Getting rid of my Bag Lady Syndrome (hopefully)

Last week, I made my final retirement contribution for the year, then totted it all up. It was… a lot.

This is great for my intermittent bag lady syndrome. But given that I’ve only been able to get serious about saving for retirement since my divorce — aka four years ago — I didn’t really have an idea of what that could mean.

Thankfully, there’s the Internet, with a wealth of retirement calculators out there.

And the results made me let out a breath I hadn’t even realized I’d been holding in.

The short version is that, no matter what, I’m almost definitely going to be okay. Probably even better than okay.

The longer version is, well, complicated. Because there are some big uncertainties.

Scenario 1: Stasis (most probable)

This scenario assumes that my pay stays the same for the rest of my employed years.

Obviously, some raises must be in my future. If nothing else, to adjust for inflation. But it’s too much of a headache to figure out when those might be.

So let’s assume this year will be the status quo.

My future funds

If I could keep contributing the same amount that I did this year up until age 67, I’d have enough that I could live on about $54,000 a year.

Last year, outside of taxes, I spent less than $48,000 — and that was with nine months really padding my mortgage payments — so $54,000 sounds like a pretty easy life.

But wait, there’s more

Of course, that’s not taking into account my monthly Social Security retirement benefits. The SSA says I can expect around $2,100.

But for my projections, I used 80% of that amount.

While I’m quite sure the politicians will find some way to shore up Social Security so that benefits don’t decrease — and if you’re unclear about that situation, I’ll explain it at the end of the post — it feels safer to work on the assumption that they won’t.

If that’s the case, the SSA estimates benefits will be about 20% lower that anything we all see in our statements. So I used $1,650 for the retirement calculator.

With that amount, I’d be able to spend almost $70,000 a year and still be okay.

I’m picturing weekly massages, pushing myself to do more traveling — and wow I could step up my charitable donations!

Obviously, actual markets/market growth is never a smooth linear line, but the point is that overall I’d be pretty comfortable in retirement.

But of course, I wouldn’t be me if I couldn’t immediately start thinking about the what ifs. Specifically…

Scenario 2a: I need a new job

This one is unlikely. But it does cross my mind.

Competition in our industry has skyrocketed in the last several years. My boss doesn’t seem concerned, but he’s been frank that we’re not growing as fast as we used to.

That said, he’s still given me small raises most years and each year he gives us a bonus based on overall company profits. So clearly things can’t be too bad.

But anxiety is often immune to that logic.

Even if we did hit hard times, I’m sure he’d just ask me to take a pay cut. But again… tell that to my anxiety.

So I decided to just play out the scenarios swirling in my head.

Let’s say I lose my current job and have to find work somewhere else. There are more remote work options these days, so I might be able to get another customer service job from home — or some other type of at-home work. But it’ll pay a fraction of my current job does.

So in this scenario I’m be able to put away the same amount (and have the same salary) for another two years, then no more retirement contributions and living on minimum wage.

Thanks to recent legislation, minimum wage will be $15 by then, so that puts me at $30,000 a year.

That may sound low, but in two more years, I’ll almost have paid my mom back for the last of the mortgage. And she’d probably either lower my repayment amount or flat-out refuse to take any more money until my finances got better. Meanwhile, my property taxes/home insurance should stay under $350 for at least a few more years.

So I could live relatively comfortably on $30,000. But what would that look like for retirement?

Well, the lower earnings would mean less in Social Security benefits. The SSA quick calculator says I’d get $1,611. So let’s call it $1,275 assuming the reduced benefits become a reality.

In that case, I would actually have a little more money in retirement — $33,600 a year — than I had while working. And I could always work til age 70 to boost my Social Security check.

Scenario 2b: Part-time work only

As I said, there are more remote job options out there now, so I could probably find full-time (or close to full-time) hours somewhere. But what if I couldn’t?

With my chronic fatigue, it’s not possible for me to work full-time outside of the house. So I’d probably be able to pull only 20ish hours a week without having a complete physical breakdown.

