CHAPTER
18

How Will You Spend the Rest of Your Life?

In This Chapter

There’s a good chance you’ll live almost as long in your senior retired years as you did in your working years. With medical advances continuing to prolong the average life span, one of the fastest-growing segments of our population is men and women over the age of 100.

The key question is, how are you going to spend the next 20, 30, or even 40 additional years? Do you plan on traveling the world, visiting places you’ve only read about in books or seen in movies? Does the golf course beckon? Or will you create that novel, screenplay, or sculpture that you never had the time to develop because of your job or family obligations? What about acting in the community theatre or taking singing lessons? Some of these pursuits, such as travel, may be more costly than others, such as writing a screenplay. So one thing you may want to consider before taking any action is how much a particular activity will cost and whether you can afford it.

Taking Stock

Before entering our Social Security years, many of us were identified by the work we did, or by our profession, which may be why so many of us want to continue working as long as we can. But what if you can’t work anymore? While ageism is supposed to be against the law, many corporations are hesitant to hire workers 60 and over because they wonder just how long such an employee is going to stick around to justify the hiring and training costs associated with a new worker. Or they question whether those who are older are able to connect to the younger workforce, or are keeping up with the technological trends.

Yes, some corporations are going out of their way to hire people over 65 who offer unique skills that make the age consideration negligible. But since those sought-after jobs are few and far between, it makes it much more difficult for the unemployed seniors to find jobs for which they are qualified and that pay much more than the minimum hourly wage.

QUOTATION

“I started taking Social Security at age 66, my full retirement age. I have 10 percent deducted for taxes, and then the monthly Medicare premium is also deducted, so I get $1,800 a month. It basically pays my rent. But it [Social Security] definitely helps since I’m not working full time anymore, just doing some freelance, and making very little. It’s ridiculous how little I’m making.”

—A 69-year-old semi-retired divorced educator

A question that usually follows, when newly minted seniors think about the gift of those added decades their parents could not count on, is, “Will I outlive my money?”

Use this opportunity to take stock of what you hope to accomplish in your senior years as well as how you’re going to finance those years.

Creating Your Bucket List

We suggest you start by writing down what you want to achieve—namely, your goals and objectives. Some people call this their bucket list of things they would like to do before it’s too late. But it’s actually much more important than that.

DEFINITION

The term bucket list stems from the phrase “kick the bucket,” and refers to the list of things you want to do before you die.

Your bucket list should include your goals, objectives, and, most importantly, the purpose that you see in what you do over the next couple of decades. Some people get depressed by living a life without structure or purpose. Co-author Fred once asked his 78-year-old father-in-law, who had retired from dentistry at the age of 65, how life in retirement was. His answer: “It’s death.”

But others, like so many of the seniors co-author Jan asked how they were enjoying retirement, responded in these or similar words: “I’m so busy now, how did I ever find the time to work before?”

Creating your own bucket list could include your dreams, goals, and objectives. A bucket list is a great way to avoid a retirement that is unsatisfying. Instead, with some planning and thoughtfulness, you just might find these years are far more rewarding than you ever thought they could be.

For example, Jan remembers listening to the brief biographies shared at a breakfast organized by one of the associations she belongs to, the Dramatists Guild. As they went around the table of 20 or so members, the older ones would introduce themselves by giving their name, the “day job” they had before retirement, and how they’re now writing plays and getting their work produced.

Rodney Brooks confirms this trend in his article “Boomers turn to encore careers after retiring,” sharing the example of then 74-year-old Yuval Zaliouk, who retired as conductor of the Toledo Symphony and then began his second dream career: selling cookies based on his grandmother’s recipe. Another example Brooks cites is David Roll, who, a decade before at age 62, concluded his Washington, D.C. law career to become a historian and author and to start a global nonprofit organization called Lex Mundi, which locates pro bono lawyers for social entrepreneurs.

What is your dream for your senior years? It helps to start with a plan. It might be just a general goal, or it might be something very detailed, like how you will spend your time each day. Of course, you may not want your plan to look as structured and pressured as when you had your 9-to-5 job. But you might not want all your time totally open-ended, either.

