Retire Happy

Like most Americans, you probably believe that exercise is a good thing for other people. But then, after months of sloth, you look in the mirror, get re-motivated, and reach for your jogging shoes, swimsuit, or the dusty barbells in the corner of the garage. Then, after a few days or weeks of furious activity, you again subside back on the couch.

The majority of America's health care dollars are spent on people over 50 -- and most of the medical conditions that suck it up are avoidable. For example, the majority of diabetes cases, 100% of osteoporosis, much of heart disease, stroke, lung cancer, colon cancer, alcohol-related illnesses, and depression miseries, are preventable. And, of course, this is only the top of a very long list of expensive diseases that older Americans inflict on themselves. Or put even more bluntly, the fundamental reason health care costs are over the moon is that as a nation we actively conspire to make ourselves sick and then do little about it except bitch about the huge costs we incur to keep our self-damaged little selves alive.

For years I've been making the point that a strong friendship network is key to leading a successful life after retirement. After years of having this subject largely ignored as a huge element of successful aging, it was great to read the New York Times' recent article, "What Are Friends For? A Longer Life".

If most of your friends are about your age or older and you live into your 80s, many, if not most, will die or become mentally incapacitated before you do. Not only will this deprive you of their companionship and increase the likelihood that you will spend many hours and days alone, but losing a friend is always a painful event. This is true even though you still have other friends or the ability to make new ones. Here is how my friends Michael Phillips and Catherine Campbell, authors of Simple Living Investments for Old Age (Clear Glass Publishing) -- a small book I highly recommend -- put it:

The death of friends, including lovers and family, will be a powerful and debilitating force. As we age, the names listed in our personal phone books will slowly be crossed out. To sense the extent of the problem, we can imagine a party to which a large number of long-time friends are invited. Now picture the same guest list when we are 65: One out of four, 25% of our male friends, will have died. By the time we are 85, only one out of five men who were our friends at age 35 will still be alive, and only two out of five women.

When we travel to a city where we once had many friends, it will be painful to try to reconnect with them. Too often the person on the other end of the phone will say, "He died in March, didn't you hear?"

To clearly understand how death will rob us of our friends as we age, consider that a person who had 200 friends, close associates and relatives in his/her life-circle at age 35 will -- at age 75 -- be losing to death one male friend every two months and one female friend every four months. Ten years later, when that person is 85, the rate of loss will have doubled, with a male friend dying every month and a female friend dying every other month. The death rate difference between males and females means that those of us still alive at age 85 will have twice as many women friends as men, assuming we started with an equal number of each in our earlier days.

A second or third marriage, seasoned by age and experience, can bring wonderful comfort and intimacy -- but it can raise a host of legal and practical questions as well. For example, when it comes to making a will and other estate planning arrangements, how can you be fair to everyone you care about in your complicated blended family -- your current spouse, any younger children from your current marriage, your children from previous marriages and your stepchildren all need to be considered.

The recession has hit people of every age and income level, including retirees and those contemplating retirement. A combination of falling real estate and stock prices combined with the loss of part-time employment gigs has meant that many retirees who, eighteen months ago, felt financially secure and now find that they can't pay their credit card debts.

In the last few years, many insurance companies have improved their long-term care policies. But, as with any consumer product, some are better than others. Here's a list of things to keep in mind when you're looking into long-term care insurance:

