Often when people retire, they put themselves on a miserly spending plan. They may have enough in their pension and savings to live the rest of their lives comfortably, but the biggest concern we hear is, “we don’t want to outlive our money!”
Most retirement research points to an impending retirement crisis for about half of Americans who save too little, but a new study suggests that this miserly behavior of not overspending makes the outlook less dire. While some people do run out of money, a person with less than $500,000 in savings, on average, spends just about a quarter of it during the first 20 years of retirement, according to a study by Sudipto Banerjee of the Employee Benefit Research Institute.
"One-third actually ends up with a nest egg larger than they had when they left their jobs,” the study says. Even people who had only $32,000 shortly after leaving the workforce had about $24,000 left some two decades after retiring.
“People don’t know how long they are going to live,” said Lori Lucas, the president and chief executive of the Employee Benefit Research Institute. “They may also be afraid of facing catastrophic healthcare costs if they need to stay in a long-term care facility for a prolonged period.”
So, what can devastate your retirement savings? The most common financial strains are typically, divorce, caring for a mentally or physically ill adult child who cannot work, and/or long-term care.
However, with some planning and strategic preparation, you can avoid this type of life change depleting all your hard-earned savings.
Paying for long-term care is frightening. Finding understandable answers is difficult. According to the Employee Benefit Research Institute (EBRI) Medicare generally covers only about two-thirds of the cost of health care services for Medicare beneficiaries ages 65 and older. Fortunately, there remain resources to help pay for care without exhausting your retirement or savings.
For example, one legal strategy before applying, is to transfer all your assets to the "well" spouse. The well spouse will then “spend down” to the allowable amount by either purchasing non-countable assets (prepaid burial or home improvements for example) or buy a “Medicaid Approved Annuity.”
The rules are complex, but the solution is to be prepared ahead of time. To learn more, register for a FREE Elder Law Workshop or call to schedule a FREE consultation with Tacoma Elder Care in Tacoma, WA.