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Notes From the Fieldby Martin Weil

Posts Tagged ‘Retirement’

June 14, 2013

Changing Retirement Expectations, an ongoing series

Perhaps it is time the pendulum swings the other way and retirement returns to its original intent—as optimal workforce nonparticipation rather than self-enriching entitlements voted in by popular demand and aided by governments which are uninterested in acknowledging a crisis …

Jason Hsu, of Research Affiliates

What Hsu is saying is that the concept of retirement  – as formulated initially in the late 19th century in England and greatly expanded upon in the post-Depression era in the US, was originally meant as a way to ration labor.  In other words, to prevent the very young and the very old from occupying employment positions that could be more profitably filled by more able workers in their 20s-50s.

Retirement then gradually evolved into an entitlement program post WWII, allowing older citizens of developed nations to retire in a comfortable lifestyle. The article points out that this model is likely unsustainable in developed economies and has perhaps even outlived its societal purpose.

May 21, 2013

An Appealing New Retirement Paradigm?

Given that we are living longer than ever and that many of us will not be able to afford a post-career of 30 years without additional earned income (and what would we do with all that free time anyway – more than 10,000 days…), how about taking a year off every 5 years or so while you are still young enough to do the really interesting stuff?  NPR tells this fascinating story of Winston Chen, who at age 40, took a year off to live with his family on a remote Norwegian Island.

chen

Of course, the story avoids addressing the practical matter of career disruption that would disrupt the lifetime earnings potential for most of us. For now it would seem. this intriguing model is restricted to tenured professors and a few others. But as the realities of our having to work many years longer, perhaps social norms around work will progress to permit this sort of mid-career sabbatical for the typical worker.

April 4, 2013

Rare praise for the WSJ

I don’t usually read much in the WSJ that I would count as good financial advice for the typical investor.  But I have to acknowledge Brett Arends for this list of “Five Really Dumb Money Moves to Avoid.”

The shorter version:

  1. Don’t go overboard reaching for yield in a low-yield world
  2. Fund your retirement before spending for private university for the kids
  3. Don’t own more of your employer’s stock than you have to
  4. Don’t take Social Security early
  5. Don’t buy long-term US Treasury bonds at today’s yield.

Not a bad list at all, though a sharp observer will note the conflict between item #1 and item #5.  The article does a decent job fleshing out a prudent path between these two contradictory recommendations.

March 22, 2013

The Best Birthday Present, Ever

For my upcoming 65th birthday, the Federal Government will start “gifting” me several thousand dollars each year for the rest of my life.  Come April, I am eligible for Medicare, which in effect transfers a significant share of the cost of my healthcare to the Federal government.  I was walking on air when I got my little red, white and blue eligibility card.  This is hands-down the most valuable birthday present I have ever received.

Gone will be a $600 per month (and rising) premium for a high-deductible health insurance plan.  Gone also will be most of my out-of-pocket medical costs.  In place of expenses that typically have run between $8,000-$10,000, I will instead be out-of-pocket $3,000-$5,000 per year.  What to do with this four figure annual windfall is a pleasant dilemma.

As excited as I am at this “found” money – and I am, no kidding – there is this nagging problem. Someone is going to have to pay for the shortfall between the actual (e.g. market) costs of my coverage and what I will pay in Medicare premiums and share of cost.  Studies show this shortfall to average in excess of $100,000 per person over a current retiree’s lifetime. With 50 million Americans receiving Medicare today, rising to a projected 80 million over the next 20 years, it is not hard to understand why Medicare’s own projections show it facing an unfunded liability of $35 trillion.  How the government is going to pay this inconceivable amount over the next 20-30 years is a question that no one has yet been able to answer.

As they say, what cannot go on forever, won’t.  We are going to have to come to terms with the reality that that we either pay more in taxes to sustain current subsidies, find a politically acceptable way to significantly reduce costs and/or trim Medicare benefits. But while I wait for the political forces to figure this problem out, I am unhesitatingly seizing my opportunity to join the millions of American seniors already enjoying their Medicare “free ride,” courtesy of our Federal government.

NB:  The time to sign up for Medicare Parts A & B is the period three months before to three months after your 65th birthday.  You can do so quite easily here.

March 16, 2013

Weekend Recommendation – Quartet

Maybe it is because I am of a certain age (65). Maybe it is because I worked for 20 years in the music field before starting a second career in my mid-40s. Maybe it is because this is just a wonderfully scripted, beautifully acted and lovingly directed film. I relished every moment of Dustin Hoffman’s film Quartet and recommend it highly.

January 15, 2013

7 Financial Resolutions Worth Keeping

The WSJ, of all places, offers this pretty good basic advice for 7 ways to get your financial house in order in 2013.

For accumulators:

  1. Track your spending
  2. Put savings on autopilot
  3. Talk with your spouse about money
  4. Long term care insurance in mid-to-late career

For retirees

  1. Don’t take SS benefits early
  2. Make sure you maximize tax advantages when withdrawing
  3. Consider an immediate, or deferred,  annuity

Thanks to Rita McGrath

November 2, 2012

A New Reverse Mortgage Product Worth Considering

Reverse mortgages have long been a fallback source of retirement funding for seniors. The knock has been the exceedingly high upfront fees imposed on the borrower. Now along comes a new product, the HECM Saver, that can function as a standby line of credit and has fees more akin to a typical mortgage loan. No less than Harold Evensky, one of the most respected voices in financial planning, is recommending the HECM Saver as a useful tool in retirement funding strategies.

A reverse mortgage is available to anyone who owns a home and is over 62. Typically, the older the borrower, the higher the reverse mortgage amount. Existing debt will need to be paid off, so a debt-free home is the preferred situation.

This new HECM Saver product, like all reverse mortgages, has no payment requirement on balances and does not need to be repaid until the owner no longer lives in the house. This means that a senior with a free and clear home but worried about running out of retirement savings, may be able to stay in their home for the remainder of their lives.

There are downsides: the value of the estate passed to heirs will be diminished and the loan generally has a somewhat higher annual interest cost than a standard mortgage.  But we think the Evensky strategy described in the link, using the HECM Saver as a backup line of temporary credit, makes excellent sense in certain situations.

September 21, 2012

Realities of Long Term Care

Long-term care costs can surprise many families who expect Medicare to cover their needs. After a hospital stay, Medicare will pay for 100 days of nursing home care, but after that, families are on their own or are forced to spend down their assets to become poor enough to qualify for Medicaid.

From this Kaiser article.  Note that individuals entering most Medicaid-funded facilities should not expect to find that “happy themed” vision of active seniors, dancing and cavorting,that is portrayed in most residential care advertisements. And then there are the across-the-board cutbacks in state Medicaid programs.

If this does not speak to why people will want to have LTC insurance, which, among other things, will pay for in-home care, then I don’t know what will.

July 27, 2012

A Short Primer on Overseas Retirement

This Marketwatch article provides a quick overview of the issues that will affect a US citizen who retires overseas, and it provides links to useful resources. A good place to start for anyone considering this move.

June 18, 2012

Retired and thinking of divorcing?

I recommend that anyone considering divorce after the kids have gone read this short Morningstar article (registration required) first, before taking the plunge.

Clients who are living fairly comfortably in retirement may have a hard time adjusting to the idea that they cannot continue the same lifestyle. … when you’re on a fixed income, with no prospect of generating future earnings from work, the likelihood of having to significantly trim back is very real.

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