Man­age risk to en­joy re­tire­ment

Daily Press (Sunday) - - Success - By Janet Bod­nar


My re­cent col­umn about learn­ing to live with­out a steady paycheck in re­tire­ment struck a nerve with some read­ers.

Jim Barthen, who re­tired two years ago, writes that he was “truly on edge” the first time he didn't re­ceive a paycheck. “It's re­ally an ad­just­ment, and the state­ment that the spend­ing bar­rier is mostly psy­cho­log­i­cal is so true.”

A num­ber of read­ers felt un­easy about the ob­ser­va­tion that re­tirees may be wor­ry­ing too much about pre­serv­ing their money.

“It seemed like your col­umn was im­ply­ing that re­tirees can't en­joy re­tire­ment with­out spend­ing down all of their money,” writes David Greene. “To me, this sounds like the ‘Keep up with the Jone­ses' men­tal­ity.”

Don't worry. I would never ad­vise that re­tirees frit­ter away their sav­ings. That's your safety net to pro­tect against cat­a­strophic med­i­cal and other ex­penses. But it does ap­pear that re­tirees are of­ten re­luc­tant to spend some of their money, for rea­sons that are as much psy­cho­log­i­cal as fi­nan­cial.

An­other reader, Ger­ald John­son, of­fers a po­ten­tial so­lu­tion. “One's an­nual ex­penses, in­clud­ing dis­cre­tionary plea­sures, re­quire a bud­get,” he writes. “That gives you the abil­ity to live the life you de­sire.”

Lori Lu­cas, CEO of the Em­ployee Ben­e­fit Re­search In­sti­tute, thinks it would “help peo­ple spend more op­ti­mally” if the fi­nan­cial ser­vices in­dus­try cre­ated more in­sur­ance-type prod­ucts to pro­tect against longterm risks or came up with a sys­tem­atic with­drawal pro­gram.

In the mean­time, you al­ready have ac­cess to some prod­ucts de­signed to ease your mind. Even with­out a pen­sion, for ex­am­ple, you could cre­ate a steady in­come by buy­ing an im­me­di­ate fixed an­nu­ity. You give the in­sur­ance com­pany a lump sum in ex­change for a monthly check, usu­ally for life; you can even buy an an­nu­ity with sur­vivor ben­e­fits for your spouse.

An­other op­tion is a de­ferred­in­come an­nu­ity, of­ten re­ferred to as longevity in­sur­ance. You pur­chase the an­nu­ity when you're in your 50s or 60s, but the pay­ments don't start for at least 10 years, so you know you'll have guar­an­teed in­come in the fu­ture.

Not keen on an­nu­ities? Many in­sur­ers now of­fer com­bi­na­tion poli­cies that give you early ac­cess to a por­tion of your life in­sur­ance death ben­e­fit if you need long-term care. And longterm-care in­sur­ance it­self is still an op­tion.

These poli­cies have be­come more ex­pen­sive, but there are ways to cut the cost — for ex­am­ple, by buy­ing less in­fla­tion pro­tec­tion or short­en­ing the cov­er­age pe­riod. Cou­ples can pur­chase a pool of ben­e­fits that can be used by ei­ther spouse.

The point is to take what­ever mea­sures you can to hedge med­i­cal and other risks so you feel more com­fort­able about en­joy­ing your­self, whether that means treat­ing your­self to din­ners out now and then with your spouse or tak­ing a dream trip. Janet Bod­nar is edi­tor at large at Ki­plinger’s Per­sonal Fi­nance mag­a­zine. Send your ques­tions and com­ments to mon­ey­[email protected]­


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