Time is money, as the old saying goes. If true, you may never be so wealthy (in time at least) as you are during retirement. Gone are the days of having to trade your most precious commodity for whatever the market would bear. More than ever, you are free to spend your days doing as you please. As part of the new “moneyed” elite, however, you will want to spend your time wisely. Otherwise you might find that another old saying applies: Easy come, easy go. What are the best ways to maximize your new time windfall?
Shake up your routine
Retirement is a major transition. That transition can be difficult and you’ll have a certain amount of inertia to overcome as you attempt to move from your normal daily routine into your new plans for retirement. To help jump start the process, it’s helpful to have big, new plans—like moving, traveling, or volunteering—that will force you to steer off the well-worn path you’ve become accustomed to and proactively pursue your new goals. If you don’t have specific new plans, it’s easy to fall into a routine that doesn’t look much different from your working years, save for sleeping in a little bit and having more time to run errands.
More than ever, retirement is a time to throw caution to the wind. As Mark Twain said, “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.”
If you’re going to shake up your routine and head off in a new direction, there will be certain activities and commitments that are no longer relevant to your plans. Just as it’s important to make a “To-do” list to keep track of things you need to get done, it’s important to make a “Stop doing” list as you transition into retirement in order to free more of your time to focus on new pursuits. Prior to retiring, make a detailed list of all of your commitments and responsibilities. Go through each one and decide which you plan on continuing into retirement and which need to be stopped or handed off to someone else. Once finished, your schedule will be much less cluttered and you will be able to use your time more efficiently.
In addition to simplifying your schedule, simplify your investment accounts. The average person changes jobs several times over the years. That could mean multiple retirement plans at former employers as well as a number of IRAs and other investment accounts. This account proliferation makes monitoring your investments more time consuming and drawing income from them during retirement much more complicated. If you have multiple 401(k)s, roll them into an IRA. If you have multiple IRAs, consolidate them into one. Doing so will help to reduce fees, simplify your distribution strategy, make your investments easier to monitor, and free up more of your time to focus on other priorities.
Focus on milestones, not maintenance
No matter how effective you are at streamlining your schedule, you will still have a good many maintenance type activities that pop up on your calendar every day or every week; things like sleeping, eating, paying bills, going to the doctor, getting groceries, mowing the yard, and cleaning the house. While important, these things don’t really add much significance to your life.
To find meaning, you will want to focus on milestones. Those are the things that, when done, give you a sense of purpose and accomplishment. Milestones tend to fall in areas like family, relationships, education, adventure, community, hobbies, travel, and health. When reflecting on your life, the milestones will be the things that stick out. They will be the things that you are most proud of. The maintenance will just fade into the background. Because of that, do everything you can to condense, consolidate, minimize, or (if financially able) outsource the maintenance so you can be free to spend more of each day focusing on milestones.
As you can see, by effectively managing your time in retirement you can make the most out of what will surely be one of the most fulfilling and rewarding periods of your life.
I originally published this article at www.fpanet.org.
For many people in retirement, their greatest fear is ending up in a nursing home. Being able to live independently or, barring that, getting into a quality facility of his or her choice is an important end goal. Unfortunately, this type of care does not come cheap.
According to the 2011 Genworth Cost of Care Survey, the median annual cost of a private room at an assisted living facility in the U.S. is $39,135. That same private room at a nursing home averages almost $78,000 per year. Because these costs are expected to continue rising in the years to come, it is important to have a plan to protect yourself against this potential shock to your retirement budget.
Covering the costs of long-term care
There are four primary ways to pay for long-term care: Medicare, Medicaid, paying the costs yourself, or purchasing a long-term care insurance policy. Many people assume that Medicare is the answer, but it only covers long-term care expenses under very limited circumstances. Medicaid will help pay, but it is a needs based program that essentially requires you to be both sick and poor in order to be eligible for assistance. It is often a last resort for someone who needs care, but has exhausted his or her personal resources.
Because Medicare and Medicaid are not great options, it is important to have alternative plans to cover the costs. Some may have the resources to self insure. For others, it may make sense to purchase a long-term care insurance policy.
How does long-term care work?
In general, a long-term care policy pays a specific dollar amount for each day of care that is covered by the policy. Covered services can include home health care, respite care, adult day care, care in an assisted living facility, or nursing home care. The policy is usually triggered when you need help performing the normal activities of daily living, such as bathing, eating, or dressing.
Roberta Hahn of Tigard, Oregon arranged for her mom Helen to get help when she began to struggle with these daily tasks. “Mom lived independently as long as she could,” Hahn said. “Physically she just got to the point where she couldn’t take care of herself anymore. Because I work I wasn’t able to give her the kind of care she needed, so it was a relief when we were able to get her into a great facility not far from my home. Thankfully, she has a long-term care policy that has helped to cover much of the cost.”
There are nearly 10 million Americans who, like Ms. Hahn, need help with these daily tasks. As life expectancies rise, that number is expected to grow. In fact, the President’s Council of Economic Advisors estimates that 70 percent of people who reach the age of 65 will need some form of long-term care before they die.
Is a policy right for you?
Policies like Ms. Hahn’s can be expensive and they’re not for everyone. If you can’t afford the premiums, don’t have significant assets to protect, or have Social Security as your only source of income, you will probably want to think twice before purchasing long-term care insurance. If, however, you want to preserve assets for heirs and can afford the premiums, a policy can be a wise investment.
Other common reasons people have for purchasing a policy are to have peace of mind, to avoid being a burden on friends or family, to be able to get into their choice of facilities and to be cared for at home as long as possible.
What to look for in a policy?
If you decide that long-term insurance might make sense for your situation, there are several things you will want to consider when purchasing a policy. Does the policy you are considering exclude certain pre-existing conditions? Is there an elimination period after you enter a facility before benefits will begin to be paid? Do benefits cap out at a certain level? Does the policy cover a broad spectrum of services from home care to assisted living and nursing home care?
Because medical costs are rising rapidly, it is also important to have a policy that offers inflation protection. You may be able to purchase one day in a nursing home in your area now for about $200, but the same day might cost you $325 ten years from now. To make sure you have adequate coverage, investigate the cost of care in your area. Then look for a policy that will cover those costs and that will compound 5 percent annually to account for inflation.
To help compare policies you are considering, be sure to ask the company for their outline of coverage, which will highlight a policy’s features, provisions, and benefits.
Also be sure to investigate: Is the insurance company offering the policy reputable and financially strong? All of the major insurers are rated by A.M. Best, Moody’s, and Standard & Poors. Check those company’s websites for the most current ratings.
When and how to apply
Qualifying for long-term care insurance becomes more difficult as you age. Because of that, the average purchase age is 57. According to the American Association for Long-Term Care Insurance, about half of those waiting until age 70 will be declined due to health reasons. A trusted insurance or investment adviser can help you evaluate your options and apply for a policy that is right for you.
Also, some employers have begun offering long-term care as part of their employee-benefits packages, so check with your human resources department to see what is available. Premiums are typically lower in employer plans, but they usually offer fewer benefits as well. Be sure to evaluate your options carefully.
As you can see, there are many different things to consider before purchasing long-term care insurance. Deciding which option is best can be complicated, but having good information and wise council will usually help the proper solutions come into focus.
I originally published this article at www.fpanet.org. It also appeared in the Omaha World Herald.