• Consider policies from good-sized, reputable companies rated AAA by Standard & Poor's or Moody's, or A+ by Best Insurance Reports. Many small companies that issue long-term care policies are poorly funded and at risk of cashing in their chips before you do, so make sure you've picked a solid insurer.
• Be sure that the daily benefit the policy pays enough to provide decent care when combined with your Social Security and other income. For many people, this will cost at least $120-$150 per day. Also, look for a policy where the benefit amount increases with inflation. Given fast-rising costs in this area, many experts consider a 5% annual inflation escalator to be on the low side.
• Realize that many policies limit the length of coverage to about three years, unless you choose to pay outsized premiums for unlimited coverage. Be sure you know what you're buying. Unfortunately, lots of people buy policies that cover a relatively few number of years -- precisely the period they would do better to self-insure.
• Try to make sure you know how much premiums will cost in future years before you buy your plan. Or, put another way, decide on one of the relatively few policies that will absolutely guarantee the amount of your yearly premium. Beware of policies that will only say rates will not change with age or health -- many companies simply raise rates for all policy holders, claiming that the increase is to cover higher than expected costs.
• Understand that policies have widely varying non-coverage periods. For example, a more expensive policy may provide that you only need be in a nursing home for 20 days before coverage kicks in; a less expensive one may require 100 days or more before the policy pays benefits. For most people, the 100-day or longer period may be worth considering if the cost is sufficiently lower.
• Carefully read fine print regarding home health care. For people with serious medical conditions requiring round-the-clock care, home-based care can be as expensive as a nursing home. Some policies that are advertised as providing home health care simply limit the amount of care provided to an unrealistically low level, and even how much services can cost, effectively guaranteeing that an inadequate level of care will be provided by people with limited skills.
• Just being elderly and infirm isn't enough to qualify for long-term insurance benefits, which helps explain why the majority of people living in elder communities and assisted living facilities aren't eligible for any benefits. In short, make sure you understand what medical condition will trigger the payment of benefits. Most policies won't pay unless you meet one of two main criteria: Either you're unable to perform two (or -- with the poorer policies -- three) activities of daily living, such as eating, bathing, using the toilet, moving about, and maintaining continence; or you have serious mental or cognitive impairment, such as that caused by Alzheimer's, dementia, or other disease.
• Check the periodic ratings published by Consumer Reports magazine, which take into consideration many important issues. Back issues of the magazine, along with a comprehensive subject matter index, are available at many public libraries.

Even though it's possible to significantly reduce the chances you'll eventually need long-term institutionalized care, as discussed in this previous entry, you can't eliminate the possibility. And given the high cost of an extended stay in a nursing facility, doesn't it follow that buying insurance makes sense?

The high cost of long-term health care will drag down the quality of life for nearly two-thirds of today's retirees, predicts the Center for Retirement Research at Babson College, as reported by David Pitt in the recent AP story "Retirees ill prepared for the long-term costs".

A century ago it was common for people to write their will in their forties and die before they were 60 with the same will in place. People who lived longer might add a codocil (a kind of legal P.S.) to reflect changed circumstances, but it was relatively uncommon for the average person to make multiple wills.

Continue reading "You Never Retire from Writing Your Will" »

Both a will and a living trust are efficient devices to leave property to loved ones. Simply identify the property and who you want to receive it and either legal device will accomplish the task.

In the previous two entries I have explored a number of reasons why the conventional advice that you'll need about 80% of your pre-retirement income to maintain your lifestyle post-retirement is just plain wrong, and that 50% to 60% is usually closer to reality.

Okay, as discussed in Part 1 of this series, if the 80% rule is nonsense, how can you arrive at a reliable dollar figure for the amount of current income you'll need to replace after retirement?

Articles in the daily press, commentaries by financial planners, and "retirement kits" published by mutual fund and insurance companies all tell us that to live comfortably after retirement we will need a big annual income for at least 30 years. For example, a recent Associated Press article by Dave Carpenter quotes an AON consulting report stating that most employees will need an average of 77 to 94 percent of their pre-retirement income to maintain their lifestyle. No surprise there, as most insurance and investment outfits who want to sell us their products use 80% as the amount of income that must be replaced.

Since many of us have no hope of ever saving the megabucks needed to produce this yearly cornucopia, the main effect of these messages is to make us anxious. Fortunately, these "you'll need at least $1,000,000 to retire happily" articles more accurately reflect the biases of the investment industry than they do the spending patterns of real retirees. As a result, they greatly exaggerate the amount you'll really need to spend post-retirement.

Start figuring out how much you'll really need to spend after retirement by understanding that retirement planning is best done with a dash of black humor. That's because, no matter what the investment industry claims, it's impossible to predict with anything approaching accuracy how much you or anyone else really needs to save. For example, unless you are currently in the last stages of a terminal illness or plan to poison yourself next Friday, you can't know how long you will live or how healthy your mind and body will be in your retirement years, both essential facts to accurately determine how much money you'll need.

Continue reading "Post-Retirement Income (Part 1): What Percentage of Pre-Retirement Income Will You Need?" »

The most direct and efficient way for depression-battered retirees to replace the money that has somehow gone up in smoke is to work for it. And despite much doom and gloom about the economy, getting a part-time job is often an easy and pleasant experience.

Continue reading "Five Keys to Working After Retirement" »