“People who don't want to think about outlawing handguns haven't seen firsthand the kind of damage they do." -- J. A. Jance, "Payment in Kind"

Thursday, August 17, 2017

8 Questions About Retirement

     I'm asking these questions mostly as a way to remind myself to check up on these issues, before it's too late.

     Many of us believe that retirement promises a life of ease, free of responsibility. And in a way that's true . . . at least in my opinion. We no longer have to show up for work, deal with uncooperative colleagues, manage self-absorbed employees or report to narcissistic bosses. We no longer have to bear the weight of important projects, demanding clients or needy patients.

     But there is one area where we do take on more responsibility: In retirement, we are in charge of our own lives and our own futures. We no longer have a boss who tells us what to do . . . or a paycheck automatically deposited into our bank account. With the demise of the traditional pension (meaning, I don't have one), we shoulder more responsibility for our financial lives. And with increasing lifespans, we need to plan for longer and hopefully more rewarding futures.

     Whether you're a younger person planning for retirement, or like me already there, here are some questions we should ask ourselves to prepare for the rest of our lives. 

     1. Do we have a reasonably accurate estimate of our retirement income? Most of us begin with Social Security, which pays out $1,360 per month for the average retiree, but can offer better than $3,000 a month for high earners who wait past full retirement age to start collecting benefits. But Social Security is only a start. Most of us add to that income with a pension, or else IRA withdrawals, or possibly income from a rental property or the proceeds from a retirement job. Whatever our situation, we need to know how we're going to replace our paycheck – or at least most of it – after we stop working. 

     2. How will taxes impact our income? I should have known this -- but of course I hadn't paid much attention. Withdrawals from traditional IRAs and 401(k) plans are subject to federal income tax and possibly state tax as well. Social Security is partially taxable above certain income thresholds. Retirement income is similar to earned income in that our take-home pay is usually much less than our gross income.

     3. Should I hire a financial adviser? Some people are do-it-yourselfers, which is fine if you're organized and comfortable with numbers. But our financial lives can sometimes be complicated, and so we shouldn't be afraid to admit that we might not have the best answers and could use some professional help. (I have an appointment with a financial adviser scheduled for the end of August.) 

     4. Have you calculated your life expectancy? This may not be a pleasant task, but it makes a big difference whether you're planning for 10 years of retirement or 30 years. And our life expectancy may be longer than we think -- as B keeps reminding me. Her mother just turned 101 years old; so B is planning to live to at least 100. In fact, even us more average 65-year-olds can expect to live into our 80s, while over 20 percent of men and 30 percent of women will live into their 90s. And the longer we live, of course, the more money we need. 

     5. Do we have health insurance? Most of us qualify for Medicare at age 65. (Don't forget to apply!) If you retire early, you need to make sure you are covered at least for a catastrophic event. And Medicare alone is not enough coverage. Do your homework and make sure you have an appropriate supplemental plan for your health needs, which may cost more or less than the old plan from work. (For me, Medicare is less than what I used to pay; for B it is more, since she used to enjoy a heavily-subsidized medical plan through her town employment.) Our needs may also change as we get older. So we shouldn't pick a plan when we're 65 and forget about it. We need to review periodically and make changes as needed. 

     6. Have you prepared health directives and estate documents? It's difficult to think about this unpleasant task. (B and I have thought about it; so far we haven't done anything except we both have wills written 15 years ago, before we met.) But we want to have our papers in place, not just for our own comfort, but also to put our loved ones at ease, and so they know what to do. I have to admit . . . this one is still on our to-do list. 

     7. Where are we going to live? B and I have just been through the wringer on this. But whether we're retiring in place, or moving halfway across the country, we should remember that moving is not irrevocable, so we shouldn't freeze up at the prospect of making a decision. But we also have to be realistic. It's a lot of work to move, so we should think things through so we don't have to do it more than once or twice. 

     8. Do we have a plan? Retirement is an opportunity to choose where and how we want to live. Instead of drifting along, we should take advantage of all the options retirement provides. But remember, a plan is only wishful thinking, until we put it on paper. There are no right or wrong answers. The plan can change. It doesn't have to be long or complicated. But write it down . . . to make it real.

     Did I say that retirement promises a life of ease? Who was I kidding?


DJan said...

I do feel grateful that I have two payments deposited into my bank account every month: my Social Security and my annuities. It's enough to cover expenses but not make me rich. I volunteer my time to help people write their Advance Directives here in Washington state, and it's a very fulfilling task. I've been retired for almost ten years now and we did move from our home and love the Pacific Northwest. :-)

Juhli said...

Great reminders and I would also caution people to remember that many times if you did your will and other legal documents in a different state than the one you now live in they may not be valid. Our Georgia ones aren't valid in California. Heading to Legal Zoom soon to fix that! We also think planning to live to 100+ is quite reasonable for the average healthy person these days - and even some who aren't so healthy. My FIL has smoked heavily since he was 15 and had some serious health problems related to that but is still going strong at 90. I do think the largest financial problem with knowing we could live so long is how to fund the kind of everyday care we may need in the last decade. Lots to think about, do the best you can and then get on with enjoying the life you have now.

Rian said...

DH and I have been retired for 8 and 6 years now. And we too have been able to live pretty much as we always have... as far as everyday life goes. We can meet our expenses as long as nothing too much unexpected happens. But living on a "fixed income" with no real way to add to it, is a little daunting. We cannot do too much traveling (which isn't a big issue for us). But house maintenance (house is 32 years old) can cause unexpected expense and must be dealt with. We have retired "in place" and are happy with it for the time being. At some point this may change, but hasn't yet. If I had to give any retirement advice, it would probably be to be sure you have medicare and a medicare supplement in place.

