July 24, 2009

The 4 Simple Steps to a Healthy Retirement

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.

Stop. Ask yourself this simple question: "What am I trying to accomplish?"

And I believe it's precisely because most people can't come up with an answer beyond a few generalities -- "to get into shape," "to lose a few pounds," "to get my spouse to quit nagging" -- that they don't stick with any exercise program long enough to make a difference. 

But enough pop psychology. The answer to the "What am I trying to accomplish?" question is simple, "To live a long, healthy, and robust life." If this doesn't interest you, quit reading. If it does, here are the four things you need to do.

Stretching. As we age, we shrink, which results in our suffering many types of chronic pain. Five to ten minutes of stretching a day and a one hour of yoga or basic stretching class three times a week will have you standing taller and feeling less joint pain in just a few weeks.

Balance. Often overlooked, most older people lose muscle flexibility in their lower legs, ankles, and feet. And this is true even if you do plenty of walking, bike riding, or other good exercise. Since poor balance leads to bone-crunching falls, this is definitely something to pay attention to. One simple cure is to stand on a Bosu ball or similar exercise ball or disk for a few minutes every day. These are available at all gyms or you can buy one for home use here. The one-footed poses in yoga, including the basic "tree" pose, are also highly effective balance restorers. Check these out at Yoga Journal's website.

Strength training. Becoming frail and experiencing all the accompanying social and physical limitations is simply not necessary. Lifting moderate weights, or using resistance or weight-based exercise equipment for five or ten minutes each day -- or even better, half an hour -- three or four times per week will have you feeling more robust in no time. Check out Wikipedia's strength training section to review the basics.

Cardiovascular health. Fast walking, swimming, jumping rope, bicycling, or, if your knees and hips will take it, jogging are just a few of a number of activities that you'll want to find time for on a regular basis. Because I'm sometimes pressed for time, I often use cross-training or rowing machines where I can combine strength training with an aerobic workout.

Your first big bonus. Many, if not most people over 55 are prone to mild depression. Far better than pills, and almost as good as sex, any reasonably vigorous exercise makes you feel better both while and after you do it. No question, when you are feeling low it's hard to get started, which is why setting exercise dates with friends or attending classes can be a huge help to overcome inertia.

Big bonus #2. Take a look at the older people you know who keep themselves in robust good health. Now compare them to the retirees you know who are sedentary, frail, and depressed. Who do you think wants and gets more sex? And just in case you've given up on sex, I suggest you think again. In my experience, people who take steps to remain sexually active all their lives are a lot happier than those that don't.
July 17, 2009

How to Cut Health Care Spending by 50%

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.

So here is a simple suggestion: Instead of worrying about which insurance company, employer or public agency is going to regulate health care and pay for it going forward, how about making behavior modification to encourage healthy living the number one priority of our national health care plan? Or put another way, to save tens of billions of dollars in health care expenditures, Americans over 40 need to live their lives in a very different way than most do now. At a minimum, a healthy lifestyle would include lots of exercise, good diet, early medical testing, as well as quitting smoking and limiting alcohol intake. Failing that, whether we adopt Obama's plan, a single payer system, or copy Slovenia's approach, the whole effort will amount to little more than rearranging the deck chairs on a sinking ship.

Too bad America still lacks the leadership and vision to get at the root causes of our largely self-inflicted health care crisis (as after 50 years of foot dragging we have finally done with our increasingly successful efforts to discourage smoking). Surely a national anti-obesity program full of meaningful carrots and sticks designed to change behavior would do more to both help Americans live better and pay less taxes than anything currently before Congress.

But although there is little hope that national policy will fundamentally change for the better anytime soon, as individuals we can and should act now. By dedicating 60-90 minutes a day to exercise, eating sensibly, not smoking, getting needed medical tests, and keeping our intake of alcohol and other recreational drugs to a moderate level, we can, with a little genetic luck, cut our retirement age health care costs to a fraction of what they would otherwise be. And in the process, we can enjoy far healthier, more active, and happier lives.

In my next entries I'll provide a few thoughts on how to develop a personal program designed to help you live a longer, more fulfilling, and far less costly life. This will focus first on how to combine the four big exercise goals -- to increase your aerobic health, maintain a healthy weight, stay strong and robust, and fight depression. Please stay tuned. 
June 16, 2009

Friends Are More Important Than Money

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".

Mentioned in this article is an Australian study that found that older people with a large circle of friends were 22% less likely to die (during the study period) than those who were more socially isolated -- and an even more fascinating 2007 study that reported a 60% increase in obesity among people whose friends gained weight.

