests for this regular Alzheimers are only available as part of research studies. The info from 23 and me or other places is not valid. Also, I caution agains having these types of tests on your medical record as I am not convinced insurance companies will not discriminate.,

  20. Leslie says:

    Congratulations on how well you are doing and your plans.
    I have a question: Does it make sense in retirement to budget for the same costs, i.e. don’t they go up some?
    Also, you don’t seem to pay much in home insurance. Are you underinsured since your home has tripled in value?

    • Eva says:

      Hmmmm, our home insurance has increase a little each year. I guess I assumed insurance companies take increased value for the area into consideration, perhaps they don’t? Sounds like it may be worth a call. Thank you.

    • Mrs. Frugalwoods says:

      Regarding costs in retirement: my assumption is always that YES costs will go up (due to inflation), but that their income (social security and investments) will also go up. Since we can’t know what those future costs and incomes will be, I used today’s dollars. Hence, it’s an estimate, but an educated one.

  21. Rich says:

    Don’t move. Keep what you have and add to it. The house sounds great maybe just focus on enjoying it and take a few bike trips when you get wanderlust. People are always more important than location and those lovely green quiet places can be lonely. You are in good shape. For me, the 95k should go in an etf, the risk is low but I might wait for a general dip to buy in. If this is stressful take 30 k and put it in for a year to test the water. Extra spending sounds like a concern, motorbikes are expensive and you guys have different philosophies. Maybe don’t track spending any more than you do but boost the savings till it bites a little. If the money hits a saving account before being invested then you can always dial it back. I invest everything with auto transfers but it sits in an account for a month before I turn it into shares. If I have an expensive month then I take it back out. If I have to hit it repeatedly then I look at why. Incidental cafe food is my wasted cask. Sigh. And tools. And books. I try not to indulge all three at the same time and generally don’t shop. Anyway, default savings might make expenses more transparent. Otherwise; I’d try to de-emphasise the focus on early onset dementia you guys are a little mortality conscious for 55, which might be sucking the joy out a little. Try a little wilful ignoring of mortality outcomes. Do some yoga instead. Breathe. As far as the motorcycles go I found that more bikes are a hassle. Combine the value and buy one really nice bike and the complete protective gear/ gps electronics. Sell it at about the 8000k mark and make sure you both have a hobby. Relationships first. Home is where the heart is. Appreciate your blessings and test the waters on ETF’s.

    • Eva says:

      Lots of great nuggets of advice! I think our occupations make us more aware of our mortality, but you’re right, worry is sucking the joy out of the present. Thank you Rich.

  22. James W Day says:

    I would not make any Real estate purchases with this inflated over valued market. You could sell a rental, or scale down from say a 4 bedroom to a 2 or 3.
    That would be paid off and you’d have extra cash.

    This is great my wife and I are both healthcare workers that moved into academia. I was going to send in an example to Mrs. FW , but our lives & incomes parcel Eve and Patrick’s.

  23. Kaitlin says:

    Wow – can I just say how much I appreciate the amount of work Liz puts into these case studies. This one was clearly a lot of research and it’s valuable to everyone trying to understand retirement. Thank you, Mrs. FW!

    • Eva says:

      YES! I couldn’t agree more. I LOVE reading Mrs. FW’s case studies and advice, and feel like she has spent extra time for us. So very much appreciated!

    • Mrs. Frugalwoods says:

      My pleasure! And thank you! What can I say? I enjoy nerding out on the IRS website 😉

