5 Steps to Plan Your Retirement

I’m sorry to pick on one of these “5 Step” lists, but planning for retirement is critically important.

When it comes to planning beyond life expectancy, investors need to create at least two plans:

  • one that gets you to your anticipated life expectancy and
  • a second that gets you beyond that life expectancy.

To illustrate, a 65-year-old male has about a 60% chance to get to 85, but for those who make it to 85, they have another 8 years or so. These years are the ones with the highest average unreimbursed medical, home health care and nursing home expenses. Yet many people don’t plan for this significant increase in living expenses during their latter years.

When It Pays to Retire With a Mortgage

As this article points out, sometimes retiring with a home you own free and clear isn’t the best choice. So, how do you decide whether it’s right for you?

In deciding whether or not to retire with a mortgage, it’s important to consider all of the available retirement financial products, not just stocks, bonds or CDs.

The alternative to paying off a mortgage may be purchasing an income annuity. It has an attractive cash flow relative to lower yielding bonds or CDs, and could more-than-cover mortgage payments.

Also, a large part of the payments from an income annuity are received tax-free during a relatively long exclusion period, putting the investor in a lower tax bracket.

Furthermore, the income can continue for a couple for as long as one is alive, enabling the survivor to stay in the house.

Sure, buying an income annuity might leave the kids inheriting the house with an outstanding mortgage. No big deal! They’d still have the property as an asset and the peace of mind of knowing that you were comfortable financially in your final days.

Next Wave of Seniors Rejects Nursing Homes, Fears Burdening Family

According to this article, aging adults have many concerns as they near retirement—among them healthcare costs and nursing home stays—but they’re doing little to plan ahead. I agree with that assessment and it’s troubling.

The question for seniors and future seniors is how to take care of the financial and physical burdens of a disability or illness requiring long-term care.

Having income to cover the cost of, say, an aide coming to the house and providing the necessary caregiving can lessen those burdens. Planning for that income requires that individuals take a realistic look at these kinds of expenses and make smart financial decisions to generate that kind of income.

Investments alone won’t cut it. Insurance and annuities are essential.