Editor’s Note: Below is another column in Steve Canipe’s series called Boomer Bytes. The column, as the title suggests, will focus on a variety of topics that may be of interest to baby boomers, those born between 1946 and 1964. But Canipe also hopes to start a conversation with younger generations, too. Check out an introduction and Canipe’s (first self-titled) column here.
- See second column – Are We Really Old? – here.
- See third column – Cars and More Cars – here.
- See fourth column – Getting Educated – here.
- See fifth column – Home Alone? – here.
- See sixth column – Death – here.
- See seventh column – They’re Playing Our Song – here.
- See eighth column – Driving: Knowing When To Quit – here.
- See ninth column – Hobbies: What’s Your Favorite – here.
- See 10th column – ‘The Last of Life, for which the First was Made’ – here.
- See 11th column – Volunteeering – here.
- See 12th column – Duck and Cover – here.
- See 13th column – Providing for the Future – here.
- See 14th column – Here We Go Wandering… – here.
- See 15th column – State of Schools – here.
- See 16th column – Our War – here.
- See 17th column – Behind the Curtain – here.
- See 18th column: Our Mind
- See 19th column: Change
- See 20th column: Memorials
- See 21th: When is Old?
- See 22nd: Roles
- See 23rd: Becoming a Dad
- See 24th: Where Are My Roots?
- 25th: Is it our fault?
- 26th: Getting There From Here
- 27th: Oriental Competitor
- 28th: Russia – The Evil Empire
- 29th: India A Sensory Experience
- 30th: Tanzania–Land of Kilimanjaro
- 31: Drug Use
- 32: Are We Being Ripped Off?
- 33: Reunions and Such Things
- 34: Our Friends and Language
- 35: Climate Change Reality
- 36: The Lure of Leisure
- 37: Photography – The New Way
- 38 – Helping Others with Your Skills
- 39 – Are We Radical or Radical Enough?
- 40 – Can You Teach Boomers New Tricks?
- 41 – Play Ball
- 42 – Aggravations to Make You See Red
- 43 – Propaganda: Twisting the Truth
- 44 – Do You Have the Packrat Gene?
- 45 – Being Thankful
- 46 – Remembering Grandparents
- 47 – Using Our Brains or Losing Them
- 48 – What’s a Family?
- 49 – Pets Becoming Peeves
- 50 – Christmas Memories
- 51 – Resolutions
- 52 – Retrospective for Boomer Bytes
- 53 – Styles
- 54 – Commemorations and Remembering
- 55 – Baby Baby Boomers
- 56 – Hoarding: Tripping Over Our Stuff
- 57 – Hate and Anger
- 58 – Alzheimer’s Disease – While I Still Can
- 59 – Rebirth in Spring
- 60 – We Are What We Eat
- 61 – March Madness Really?
- 62 – Cell Phones and Other Gadgets
- 63 – Starbucks, Race and Other Things
- 64 – Grandkids and Other Fun Things
- 65 – Memories of Younger Times
- 66 – National Parks: They Are Ours
- 67 – Traveling to Learn
- 68 – May Day – What’s That?
Will You Live Too Long?
By Steve Canipe
Have you ever heard of such a crazy question as “Will you live too long?” That is what I would have thought at one time but now as I get older and am contemplating actual retirement, I am thinking of it more and more (you remember that I am still working full time for an online university – Walden). While I am working, I am not concerned about not having enough money to do generally most things I want to do when I want to do them. But if I quit in a year or so – I will still have hopefully another 15-20 years to live and the question of outliving my savings is very real. These years when I really retire will be during a time when my medical expenses will be likely to increase. During my first 69 years, I’ve been very blessed to have been really healthy. Only the occasional cold/flu has been a problem and the only surgery was for cataracts. Normally I visit the doctor once a year for the annual physical. I’ve no knee or hip problems and have no arthritis.
The AARP Bulletin from April 2015 has an emphasis on money in retirement. (http://newsstand.aarp.org/#Home&Document=92332) The headline is “Your Guide to Financial Resilience: Hang on to your hard-earned money.” This headline from the magazine started me thinking more seriously about what I would need upon retirement. I do have several retirement funds, IRAs, 401(k) accounts, and savings accounts. In an article from MSN, dealing with cost of nursing homes, they reported that the median cost of a private room was now in excess of $91 thousand a year, up from $87 thousand last year. (http://www.msn.com/en-us/money/insurance/annual-cost-of-nursing-home-care-hits-dollar91000/ar-AAaEK1t?pfr=1) I’m thinking WOW, how can that be? This is $249 per day. About what you would pay for a really good hotel, so maybe it is not out of line after all.
But needing to find that amount of money would surely wreck my financial planning for the future. Most of us boomers would have Social Security (average check is about $1250 per month) and I have North Carolina State Employees retirement (the average there with the final four years of pay at $50 thousand and having worked for 30 years would have a monthly pay out of about $2300). The two added together would give $3550 or less than $43 thousand per year. Or in other words not enough to pay for but half the average cost of nursing care. In order to pay for the median cost of nursing home care, I would need to have invested over a million and half dollars at 3% interest to get the needed amount to make up the difference for the nursing home.