  24. Kate stephens says:

    Congrats on all of your accomplishments. Here are my thoughts: don’t move! You live in an amazing place that you love, are well connected to your community and make the most of the nature around you throughout all seasons based on your hobbies. That will be very hard to recreate and you don’t need to. Shift your retirement savings into 1 place ( you have fidelity so that could be easy) and put them in a total stock market fund. Other option is vanguard and do vtsax (vanguards total stock market fund) within an IRA for your retirement. You are potentially going to be retired for 40 years so need the growth. I love Jl Collins book and recommend that too……..simplifies the whole thing and an easy read. The money you have in savings …keep 30k in a savings account (capital one have reasonable rates but there are others) and deploy the other 60k to earn money for you. I would consider 2 options: the easy passive option is put it in a taxable account in the total stock market (same as your IRA above but in a standard taxable account). Option 2: You may want to consider buying an investment property that is a single story bungalow that you would consider moving into if needed later in retirement. In the meantime you could rent this on Airbnb as short term rental. This can generate significant income, is something Patrick could manage as part of retirement whilst you still work and you will have a retirement house paid off when needed. You could then sell your primary house without any capital gains tax implications. Important note – I would not place the property on long term rental as the tenant laws in Oregon make being a landlord there challenging.
    Whatever you decide you are in great shape. Enjoy retirement!

  25. Pat says:

    Just an out-of-the box suggestion to consider…perhaps take a couple of years as travel nurses. See different parts of the country, get paid large sums of money, and potentially retire even sooner.

    I just saw an article advertising close to $100/hour for travel nurses. If the two of you worked 50 weeks per year for the next 2 years, that would gross $800,000. Netting out taxes at (ballpark) $100k/yr and your expenses at $50k/year, you’d finish with somewhere around $500,000 banked. Using Liz’s cash flow estimator above, that could cover you with minimal additional working until social security. Obviously, this is just big picture/back of envelope calculations, so if you were interested in it, you’d have to do some more in-depth research and planning!

    It really depends on your happiness levels with your current jobs and lifestyle. You could easily be content with that–no problem! On the other hand, if you’re ready for a change, this might be worth exploring.

    As for health care, marketplace plans are not terribly expensive for people with lower incomes, and since you’d want to live on $55k/year, I bet you could find an affordable gold plan.

    • Mrs. Frugalwoods says:

      Ooo travel nursing! Good idea, Pat! I had a travel nurse as a Case Study participant a few months ago and she is making substantially more as a travel nurse than she was at her hospital.

    • Eva says:

      Some great suggestions Pat! We often work with travel nurses, so are aware of the amount of money that can be made in a short period of time. We are happy with our current employer, but always something to keep in the back of our minds : )

  26. quincy says:

    Cool case study, and nice work! A few thoughts…does your husband want to retire or do YOU want him to retire? I couldn’t quite figure out from the article. If you’re worried about dementia, it seems that him staying busy and involved at work (maybe just part time) might be a better way to stave off the Alzheimers. If you don’t want to sell your house, why don’t you rent out the bedrooms upstairs? Maybe you could get a separate entrance to it and then get some extra income that way. Retirement–if you’re thinking about moving, maybe you could move to another country with a lower cost of healthcare. I know that is something we have thought about, because it is SO expensive here. Seems like you are in an excellent position for an exciting future. Thank you for your dedication throughout COVID, I appreciate your service as a healthcare worker!

  27. Kris says:

    There is an excellent, free calculator at http://www.opensocialsecurity.com. It provides the most optimum strategy for maximizing social strategy benefits. The only pieces of information required are the the “Full retirement amount” for each individual and the respective ages/birthdates. The full retirement amount is available at ssa.gov.

  28. Natasha says:

    Eva, it sounds like you’re doing great! Given that your house is already paid off, I wouldn’t be in a hurry to move. I used to live in Oregon, and I know the city you’re in. It’s a beautiful place, with so much access to so many great outdoor adventures, as well as good resources for assistance should you need it as you age. Plus, the community you’ve built over the years will be invaluable to you in retirement. It’s hard to start all over building new friendships. If the house is really too big for you down the line, you might consider moving to a smaller place in the same town, or just outside it.

  29. I am not as optimistic that your income in retirement will provide the lifestyle you want in retirement unless there are cutbacks to lifestyle.

