Ready to Retire?
Part of retirement is to plan on how to spend money saved over the years, an expert says
By Deborah Jeanne Sergeant
Are you ready to retire? Sure, you may have 401ks, IRAs and other investments lined up for your retirement nest egg, but that’s not all you need, according to area financial advisers.
You need to have a reason to retire. Facing personal health challenges, caring for elderly parents or supporting a spouse who is launching a business or other sizeable endeavor call all contribute to the need to scale back and retire.
“If people can’t handle the work life balance and struggle with day-to-day emotional or wellbeing reasons, then definitely, they should think about slowing down and retiring,” said Diana Apostolova, investment consultant with Rochester Investments in Rochester.
People in poor health may want to retire so they can better care for themselves and also enjoy the remaining years they have left.
Apostolova added that it may be time to retire if the “good life” sounds very tempting.
“If they want to enjoy life doing things they like, rather than getting up in the morning to go to a job, then yes, they have the readiness signs to retire,” she said.
She encourages retirees-to-be to set goals based upon what they want to do, like travel, spend time with family or volunteer. Doing so can help people motivated to finish their
careers strongly.
“Hopefully people can enjoy retirement and not stress over other things,” she added. “Life is short so making it fun and enjoyable is important.”
You also need to know what to do.
Planning what to do is as important as how to fund it. Norton Suda, certified financial planner, wealth adviser and assistant vice president at Canandaigua National Bank & Trust in Pittsford, frames it as “What will you be doing to spend eight hours a day doing? That’s 40 hours a week. What will you do to fill that time?”
For example, many of his clients find fulfillment in volunteering for causes which they feel passionate about — a much better way to pass their days than merely watching TV or aimlessly puttering around the house.
“It doesn’t have to be a big challenge, but things you’re already passionate about if you had more time,” Suda said. “Start engaging in it even before retirement.”
Many charities need volunteers to support their mission.
You also need to get ready to spend instead of save. Alex Neri, certified financial planner and partner at SixPoint Financial Partners in Pittsford, works predominantly with people who 55 to 60 and preparing to retire.
Neri said that most of the time, people plan adequately saving retirement finances, but not on how to spend it.
“There’s a psychological hurdle ahead,” he said. “’I’ve always been trained to put money away and for 40 years; I’ve been all about saving,’ they say. It’s mentally about not feeling guilty about taking money out and not saving.”
Instead of saving, it’s time to spend and it’s tough feeling free to do so. Neri said that some retirees drive a 15-year-old vehicle and eschew paying for cable television to save money and the thought of splurging on a trip, home upgrades or even dining out seems difficult.
“We’ve got a lot of people who got into a bigger corporation 40 years ago,” Neri said. “They might live very comfortably on that. Their expenses are lower than what they thought, and they might have $100,000 in retirement income and need $50,000 and have $1 million in a 401k somewhere.”
Planning a budget can help retirees know they can afford to spend on a few nicer things and experiences so they don’t feel guilty for enjoying their retirement life.
“It’s OK to treat yourself,” Neri said.
Planning for Long-term Care
By Deborah Jeanne Sergeant
About 70% of people aged 65 today will need some type of long-term care in the future, according to the Administration on Aging, part of the US Department of Health & Human Services.
A Place For Mom, a senior care referral company headquartered in Seattle, states on its website that the average length of residency in a long-term care facility is 3.2 years and more than 20% of residents will need more than five years of care.
Currently, Medicaid covers only 54% of the nation’s long-term care costs. The rest requires private resources or long-term care benefits.
Most insurance companies have phased out their long-term care policies. They’re costly to pay out and many policyholders will use the benefits. But you do have options for funding long-term care.
“There are plans where they put in a lump sum of money that is in a bigger bucket,” said Norton Suda, certified financial planner and assistant vice president at Canandaigua National Bank & Trust in Pittsford. “If you don’t end up using it for long-term care needs, it provides a benefit to give to a beneficiary. You don’t have a [financial] vehicle you put money into that you end up losing.”
In addition to saving for future healthcare needs, Suda also recommends that those currently working sign up for a health savings account (HAS). These accounts will pay both for healthcare needs now “and you can carry it into and through retirement for long-term care needs,” Suda said.
Because so few insurers provide a long-term care policy anymore, Alex Neri, certified financial planner and partner at SixPoint Financial Partners in Pittsford, said that planning for financial needs, along with a plan to meet those needs, can form a good strategy for long-term care.
“Some life insurance policies allow a long-term care rider,” Neri said.
Although somewhat complicated, the plans allow policyholders to tap into the death benefit while still living to cover long-term care needs. But be ready to dig deeply to cover a plan like this.
“They’re not cheap, but they are available in the marketplace right now,” Neri said. “The other strategy would be to self-insure. If you have enough investible assets saved up, you can afford to care for yourself at that stage of life. You can use trusts to protect your assets. An attorney can help you set up the trust for something like a cottage or vacation home to pass down to heirs.”
Arranging for family members to provide care initially at least, can also help. For example, living with an adult grandchild may be all you need for a number of years until your needs increase and you need medical assistance. Discussing the terms of the care in advance can help make decisions that your family feels good about.
Medicaid subscribers may receive covered care from a relative or friend who receives pay for providing the care.
When considering long-term care needs, it is best to discuss funding them with a financial adviser who knows your situation.