But one key thing about the value of strong friendship ties that most studies and commentators have missed so far is that the age of your friends is at least as important as the number. Or, put another way, if your friends are predominantly older than you are, or of the same age, then the more you have, the more funerals you'll attend.

Watching friends decline and die is obviously no fun -- so little that each time you go through this, you'll be at high risk of being sad and depressed for weeks, if not months.

So if having lots of friends will enrich your later years and may even contribute to your longevity, but experiencing the death of a friend will obviously be a bummer, what course of action will be best? The answer is to make and keep a good number of younger friends. Obvious, you may be thinking, but a lot easier said than done. Not so! As I'll explore in my next post, there are many ways to make true friends of all ages.
June 10, 2009

Make Younger Friends

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.
Fortunately, there is a simple way to plan ahead to cope with this unhappy eventuality: Consciously make and keep younger friends throughout your life--people who, statistically at least, are unlikely to die before you do. At first, this may sound calculating, or even selfish--after all, since authentic friendship comes from the heart, not the head, deliberately deciding to cultivate younger friends would seem to contradict friendship's most basic premise. I don't buy this argument, for two reasons:

  • First, in the larger context of the inevitability of human aging and death, each of us must find a way to live out our final years with dignity and, hopefully, a little joy. Cross-generational friendships are simply one commonsensical and traditional way to do this.
  • Second, and probably more importantly, making good friends with anyone -- young or old -- is never a one-way street. You can't force someone to become or stay your friend. Bridges of affection are built and maintained between people only to the degree that there is both a mutual attraction and sharing, which usually means that each person has something to offer the other. Younger people, for example, are often attracted to the knowledge and experience of a person who has resided on this planet a little longer. And older people are commonly drawn to the energy, fresh ideas, and vivacity of people who are many years younger.
Just in case you are still concerned that deliberately setting out to make younger friends is a mite selfish, it's easy to even the score by making an effort to befriend several people who are older than you are. My experience of doing the interviews for the book Get A Life: You Don't Need A Million to Retire Well has again forcefully reminded me that people who have lived a few years more than I have often have the experience and wisdom to teach me a great deal about how to live a more fulfilling life. I suspect that if you take the time to talk about aging with the older people in your life, you will have a similar experience. We all need good role models when confronting the big transitions in our life, be it leaving home and establishing our independence, establishing our first intimate relationship outside our family, finding and succeeding in our work, or learning how to grow old gracefully.
June 1, 2009

Estate Planning -- the Second Time Around

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.

Who knew balancing the disparate needs of so many people could be so practically and psychologically difficult? And where is the instruction manual which will help you accomplish it?

Start by dividing your task into three steps, your first -- identifying your goals -- being the hardest. For example, if you still have minor children, your first goal might be to provide for them until they reach adulthood. And, of course, it's likely you'll have more than one goal -- perhaps the ongoing care of a special needs child and providing adequate income for a surviving spouse are goals two and three. 

Once your major goals are identified, step two is to discover the legal tools and techniques you'll need to best accomplish them. For example, if you have minor children, you'll need to adopt one of several mechanisms such as a child's trust or the Uniform Transfers to Minors Act to name a financial manager if you die before they are of age.

Step three is to use either self-help tools like Nolo's Online Will and Living Trust or a lawyer (or often a cost-effective combination of the two) to carry out your plans.

Of course, saying all this is far easier than doing it, which is why I strongly recommend Nolo's new book, Estate Planning for Blended Families, by Attorney Richard Barnes. There is simply no comparable source of reliable information for people who need to make an estate plan that balances the needs of a complicated, multi-generational family.
May 30, 2009

Retired & Broke: Don't Use Retirement Funds To Pay Debts

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.

Let's start with what not to do. First on the "no-no" list should be invading 401(k), IRA or other retirement funds to pay credit card or most other personal debt. The reason is simple: Money in these funds is exempt by law from being grabbed by creditors to pay debt-related court judgments for the very good reason that lawmakers have gone out of their way to reserve these funds for your retirement needs. Or, put another way, if you invade your retirement funds to pay personal debt, you voluntarily hand over funds that in most instances can't otherwise be touched.

And money in retirement funds isn't the only property that's exempt from being grabbed by creditors. In most states, under "homestead laws", considerable equity in your house is also exempt from being grabbed by credit card companies or others to whom you owe personal unsecured debts. For example, in California, the homestead exemption is $150,000 for people over 65 (or 55 for many low-income residents).

In addition, many states have a long list of other exempt property that is yours to keep no matter what your debt level.

