I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Wednesday Wealth, I write about money management, retirement, estate, and long-term care planning.
What are some givens of financial planning in late middle age that you might question? I’m starting to catalog them, and consider alternatives. I’m thinking of writing a series of newsletter articles on these. I have a number of friends who keep asking themselves, “Can I retire yet?” then they ask the next questions:
- How will I get health insurance?
- Do I have enough saved?
- What will I do if I need expensive long-term care?
- How can I protect against sequence risk with my investments?
- What are the most important tax moves to make, now, and later?
- And more
Standard retirement advice goes something like this:
- Figure out the amount of savings you need and don’t retire until you have it (it might be as high as $10 million)
- Plan on a U.S. stock-heavy portfolio to target 8-10% returns on your savings
- But don’t plan on withdrawing any more than 4% of your total portfolio value in any one year
- Prepare for many years of in-home or institutional care, in case you get Alzheimer’s or another disease leaving you unable to care for yourself
- Think about what you want to do in retirement — what is that money for? — and accrue enough to pay for travel, a vacation home, support for grandkids
- If possible, don’t retire before 65 unless you have health insurance covered already
- If you get laid off in your fifties, update your CV, tap into your network, and find another job as similar as possible to the one you just left
- Keep up with as much preventive screening as you can — see your doctor regularly to ensure you are getting all the medication and procedures you might need
The vision of building up a large nest egg and then carefully managing it so that you can have it available when you need long-term care is one that most people wouldn’t think to question.
But I’m questioning that, along with a lot of other assumptions of modern retirement. And the questions go to some very uncomfortable places like:
- Can I reduce or eliminate health insurance as a way of ensuring I get the health care I need?
- Can I reduce my health care usage overall instead of following the majority of older Americans in pursuing excessive medical care, pharmaceuticals, and surgical procedures?
- Can I make a plan for a managed passing if I learn that I have started down a path of deterioration (cognitive or physical) that will lead me to a need for round-the-clock care in the near-ish future?
- Can I trust in the funds I have or in my ability to change my budget somehow (earn more income, reduce expenses, etc) rather than assuming I have to have all the money I’ll ever need in an investment portfolio right now?
- Can I pursue alternatives to buy-and-hold investing that will reduce sequence risk, the risk of a big portfolio drawdown early in retirement that leaves less principal for the future for compounding?
Many of these are uncomfortable ideas and strategies to explore. But by investigating them even if you end up not going with the most radical approaches you learn more about what might work for you.