Retirement Reality Check

Let’s Take a Look at the Costs of a “Bare Bones” Retirement

by Gary L. Fisher

Golden Piggy.jpgAmong the myriad of considerations we have to examine when it comes to planning for a sound and happy retirement are the basics. Things like health care, prescription drugs, long-term care, food, clothing and shelter. That sounds like a tall order, and it is. Certainly those are things that range from stuff we’d rather not think about, all the way to stuff we take for granted.

The most elemental of these factors is food. Gotta eat to live right? You cut that out of the budget and you won’t have to worry about a long retirement! So what does the potential for food expenses look like during your retirement? Let’s take a look:

If you and your spouse live to your life expectancy of age 83, and if you retire at 65, you’ll eat 39,430 meals in retirement. That’s breakfast, lunch and dinner, 365 days a year over 18 years for two folks. If each of these meals costs a mere $5 you’re looking at a budget of $197,100 on food. If you want to eat something other than Ramen noodles and Chef Boyardee in retirement, let’s make it $10 per meal. Now our budget is nearly $400,000! 

What are your odds of living long enough to spend that kind of dough on food? Well, according to the Social Security Administration, one out of four 65-year-olds will live past the age of 90.  One out of ten will live past the age of 98.  So that’s a lot of Early Bird specials at Denny’s to plan for.

How about “working until you drop”, as I’ve heard some proclaim that they will do? Sounds good…well actually it sounds pretty awful…but it’s probably not something that most could do even if they wanted to. In truth, 41% of Americans retired earlier than they planned for various reasons. Health issues are usually the culprit. This situation is exacerbated greatly when people either have no long-term disability insurance through work, or privately purchased. Or they have it, but it’s inadequate. Of course, sometimes people have just had enough of work, and believe it or not, age discrimination is a real thing. Bottom line?  Planning on being the 85 year old guy at the office isn’t really much of a plan.

Like food, the out-of-pocket costs for medical expenses can be astronomical, as well. According to Fidelity, $220,000 is the amount of money a couple can expect to pay for health care in retirement. 

Lastly is the reality of long-term care. I could write a book about this one, and maybe I should. Since this is a topic most people enjoy as much as a funeral, I’ll be brief. The facts are: 7 out of 10 people over the age of 65 will need some form of long-term care at some point in their lives. Medicare does not pay for long-term care insurance.  According to the most recent Genworth Cost of Care Report, the cost of a semi-private room in a long term care facility is $90,703. The average cost for Assisted Living facilities is $43,200 per year. At a 4% increase per year rate (which Genworth say’s it is currently in Michigan) these costs will double in 18 years.  That’s a cost that few are prepared to handle without a plan.  (Source 2015 Genworth Cost of Care Survey @…/cost-of-care.html)

I don’t know a lot of people who love to buy insurance….okay I don’t know anyone (myself included) who actually enjoys paying premiums. However, when compared to the costs of being unprepared there’s really not much to think about if you have the health and wherewithal to take action. Similarly, when it comes to planning for retirement income. The roadblocks are clear: Health considerations, living longer/longevity risk, inflation, and taxes all play a part. We could also toss in common issues like providing ongoing financial support for children, divorce costs and expenses, paying for aging parents, and unpredictable government intervention and geopolitical events. In truth, no one sane plans to fail, but countless people fail to plan. It’s really human nature. None of us want to confront our own mortality. But to do so can become a liberating, and life–affirming move. Mitigating our risks of living longer than our money can be a smart move in uncertain times.•