Jane Bryant Quinn is one of the most successful syndicated newspaper columnists. She’s a writer for Newsweek, Good Housekeeping and Woman’s Day, a PBS host, and a regular on CBS News. She has also written a money column for the AARP for years, as well as several other personal finance books.
In her newly revised book, How to Make Your Money Last: The Indispensable Retirement Guide, she reveals how her thinking has changed on the subject of making your money last, and talks about how she and her husband have planned for their own retirement.
Below is a recent interview by Richard Eisenberg, published for NextAve.org, where she provides more insight:
Richard Eisenberg (RE): Why did you want to write a new version of How to Make Your Money Last three years after the last one? Have things changed that much? Or has your advice changed?
Jane Bryant Quinn (JBQ): There were three things on my mind. For people who are middle age or near Medicare age, I felt it was important for them to understand what’s going on with the Affordable Care Act and with employee health insurance.
And there are the new fiduciary rules put out by the SEC [Securities and Exchange Commission], where people who are actually salespeople at heart are now allowed to say they are putting your interest ahead of theirs. But they are not fiduciaries; I call them ‘fake fiduciaries.’ This is insane.
Another reason I revised the book is that people are concerned about the stock market having gone up so much for so long. They think around every corner there’s going to be a market collapse. So, with this fabulous market, I thought they needed to be updated and reminded about asset allocation [dividing your investment portfolio among stocks, bonds and cash].
RE: Your book is called How to Make Your Money Last. How concerned are you about the possibility of Americans running out of money in retirement?
JBQ: How do you prudently decide how much you can afford to spend every year and have it last thirty years? That’s a difficult thing to figure out. I am concerned that people don’t make those calculations.
When your paycheck income stops, it’s a terrifying moment. You look around and say: ‘Now what?’ When people are working, it’s like climbing a mountain with a [retirement savings] dollar value in mind or maybe it’s just saying ‘I want more money.’ But when the paycheck stops, you have a whole different view of money; now it’s a de-accumulation mind, not an accumulation mind. So you have to say to yourself: ‘How can I create income out of this money?’ That’s what I wrote about in the book.
When you retire, it’s like when get out of school: You don’t know who you are going to be or what you are going to do. Everything is open. But presumably, you have thirty years to live, so what will you do with that time? It’s kind of like being young again, but with some aches and pains.
I lost my mother this year at a hundred and three. You probably have a much longer life span than you think you do.
RE: And the retirement-income calculation are more complex for couples?
JBQ: When a couple sits down and does the calculation or goes to an adviser, they look at themselves and say: ‘We can afford to spend X amount.’ But that’s only part of what you need to do. You need a second calculation on what would happen if my spouse or partner died tomorrow? And a third calculation on what would happen if I died tomorrow? Those calculations can help you decide whether you can afford to retire.
RE: You wrote in your book that your views have changed on a few things regarding making money last in retirement. What have you changed your mind about and why?
JBQ: A simple, low-cost, single-premium, immediate-pay annuity that pays monthly income for you or your spouse for life. I’ve become much more interested in them. The prices of these annuities have gotten better, relative to bonds, as interest rates on bonds have come down. If you move money from a bond fund to a simple lifetime annuity, your income will improve.
They’re especially worth considering for people who are getting older and think their savings is going out the door faster than they wanted and who are conservative about money.
Social Security is the best longevity insurance anywhere, because benefits are linked to inflation.
RE: But you aren’t a fan of all types of annuities.
JBQ: There are other annuities [variable annuities or fixed-index annuities, paired with living-benefit guarantees] that promise a guaranteed lifetime benefit of five percent for life. To get that, you probably have to pay three or three-and-a-half percent in costs. That’s a heckuva lot of money. It makes no sense to me.
RE: And you’ve changed your mind about reverse mortgages. You like them more, for some people who are at least sixty-two — the minimum age to qualify —than you once did, right?
JBQ: Yes, I’m feeling better about them. Two things have happened. In the past, one of the problems with reverse mortgages was that people who almost ran out of money took them and the reverse mortgage income wasn’t enough to pay their bills and keep up their house. So, they’d run out of money and be at the risk of foreclosure.
The law changed. Now, if you apply for a reverse mortgage and the lender’s analysis is that you might be unable to pay your bills after ten or fifteen years, you don’t get all the money to spend. The lender keeps some aside to pay for the property taxes and keep the house going. So, there are fewer risks for people who don’t have much money.