    Based on income projections you will be subject to IRMAA Medicare premiums (income based) so your premiums will be much higher than $800. In 2021 a couples Medicare Part B and D standard premium plus Medigap are be about $870 a month.

    Cut back on the $2,000 savings and invest more of it.

    At your ages LTC insurance is probably too expensive to afford if you can get it. I bought mine 30 years ago. Last year the premium went up 46% and this year another 26%.

  30. Rosie says:

    I didn’t see taxes listed as an expense in the post retirement budget — RMDs from a traditional IRA are taxed as ordinary income, and 85% of social security may also be taxed, see https://www.ssa.gov/benefits/retirement/planner/taxes.html. Also, you may need to include a bit more for “sinking funds” – those “one time” costs for items like a new roof, a new car, painting the house, etc. that seem somehow to come up every year for something or another!
    I don’t think $800 a month is too low for medical expenses in retirement — in addition to Part B and part D premiums, there are copays and deductibles. Prescriptions in particular can cost thousands of dollars, particularly if a generic is not available. See https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance. Plus costs for dental, vision, etc. (I just looked at the cost recently and was shocked to see how high Medicare premiums are once you get out of the lowest brackets — which many people are if they have been saving in IRAs/403’s all along and will have RMDs along with social security.)
    It seems as if you are saving a sizeable amount each year ($40,000) in addition to retirement which is great — will you be investing that? Seems like regardless of what yo do with the existing emergency fund, you might want to invest that going forward. Putting some in a Roth could be helpful — you are always allowed to take out the contributions, and can start taking out the earnings once the account has been open for 5 years if you are over 59.5 (and for some other triggering events). Liz discussed further up above.
    One last observation on the sale of the house — it sounds as if you may have a capital gain which would be taxable if you sold the house now — but if your taxable income goes down (as it would once Patrick retires) you might end up having a capital gain rate of 0. So this might be worth thinking about if you end up wanting to sell around that time that you are retiring.
    Best of luck! It sounds as if you have a wonderful lifestyle — enjoy!

  31. Joan says:

    It is worth looking up the ranges for IRMMA the income based Medicare premiums. You could contact the SHIBA office in your county in Oregon for more information of Medicare costs to help you plan ahead.

  32. monica says:

    They don’t have to switch to an MVNO for cell phone to save. I have 3 phones with 6G of data on each phone for total of $85 a month. This is a prepaid account so there is no 2 year contract and you can bring your own phones. I think an additional phone would be an extra $20 so well under what they are paying and staying with Verizon’s network.

  33. Lindsey says:

    I want to put a word in here for your husband retiring as early as possible in order to enjoy life in case he does begin to show signs of dementia. I come from a family which seems to keep passing on its genetic cardiac defects (and yet none of them understand why I refused to have children…). I retired very early, in order to have time to enjoy life just in case, and, sure enough, I am no longer able to do any significant travel or enjoy a lot of activities we used to. I do not for one moment regret that we live a bit poorer now because I took the time to retire and spend some savings to enjoy life in case the time would come when I could not.

  34. Terry Moseley says:

    Hello Eva and Patrick, this message is off-topic, yet here goes. I am Terry and I live in Cannon Beach, OR. Mistakenly I bought two tickets to a Bruce Cockburn concert at the Tower Theatre in Bend for Monday evening the 13th. I thought I was getting tickets to his concert in Eugene. (I was planning the trip tomEugene and looked at the tickets yesterday (bought last summer!) and saw Bend?!) If you don’t know his music, it’s really lovely-look him up-and will be a beautiful evening. The Tower Theatre looks amazing from photos I’ve seen. These tickets are hard copies and I would need to get them in the mail tomorrow for you to get them in time. I know this may be considered dangerous to request a mailing address. I consider Frugalwoods to be a safe and respectful place, and I truly would like to see these tickets enjoyed and I don’t know anyone in Bend. I did put an ad in Craigslist there under tickets, and I offer these free to you. A Frugalwoods Case Study is brave and pretty enlightening! My husband and I are of a similar age and prepping for retirement on the other side of the state. Experiencing the same population growth over here by the beach. Wondering if we should move on to a less busy place after retirement. Yet Oregon really is so beautiful and the PacNW weather, once you live in it, it becomes difficult to imagine another climate. Your case study is the closest to our lives and was really helpful.
    So, if you can use the tickets or know someone who would appreciate the gift, please be in touch. Terry

