You Made It
This is where all the planning, saving and hard work pays off. But it’s not all R&R. There are some decisions still to be made.
Your dedicated focus for all those years means you’ll now be able to reap the rewards and live the dreams you committed to in the Starting Out stage. Or, perhaps living close to family or a good medical facility has become a priority over that beach you’d dreamed about. Either way, your reward will be the peace of mind that comes from having saved for this day.
The number of retirees who draw Social Security outside the U.S. jumped 40 percent, to more than 413,000, between 2007 to 2017. 1
Social Security replaces just 40 percent of pre-retirement income, on average. 2
Two-thirds of American workers (67 percent) feel confident in their ability to retire comfortably. 3
Ninety-four percent of retirees say they are generally happy and 90 percent say they are enjoying life. 4
The average Social Security disability benefit amount was $1,383 per month in January 2020, according to Social Security Administration data. 5
If you're receiving benefits based on your own work record, your benefits will continue unchanged. Your new marriage will only affect your social security benefits if you’re receiving spousal benefits based on your former spouse's work record. If that’s the case, those benefits will generally end upon getting remarried. Now, if you were the working spouse during your first marriage, your remarriage does not change the social security benefits paid to either your new spouse or ex-spouse.
As you might guess, the rules surrounding payment of social security benefits are complicated. For example, if you're a widow(er) under age 60, or you're disabled but under 50, remarriage ends any benefits based on the record of your deceased spouse. However, if you remarry after age 60 (or after 50 and are disabled), those benefits remain intact, unless you get spousal benefits through your new spouse (at age 62 or older) if those benefits are higher. If your second marriage ends as a result of death, divorce, or annulment in less than 10 years, you will again be eligible to collect benefits on your first spouse's record. Benefits paid to a disabled widow(er) are unaffected by remarriage.
For how the rules apply to your specific situation, contact the Social Security Administration at 800-772-1213.
Long-term care insurance (LTCI) is available in a wide variety of coverages, but it is all designed to take care of you in a setting such as a nursing home or other assisted-living facility. Look for a policy that covers the costs of round-the-clock nursing home care at the custodial, intermediate, and skilled level. You may also want a policy that covers any expenses associated with assisted-living residences (provided that the facility is state certified), adult day-care centers, and respite care (temporary professional care when your regular caregiver is on vacation).
Other benefits may include at-home care provided by registered nurses; respiratory therapists; physical, occupational, or speech therapists; registered dietitians; or licensed social workers. Policies may pay for the cost of caregiver training for a family member or friend. They may also cover the cost of a registered nurse or other independent healthcare professional who can act as your consultant to discuss the quality of your care.
There are many requirements you must meet before an insurance company will issue these benefits. It’s wise to speak with your insurance advisor before purchasing any LTCI.
You generally have three choices when it comes to paying for nursing home care: out-of-pocket, long-term care insurance, and government benefits.
Paying for nursing home care yourself is the least attractive option. The care is expensive and could eat through your savings in a short amount of time.
For those who can plan ahead, long-term care insurance is a common choice. Premiums are based on your age when you buy the policy and the type of benefits you choose. Long-term care insurance pays a fixed dollar amount of benefits per day, so it likely won’t cover the entire cost of nursing home care.
Government assistance may be an option for those with little income and few assets. If you qualify, Medicaid may pay for your nursing home care. Medicare, on the other hand, covers only short-term stays in a nursing home for the purpose of rehabilitation after a period of hospitalization. Veterans may be eligible for care in a VA facility, although veterans with service-connected disabilities are more likely to receive care, due to limited space.
It depends upon how your spouse set up their retirement accounts. For an IRA to go to you, you’ll need to have been listed as the designated beneficiary. Your spouse’s 401(k), however, will automatically go to you as long as you were legally married to your spouse at the time of their death.
Social Security benefits are more complicated. You’ll receive a one-time death benefit of $255 if you were living in the same house with your spouse. Beyond that, there are survivor benefits that are so complicated, the Social Security requires that you speak to a representative to receive them.
Are You Really Enjoying It?
Retirement can be truly enjoyable with a successful retirement plan. How is yours working out? If it could use some adjustments, you should talk to an advisor about:
- Getting your debt in order.
- Maximizing social security.
- Making sure your allocation fits your income needs, risk tolerance and retirement objectives.
Go-Go. Slow-Go. No-Go.
In retirement, your spending will likely change over time. In his book, The Prosperous Retirement: Guide to the New Reality, Michael Stein introduces three distinct stages of retirement.
You’re still pretty active in this first stage and spending more than in any other stage. This is where you may travel, take up new hobbies and spend time (and money) on the grandkids. This stage typically lasts until age 75.
Around 75-85, the energy starts to slip and the pace begins to slow. Homes are downsized and spending is too. In fact, annual expenses typically decline 20-30 percent in this stage.
As you pass 85 until the end of your life, your world and your expenses tend to shrink. The one exception, of course, is medical and long-term care costs. Planning for these uncertain expenses is one of the greatest challenges of retirement planning.
When you cross over into retirement, you will begin using your retirement income for daily living. Which draw-down strategy is best for you?
Sixty-seven percent of workers plan to work for pay in retirement. However, only 27 percent of retirees report they have actually worked for pay in retirement. 6