Retirement, Now What?

The transition from working a 40 hour week to retirement can run many unexpected courses. Some people retire before they are ready due to disability or downsizing. For many people retirement means not working, for some people it means working less. Many retirees take part time jobs in retail, fast foods and some have crafts and hobbies that bring in extra income.

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People as they grow older look for things to fill their life with meaning. Volunteering, hobbies, socializing, church, caring for grandchildren and exercise can help fill the days when someone leaves the workforce. Many people in early retirement ask themselves how they ever had time to work.

Hobbies like golf and gardening can keep seniors very busy. However volunteering in the community, church or caring for grandchildren can be more fulfilling. These activities contribute to a healthy active retirement. Programs like Silver Sneakers are targeted at the need for seniors to get moving or keep moving. Silver Sneakers is sponsored by health insurance programs and gives seniors access to gyms like the YMCA and special classes that help seniors stay motivated toward fitness goals.

The most important thing that seniors sometimes underestimate about work is how important the daily social interactions are. It is important to develop and maintain relationships with friends and family during retirement. People who are engaged with friends and family are happier and healthier. So focusing on your social network is essential to a happy and healthy retirement.

Estate Planning Essentials

Estate planning isn’t just for the rich. Certain basic estate planning measures should be taken by everyone. An attorney can help you prepare all of the estate planning documents you need. Some people prepare a will using forms purchased online or at a business supply store. Most people benefit from the advice and expertise of an attorney.

1. Will-  It is especially important for people who have minor children to establish a will. A will determines who will care for your minor children. A will also determines who will get your financial assets, personal items and real estate when you die.

2. Advanced Health Care Directives-  If you become incapacitated while terminally ill and are unable to make decisions about life support, an advanced healthcare directive can communicate your wishes to healthcare providers.

3. Healthcare Power of Attorney-  With a Healthcare Power of Attorney you can identify someone to make healthcare decisions for you in the event of your incapacity. Make sure the individual is good at making decisions under pressure and understands your desires.

4. Living Trust- A trust is legal entity, like a corporation that lives on after you do. If you have a trust you are able to control how assets are distributed long after you die. There are also ways that a trust can minimize estate taxes.

Please visit the CNN Money Estate Planning Primer for more details on estate planning.

 

Long Term Care

Long term care is not medical care, and is not covered by Medicare, or individual health insurance. 

Long term care is for people who need help with the activities of daily living.  According to the Department of Health and Human Services, the "activities of daily living," or ADLs, are the basic tasks of everyday life, such as:

•           Eating
•         Bathing
•          Dressing
•         Toileting
•         Transferring. 

Most long term care happens at home, however long term care can take place in Adult Day Care, Adult Foster Care Homes, Assisted Living Facilities, and Nursing Homes. Medical Insurance does not cover Long Term Care. 

The vast majority of Americans do not have long term care insurance, even though according to the American Association for Long Term Care Insurance, “For someone with a 90-day Elimination (waiting) Period, the lifetime chance of someone buying coverage at age 60 and using policy benefits was 35%. So, 35% will use their coverage and 65% will not. ” The majority of people will use their life savings to pay for long term care, pass along the burden to their family or to the state through Medicaid.

When I ask clients how they plan to deal with the costs of long term care, the two top tongue in cheek responses are I have a .45 next to my bed or my daughter  is a nurse.  Both answers are very unrealistic. What if the daughter who is a nurse needs to work and save for retirement?

In general people who do not have any savings to protect don’t have many choices, their care is going to fall to family and to Medicaid. However there are choices to help people protect their family and their savings from the cost of long term care. Options include traditional Long Term Care Insurance, Short Term or Recovery Care Insurance, Hybrid Long Term Care Life Insurance and Annuity contracts.

U.S. Department of Health and Human Services 1990

American Association for Long Term Care Insurance

Retirement Income Planning

According to the Social Security Administration, before Social Security; the elderly, orphans and disabled people often depended on charity and lived in almshouses or workhouses that were funded by taxes.

 Over time, trade association called guilds and fraternal organizations also helped provide for the needs of the elderly, sick and disabled. Eventually defined benefit pensions and social insurance programs were developed by companies and governments to provide for retirement.

In 1935, The Social Security Act was passed as part of the Franklin Roosevelt’s New Deal. Although the Social Security system was not the first government social insurance program, it is a model of success.

If you were born before 1937, you reached full retirement age at age 65. Full retirement age has been adjusted to age 67 for people born 1960 or later. The chart below shows how benefits for spouses and retirees are impacted by early retirement.

Full Retirement and Age 62 Benefit By Year of Birth

Today people can live twenty to thirty years or more in retirement. Social Security is strained by a relatively smaller workforce and growing life expectancy. Here is a link to the Social Security Website where you can set up an account to check on your earnings record and get an idea of how much your Social Security Benefit will be during retirement.

The number of companies offering defined benefit pension plans has steadily declined in recent years. Employers are increasingly shifting the responsibility for retirement income planning to the employees.

IRAs and 401k are very good ways to put money away on a tax deferred basis for retirement. Although Individual Retirement Accounts (IRA), and 401K retirement savings plans have grown in popularity, most people have little or no retirement savings. Most financial experts agree that you should start saving for retirement as soon as you begin working.