As you write down all the things you want to do, you may want to set aside a special section for volunteer work. It not only makes you feel good to help those in need, but you get to interact with like-minded people and maybe even make new friends. Jan recently learned that a married retired radio host, upon her arrival in Florida for her second winter as a retiree, shared on social media how thrilled she was to have just signed up to be a volunteer at a local animal shelter.

Your bucket list could include visiting places, like the 2011 1,200 page bestseller 1,000 Places to See Before You Die by Patricia Schultz. But it could also include people you want to reconnect with, or even meet for the first time, and maybe projects you’ve wanted to do your whole life, but you’ve been putting off until now. Maybe it’s starting a new company or volunteering in another part of the world. Perhaps you have a bucket list of must-read books you always hoped to get to read “someday.” Or maybe it includes traveling with your family or some of your friends to someplace exotic or far away, or writing a play or a book.

Make your personal bucket list as short or as long as you want it to be. Put it in order of priorities or chronologically, by what you plan to do first, second, third, and so on. Put it on your computer, or in a journal, and make it flexible so you can revise it, or make it hard and fast so that you’ll go right down your list, sticking to every single entry in order.

If you’re married or you have a significant other, include him or her in your choices and selec-tions. Will you do everything together? On your own? With others?

Are You Going to Outlive Your Money?

We’ve talked to a lot of people in their 60s and learned something interesting: in addition to many of them preferring to avoid using the word “retire,” discussions about money are even less popular. Certainly there are some individuals with ample pensions, impressive savings set aside for retirement that they do not have to dip into yet, or even sufficient Social Security benefits, who are able to live a comfortable life without having to earn additional income to survive.

But for many Americans, total retirement is still just a goal. The recession of 2008 diminished or wiped out retirement savings. The bursting of the real estate bubble left many either underwater on their homes or forced to sell and live in rentals that are just as high or even higher than their previous mortgages. Because of those and other related economic downturns, including short- or long-term periods of unemployment, the number of American retirees in their late 50s or 60s appears to be dwindling each year.

Fewer and fewer workers are receiving the kinds of pensions our parents received. Today, it’s either a 401(k) or similar employee-funded retirement savings account, or an IRA. Self-managing one lump sum has proven a lot harder to do well than receiving the monthly pension benefit that at least has some economic checks and balances on spending built in.

QUOTATION

“You have to put money aside. People need to have a reality check. ‘What have I done? Am I on the right path?’ Regardless of what their resources are, they need to sit down with an advisor and learn the numbers. To me, that’s a wake-up call. ‘I have to save $500 a month.’ ‘I have to start saving somewhere.’ It might mean a change in lifestyle, one less vacation a year, or working a second job for that purpose. It just really comes down to proper planning.”

—Dan Fisher, Financial Advisor and Founder, Fisher Financial

Most of us want to live in a financially independent way. So it’s time to ask ourselves some difficult questions, such as “How much money will I need to continue to pay my bills, take an occasional vacation, and not have to turn to anyone else for help as I enter these final decades of my life?”

According to the Social Security Administration, a man reaching age 65 today can expect on average to live until 84.3. A woman turning 65 can expect to live to 86.6. It’s not uncommon to find men and women living into their 90s and 100 and beyond. This means you can expect to live for another 20 to 40 years after becoming eligible for Social Security benefits.

How widespread a concern is it to wonder if you will outlive your money? According to Bankrate.com, 40 percent of retirees say they fear outliving their money. More women have this fear than men. Moreover, three out of four workers in America expect to keep working as long as they can.

For too many in America, unfortunately, there is the reality of poverty—those who truly are poor, are trying to live on just their Social Security in retirement, and are in need of government or private aid to get by. With the average Social Security retirement benefit in 2014 at $1,294 and the maximum, if you retire at full retirement age, at $2,642, trying to live on just your Social Security benefits can be a struggle—especially if you’re single, it’s your only source of revenue, you have little or no savings or investment income, and you live in a high cost of living area.

WORTH NOTING

According to the U.S. Department of Health and Human Services, a person was considered living below the poverty level in 2014 if he or she earned less than $11,670 a year as a single person. For a family of four, the poverty level in 2014 was $23,850.