So again, the larger point is that if you are a retiree facing a true debt crisis, it's key to understand debtor protection laws before you get stampeded into making poor decisions -- one of the poorest being to take fully protected retirement funds to pay off credit card debt. For the information necessary to come up with a debt workout plan that will fit you like a glove and not a handcuff, see Nolo's Solve Your Money Troubles, by Robin Leonard & Margaret Reiter, a book that's likely to save you at least 100 times what you pay for it. Now there's the best deal you've been offered in many a day.
May 25, 2009

What Does A Good Long-Term Care Policy Look Like?

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.
May 21, 2009

Is Long-Term Care Insurance A Good Value?

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?

For the poor and affluent the answer is clearly no, albeit for different reasons. But for middle- income people, depending on several factors -- most importantly whether they are single or coupled -- the answer may be yes.

First, let's consider people with low to lower-middle incomes and savings levels. Given that the premium for a care policy with even mid-level benefits can cost over $1,000 annually at age 55, and upwards of $2,000 at 65, people in this group simply can't afford it.

In my view, it's better to spend the money affording a decent life now, relying on Medicaid to cover care costs later should they turn out to be necessary.

The affluent should usually say no to long-term care insurance for a different reason. Given that the majority of seniors will never enter a nursing home and of those who do, only 25% will stay more than a year, simply paying the cost out of pocket is likely to end up being less than 30 years of premiums which, of course,could otherwise be invested.

And even if an affluent person spends two or three years in a nursing facility, it won't be a financial disaster, since Social Security and other income will cover part of the cost, and receipts from the sale of the person's house or condo will easily cover the rest.

But long-term care insurance can make more sense for middle-income Americans with moderate savings, especially single people. The fact of being single is important since it raises the odds of needing long-term care. That's because, with a couple, when the first spouse begins to need help, the other often provides it at home.

And single or married, middle-income Americans with savings in the $200,000 to $400,000 range may want to purchase long-term care insurance for economic reasons. On the one hand, provided you're willing to scrimp a little. And on the other, should one or both members of a couple be unlucky enough to be in the small group who needs institutionalized care for many years, the money will be there to provide it.

In my next post, I'll discuss what kind of policy, assuming you are interested in looking into the purchase of long-term care insurance.
April 24, 2009

Budget-Busting Long-Term Care: Is It Inevitable?

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".

The article, like many of its type, then goes on to present a mix of horror stories about at-risk seniors unable to afford the care they'll inevitably need, along with scary statistics about how expensive it is to purchase long-term care insurance.

Too bad there isn't a word about the many low-cost steps people can take to greatly decrease the likelihood that they'll need long-term care in the first place. For example, many of us fear that diseases of the brain like Alzheimer's will sentence us to spend our last years in a nursing home. Actually, it is far more likely that we will be institutionalized because of broken bones -- most commonly, hip fractures. Most of these injuries are the result of bone loss or osteoporosis.

Twenty-five million Americans, 80% of them women, suffer from osteoporosis. This horribly debilitating disease results in well over a million annual skeletal fractures of which as many as a third are hip fractures. The good news is that osteoporosis -- and the height loss, pain and high risk of bone fracture it causes -- can largely be prevented. The keys are to get enough vitamin D and calcium daily and to engage in regular weight-bearing exercise.

Type 2 diabetes is a second huge and highly preventable condition that in all its unhappy manifestations, such as increased risk of heart attack and stroke, results in millions of people needing long-term care. And as you probably know, sedentary, obese people are at much higher risk of developing Type 2 diabetes in mid- or later-life than are adults who maintain a healthy weight, exercise daily, and eat sensibly.

Finally, as anyone who has ever spent time in a care facility knows, depression is yet another reason why older people can no longer function independently. And while depression can affect anyone, health professionals have known for years that people who exercise regularly and vigorously are less likely to be depressed than are those who are sedentary. At least part of the explanation seems to be that exercise, like Prozac and other anti-depressant drugs, releases the brain chemical serotonin, a natural mood elevator.

So think about it: If frequent exercise and a good diet can greatly reduce the need for long-term care by at least 50%, doesn't it make far more sense to head for the gym than it does to turn on the T.V. and listen to yet another news item about how you're likely to spend years in a poverty-level nursing home?

Still, you might be thinking, "What about buying long-term care insurance?" I'll discuss that one in my next post.
April 8, 2009

You Never Retire from Writing Your Will

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.

Today, just about everything concerning making a will is different. Many of us will live up to 50 years after we make our first will, meaning that all sorts of important life events that occur in the interim will all but require changes. And codocils, which saved 19th- and 20th-century lawyers from having to retype and reproof wills, are as dead as the typewriters that created them.