And for people with plenty of money, you might take a reverse mortgage at sixty-two, in the form of a credit line that increases every year by the amount of interest due on the loan. This credit line is a hedge against inflation and gives you the option so if the stock market goes down, instead of selling stocks, you could borrow from your credit line instead.
RE: What’s your view about working in retirement to make money last?
JBQ: It’s clearly one way to continue to have a paycheck without living entirely on your savings. But it’s a very individual thing: Is your health good? Are there jobs in your area?
For a married couple where both are working and one becomes very ill, often the other spouse will quit his or her job to take care of the spouse. I would ask couples to think very carefully about doing that. If you stay at work, you’ll still have a paycheck and can contribute to your savings plan and build up more earnings for Social Security. Then, you could hire the kind of help you need at home. Emotionally, it feels right to quit your job to take care of your beloved spouse, but you need to look at the financial aspects.
RE: How important is choosing when to start claiming Social Security retirement benefits?
JBQ: A lot of people leave money on the table by claiming benefits starting at sixty-two because the payments are reduced compared to waiting to start claiming until age seventy. The longer you wait, the bigger your Social Security check will be. Social Security is the best longevity insurance anywhere, because benefits are linked to inflation.
But for couples, it’s very hard to figure out when each spouse should start claiming Social Security benefits. I recommend using one of the services that help do the calculations: SocialSecurityChoices.com or MaximizeMySocialSecurity.com.
RE: The stock market had a terrific year in 2019 and has been on a pretty good run in recent years. What’s your advice to people nearing retirement or in retirement who have money in the stock market?
JBQ: This is an asset allocation question. My feeling is that people closer to retirement might want to perhaps hold a smaller percentage in stocks when they first retire, in case the market goes down. There will be a decline in the market at some point; and that’s the time to go back to a normal allocation for stocks.
Research has shown that using the four-and-a-half percent withdrawal rule [taking out that amount from savings in the first year you retire; in each subsequent year, taking the previous year’s dollar amount plus an inflation increment] works if you have stock-market index funds and intermediate-term Treasury bonds — even if you have as little as thirty-five percent of your portfolio in stocks or as much as sixty-five percent in stocks. That’s a pretty wide range.
RE: In your book, you make a distinction between index funds. You recommend buying low-cost index funds and not high-cost index funds. Can you explain the difference?
JBQ: The difference is a salesperson. When you’re buying from one of the firms that has brokers and sales charges, an index fund will cost a lot of money. But Fidelity has an index fund that costs zero and Vanguard has one close to that.
RE: Interest rates are still very low. What do you advise people looking for safe and steady retirement income?
JBQ: I’d tell them that things sold as bond substitutes are not bonds. A lot of financial products say they are safe and pay a higher interest rate. How can that be true?
RE: You also write that the ‘last and hardest plan’ for making your money last in retirement is planning for what might happen if you develop dementia or a have a stroke. What’s your advice on this?
JBQ: First, you have to think about it. Where might you want to live if you become indisposed? What renovations might you need to make in your home? You need to make a will and you need to ask yourself if you need a trust. And if you’ll have a trust, who should be your trustee? Do you have a living will? A medical power of attorney?
These are important things, so if all of a sudden, you can’t take care of yourself, you don’t just say: ‘Oh, the kids will handle it.’
RE: You recently retired yourself and moved to Rome with your husband for a year. Can you walk me through that decision — both when to retire and where?
JBQ: Why now? Because I’ve been working since I was sixteen. I took a look at my age and asked: ‘Do I want to write one more column or book?’ And the answer to that was: ‘No.’
We could afford to retire. I’ve done, as you might expect, some decent financial planning.
Our original plan was to downsize from our big New York City apartment and sell it and get something smaller, maybe rent. We also have a second home, an hour and a half north of New York City. Then my husband and I said to each other: ‘If we sell the New York City place and keep the weekend place, what might we do?’ And we looked at each other and said: ‘Let’s live in Italy!’ Just like that.
Rome has art and culture and music and, of course, great food. We’ve always loved Italy. We told our friends we were going to do it, so we couldn’t back out.
We came over last June to look for apartments and found a great one and signed a lease. And we came here to live October first.
RE: Do you have plans for retirement after your year in Rome?
JBQ: Nope! It’s hard for me to say I won’t work anymore. My emotional mind says: ‘Who am I if I’m not writing columns or books?’ But I’m learning Italian, taking in culture and making friends. We’ve got a whole new life here that’s just fabulous. I call it ‘my gap year.’ When it’s over, I’ll be used to not working.