    • Eva says:

      Hi Terry, That is so very thoughtful of you! If we didn’t have a birthday dinner that evening, we would take you up on it. We have been to numerous events/shows/concerts at the Tower Theatre and it is a wonderful place. Thank you anyway for the sweet offer.

  35. Cindy says:

    For long-term care, this is done state-by-state so check on how much the premiums will increase as time goes by. My parents carried this insurance for years and every year the rate hiked so much that they sat down with a financial planner and decided they were “self-insured” enough to stop carrying it. It’s really not worth it as you get older.

    For Medicare, my father’s family has a history of Alzheimer’s and he has Medicare. You can’t be denied coverage for a family history.

    I also think it’s awesome that you all are making these kinds of plans, now. Best to you as you work toward retiring early!

    • Eva says:

      I think LTC insurance is out. So many people here are of the same opinion. Good to know coverage with Medicare can’t be denied. Thank you Cindy!

  36. Rodney says:

    I don’t like putting my info into online programs either! I use excel and it works totally fine!!

  37. Nancy B. says:

    I’m a different Nancy, but if you look closely I believe she said that’s .6% interest currently after a big percentage initially. Point six % isn’t good, but nothing to sneeze at compared to the offerings of many financial institutions these days.

  38. SpaceDoc says:

    The idea that keeping the emergency fund in cash has “essentially zero potential for growth OR loss” is part wrong. You are guaranteed a LOSS by keeping it all in cash.

    Your money decreases in buying power in proportion to the rate of inflation every year. Keeping some of it in cash for quick access might be good, but the rest could be in an index fund, or bond fund that can be sold and accessed in a few days if needed.

    Early retirement may hasten the onset of dementia according to some studies, but this is not well defined. Maybe better to go halftime for a few years before full retirement. Also, I think we are on the verge of actual effective treatments for this, so the longer he can hang in there the better.

    At this late stage with only 10 years to go of savings, the load on your mutual funds is probably not as impactful as it would have been 20 years ago, but good idea to minimize none the less.

    Last, why wait to go to Ireland? Seems like something you should do ASAP.

    Good luck.

  39. Donna B. says:

    I was thinking along these line too. I’m not familiar with the going pay scale for nurses in your area but your income seems low to me especially for someone with your experience. My daughter is an RN who just graduated 2-1/2 years ago and spent her first 2 years in med-surge. She put her resume online and had so many offers it was hard to believe. She was offered a traveling nurse position that pays $3600. per WEEK! She was also offered positions in other hospitals that came with $25,000 signing bonus. She did not want to be a traveling nurse because that can be an even more stressful situation. She actually ended up getting hired as a home health nurse where she gets to work with the elderly (that she loves) and she has a normal schedule working Monday -Friday 8:30-4:30. They pay her $90K a year. She is in Olympia WA and COL is high there but she had offers coming in from all over the country. I don’t know if you are set on staying at your current hospital but you may be able to increase your income a lot.
    You guys have done a fantastic job so far and I wish you all the best!

  40. Eileen says:

    I can’t wait to re-read this (and the comments) when time allows. We are just a few years older than this couple (also same age as each other) and are eyeing retirement from traditional/full-time employment in 2023 (we’ll turn 60 that year) for many of the same reasons (parent/grandparents who died earlier than one would like, ALZ, work burnout, etc). And I LOL’d at the trip to Ireland because that’s on our first year of retirement list as well! Our ages and numbers differ a little, but so many things align (no debt, expected retirement expenses, concerns about LTC). Thank you all so much for this case study!