The result is that today when you need to modify your will, you'll do one of the following:
  • go to a lawyer who will feed your info into a computer and print out a nice new one for you to sign in front of witnesses, usually charging between $300-$1,000 for their services
  • adopt a self-help approach by using software such as Quicken WillMaker, or
  • go online and use one of several reliable online wills at a cost of about $70. Since this is a Nolo blog you'll probably guess that I think that Nolo's Online Will is the most legally comprehensive and easiest to use -- but hey, you don't have to take my word for it.
OK, assuming you agree that 50 years is a long time to live with one will, what are the key events that indicate you need to make a new one pronto?

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

April 5, 2009

Do You Need a Will or a Living Trust?

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.

But unlike a will, a living trust lets your property bypass probate court -- something that will save your family money, delay, and hassle. The only drawbacks to a living trust are that you must transfer your property to the name of the trust, and living trusts don't work to name guardians for children.

So why doesn't everyone opt for a living trust over a will? The main reason is that these days there are many other and usually simpler ways to avoid probate. As set out in detail in Nolo's 8 Ways to Avoid Probate, bank accounts, brokerage accounts, and retirement plans, such as IRAs and 401(k)s, can all be transferred free of probate simply by designating a beneficiary in writing. And couples who own a house or other real estate together can take title in joint tenancy (or in some states, tenancy by the entirety) and also avoid probate.

Assuming you take advantage of all these probate avoidance approaches, a simple will is your best bet to pass the rest of your miscellaneous personal property. And again, no probate is likely to be required since most states exempt small estates.

So when might a retired, or soon-to-be-retired, person want to choose a living trust? Usually when a house or other real property is involved. Even if the property is co-owned in joint tenancy or tenancy by the entirety, living trusts will avoid probate automatically and pass the property to the survivor only when the first spouse dies. If the survivor dies still owning the property, probate will be required, unless a living trust has been drafted and the property transferred to it. And, of course, the same thing is always true if the owner is single and owns the property outright.

Okay, assuming you're convinced that as an older real property owner a living trust makes the most sense to pass your property to your loved ones, how do you go about getting one? Lawyers typically charge $800-$1,200 for a trust for a single person and up to $2,000 or more for a couple. (Nolo's Lawyer Directory, complete with detailed attorney profiles, is one good place to find a quality lawyer.) Or you can do your own living trust using software like Quicken WillMaker Plus. Finally, an increasingly popular option is to do the job online. Both Nolo and Legal Zoom offer reliable online living trusts. Nolo charged $149 and Legal Zoom charges $219 and up. What's the difference? Legal Zoom uses advertising to get the word out about its products, while Nolo relies on the positive recommendations of its satisfied customers. Plus, unlike Legal Zoom, Nolo's Online Living Trust allows you to access your completed trust documents online, from anywhere, whenever you'd like.
March 23, 2009

Post-Retirement Income (Part 3): How Much Income Will You Need to Replace?

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.

But there is another huge and crucial factor that means you'll spend far less than you probably imagine. In a word, it's AGE. 85-year-olds almost always spend far less than 65-year-olds, something that all by itself vitiates the retirement calculators that predict you'll need to replace 80% of your income until the day you die.

Think of it this way: How much clothing, travel, entertainment, consumer electronics, furniture, vehicles and other gee gaws of modern life does your average 85-year-old consume? Typically, a fairly modest amount -- and almost always far less than the same person consumed at 65. What about medical care? Even here, the combination of Medicare and decent Medigap insurance means that costs should be fairly steady over the years.

Indeed, I know a number of reasonably frugal (but not self-denying) 80-year-olds who spend very little beyond taxes and maintenance on a house or condo, utility bills, groceries, and fuel for a decent car that they, don't drive that much anyway. In addition, some of these people spend significant money helping younger family members, but this, of course, is a discretionary expense. 

But what about the possibility of needing big bucks for expensive long-term care? I'll deal with this in detail in a future blog (or you can take a look at the entensive treatment in my book Get a Life: You Don't Need a Million to Retire Well (Nolo)), but, statistically at least, this is far less of a potential financial tsunami than you might imagine. Among the several big reasons for this is that, at least for people who are partnered, the first mate to die rarely spends much time in a care facility, preferring to remain at home as long as possible. And assuming the second partner (or a single person) does need extended care, any house or condo they own is usually sold, providing a source of needed funds.
March 20, 2009

Post-Retirement Income (Part 2): Finding Your Figure

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?