As popular as IRAs and 401ks have become, many retirees find they are not well suited for distributing income and insuring that you do not run out of income during retirement. Fixed annuities offer retirees a way to insure their retirement funds because they do not lose money due to market fluctuations, they also provide for income distribution options that can guarantee income for life.

Medicare and Individual Health Insurance for Retirees

The most troubling budget line item for many people who are retired or retiring is often the cost of individual health insurance. An individual health insurance policy can cost $1000 per month for retirees who aren’t eligible for Medicare.

Most people who have employer group coverage pay some portion of the employer group premium, however because the premium is normally deducted from payroll checks it is often overlooked in retirement budget planning.

Medicare is usually much more affordable for retirees. Here is an overview of how Medicare works. You may click on key words in this post for more detailed information from the Medicare Website. Individuals who have earned 40 quarters of employment credit (10 years) are pleasantly surprised when they reach 65 that they are eligible for Medicare. People automatically qualify for Medicare due to disability after receiving Social Security for 24 months or if they have End Stage Renal Disease, or Lou Gehrig’s Disease (ALS).

Part A of Medicare is called Hospital Insurance, most people receive Part A without paying a premium. Part A covers room, board and nursing care while confined to a hospital. Part A also helps pay for Hospice and Skilled Nursing in-patient rehabilitative care. There are deductibles and co-pays under Part A, Part A does not cover medical care in or outside of a hospital.

Part B is Optional Medical Insurance, it covers medically necessary care in and outside of the hospital. Most people pay $104.90 per month for Medicare. People with higher incomes pay more. People with low incomes may qualify for a Medicare Savings Plan that will pay the premium.

Part B pays for certain preventative care with no deductible or copay. However for most diagnostic, therapeutic, and palliative (pain) care the Medicare Beneficiary pays 20% and Medicare pays 80% after the annual deductible of $147 has been met.

Many people choose to purchase a Medicare Supplement to help pay to co-pays and cost sharing associated with Medicare. Medicare requires that insurance companies offer standard plans so it is easier to shop for the lowest price. This is a wise choice because most of the medical services an individual uses during their lifetime are likely to occur when the individual is on Medicare. Without a Medicare supplement an original Medicare beneficiary would have unlimited exposure for their share of healthcare costs.

Budgeting Before and After Retirement

As important as budgeting is while you are accumulating money for retirement, it is even more important when you retire. A good pre-retirement budget puts retirement savings first. IRA’s and 401k plans allow you to save money first, even before the government takes their cut by allowing workers to save on a pre-tax basis. A budget provides a framework to pay for current expenses and save for future expenses, allowing for income and expense variations over months through the year.

About.com: Money Over 55, features a great article by Dana Anspach. In the article, “How to Make a Retirement Budget: A Retirement Budget Leads to More Fun in Retirement “, Dana outlines the steps to preparing a retirement budget. Here is a brief summary of her guidance, follow the link above to read the entire article. It even includes a budget worksheet.

 

Here are Dana’s 5 Steps:

 

After you gather your bank statements and credit cards statements along with any income information follow these five steps.

 

STEP 1 - Research your costs for health care before and after retirement.

STEP 2 – Research your costs for health care before and after retirement.

STEP 3 – List all your flexible or optional expenses.

STEP 4 – Write down some thoughts on how you want to spend your time in retirement.

STEP 5 - Calculate Fixed verses Flexible expenses.

It is pretty easy to prepare a budget when you have all of the steps laid out like this. So get started on the path to a financially stable retirement.

Why do I need a Senior Health Advisor?

During your work life you make a significant time and energy, in return your employer provides a regular income and often many additional benefits. Many employers provide short term and long term disability, pay into workmen’s compensation insurance, unemployment insurance, health insurance, dental and optional insurance.

Many employers offer life insurance for workers and their families and even a 401k savings plan so that you can defer income for retirement. Employers can really be one stop shops for most types of insurance benefits.

Some government and union employers continue these benefits for life along with pensions that guarantee life time income.

However, due to the high cost of providing health and income benefits most employers do not provide any benefits at all after retirement. This is where I come in as a Senior Health Advisor. 

I keep you connected to information from government agencies and top insurance companies with @Senior_Advisor on Twitter.

Click this link to keep connected with me on Facebook Senior Health Advisor

This video from United Healthcare illustrates a common problem I help seniors with every day Welcome to Medicare: Bonnie and the experts

Many of the employers who do offer lifetime benefits are trying to contain costs by scaling back the benefits offered to retirees. I help coordinate the benefits you receive from with your retirement with government benefits and benefits you can get through private insurance companies.

Benefits can be complicated. Understanding benefits that are offered by Medicare, Medicaid, VA, and former employer retirement benefits takes time, research and patience. Most people lack experience and expertise in these matters. As people approach retirement it is important to have a resource for advice on these matters, because they are of critical importance to your successful, prosperous and healthy retirement.

A Senior Health Insurance Advisor does not just advise you only once. I am with you throughout your retirement journey helping you update your plan along the way.