Category: Retirement

It used to be that after you worked for 20, 30 or 40 years, you retired and collected
a nice pension from your employer. That’s the “old” retirement—and for most American workers, it’s history. (No, I haven’t forgotten the substantial minority of workers who are still entitled to pensions. I’ll address the lucky people in that boat later).

As a consequence, the traditional three-legged stool of retirement finance--consisting of Social Security, a private pension and the retiree’s savings--has had one leg taken out and is now getting pretty wobbly.

So it’s no wonder that to keep their post-retirement budgets from toppling, more people are doing what they planned to leave behind in retirement: work. (That’s the “new” retirement.)

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Here’s a little quiz: When you become eligible for Medicare at age 65, you no longer have to worry about health insurance and medical care costs. Yes or No?

If you answered yes…you had better tune in to the next installment of our “Get Your Finances Ready for Retirement” series, on Monday, August 11. In it, reporter Joe Collum shows that health insurance and medical care costs are considerable even under Medicare--and these costs need to be provided for in retirement budgets.

Part of the reason is that Medicare is full of holes in its coverage. Eyeglasses, hearing aids, most nursing home care and dental care are excluded (and teeth don’t get better with age!). Many Medicare programs, including Parts A and B, require large premiums and deductibles. And even Medicare Part D, the highly-touted prescription drug benefit, requires that the person enrolled pick up a large share of initial drug costs.

That’s why having a “Medigap” supplemental insurance policy can be a good idea, even though it can be expensive. Joe shows how one retiree golfer had to undergo knee replacement surgery with a pricetag of about $100,000. Medicare picked up about 80% of that--still leaving a bill of around $20,000. Luckily, this golfer had a Medigap policy, and it paid all but $69!

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This month, our “Get Your Finances Ready for Retirement” series moves on to subject of how to manage your investment portfolio when you retire. After much research, I’ve concluded that this is not something that you want to learn through the “trial and error” method.

Here’s why: in your pre-retirement investing days, perhaps you could afford to invest like Jim Cramer. If you went for the home run and struck out instead--well, it wasn’t the end of the world, since it probably wasn’t money you needed right away…and you had enough time to make it back. But now that you’re depending on your portfolio for a big part of your income, you don’t have much room for error!

So reducing risk is among the first things you need to do in transitioning your portfolio to in-retirement status. On July 28, Connie Hicks will report on an Iowa farm couple that was convinced to put some retirement funds into an IPO (the Initial Public Offering of a company’s stock). As securities with no track record, IPOs are inherently high-risk. There is general agreement that this type of investment is unsuitable for most retiree portfolios--and in fact, the Iowa couple ended up losing thousands of dollars through their IPO stock.

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One of the advantages that retired people have (over those of us who must work) is that they can live pretty much wherever they want. And there are some good financial reasons to move when you retire. To cite a few:

• By downsizing from a large house to a smaller apartment or condo, you can save on living expenses. Besides a cheaper rent or mortgage (if any), a smaller place generally means lower property taxes, insurance bills and even energy savings.


• By moving from a high-tax state to a lower-tax state, retirees can save on income, excise and other taxes.


• Moving to a sun-belt area, a college town or a retirement community can mean more recreational, educational or communal activities -- at no extra cost.

Yet moving is anathema to many retirees. And it’s easy to understand why someone would be reluctant to leave the house they’ve lived in for decades, or the community where they have many of their relatives and friends.

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Sometimes, when you ask a question that seems relatively tame, you inadvertently step into a minefield. That’s what happened in the second installment of our “Get Your Finances Ready for Retirement” series, when we tried to tackle the matter of “how much money do you need to retire?”

The problem is that there are so many variables in retirement -- beginning with how long are you going to live? (There is no way to know.) Then there is the matter of whether you’ll cut back on your living expenses in retirement or just keep living in the style that you’ve gotten used to. And there is the matter of how much income you can count on from investments and savings (another question mark).

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A little over a year ago, I produced an NBR special called “America’s Changing Demographics.” It exposed me to some astounding numbers about the aging of America. What really shook me up was that the baby boom generation’s move to senior status would soon turn the U.S. into a giant version of my home state, Florida. (I’m referring to the fact that Florida now has the nation’s highest percentage of residents age 65+, about 17%).

To paraphrase a former GM Chairman, I figured that whatever is good for America is good for NBR. So I suggested that we produce a series aimed at the millions of Americans who would soon be retiring -- and who would also be facing lots of crucial financial decisions. The FINRA Investor Education Foundation* saw this as an area of critical need and graciously agreed to fund the project. Then US News and World Report came on board, adding its expertise and reporting capabilities to our own.

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