Retirement Income

The Tax Attic with Jerry Coon—April 29, 2010

April 29, 2010 // 0 Comments

Make retirement income last There sure is a lot of concern and discussion these days about making retirement income and retirement assets last through all of a retiree’s retirement. A married couple at the age of 65 today can be expected to have one of the two reach the age of 92. With any luck at all, they could both easily reach 85. However, if they retired at the age of 62, this means the savings they accumulated over the 40 years they worked would have to withstand not working for another 30 years. Let’s analyze that 40 years of working and I think we will find that saying the couple accumulated money for 40 years is really not too accurate. In the first working years, most people don’t save a whole lot of money. There is a whole lot more outflow to places other than savings accounts. In their 20s, it’s a time of spending money on children, accumulating money for a down payment on that starter home, purchasing something other than a 10-year-old vehicle, and paying off student loans. Let’s say that spending time frame lasts until our couple turns 32. This means they are really saving for about 30 years, age 32 to age 62. And what they save for, that 30 has to last for another 30 years, age 62 to age 92. When you look at it like that, it’s easier to see why people do run out of money. In addition to the regular, everyday expenses that everyone has to deal with, such as property taxes, utilities, car-operating expenses, food, clothing, prescription and out-of-pocket medical expenses, there are wild-card, catastrophic type events that might happen to quickly to deplete much of the money saved throughout those 30 years. Most of these catastrophic events are medical in nature. According to the Department of Health and Human Services, Americans age 65 and over have a 40% chance of being disabled enough that they would qualify to enter a nursing care at some point in their lives. At the age of 85, that figure increases to 55%. We have the misguided understanding that Medicare or Medigap or Medicare Advantage policies will pay for this nursing care. This is not true. These policies […]