This weekend my friend Kurt came by to pick something up that he left at my 50th birthday party and let me know he just turned 60. Although due to ageism he doesn’t share his real age “I’m a perma 55 on the street”. On that note we got to talking about his future and he shared some perspective based on his and his friends experience:
- While he’s financially secure he enjoys work and is planning to work at some level for a long time. Kurt’s father ran a small manufacturing business until he was 91 last year and he felt it helped him psychologically (sense of purpose), socially (co-workers and business network) and financially (some income).
- He’s worried he’d get bored without some kind of work to engage him – “it’s not just about playing golf, hanging out in the cabin and traveling like the ads on TV want you to believe is the goal. I want to stay engaged with entrepreneurial, business or non-profit activities AND be physically active”
- He’s fit and wants to stay that way – he rides mountain bikes, skis and hikes regularly and plans to keep at it for life.
- For him the biggest things are control and flexibility.
Kurt envisions an economically and physically active retirement for himself, and as we kept talking we boiled it down to four big questions that drive the money side of the equation:
1) Location: Where Do I Want to Live in Retirement?
This is the most frequently asked question as people approach retirement and it’s a loaded question, since you need to consider family, community, activities, proximity to healthcare, taxes (property and state income taxes) and cost of living.
Kurt has seen friends move away to beach and wine country retirement destinations and also seen some bounce back after they found them boring or lacking an active community, since many of them are just vacation places with few full time residents.
Forbes has a good resource to help people find The Best Places To Retire in 2019. Also check out this article if you want a comprehensive list of US and international choices along with things to consider.
How you answer this question and whether you downsize has a huge impact on your retirement expenses.
2) Healthcare: How Will I Pay for It?
This is a huge issue which bites many people who don’t understand just how expensive healthcare is both before and after Medicare.
We just did a Webinar on Retirement Healthcare and one of the biggest questions was “What is a reasonable self funded healthcare cost for a couple in our late 50s? What number is reasonable for inflation projection?”
Per the experts on the Webinar: “According to the Kaiser Family Foundation, the average cost for a Silver Plan in the US for two non-smoking adults age 58 is $1,907 per month, however the cost varies by state. For instance, in CA, the average cost of a Silver Plan is $2,236. There are substantial Premium Tax Credits made available through the ACA based on your income. In order for you to get a better picture of your scenario you should visit https://www.kff.org/interactive/subsidy-calculator/ . Regarding healthcare inflation, you should assume two to three times the CPI rate.”
Once you’re 65 there’s a lot to consider around how you’ll claim Medicare across
- Medicare Parts A and B (original Medicare)
- Original Medicare with a Medigap policy only
- Original Medicare with a Drug Plan only
- Original Medicare with Medigap AND a Drug Plan
- Medicare Advantage plan with drug coverage
3) Work: How Active Do I Want To Be And What Do I Want to Do?
Working longer has a huge impact on your retirement income since it allows you to save for longer, let’s your money grow for longer and let’s you delay Social Security. Even if you’ve been making $75-100K+ per year, you may find that even if you just make half of that you can still get by and have a lot more flexibility and control over your time.
For Kurt – he envisions working in some capacity, but likely fewer hours, working when he wants and where he wants. If you’re a knowledge worker today and willing to embrace the gig economy very often you can work from anywhere there is an internet connection.
4) Money: How Will I Generate Lifetime Income?
This is where most people start, but really it’s driven by how you answer the questions above about where you want to live, what your plan for healthcare is and how active you want to be on the work front. This is Why Money Is The Last Thing You Need To Think About As You Approach Retirement. It’s helpful to create an online retirement plan to think through these questions and create different scenarios across your plan Income, Expenses, Taxes, Social Security, Housing and Healthcare. Do this and you’ll be ahead of 90% of the population and dramatically improve your chances of having a great retirement.