Then there’s the elite group who have a fixed income that is much higher than the poverty level, possibly even over $100,000 per year, from pension income as well as earnings from dividends and investments. However, those in this group may still see themselves as potentially outliving their money because they’re earning less in retirement than they earned when they were working. Because of that, they’ll probably have to start dipping into their savings. Unless their dividends and investments keep growing to make up that shortfall, they’ll feel that as their nest egg shrinks, so does their security that they’ll have enough money to enjoy a comfortable retirement.

Taking Inventory of Assets, Savings, and Investments

When you write down your goals, be clear about the expenses you’ll have to cover each year going forward. Make a list of your assets, savings, and investments, including any real estate holdings such as your apartment or house if you own it.

This list of your assets should also include all of your bank accounts, brokerage accounts, Individual Retirement Accounts, 401(k)s, deferred compensation, life insurance, safety deposit boxes, automobiles, home furnishings, collectibles, antiques, jewelry, and any other items that have value.

You’ll also want to record your debts, including all credit card debts, first and second mortgages, student loans, car payments, and so on.

When Catherine Kitcho, a business consultant, started to worry about whether or not she and her husband would outlive their money, she began a research project that turned into a book titled Happy About® Being a Baby Boomer: Facing Our Newfound Longevity. Unlike those who do an income projection analysis of their retirement years, Catherine focused on what expenses she needed to cover. That way she could see her estimated expenses and compare them to her income from Social Security and any other sources she could count on, such as a pension, as well as any savings she had amassed. In Happy About® Being a Baby Boomer, published in 2007 right before the crash of 2008, Kitcho wisely suggests that everyone create a Longevity Plan and shares examples and guidelines on how to make one.

WORTH NOTING

When it comes to long-term care, where you live matters. Most people want to stay in their own home for as long as possible. Whether that’s even feasible depends on the condition of your home; whether it can be modified to accommodate a wheelchair or other health aid devices; whether there are long-term care services in your area; and whether your community is “age friendly” and offers services that aid the elderly, such as free or low-cost van services for those with mobility issues.

As hard as it is to think about being 85 when you’re only in your 50s or 60s, you really do need to take into consideration some of the age-related costs you may incur down the road. If you have an aging parent, you may be watching them spend much or all of their money on such expenses as an assisted living residence, which can cost as much as $6,000 a month in some places; part- or full-time private care, including live-in care; and nursing assistance.

Other age-related costs include the following:

Developing a Budget

Even if until now budgeting was not something you did on a regular basis, now is the time to commit to developing a budget. Start by keeping track of your expenses.

How Much Money Is Going Out?

It all comes back to planning and being prepared. The better you are prepared for retirement, whatever your age, the better the outcome when that day occurs. Hopefully, because of your plans, you won’t run out of money.

You start by either creating a budget or revising the budget you already have. You need to know what your fixed expenses are each month. (See Chapter 16 on a more detailed discussion about how to create a budget.)

That includes everything you spend money on each month including such essentials as: mortgage or rent, utilities such as water, heat, and electricity, telephone (cell phone and/or landline), and groceries.

Next figure out any nonessential expenses such as your cable TV bill, eating out, and vacations. Financial advisors recommend cutting these nonessential expenses to less than 30 percent of your income.

Determining How Much Is Coming In

The second part of a budget is figuring out how much money you can count on each month. As long as you keep working and you postpone taking Social Security for as long as possible so you get a bigger payout, you should have more funds to work with than you will when you can no longer work. You may want to continue working the same job you’re in now because you already know the ropes, and they have a loyalty to you, despite your older age. You might not want to take on the challenge of a new job situation, if you could even find one that suits your skills.

WORTH NOTING

The AARP keeps track of those companies that hire and reward workers over 50. Each year it publishes the top 50 companies for older people to work for. In 2013, the top 10 places were the National Institutes of Health (NIH), Scripps Health, Atlantic Health System, University of Texas MD Anderson Cancer Center, Mercy Health System, YMCA of Rochester, West Virginia University, Bon Secours Virginia, National Rural Electric Cooperative Association, and WellStar Health System. To see the full list, go to aarp.org.

Of course you might be able to switch to another job. But the key is to keep one or more income streams coming in so you’re not trying to live off only your pension, if you have one, or off your savings or investment dividends.

If you’re already living on a fixed income, which means the amount of money you get from various sources, such as Social Security, pensions, and any other regular income, add this up and that’s what you have to spend each month.





