Will you run out of money?

In a recent survey of high net worth individuals (defined as people who have
at least $1M of investable assets), UBS reported that the life event they fear most is becoming a burden to their families. Is this a concern to you? Answer these questions to see if you need to make some adjustments to minimize the possibility of having to turn to your family for a handout:

  • Will I be able to afford skilled nursing care for a long period of time? If not, you may want to look into long-term care insurance or set aside assets specifically for long-term specialized care. Having a plan to afford 24/7 home care may be the best way to avoid moving into a nursing home when you and your spouse can no longer care for yourselves alone. To prevent one spouse’s needs from bankrupting the healthy spouse, check with a financial planner and/or Medicaid attorney about advanced planning options to protect assets.
  • Are my savings invested to provide enough income during retirement? I have seen an alarming tendency to move into retirement without a financial plan beyond a graduated change into a bond-heavy portfolio. Considering that the joint life expectancy for couples who retire at age 62 is 30 years, a fixed income portfolio that is not based upon a sound financial plan may not even keep up with inflation. The longer you live, the more your chance of total retirement independence will fall.
  • Is my charity based on excess wealth and a plan – or emotion? When our children become adults, it can be tempting to help them out with the down payment on a first house, college funding for the grandkids, or lavish family trips. It feels nice to share, especially when you’ve finally paid off your own mortgage or before you have spent down your IRA, but you should first ensure you’ll have enough for yourself. Going to your children when you’re in your 80’s, hat in hand, won’t give you that same warm and fuzzy feeling. Plus, it’s doubtful they will have worked your support into theirbudgets. If your budget allows, you can still be generous as long as you’re not compromising your long-term financial security and consider surprising them with a gift after you are gone.
  • Do I need to change some habits? In the 1900s, medical science managed to conquer almost everything that killed us quickly – polio, influenza, diphtheria, measles, and so on. Many common health problems today, such as diabetes, are the result of poor diet, lack of exercise, and other bad habits such as smoking. We have the information and technology to improve our health (in most cases) if only we’ll put it to use. A healthier you will be more self-sufficient in retirement and spend less on health care.
  • Is your retirement date realistic? Consider the risks at both extremes:
    • Do you think you’ll never quit working? The “die-at-your-desk” plan assumes you’ll continue to enjoy work in your 60s and 70s as much as you do in your 40s and 50s, so you don’t need to save as much. This ignores the chance you will become disabled and the possibility that your stamina and/or interest will begin to decline as you age. It’s okay to plan to work forever, as long as you save enough to be able to work because you want to, rather than you have to.
    • Do you want to retire the minute you turn 62? Again, that’s possible if you plan long in advance and have health insurance to cover the gap until you qualify for Medicare. If you’re simply burnt out at work, consider a back-up plan to continue to work part-time at something you enjoy and delay collecting Social Security until at least your Full Retirement Age (FRA).

I’ve yet to address one other significant threat to retirement autonomy. What is this danger and why are women particularly at risk? Watch my video to find out.

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