What Retirees Want, Conclusion

Today we conclude our coverage of the great retirement book What Retirees Want. It is packed full of great information and statistics about the state of retirement today.

If you’ve missed any posts in this series, there are two ways to catch up. You can begin with the first post, which is an introduction and overview of the book, and click through to the next posts at the end of each one you read. Or you can check out my retirement category and scroll through the posts there.

Like with other books I’ve reviewed on ESI Money, I will share some key passages from this one and give my thoughts on their conclusions.

Today we wrap up coverage of this book with a hodge podge of retirement topics I thought you’d be interested in.

Let’s get started with the one cost that scares most retirees…

Health Care Costs

Many retirement books cover the issue of paying for health care costs in retirement — this one is no different. But it does separate itself from others in that they have data that compliments their findings.

FWIW, they lump long-term care in with health care costs, so we’ll include them both here as well.

Their thoughts:

Health care cost is many retirees’ greatest financial worry for good reason – the costs are high, increasing, and uncertain. Most retirees are willing to spend what they can afford to regain or maintain their health. But for those of modest means, sudden and unanticipated health care expenses can be financially disastrous. This concern is ubiquitous.

Fidelity Investments estimates that a 65 year old couple retiring in 2019 can expect to spend $285,000 out-of-pocket in health care and medical expenses in retirement. That’s more than the average home equity and more than the median household net worth of Americans 65 and older. And that estimate does not include long-term care.

Only 37% of Americans anticipate that they may need long-term care at some point, when informed estimates put it at about double that (70%). In 2018 the average annual long-term care costs in the United States were $45,800 for a home health aide for 40 hours/week, and $89,300 for a semi-private nursing home room. Total out-of-pocket expenditures were $9.6 billion on home health care and $46.1 billion on nursing home and continuing care facilities. The average lifetime costs for an individual’s paid long term support services is $266,000, more than half of it not covered by insurance and thus out-of-pocket. Aggregate national spending on home health care is expected to nearly double in the next 10 years.

Anticipation and preparation should start well before retirement, yet health care is often a missing link in retirement planning. Only 15% of pre-retirees say they have ever attempted to estimate their health care and long term care expenses in retirement.

Nearly all would welcome guidance on Medicare and supplemental plans, long-term care, other insurance and funding options, and how much money they may need for health care. However, as with financial advice generally, few say they have a trusted source for answers on financing health care.

Lots of thoughts on this:

• I like the thought of spending to regain/maintain your health. Why not do this before medical intervention is required? Yes, I’m talking about exercising, eating right, and all the other steps that generally lead to good health. Instead of having to pay the doctor, why not pay the gym, trainer, etc.?
• I have gone so far in the above that I now classify my gym membership and my trainer’s costs as medical expenses in Quicken. I had listed them as “Entertainment” for many years, but they are way closer to being medical costs (prepaid medical costs, if you like) than they are to being entertainment of any kind — unless your kind of entertainment is pain and sweating. Hahaha.
• I wish I could simply give someone $285k and know all my health costs were covered. Wouldn’t that make life a lot simpler?
• I’m guessing that since I’m younger than 65, my expenses will actually be more than $285k on average, right?
• I’ve talked a lot about long-term care so I won’t repeat myself here (though repeating myself is one of my best skills! LOL.) If you want a ton of information on the subject read Long-Term Care Insurance Overview and Thoughts from a Long-Term Care Insurance Expert.
• “Anticipation and preparation should start well before retirement.” This statement applies to ALL parts of retirement including the two main areas — financial and life. If you plan in advance, your odds of success increase dramatically. If you roll the dice and hope for the best, you might roll a seven or it might be snake eyes. Do you want to take that chance with a multi-million dollar decision that lasts two or three decades and greatly impacts your quality of life?
• “Only 15% of pre-retirees say they have ever attempted to estimate their health care and long term care expenses in retirement.” I’m not surprised. This is probably the same percentage of people who plan in any way for retirement life.
• “Few say they have a trusted source for answers on financing health care.” Again, lack of good counselors is an issue. And again, I like the Millionaire Money Mentors for this reason. No, there are not any health care financing “experts” there as far as I know, but there are a lot of smart people who could tell you what they have done and why, which should get you far down the road in deciding what’s best for you and your family.