  41. Mel says:

    Hi, from a fellow RN. I would keep working, at least part time, as long as you enjoy it and can physically and mentally handle it. I would stay in your same area, but sell your current house and buy something less expensive, (one story) and save / invest the profits. Stay on track and you are doing awesome.

  42. Shannon says:

    I’d do genetic testing and find out how likely it is that Patrick is going to get Alzheimer’s. If it turns out he has a very low likelihood, that would be a major stress reduction.

  43. Sarah says:

    Have you looked at renovating to age in place?

  44. Michele says:

    Fantastic case study! Thank you, Eva and Patrick, for your work as nurses!

    Mrs FW did a good job of remaining impartial and laying out all the options, so I will be the one to be partial–OPEN TWO ROTH IRAs! I am pretty positive that you fall within the income limits for doing so.

    You are going to want the tax diversification in retirement, meaning some money you don’t have to take RMDs on. Plus, you can access the money you put in (not the gains) anytime, AND money in a Roth moves to the next generation tax-free so your kids won’t pay taxes on it, either. Once in retirement, you’ll withdraw from your accounts in this order: taxable brokerage, pre-tax 403bs and Rollover IRAs, and then Roth IRAs.

    I would do it this way:
    –Keep $50k in cash. I know that technically you only need $30k, but I’m conservative with my money and I would be with yours, too. $50k is a nice number for sleeping well at night, especially when you own a house. Put it into an online high-yield savings account and keep that ~$4k in checking.
    –Of the remaining $45k from savings, put $7k into a Roth for each of you for the year 2021 (you can do this until April 15, 2022).
    –Then you have $31k left. Put that into a taxable brokerage account, which you may already have for the Costco stock. Invest it in 50/50 stock/bond index funds or use something easy like a Fidelity Freedom Index Fund. Remember this money will come out first in retirement, so make the time horizon about 6 years away.
    –Starting in January, put another $7k into a Roth for each of you for 2022. Create monthly automatic transfers of $583 for each of you to max out your 2022 Roths. Think of this as coming out of your $2k/mo savings. Invest your Roths in the appropriate target-date funds, noting that if you’re on the cusp of a date you should use the farther out date because you tap the Roth last.
    –Now that you’re putting money into your Roths each month, of that $2k/mo you’re putting in savings, you have about $834/mo left. Put that amount into the taxable brokerage account into the 50/50 split. As I mentioned above, once you’re retired you will withdraw from this account first.
    (Side note 1: You could also increase your 403b contributions to the max and put less than $834/mo into the taxable brokerage account, but I like the idea of you building up your brokerage account because you will use it first after Patrick retires).
    (Side note 2: You may want to consider selling the Costco stock because I assume it has good gains and you’d only pay 15% taxes, and then put it into the 50/50 mix. It’s okay to have that ‘fun money,’ of course, but know that it could drop a lot! I’m a fellow Costco lover so either way is good with me).
    –Consolidate not only your old 403bs into a Rollover IRA, but also the SEP IRA. I would do this at Fidelity. Put all of that into a target-date fund, too.

    In addition, I do think that your retirement plan is okay, but instead of Mrs FW’s resounding YES! I would say “Yes, but!” Given your husband’s family history and what seems to be some longevity in your own family, I would feel more comfortable if you did at least one of the following:
    –Review your retirement budget to ensure it includes large, one-time costs (e.g., new cars, home repairs). I didn’t see any of that so I worry the estimate is too low.
    –Downsize to a one-story that costs less than your current home is worth, and pull out about $100k and put it into the taxable brokerage account in the 50/50 split. With current prices the new home could be in the $450k range, which hopefully would work in or near your current community (or wherever you want!).
    –Have Patrick work part-time for 1-3 years at age 62, or you work 1-3 years part-time at age 65. It doesn’t even have to be nursing; just bring in some more money while you can.
    –Like Kris noted above, be sure to investigate the optimal way to take your Social Security. I am not convinced that taking it at 65 and 67 is the best way, but I don’t know enough about it.

