Saturday, July 15, 2006

Life Lines

In this business, we spend a lot of time planning for, and talking about planning for, retirement security (and talking about helping others plan for retirement security). However, tomorrow’s version of retirement seems likely to be quite different from that image in the travel agency brochures—or that enrollment plan kit.

This came home to me in a very real sense recently when I sat down with my mother to work up a budget that would last—the rest of her life!

Now, I’ve done plenty of budgets in my life, both personal and professional. But even those that incorporated, in some form or fashion, elements of longer-term goals…bear in mind my eldest heads off to college this fall…have always tended to be a year-to-year process. Mom’s income isn’t getting any bigger—or not much bigger, anyway. There’s a serious dearth of promotional opportunities in retirement, after all.

I will confess to a bit of anxiety ahead of the event. Like many families, while I knew some of the details of their financial situation, we had never really sat down and talked about the whole picture while Dad was with us. When asked, I’d do some research on taxes or make the occasional recommendation on a mutual fund investment. I remember a reasonably animated conversation with my dad about annuities when he retired. We’d talk about things like the pros and cons of paying down their mortgage—and every so often Mom would ask me if we didn’t need to rebalance that asset allocation fund (but that’s a story for another day). I knew where the will was, what the will provided for, but I didn’t know many of the basics—their regular expenses or even their annual income, much less the sources of that income. On a rational basis, I know I should have imposed myself on their privacy years ago, but it’s hard in the real world to push deeper than “are you guys doing OK?” if it’s clear they aren’t really interested in sharing that information.

Now, three months after Dad’s passing, most of the dust had settled—the calls made, the funeral-related bills paid, the requisite beneficiary distribution forms completed and submitted, and yes, an ability to see what regular monthly expenses one person has, versus that of a couple that had been together for nearly 55 years.

Lest you worry, I think Mom’s going to be fine. She still has a pension, access to retiree medical, a long-term care policy, a tax-sheltered annuity, access to Medicare, and her house is bought and paid for. She doesn’t have Social Security—she “lost” that when my dad passed (she had an opt-out provision in favor of her teacher’s pension years ago). But Dad also had a savings plan, and it will pay her an annuity for the rest of her life. It isn’t much, perhaps, but, all in, it’s roughly what their combined retirement income was last year. If her needs don’t change drastically, she’s in good shape.

Things could change drastically, of course. Medical expenses remain the largest unknown, and while she currently has insurance to cover that, her son is all too aware of how fleeting those commitments can be. Gasoline is over $3 per gallon there already, and winter is coming. She’s got some problems with her knees that make getting around a bit of a challenge, and while her teacher’s pension has a cost-of-living provision, the politicians seem, in the aggregate, to lack any real sense of fiscal responsibility.

The bottom line is that, thanks to their planning ahead of time (aided by modest expectations), she’s in better shape a decade into retirement than many begin it. But the careful planning that made that possible isn’t over—it’s just beginning.

- Nevin Adams editors@plansponsor.com

1 comment:

  1. It is hard to take on any part of the role of parent to your parents. Nothing in life helps much to prepare for this role reversal. This is one reason that people find it hard to intrude into their parent's affairs -- neither side is ready for it.

    It sounds as if your parents planned well and have left your mother in reasonably good condition. And have raised at least one child that isn't a loser. Not too bad at all.

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