I know a bunch of Americans who aren’t enjoying what they consider to be a comfortable material lifestyle in retirement.
The problem seems to have started with excessive consumption during their own or their spouse’s working years. (This inability to control spending is typically characterized in our media as an “inability to save for retirement,” as though people are being coerced into spending 100 percent of their paychecks.) Essentially they spent beyond their means unless they had some assurance of drawing a paycheck until death. Just as American politicians cannot be trusted to avoid bankrupting the public with pension promises, Americans themselves apparently cannot be trusted to refrain from spending whatever isn’t nailed down.
In some cases this was compounded by American-style divorce. Being sued cost the future retiree roughly 50 percent of total assets/savings in legal fees and then the divorce judgment itself would typically award the plaintiff roughly 50 percent of the remainder. If alimony was at stake, each party had an incentive to ramp up spending prior to the trial so as to demonstrate more “need” (plaintiff) or less “ability to pay” (defendant). See “Divorce judge awards woman who gave up career 90% of family assets” (Guardian) for an English case that could just as easily happened on this side of the Atlantic (but not on the other side of the English channel under Civil family law). “Extravagant spending,” presumably positioning for favorable alimony treatment, reduced “multi-million-pound family assets to just £560,000” (paying for lawyers on both sides through a trial and an appeal also could have taken care of a million pounds in assets, but, like in most media treatments of divorce, litigation is portrayed in the article as essentially cost-free and also as having been started by mutual agreement (“they split” is how the beginning of a lawsuit by one person against another is characterized)).
Whatever the reason, these folks are not going to be hired by anyone unless they can somehow contrive to appear less than 50 during a job interview. They don’t have significant assets. They’re trying to live on Social Security. The latter seems to be challenging principally due to the high cost of real estate in the U.S. As the country gets ever more packed (the population has doubled during my lifetime), the cost of shelter seems to grow accordingly.
Yet for many Americans the cost of shelter is $0 or near-zero. These are folks who have been blessed by a government ministry and provided with “public housing.” In the Boston area, the value of a government-provided house can exceed $60,000 per year (after-tax or tax-free dollars). One can’t qualify for a free house or apartment, however, if one has a W-2 job. I’m wondering if it would make sense strategically for older Americans to leave the workforce (at least the non-cash workforce) starting around age 62. They’ll perhaps have a slightly smaller Social Security entitlement due to paying in less, but if they can use the years between 62 and 67, for example, to qualify for free housing then they’ll be entitled to stay in that free housing once they do start drawing Social Security.
What do folks think? Now that Obamacare is an entitlement and food stamps are readily available, an American with a modest income would seemingly have little to lose and much to gain by spending a few of the pre-golden years without a W-2 job. If the waiting list for a free house is too long, a tweak to this strategy would be to take over temporary responsibility for a grandchild (or at least write that down on a form applying for housing). A no-income adult who has gotten hold of a child generally has priority over a no-income adult without a child. Another useful tweak might be to go onto SSDI because disability is a requirement to get into some public housing, at least in Cambridge, Massachusetts. Someone experienced in this area said “Disabled single parent is great, but disabled pregnant single parent is better.”
Depends on how nice the public housing is. I grew up in public housing in NYC. It wasn’t that nice and was down right scary in terms of crime. Public housing in NYC is still full of crime according to a recent NYT article. Public housing in Washington DC is also terrible and crime filled. If you are an older white person in a predominantly black young housing complex be prepared to be the victim of lots of crime.
This strategy works better if you own your own house outright, of course, in addition to having practiced living on a sensible budget prior to retirement. But yes, Obamacare is a huge unexpected boon for early retirees…if you keep your Adjusted Gross income down (switch to no- or very low-dividend stocks in taxable accounts, for example) you can get bronze coverage here in California for $1 a month, along with zero taxes on capital gains and those dividends and interest that you do earn. You can leverage this until SS starts at age 70, at which time some of that will be taxable, along with any RMDs from retirement accounts. But you will still be in the lowest tax bracket, unless your IRAs are sizeable. The income tax/insurance premium assistance angle is critical to play right in these pre-SS years, because it really adds up, so get thee to a spreadsheet to model your particular variables.
Check out the rules on public housing and/or housing for the elderly/disabled in Massachusetts. The last time I checked, you are eligible for elderly/disabled housing if your visible income is under about $50,000 per year (80% of community per capita). Of course, the waiting list for elderly/disabled housing is long, since I think the residency requirement is 6 months before applying and people come here from other states to get on the housing lists. You can move up the list with an “emergency” – such as adding a child (your own, your grandchild that you have “custody” of, burning your house down or other natural disaster). There are mandatory set asides for these “low-income” tenants in all new construction, including luxury apartments. The ‘housing authorities’ can decide who to parcel out the ‘low-income’ set asides to in newly built luxury apartments. Low income does not mean you live with dark skinned youngsters in high crime neighborhoods.