    I think that doing a few of the above items will help take your retirement plans from mostly secure to fully secure.

    And finally… a man who rides motorcycles AND dyes his wife’s hair??? Patrick is a unicorn! 🙂

    Feel free to ask Mrs FW for my email address and shoot me a note if you have questions. Best of luck to both of you.

    • Eva says:

      Wow Michele, thank you for the additional helpful suggestions! You’re another Mrs. FW : ). We are planning to open Roth IRAs in the next 2 weeks for 2021, and will roll all my accounts into Fidelity for greater ease later. Maxing our 403b’s sounds great (what happens if we accidentally go over the amount allowed?). It’s hard to get it to the exact amount for the year… You may never see this response, but after I’ve implemented some of the suggestions from both of you financial wizards, I will post an update. Thank you again : )
      P.S. Patrick is loving the “unicorn” comment 😀

  45. Bri says:

    Hi there,
    Just making a comment since Alzheimer’s became a reality in my family. My Dad was diagnosed relatively early after a few years of retirement and my Mom was his primary caregiver, still working when it all came down but had to retire early to help him. My brother lives in another state and so I moved home to help them both for several years. Specifically, she wasn’t at all informed about their finances and it took two years to sort out. I am so happy you are thinking of these things now! So I just have some thoughts.

    It was helpful beyond belief that Dad was living in the home they had shared for forty years. It was so familiar to him and a big comfort as the disease progressed, the doctors marveled at his functioning. He knew the layout, the possessions, the area because that specific home was such an old engrained part of his memory. One big expense was simply upgrading a bathroom so that he could just walk into the shower (no stepping in over the tub) so again, he could care for himself much longer than you’d expect. And it was wonderful for his pride! Having savings meant that could happen without being a hardship.

    The stairs would worry me too, if you have this potential in your family, but the truth is they can be gated off and, in the case of Alzheimer’s, hanging a curtain over doorways etc can actually stop a person from crossing since they’ll eventually not see it as a pathway. That, and dark mats in front of doorways. And those door handle things for kids. Anyway! There is so much to unpack and I know your husband isn’t actually sick. It’s just good to know that you could probably make your existing house work since there would be so much benefit to having him somewhere so familiar.

    That extra room upstairs could be excellent for a live-in caregiver or family to come help if needed. It’s SO nice you have relationships with the community and neighbors there and God forbid this happened, it would be amazing to have their help. My poor parents live in a rural mountain community and very far from resources, which in the end wasn’t a positive with all the appointments. He got a spot at a research hospital with excellent care, and access to new treatments but it was three hours away and soon he couldn’t go that long without an accident or total meltdown. However! Being in that community all the neighbors knew him and were incredibly kind, would stop their cars and chat if they saw him somewhere outside, even when his speech became difficult they were patient because they knew what was going on, and would report to us if they saw anything they thought we should know. How helpful if he had ever become a wanderer too!

    If you’re wondering you can research caregivers and facilities in your area just to get an idea financially what things might cost if it ever came to that. It fluctuates wildly county to county, state to state. Seriously not a bad idea. Then you’d know if you could see yourself funding it, or if what they offer for long term care insurance would be worth it. Due to a doctor’s mistake with meds, my Dad went downhill within days and although we swore we’d keep him at home, we found that we couldn’t afford a live in caregiver’s hourly wage since he was up all night confused and combative. With my mom, me and a caregiver, he was still dangerous and hurting himself. So it had to be a facility to keep him safe. In a rural area, you are quite limited in places, or number of caregivers to choose. The first facility was the only Alzheimer’s-accepting option was $6800/month to start and they warned it went up with additional services. So for that amount they did next to nothing. Poor guy was filthy, scared, example they shut off his water because he was confused and would leave his sink on or put things in the toilet….. so…. thankfully we found another place that currently is $6000/month and he requires and receives the maximum level of care. They thankfully accepted him! It’s a wonderful family. Believe it or not in Northern California that was a bargain! It depends if you are the kind of person who’d want to know those numbers ahead of time or not, but I’ll tell you they sure shocked me!