And if major health costs aren’t enough of a depressing topic, let’s move on to this…

Estate Planning

The book now covers estate planning with the following thoughts:

There’s one more financial matter to attend to in retirement – keeping one’s formal “affairs in order.” Retirees care very much about the legacies they leave. They want to remain in control in their final years, including in control of their late-in-life health care. And they want to enrich rather than burden the lives of their loved ones and heirs.

So they need three essentials: a will or trust to control distribution of assets not already covered by beneficiary arrangements, a durable power of attorney to make financial decisions if one is incapacitated, and health directives specifying treatment preferences and who can make medical decisions if one is incapacitated. In addition, their key documents (including insurance policies, real estate titles, family medical history, and account passwords) need to be organized and secure but accessible.

Unfortunately, the overwhelming majority of older Americans cannot claim to have their affairs in order. Only 55% of those age 55+ have a will, and only 18% have the trifecta of a will, power of attorney, and health directive. One-fourth of those age 75+ still lack a will, and an estimated 23% of wills in force are out of date. Best prepared are widows, who have learned from the experiences of dealing with their deceased spouses’ end-of-life and legacy matters.

Here are the actual stats:

• Will – 55%
• Advance health care directive or proxy – 41%
• Durable power of attorney – 33%
• All three essentials – 18%

Some thoughts:

• I have written about the need of having an estate plan many times through the years. Every time I post on it I can hear the crickets. People generally don’t want to read (or even think) about the subject.
• We have all three essentials in place and we’ll keep them updated as our situation/needs/desires change over time.
• Most millionaires do NOT have an estate plan — at least among the ones I interview. Almost all recognize that they “need to think about getting one” but thinking about something and doing it are two different things.
• The account password tip is a good one. When my mom died, my dad knew nothing about how their affairs were managed. We were able to find some of mom’s passwords, but were never able to get into her computer or on her phone because we couldn’t locate passwords. It made managing things much worse than they needed to be.
• It’s interesting to me that my mom had a health care directive and we had a copy of it, but the hospital never asked for a copy (I would of if I was them, if for nothing else than to make sure I was dealing with the real decision makers). Anyway, they did what we wanted so there wasn’t any issue, but I always found it interesting that we had the documentation (and they knew we had it) but no one from the hospital asked to see it.
• “Best prepared are widows, who have learned from the experiences of dealing with their deceased spouses’ end-of-life and legacy matters.” I think the best estate planners are those who had to manage estates that were less than planned for. They learned the hard way what a nightmare it can be sorting out someone’s affairs without the right documents and thus they want to be sure their estates are in order for their executors.

On a related note but actually in a different chapter, the book covers leaving an inheritance to children.

Here are their thoughts:

It’s a good thing to do, but is it a parent’s duty to leave their children a financial inheritance? Only a little more than a third of Boomers think so, but 44% of GenXers and 55% of Millennials do. More fathers (39%) than mothers (30%) feel obliged to leave their children financial inheritances, and Latinos (49%), Asians (45%), and African Americans (38%) feel far more obligated than Caucasians (30%) do. Feeling obliged or not, nearly six in ten Americans say they do plan to leave inheritances to their heirs.

Probably the biggest continuing shift in attitude and preference is that two-thirds of Americans now favor “giving while living,” dispensing some of their assets to heirs while they’re still alive. Assuming that’s a responsible decision in terms of retirees’ own financial status, that provides the opportunity to control the distribution and see how the assets are put to use and benefit the heirs. It can also provide financial support to heirs when they most need it, for example, in raising children or covering college costs. Women, and thus many widows, ten to be more interested in giving while living than men are. As Chuck Feeney, founder of Atlantic Philanthropies, puts it, “If you give while living, the money goes to work quickly – everyone gets to see and feel good about the action and the results.”