The truth is that type of investment of $1.5 million at 3% would leave the total amount when I pass away. So if the earning was at 3% (certainly conservative) and instead of just taking the interest, I were to take the dollars needed to fully fund the nursing home, I get different figures. This scenario would totally deplete my million and half dollars during the 26th year.
If I were actually doing this withdrawal now (and assuming that I had the $1.5 million in savings, which I don’t), it would be when I am 95 when the investment would be gone. That is probably not too bad a story to tell, since probably only a few of us will live to be that age, but, unfortunately, my example is not reality based. Most of us average people don’t have that kind of invested money ($1.5 M) or even close to it.
There is a great online calculator that will do the amortization mathematics for you based on what you really have invested and what you estimate you will need on a monthly basis. You do have to make some assumptions about inflation. See it at https://www.calcxml.com/calculators/i-am-retired-how-long-will-my-savings-last?#top You can adjust the amount of savings and the amount of money you need to gain a better picture of your needs and what modifications you may need to make. The assumptions are based on certain percentages of inflation and interest. If any parameter’s assumption changes, then the story of the funds longevity will also be different.
When you look at the example above, this scenario is making an assumption that you don’t have any other obligations, like a home mortgage, taxes, medical expenses not covered in the nursing home, personal grooming needs like haircuts, makeup, etc. All of these may well not be true assumptions and to get an accurate picture they need to be included.
So whatever goals you are trying to reach, the April 2015, AARP Bulletin article entitled “10 Keys to Reach your $ Goals,” may be helpful. (http://pubs.aarp.org/aarpbulletin/201504_DC?folio=16) The advice is good for everyone but may be particularly relevant to all boomer-aged people. The 10 goals are 1) Don’t take Social Security too early; 2) Don’t say “take this job and shove it;” 3) Don’t underestimate your lifespan; 4) Factor in health care costs; 5) Don’t ignore major expenses; 6) Consider long-term care; 7) Don’t fall for scams; 8) Simplify your finances; 9) Keep track of pensions; and 10) Don’t miss your Medicare deadline. Each of these is explained on the AARP website listed above.
One thing that my wife and I did that will help with long term nursing care costs was to take a long-term care policy that was a 10 year pay. It is not great but when we first left NC service it was what we felt we could afford. In hindsight more would have been better. This policy, now paid up, will provide an assist of about $27 thousand per year!
There are any number of folks out there who are happy to provide you information on retirement planning. Some of them even send advertising offering free meals at various local restaurants just for listening to them. I have not gone to any of these but some folks tell me that some of the representatives can be pretty high pressure. I would refer you to #7 above—“don’t fall for scams.” There are many reputable planners in the area – just do your homework and check credentials and then decide if the person/office seems like a good match for you.
Remember if it sounds too good to be true, then it probably is too good to be true!! There has never been and will never be a “free lunch.” Get whatever promises, even from reputable people, in writing. This is just you doing your due diligence. If the person objects to putting what is being said in writing — one word of advice RUN!! You also need to know what is always in the fine print “past performance is not a guarantee of future gains;” you know this just be aware of it especially if you go to a “free meal” presentation but even if you go to a planner’s office or they come to your home.
Nothing is better than you doing some studying about the topics of interest to you. This is true whether you are talking about 401(k) accounts, roll-overs, IRAs including Roth, Tax Sheltered Annuities (TSAs), and Required Minimum Distributions (RMDs–once you reach 70.5) from deferred accounts like IRAs, TSA, etc.
This retirement planning is not for the faint of heart as there are so many variables that must be considered and there is no way to really know the answer to the key question….the same one I started this column with “Will You Live Too Long?” I certainly am not a certified financial planner, but there are plenty of very reputable ones who serve Boone and Watauga County people. My advice is to be in contact with one. This advice is for every boomer regardless of the age and really any working adult – tell your children and grandchildren. It is never too early to plan. Small amounts invested while young can really pay off when retirement age comes.
Oh to be young and know what I now know. If one were to invest $20.00 per month it could be worth $2,943.45 after 10 years if the annual rate of return was 4.00%. If the horizon is longer say 35 years the amount at the end is over $18 thousand. That $20 per month is only $1 per working day. It is the power of compound interest. There are numbers of online calculators that will help any age person with amounts and what a payout might be. Visit one site at https://americanfundsretirement.retire.americanfunds.com/tools/calculators/investing.htm to do some hypotheticals.
Let me hear from you about your investment and saving strategy. Do you worry about outliving your money? Do you have strong investment? Do you think Social Security will provide for you in retirement? (Hint: it will not). In the space below, share your thoughts on retirement investing and how you will be able to keep some semblance of your life style after full retirement or send me an email at boomerbytes@yahoo.com. Remember good planning helps!!