Projecting Future Health-Care Costs

If we live long enough, at some time in our lives most of us are almost certain to require some kind of long-term health care. According to the SSA, 70 percent of people who live to 65 can expect to need long-term care during their lives. This percentage increases the older we get. Long-term care encompasses a wide range of services and support you might need help with, such as:

Evaluating Health and Medical Costs

If you’re 65 or older, Medicare Part B provides a free “wellness consultation” with your doctor. This would be a perfect place to start evaluating your health as you enter this next chapter of your life.

One thing your doctor will probably go over is your medical history up to this point, as well as your family’s medical history. Like it or not, research has found that we inherit much of our propensity to certain illnesses. For example, if your father and every one of your uncles developed heart disease, you have a greater risk of suffering that same fate than someone whose relatives never had the disease.

Next examine your lifestyle, which includes what you eat and drink, whether you smoke, and how physically active you are.

You may want to consider getting a Medicare Part C or Medigap insurance plan just in case, especially if you fall into a high-risk category based on your family’s history of disease.

The good news is, as you know, we’re all living longer. The bad news is that as we age, our medical costs often go up. What can you do to keep your medical expenses from getting out of hand? One thing is to stay as healthy as possible.

Consider any conditions that may impact your health that you can proactively prevent by changing your behavior, such as giving up smoking, losing excess weight that makes you prone to diabetes or heart conditions, eating a healthier diet to keep your cholesterol lower, or increasing physical exercise to help reduce your risk of heart disease.

Consider Long-Term Care Insurance

If you or your spouse requires long-term care, it can quickly eat up your savings, even if you’re eligible for Medicare or Medicaid. As we’ve noted, if certain financial conditions are met, nursing home care is usually covered by Medicaid. Assisted living, however, is not covered by Medicaid. Therefore, one option to consider is long-term care insurance.

DEFINITION

Long-term care insurance is designed to cover long-term services such as personal and custodial care in a variety of settings including your home or apartment, specialized continuing care retirement communities and other residential situations such as public housing and assisted living.

Every long-term care policy is different in regards to what’s offered. The monthly premium will vary according to the age at which you get the policy, your overall health, where you expect to live, and what health care services you want it to cover.

The first consideration is getting realistic about what long-term care might end up costing you. If you had any family member go through this, you might know that it can cost between $10,000 and $20,000 a month for long-term care that is not covered by health insurance. If you have not had any first-hand experience with long-term care, do research to find out what the costs might be if, for example, you need to have a nurse from 9 to 5, for two shifts, or even a live-in care provider.

Then find out what the premiums will be for a long-term care insurance policy. For example, for a 50-year-old in good health, the premium would probably run between $4,000 and $8,000 a year; for a 60-year-old in good health, $6,000 to $10,000 a year. The cost goes up quite a bit as you age, with a healthy 75-year-old having to pay $8,000 to $15,000 for a year of long-term health-care insurance.

Now that’s a lot of money per year for practically anyone, unless you’re super wealthy. But if you consider that by paying those annual premiums you may get as much as $200,000 to $300,000 in coverage for long-term care when you need it, it’s a relative bargain.

Make sure that if you go this route the cap on the policy is realistic. You don’t want to pay those kinds of premiums for all those years only to find out that when you need to rely on the policy, the maximum benefit is $100,000. If you’ve been paying for the policy for 20 years at $10,000 a year, you’ve already paid double the value of the policy in benefits.

So do your homework on whatever policy you’re considering to understand what its maximum benefits are. Then do a cost-benefit analysis of what your premiums would be and what you would have to pay out of pocket if you had to pick up all the costs of long-term care on your own.

For more information on long-term care insurance, go to the AARP website, aarp.org, and type “long term care” in the search box.

Will You Have Enough to Live On?

The key is to be able to live on your new or reduced income stream, which may now or in the future include your Social Security benefits; part- or full-time work, if you plan to keep working; a pension if you’re lucky enough to have one; and any retirement savings you have in the bank or through 401(k)s or IRAs.

Is this amount going to be enough to finance your goals and objectives? The answer will of course be that it depends on your monthly income compared to how much you’re spending. If you’re spending more than you’re taking in, you may have to revise or at least postpone some of the goals on your bucket list until you can afford them.