Cindi said...

Great retirement advice. As always.
Thanks for that info about the will. Since DH and I don't know which state we will retire in, that was a valuable piece of information.

Anonymous said...

B will probably live to 100 or beyond.

Kathy @ SMART Living 365.com said...

Hi Tom! Really good information. My husband will be hitting 65 a year from now and there are lots of things to think about. And as you might expect, I think it is extremely SMART to plan ahead. Thanks for the heads up. ~Kathy

Janette said...

I tend to be a "but what happens if" type of person. Hubby has a good federal pension now, but who knows if that will change in the next twenty years? Same thing with my small state pensions? I give myself permission to worry about once a month. Our goal, right now, is to live normally, but continue to save. Hubby plans to be at least 100 (his parents passed at 80 and 81). My dad passed at 75, but I favor my mom and she is still alive and kicking at 87 and has two sisters older then her Who knows.
We, too. are hanging our heads in shame with no current will or health directives (but we have discussed our wishes with the kids). Last will----1986 in Kansas.

Anonymous said...

Good ideas to think about. It's good to think about living to 100, but that's pretty rare. I'm a pretty big on long term care insurance if you can afford it as then you have some breathing room if you have to make any sudden decisions. Thanks for these thoughts.

stephen Hayes said...

My wife is retiring in October so I found this post wonderfully educational.

Anonymous said...

My father died at 56 but my mother, and four of her siblings, lived well into their 90s. I have survived 2 bouts with cancer (different kinds no less) so I have no idea what to expect in life expectancy. Every day is a plus.
I moved out of an old house which was always on the verge of another expensive repair into a 'senior' apartment in a small walk-able community. This will be a good move but it's taking a while to feel like home.
I have my social security but no pension just some moderate savings. Because of my health issues, I paid exorbitant amounts to maintain health insurance coverage until I could get to Medicare. That affected my ability to save for retirement. I worry a lot about outliving my money. I am frugal but I have to draw from my savings each month for living expenses. I have expensive dental issues looming and I need new glasses. I'm 68 and I worry a lot. -joan

Anonymous said...

Tom - I thought about you when I drove past Bucknell University this past Sunday on my way to celebrate my last living uncle's 90th birthday in Lewisburg, PA. He drove to his party and looks like he will live to be 100. - plynjyn

scapaflo said...

Hi Tom,
Always waiting for your new insights or your self discovery's. I'm 68 and still working part time in a job I love with good people. Will continue to work until I'm 70 God willing. Started collecting my pension at 65 and S.S. at 66. Will start MRD either at 70 or wait until my first day of work in the new year after I have turned 70. My S.S. and pension will more then cover my expenses as they are now with all debt payed off and major house expenses taken care of this year. New roof and new heating and cooling system payed off this year. Plan to stay in place. Wife is 5 years younger and my job covers her health care. She will also have a pension and S.S. plus as do I a 403b account. The big question for us is the medicare supplement choices. I've always been self directed regarding investments. My basic instinct is I will need professional assistance on this most important question. Hope you will elaborate in the future an the merits and or the shortfull's of supplemental health insurance. Perhaps web sites that can help break down the pluses and minuses. Thanks for the blog, Al

Tom said...

Medicare is complicated, no doubt, but you can find out a lot of info. on the website, and there are health insurance agents that can be helpful as well. Anon. . . may your uncle live to be 100, and may he also enjoy the ride! Personally, I'm a little skeptical about long-term-care insurance; but I got it anyway, because B insisted . . . and who can blame her? I'll be doing a post on LTC in the near future.

joared said...

Good advice. I figure at least 100 years life span has been a good round number for planning, but don't discount the possibility 110 to 120 might be in the offing. Those of you in generations coming after me better think of over 100. I did continue working part time 'til I was about 78, but might have stopped sooner had my husband still been living with his health such we could have traveled m U.S. as we once thought would be how we'd spend these years -- we enjoyed driving travels, wanted to travel north of our U.S. border. I highly recommend retirees make the most of their years with activity in the decade after 65 (and before if you retire earlier) because ages 75 to 80 for many older people can begin to see a decrease in stamina and/or, for some, increasing health needs -- but maybe you'll be the ones who are "fit as a fiddle" all your years.

Anonymous said...

This is great information. When my husband and I did our financial planning for our retirement, we didn't even factor in Social Security. We figured that if it was there for us, great. If not, we'll be fine.

I am amazed at how many people pick what they think is a big number (even "one million dollars" isn't that big anymore... hasn't been for a while), then say that they will retire when they get there. There needs to be so much more going into that decision.

Anonymous said...

Hubs forced out of the employment he knew at about 65 or so..I am 7 months younger, got a fed pension and he gets union and social security and I do toooo..we live in the home we got about 39 years ago..It needs work, taxes okay, maintenance wish we did it all along, a child only one we have been putting thru school and helping out..She will never buy a home, never saves anything and not married her preference lives in NYC and gets by...we feel we will live til God knows when..His mom lived to nearly 87 his dad only 74 full of cancer he was a drunk and no husband or father..His mom thought it better to still keep married even though her kids starved and begged her to divorce him she did not, he was never ever around and died young, siblings one died of aids and another as a baby, sister 17 years older than my hubs lived into her 80's..My mom died young of cancer raised without her and it was a hell on earth and now I know there is no hell I already experienced it..We have been married 43 almost 44 years..No one knows when one will leave this terrestrial I don't think one really knows what is after this life, I say be happy, love deeply and let hate and terrible thoughts go by the wayside as life is truly short..enjoy your column, peace out!