Start with what you know rather than guesstimates about the future, which, like most fantasies, are unlikely to have much of a relationship to reality anyway. Ask yourself: How is my financial health today? If you're currently living within your income and possibly saving a little to boot, you have a good start for estimating how much income you'll need to maintain a similar lifestyle after retirement.

Now it's time to subtract the current expenses that will diminish or disappear later. In Part 1 of this exercise, I pointed out that for many people who no longer need to pay a mortgage or bear the costs of raising children, they'll enjoy the largest post-retirement savings, together often netting at least 40% -- and often more.

And, unless you're a shopaholic for whom more free time necessarily means more spending, there are a whole host of other possible savings. The most obvious are related to the job you no longer need to perform -- for many people, the top of the list is the cost of commuting, followed by work-related clothing and food. For example, a woman who drives 20 miles to work, maintains a wardrobe of business-appropriate clothes, and buys lunch and coffee now and then can easily save five thousand dollars per year simply by staying home!

Many other potential post-retirement savings fit into what I call the "time is money" category. The equation is simple: The more free time you have, the easier it is to maintain an equivalent lifestyle at a lower cost. For example, instead of patronizing the pricey but convenient corner store, you'll have plenty of time for a once-weekly trip to Costco. And when it comes to taking a vacation, you'll now be able to travel at off-peak times, taking advantage of significant savings in transportation and lodging.

But what about the so-called retirement experts who, to quote the Associated Press reporter Dave Carpenter in his recent article "Retirement: Test Your Financial Planning IQ", say that "people tend to spend more money when they have more time." Perhaps, if we remember that these are the same retirement experts, for the most part, who recommended buying mutual funds when the DOW was over 13,000, we can put their "you can never save enough" advice into perspective.

Finally, don't forget the savings you'll achieve by taking advantage of senior discounts. For example, an excellent public golf course near me lets seniors play as much as they want on weekdays for $80 per month. And the local rapid transit systems discount senior fares by up to 70%. And then, of course, there are America's national parks which offer free admission to those over 60.

But what about medical costs and other things that may be more costly after you retire? Medicare will cover most of these costs, but especially if you have or develop a chronic illness, you'll be out of pocket some cash, either by paying for a medi-gap insurance policy or directly for uncovered fees and drugs. If you are reasonably healthy and do the kinds of things necessary to stay that way, you might sensibly guess that adding back a few thousand dollars per year makes sense. And, for anyone who feels the need to be more precise, I recommend Social Security, Medicare & Government Pensions, by Joseph Matthews (Nolo), which will provide the tools you need to make a far more accurate estimate.

In Part 3 of this series, I'll discuss the final big piece of your retirement spending conundrum: how your spending patterns will change as you age.
March 9, 2009

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

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.

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February 23, 2009

Five Keys to Working After Retirement

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.

First, the pleasant part: Probably the most important single factor for enjoying retirement is having a full plate of interesting things to do. For example, as the movie Frost/Nixon illustrates, Richard Nixon spent the most unhappy years of his life after he resigned the presidency because no one wanted him to do anything. While having lots of interesting things to do doesn't need to mean working, it can certainly include doing so as long as the work is enjoyable and leaves enough time for other activities. Or, as a 70-year old ski instructor told me the other day, "Working weekends and holidays teaching little tykes to ski is the most fun I've had in years -- and they pay me, too!"

To find a part-time job -- or, perhaps, during the course of the year, two or three -- it helps to think like a twenty-something. That is, to assume that in many fields the world of 9 to 5 is gone forever and to instead adopt a "gig" mentality. That is, to piece together the desired amount of pay from several easy-to-get part-time jobs. After all, someone has to be on duty at the resort parking lot at 6:00 AM Sunday morning and at the drugstore at 10:00 PM on Monday -- and if you like to get up early or stay up late, jobs like these could be yours for the asking.

Probably the biggest key to older people getting work is to overcome shyness. After 60, even the most outgoing people become socially shyer and shy people can become almost invisible. No, no, no -- resolve that this is not going to be you! Then decide how much you need to earn, what you would like to do, and hit the bricks (or at least Craigslist).

Here are the five easiest places to find work:

1) Where you have worked before. As long as you'll accept less pay and don't try to assert your former status, employers who already know your skills may find plenty of part-time work for you to do. For example, a retired partner in a law firm specializing in intellectual property may be welcomed with open arms if she proposes drafting patent claims two days per week for a reasonable hourly rate.

2) A competitor of your former employer. For the same reason your employer might want you back on a part-time basis, its competitors are likely to want to employ someone who already knows the job. And this will usually be true even if you make it clear that you'll reveal none of your former employer's trade secrets, such as customer lists or pricing formulas.

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