Once you’re on a fixed income, everything changes. You now have to live within your means, because you can’t afford to take on any more debt.

How Will You Cover the Shortfall?

Social Security was never designed to be anyone’s only source of income during the senior years. In fact, according to SSA projections, it only replaces about 40 percent of an average person’s income. So how will you make up the rest? If you’re like most Americans, you’ll have to keep working. That will help, but only up to a point.

Continuing to work in your 60s and 70s may seem exciting and even preferable to retiring, especially if you don’t yet have the money to retire to the lifestyle you would like to live. But working in your 80s or 90s might not be all that appealing a thought. And, if statistics are at all reliable, it will be a lot less feasible as even the healthiest of Americans start to suffer from motor issues, macular degeneration, heart disease, Alzheimer’s, Parkinson’s, and any number of ailments associated with aging.

We don’t want to depress our readers, but the reality is that certain diseases and ailments are age-related. As a National Institutes of Health (NIH) study of 642 persons age 65 and older concluded in “Age-Specific Incidence of Alzheimer’s Disease in a Community Population,” published in the Journal of the American Medical Association (JAMA), people of age 85 and older are 14 times more likely to get Alzheimer’s than those in the 65 to 69 age group.

DEFINITION

Alzheimer’s is a disease that wreaks havoc with memory, thinking, and behavior. Its symptoms include memory loss and changes in personality, and it usually starts slowly and gets worse over time until you can no longer perform daily tasks.

So if you haven’t saved enough for retirement, and most of us haven’t, the only way to maintain the lifestyle you’re accustomed to is to continue to work and earn income during your 60s and 70s, and as long as possible into your 80s. Otherwise, dramatic changes in lifestyle will have to be made.

Fortunately, as we learned in Chapter 16, changes are possible, such as moving to another state or even another country where the cost of living is lower. But that’s not for everyone, and we all want such a decision to be based on such concerns as climate or proximity to family and friends, or a culture or lifestyle we’re curious about, rather than desperation or economic necessity.

Fortunately, some of us are still able to look toward our home, condominium, or retirement getaway as the way to generate the retirement savings we need. That might work if you have enough equity in your home and the price is high enough that when you sell it you see a profit.

There are some dire statistics floating around that highlight how urgent it is for you and your loved ones to really take these issues seriously. For example, one statistic we found is that it’s predicted that by 2020, one in every three Americans 65 and older are going to be living in poverty.

We’re talking about Americans who were considered upper lower class and middle to upper middle class when they were working and bringing in a paycheck. But, because they were too often living from paycheck to paycheck without any real savings, and with mounting credit card debt and escalating unreimbursed health-care costs, many are finding themselves part of “The New Poor.”

This is a huge retirement crisis on the horizon and, unfortunately, not enough is being done to address it. However, you can start addressing it yourself by making sure you at least start taking stock of how much longer you can work, what spending habits you can change so you keep more of what you do earn, and how to reverse the American trend of having a resistance to saving that, sadly, characterized so many of the Baby Boomers.

Maybe this was because they were raised by parents who, having lived through the Depression era were dedicated to saving, so deep was their fear of the poverty they had witnessed firsthand. Or maybe it was a reaction to the boom years of the 1990s up to 2008 that lulled many people into a false state of confidence that the money would always be there. Whatever the reason for past spending habits, it’s now time to get your own financial house in order. It is, after all, the only house you can really do something about.

You also want to be aware of trends that have the goal of helping more Americans remain in their home or apartment and as financially independent as possible, without having to rely on public assistance, the community, friends, or family. One such movement is known as “virtual villages,” a nonprofit organization with annual dues paid by members. These villages are sprouting up throughout the United States, providing services for their members, from cleaning up the yard to driving members to the airport.

The services are provided through volunteers who devote their time to these associations, as noted by Constance Gustke in her New York Times article, “Retirees Turn to Virtual Villages for Mutual Support.” Some experts, including Andrew Scharlach, Kleiner professor of aging at the University of California, Berkeley, who studied nine retirement villages in California, predict that virtual villages are going to grow in popularity, especially as the Baby Boomers continue to age.

The Least You Need to Know