So as with scenario 2a, in two years from now, I stop being able to contribute to retirement altogether — but now I earn just $15,000 a year until retirement.

That lowers my Social Security benefits to $1,388 — so $1,100 for my purpose here.

And, folks, even in that scenario, a safe draw-down rate and the Social Security benefits would still put me a little over $32,000 a year. Which, if I’d been living on $15,000 a year for the previous two decades, will feel downright decadent.

In other words…

Whatever my financial future looks like, I’m going to be okay. That sounds so alien to me. Because for the last 20 years, my financial future has felt ominous.

In my early and mid-20s, I was struggling to hold down a job because chronic fatigue made it more or less impossible to earn a livable salary.

Then in my mid-20s, I was waiting for disability. And even when I got that, it was $663 a month. In Seattle.

Once I met Tim, the household had enough money to get by — except that we were focused on paying down his medical and student debt. So it was still a worry, especially as his unemployment was running out and he was waiting on disability.

Then I got my current job, and things eased up some. We finished paying off the debt, but then we got the house and had to fix an endless number of things. And save for Tim’s dental implants, which ended up being around $25,000.

And of course life expenses — and a husband with ADD impulsivity (and the times I’d humor him and pay for something just because I was tired of fighting or just to keep him happy and quiet) — meant costs kept coming up and pushing our progress back a step or two.

Once the divorce happened, my finances were infinitely better. But at age 40 with (relatively speaking) not that much in retirement accounts, I felt lost. Doomed, even.

So it’s a foreign concept to know that I’ll be okay no matter what. Life may not be ideal. It may get tough. But I won’t be penniless in my old age.

Here’s hoping this knowledge finally quashes my occasional Bag Lady Syndrome.

Has anyone else finally realized they’re going to be okay financially?

A couple notes

Some folks may think it’s foolish to gloss over some things: market shifts, home repairs, etc.

And those will definitely be wrinkles in the plan. But my projections omit over a few helpful things as well.

First of all, there’s no guarantee that I live to 95. My mom’s side of the family is mostly long-lived, but I think even my great-grandmother only got up to 92.

Second, they ignore the cushion of my savings accounts. My emergency fund alone is getting close to having one year’s worth of a bare-bones spending budget.

Finally, even if my job is destined to vanish altogether — which isn’t really all that likely — I’m quite sure it’d be more than two years away. My boss would hate to fire me, so there would be years of stepping down my salary first.

All this means that I have more than two more years of retirement contributions ahead of me. And more years of higher earnings that will buoy my Social Security benefits in retirement.

So ignoring things like home repairs and market downturns isn’t the glaring omission it might initially seem to be.

The actual Social Security issue

I hear people swear up and down that Social Security may not even be around when they retire. So let’s just start with the basic: As long as FICA taxes exist — and politicians won’t abolish those, for reasons you’ll see further down — Social Security will pay retirees something.

That’s not in question. The actual question is how much it’ll be able to pay us.

Now that Boomers are drawing Social Security benefits, and now that subsequent generations had fewer kids (meaning there are fewer workers paying FICA taxes), the Social Security Administration is paying out more money than it’s bringing in.

How is this possible? Well, there had been a surplus that had built up over decades. But it’s getting eaten up fast. And if it’s allowed to run out — which is unlikely — the SSA would have to adjust benefits based on what it’s actually receiving from workers. The current estimate is a 20% drop from whatever you’re receiving now or being told you will receive.

But.

Politicians are terrified of the senior voting bloc. Old(er) folks have strong lobby groups — and a high turnout rate for elections. So politicians can’t afford to piss off the seniors. And since many seniors subsist solely on Social Security benefits, letting their benefits get reduced is a pretty quick way to piss them off.

So while I’m sure Congress will wait til the last minute to address the SSA’s depleting financial cushion, it’s almost certain that politicians will find a way* to get the SSA enough funds to keep the current benefit amounts.

* Cough cough, abolish the FICA cap, cough cough.

Related reading:

FOMO vs Bag Lady Syndrome: The ultimate anxiety showdown

Are women screwed in retirement?

Is Bigfoot more real than retirement?