Whether you're an early retiree or a senior in the more traditional 65+ age range, my team at Keen Wealth understands that you have questions about navigating this major life transition.
But, as we discuss on today's episode, very few retirement questions have simple answers.
Arriving at the best decisions for you, your family, and your money is rarely as easy as following a rule of thumb or crunching your numbers one more time. A financial plan should be designed to provide for every aspect of your life. And as your life changes, a good plan should be ready to change with it.
Let's dig into some listener questions and examine where general planning principles meet the personalized, comprehensive planning process we use at Keen Wealth.
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1. "Is long-term care insurance really necessary if you are a saver and have an active, healthy life?"
While clean living and exercise are certainly pluses for retirees, they aren't going to prevent conditions like Alzheimer's. Nor will they guarantee you won't miss a stair in your 80s or get hurt in a car accident that's not your fault.
Being a lifelong saver, however, does give you options. After weighing the pros, cons, and costs, many of our clients do choose to self-insure. But as we covered on another recent episode, both the number of insurers and the quality of coverage has gone down in recent years. It's important to make sure any plans you're considering provide coverage that justifies the cost of the premiums. And the most important part of that calculation will be the specific health care needs of you and your spouse.
2. “How much are retirees typically spending?”
Between $7,000 and $10,000 per month is the range that we're seeing in the Midwest.
Of course, that doesn't mean you personally should be spending in that range. You could comfortably spend more or less if that's the lifestyle you want, and your budget allows it. That range also doesn’t suggest that you should be spending the same amount every month or every year, per the old 4% rule.
Often, when we're asked this question, or questions about withdrawal rates, what the senior is really asking for is permission to spend their nest eggs. It can be really difficult to switch out of savings mode when you've been diligently saving and investing for decades. We encourage retirees to try to embrace a "reward" mindset, within the boundaries of a responsible budget.
If you'd like some more info on spending in retirement, I highly recommend that you check out our recent webinar from Matt Wilson, my podcast co-host and the Chief Investment Officer and President at Keen Wealth. We always get tremendous feedback on Matt’s presentations, and if you subscribe to our mailing list, you'll be notified when the next one is on the books.
3. "I'm 55 this year and I could retire with a pension. What should I be thinking about?"
The number one item on any early retiree's action list should be health insurance. Assuming you can't jump on a working spouse's health care plan, ten years is a long time to be paying for health care premiums completely out of pocket until you’re eligible for Medicare.
You can stay on your former employer's health care plan via COBRA for 18 months, but you'll be paying 102% of the full monthly premium. After that, you'll need to purchase insurance off your state of residence's health care exchange. In either case, depending on your health care needs and the needs of your spouse, you could be looking at adding $10,000 or more to your annual budget.
I would ask this 55-year-old "retiree" if she's retiring for good, or just closing the book on one chapter of her career. Starting a second professional act in retirement can help pad your next egg, give your schedule some structure, and depending on the job, provide for your health care until you hit age 65 and, eventually, transition to full retirement.
I hope you'll listen to this episode to hear our full discussion of these topics and a couple more very thoughtful questions from our listeners. Again, Matt's webinar on spending is another fantastic resource on these topics. And if you have a question you'd like us to cover on a future episode, please click here to get in touch.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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