Report-What retiree's wish they had known

[Willers]

Morningstar recently published a report based on feedback from their subscribers regarding what they'd wish they'd known. I thought some on the board would find the comments interesting.

In Hindsight, Here's What Retirees Wish They'd Known

The one that really hit home for me was health-related:

"I spent much more time planning the financial side of retirement than I did taking care of myself so I would not need medical care," wrote Bill1234. "Turns out that the biggest risk we all face in retirement and the biggest impediment to a happy retirement is our health."

This one really hit me a year ago when I had a really hard time skiing like I always had because I was overweight and out of shape. Frustrating! I'd gotten so distracted with long hours at work that I just ignored my health. I thought about retiring in that shape and what I wouldn't be able to do. So...I lost 25 pounds (thank you MyFitnessPal) and am running again. I'm not sure if money can buy happiness, but without my health I'm sure that all the saving I've done wouldn't have been worth it (except maybe for my wife and her future pool boy husband). The down side, of course, is that now I probably have a lower SWR.

 

[imoldernu]

Planning for retirement usually centers on having enough money... getting it, and keeping it. Being "safe" often is discussed in terms of extending the number of years that one may be expected to live. The question that is often asked of those who have shared their economic status, is... "But what if you live 'til you're 95". Basically the chances of FIRECalc success.

While this is a good check on financial health, I would suggest there might be another consideration... that covers the matter of just how much money one plans and saves for to feel comfortable. Maybe a two level consideration, based on whether one is retiring on $500K or $3 Million.

Leading up to... understanding Medicaid.

Let me explain... It has to do with the unthinkable. A case where, for whatever reason, the assets may be depleted. Catastrophe! In any one of hundreds of possibilities. More serious for couples than for singles.

What happens if:
-Losing a lawsuit for a million dollars
-Alzheimers with 8 years in a nursing home @ 90K/yr
-12K/mo. cancer medicine
-Cannot continue planned part time consulting (etc.)
-Forced to take on cost of a family responsibility of any kind...
-Become disabled requiring home care
-Loss of assets
-Pension Failure
-Market losses

Not necessarily an instant loss, but a continuing cost that may deplete assets.

Cut to the chase: Medicaid can help, but how many people know when, and how much?
Just a few questions:
Where does medicaid aid come from? As in where does the money come from?
What laws apply? State? Federal?
Will Medicaid pay for medications?
Will Medicaid pay for home care?
Does Medicaid pay for food?
How much money can you keep to pay for living expenses?
Will Medicaid pay for out patient care? For how long?
What kinds of disability qualify for Medicaid?
Which Nursing Homes take Medicaid Payments?
Are there other government programs to consider, besides Medicaid?
What kind of Spousal shelters are available... home?, car?, pension? Social Security for self or Medicaid recipient? Annuity?
Spend down limits?
100 day Nursing home limit?
Pay relative for home care?
Rehabilitation?
Effect of divorce?
5 year lookback?
Protected non-money assets?

You knew the answers? You've done your homework!

Just a partial list of questions that could require decisions. Many of these questions could have an effect on what you do, before any need occurs.

Worth of... your home, your car... how much to pay, and how many years in advance of medicaid needs to avoid lookback. ie. an $85K Tesla, vs. a 2003 Toyota... a $800K house vs a rental.

So... What retirees wish they had known? Maybe more like what did you know and when did you know it? It's very possible to find out too late, what you should have done. So it's not a matter of dealing with the problem IF and WHEN it crops up. Much has to happen in advance.

"It's not likely to happen to me"... Probably... but that's what 66 Million other Americans thought, too... but that's the current enrollment.

 

[lorikmt]

What I didn't know when planning for retirement, but not really sure I would have wanted to know: that my vigorously healthy husband, a corporate CFO, would be diagnosed with early-onset Alzheimers in his late 50's and be unable to work after the age of 57. What has been the greatest salvation for us is our good saving habits over the years and the habit of living below our means - thank God we have some decent savings. Still, the future is a total unknown right now, except I'm pretty sure that neither of us will live to the age of 95. At this point I view that as a good thing. For now, we are enjoying each day and making the best of it. We are now a year and a half into the diagnosis, and although the specter of a long nursing home stay is looming over our heads, I feel like I've done the research as to how to best position ourselves for that very likely possibility. The kids are through college and out of the house, and that's a blessing. Life goes on - but I am very thankful we were savers and not spenders throughout our working lives.

 

[Tekward]

Thanks for the link. It triggered a new thought that might help a few others. There were comments about IRA withdrawals raising taxes on SS that got me thinking. I'll be facing an option to buy back military service time for my state pension. It purely based on actuary tables so I'm betting on good health to make it worthwhile. But this article got me thinking about the link between the two decisions; I should max out the service time purchase with pre-tax IRA money to spread out the taxable income and minimize the IRA distribution impact on SS taxes. Sound logical, or am I missing something?

 

[Nords]

I'll be facing an option to buy back military service time for my state pension. It purely based on actuary tables so I'm betting on good health to make it worthwhile. But this article got me thinking about the link between the two decisions; I should max out the service time purchase with pre-tax IRA money to spread out the taxable income and minimize the IRA distribution impact on SS taxes. Sound logical, or am I missing something?

I don't know your state's numbers for buying your military service credits, but here's a post from one of E-R.org's very own posters that can help you estimate the credits' present/future value:

Skip over the post's discussion of the (federal) forms and scroll about halfway down to the sentence that starts with "Third, figure out if this is a good deal or not." See if you can do the annuity analysis using your state numbers.
GubMints Comprehensive Military Service Credit Deposit Guide | GubMints

Of course another way to look at the situation is that your military service credits are worth nothing until you buy them, so as long as the annuity rate exceeds CD rates then you're probably ahead of the game.

If you can somehow use IRA contributions to buy your military service credits then that's great, but I would not cash out an IRA (and pay the taxes, and pay the penalties) just to avoid future taxes. Instead I'd buy the military service credits out of whatever savings you're putting into taxable accounts and later, once you're no longer working for a paycheck, see how much of your IRA you can convert to a Roth IRA. Then you won't have to worry about RMDs and Social Security taxation.

 

[Tekward]

Excellent link Nords, thanks. I agree with your points. Two things working to my advantage: first, every source I can find says that I can use IRA funds tax free to buy the service time and second, my purchase will be very close in time to collecting the retirement check so I avoid the cost of delay.
One additional consideration is the prevailing interest rate when I make the service time purchase. If the rates finally rise then the service time purchase price will go down (it takes less money to generate the retirement check). There may be some delay in resetting the service time calculation but it's something else I have to consider. The current low interest rate environment actually helped me a lot when I took the bigger lump sum on leaving mega corp.

 

[KrissK]

Thanks for sharing!