    It feels like this response is all scary warning stuff but as you know having that history in the family, it’s so good to get ahead of things and I marvel that you are this organized and prepared! I think you have a long list of reasons to stay where you are and since financially you can see from this case study you’re in great shape, you can make decisions based on what is best for your family. Sending you so many good thoughts! It warms my heart to think how much you’re doing in preparation for both best and worst case scenarios 🙂

    • Eva says:

      Thank you Bri for such a warm and thoughtful response. Your suggestions are spot on. Our home has all bedrooms upstairs, which is concerning. Perhaps we should be looking for a single-story home sooner rather than later — noting the information you gave regarding memories of current home. I’ve heard (at work from patients’ families) the unbelievable sums needed month to month for care in a facility. I don’t know if I’ll research prices yet, only because they will surely increase by the time we (might) need them. I’m sorry you’re having to go through this with your Dad.

  46. Sandra, Italy says:

    Chiming in late here and certainly don’t have any advice to such pros, I just wanted to thank Eva and Patrick for the lovely pics – they made my morning! 🌻

  47. Andy says:

    Great case, I wish I will be there one day!
    One question for Patrick: how did you convince your wife and yourself that a motorcycle is good spending?
    I’ve recently got a class M license, really want ride but cannot convince even myself that I need it.
    I working remotely now, so I don’t ride to work. When (someday) I will go back to the office, MC indeed might be a good option for commuting but only part of the year (we are in the Greater Chicago area, so winter is wild here). We only have one car, so having the second vehicle might be nice at some point.

    But just buy MC for rare rides on weekends, pay insurance, registration, etc – my frugal soul cannot accept it 😀

  48. Laurie Villotta says:

    As a nurse of 28 years I really enjoyed this case study. I just turned 50 so have some years ahead of me. I want to retire at 62 and I think if I continue to work hard over the next 12 years I can achieve this. I am debt free home included with no plans on moving. My girls will be done with college and on their own. I work in long term care and I would like to chime in on costs and LTC insurance. I live on the Midwest so our COL is very reasonable. Where I currently work it is around $10,000 month to live here. We do accept some medicaid, but we have a lot of private pay also. I have talked to many families whose residents have LTC insurance and it is worth it. The average pay out is around $6000-7000 month and then SS of course will cover most of the balance of this. You have to have 2 years cash assets to be able to live here. For many people it is not feasible for them to have saved that much money to be able to afford $10,000 month for care. I am already looking into LTC insurance when I turn 55.

  49. sara a rudolph says:

    Just one suggestion…set aside a little of the cash on hand and GO to Ireland!!! The few thousand you will spend will be worth it. The memories of a long-time dream trip will far outweigh the costs. If your financial situation was different, I would never suggest this, but you have both worked hard, cared for others and your children…it is time for you 2 to do this for yourselves :-). The future is so unknown and never promised…due it while you can <3 !

  50. ZW says:

    Eva, if your 403b allows for easy election adjustments you could max both of your contribution election percentages to 90% of each paycheck and pay your monthly bills out of the cash you have on hand, rather than contribute lower amounts and use paycheck money to pay bills. This is assuming that any matches would not be affected! I don’t have your exact numbers so can’t say “do this for three months”…just think about how much cash you want to put to work, do the math, and remember to lower your election percentage in time for payroll to make the adjustment back to 24% and 29% respectively. MOST plans cut off contributions automatically when you max out for the year, then pick up next January with the % on file. Also–make sure your 403b administrator knows you want to participate in additional, over-50 catch up. As far as I know you have to opt in for the catch up, it doesn’t happen automatically.

    It’ll be a shock to have a few paychecks of 10% but it’ll definitely help use some of that cash without having to think too much about it.

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