Miriam Zettlemoyer, Consultant
Transitioning from working years into retirement years can be difficult. It can create great anxiety and people sometimes rather not deal with what retirement would look like financially and just continue to work. It can seem like the easier option. The thought of what might be on the other side is too daunting a task but at some point, in their life age, health and life forces you to take a look. I always tell my clients that it might not be as bad as you think. We start with the budget and we look at current working year’s budget to moving into retirement budget – needs versus wants come into play. Next, we look at income current versus retirement income.
Predictable income can include social security income, pensions if available and other assets like retirement accounts, annuities that can produce income if there is a shortfall between budget and income. After doing the math on both those items we can determine if there is money for variable cost items like travel, gifting, hobbies or other. Healthcare can be a big cost if your current employer was paying for your coverage 100% but you may find that moving into a Medicare supplement plan option could reduce your annual out of pocket costs for deductibles, co-insurance, co-pays and other even if the premiums were 100% covered by your employer. Working with an advisor can help you also get your “stuff” in order and make you think of things that you would normally not be on your mind. Are your wills and powers of attorneys current and say what you want them to say? Are your beneficiaries up to date on all your accounts and policies? Should I keep paying on my life insurance and do I still need it? Will my car last 20 years in retirement or is that an expense I should budget for? Lots of questions that can be difficult to think about, but relief follows once answered. Putting a plan in place to make sure you don’t outlive your retirement can include downsizing, determining a way to reduce necessary expenses, working an extra year to increase your social security income, rolling over some assets into an income producing product, moving in with family and keeping variable expenses to a minimum.
We haven’t addressed or talked about additional health needs and long-term care that can drain the assets quickly. This is a concern as we age, and health deteriorates that our expenses could increase and use up our assets for care needs. Assisted living costs on average are $3,500+ per month and skilled nursing costs are averaging over $7,500 per month. One of the planning options available to help cover the cost is Long-Term Care insurance. You must however purchase this when healthy and be sure that costs for the insurance even if they increase are manageable into retirement. The markets have allowed for some hybrid life insurance and long-term care options as well as a one-time deposit into a life policy to be used in long-term care situations. These newer products avoid the use it or lose it mentality of the traditional long-term care products that you pay for and if you don’t use then you forfeit all the paid premiums but still include some underwriting/health requirements in order to qualify. Contrary to widespread belief Medicare will not cover long-term care situations. Medicare covers a very limited amount of care in a nursing home and with strict rules of being in a hospital for at least three days and then transitioning directly to a skilled facility for care.
A good advisor will be able to show you different options, plan your budget and income and give you peace of mind when moving into retirement to cover all your basis. The baby boomer generation include people born from 1946 to 1964 and they started turning 65 in 2011. Since then there were 10,000 boomers turning 65 per day that will continue for another 12+ years until year 2030. Are you one of them? Are you ready? Meet with your advisor today to review and make sure you have all your ducks in a row. If they aren’t asking you some of these questions it might be time to look for another advisor. The sooner you start the planning process the better chance you will have for financial success.