My take here:

• I wouldn’t say it’s a parent’s “duty” (or obligation if you prefer) to leave their child an inheritance, so I guess I’m with the majority. Hahaha.
• I wonder if Millennials think so because they are going to be recipients of the next wave of inheritances. lol.
• Interesting that fathers are more likely than mothers to want to leave an inheritance. My wife and I both want to, but I would leave more if it was up to me alone. I joke with the kids that they better hope I don’t go first — otherwise they might get much less!
• I am 100% in favor of giving while living — both to charitable causes as well as kids.
• For charities, we still use our donor advised fund to give appreciated securities. We supply the DAF from our regular brokerage account which, despite us giving a ton from it, is much higher in value than it was a few years ago. That’s what a strong market can do for you! Anyway, giving is still one of our largest “expenses” each year, fighting it out with “taxes” to see which one is on top.
• For kids, we have decided to do a couple things. First, we will help with any “good” expenses they have now to help get them established. Case in point, we just matched my daughter and son-in-law’s downpayment on their first home. Second, we have been giving them cash for Christmas and will keep doing so (this year was $1,250 each). Not a huge amount as of yet, but if we keep adding to it (a year ago it was $1,000 each) it will start to become significant.
• We also have $150k in 529’s that we’d love to pass along to grandchildren some day (hoping that’s sooner rather than later). 😉

Two more topics and this book is a wrap!

Here’s one I found to be really interesting…

Women: The More Generous Gender

The book now addresses something I’ve known for quite a long time:

Studies repeatedly show that women are considerably more generous than men, including during retirement. They donate more and volunteer more, and because they outlive men by an average of six years, they more often control bequests and inheritances. And generosity is a bigger part of their identities in retirement. Women are more likely than men to define success by their generosity (versus their wealth), to say they get happiness from helping people in need (versus spending on themselves), and to agree that retirement is the best time in life to give back.

Women retirees are also more likely than men to make charitable donations (81% vs 71%) and volunteer (29% vs 22%). And they have stronger – and we might say purer – motives in giving. They more often give out of gratitude, faith, or passion. Men are more likely to say they give out of obligation or pride. Very significantly, women retirees increasingly control decisions around giving. And single older women hold the power of numbers. For every 100 men over age 65, there are 121 women. Among Americans age 85 or older, there are almost twice as many women as men. With women being three times more likely than men to be widowed in later life, they therefore often decide how and where to pass on money and assets – both to family and to charitable causes. Among people age 55+, single women, including those who are widowed, divorced, or never married, already contribute nearly half (49%) of all charitable bequests.

I was the volunteer president of a non-profit for seven years when we lived in Michigan and I saw all of these facts play out over time.

And even in our family, my wife is much more generous than I am. In fact, if I pass before she does, I worry that she’ll give so much away that she’ll put herself in a tough financial spot. Hopefully we’ve discussed it enough that she won’t do that (this is one major reason that I’m probably going to opt for taking Social Security at 70 — at least she’ll have that income if she gives the rest away. lol.)

Now let’s move on to one of my favorite topics in this book…

The Definition of Retirement

As the book comes to a close, it leaves us with some general, parting thoughts.

Here’s one I liked:

Clearly we believe the word “retirement “ is reaching the end of its line. It’s far too small and narrow for what is now emerging. Its positive connotations – freedom, leisure – tell only part of the story. Its negative connotations – withdrawal, decline – are increasingly problematic. The words “retirement” and “retiree” will most likely linger for another decade or so, but their meanings will evolve as the lifescape of retirement keeps expanding, disaggregating, and diversifying.

We believe it’s time to re-identify the “Lifestage Formerly Known as Retirement” to mean something far bigger and worthy of a new name.

My take on this:

• I’ve been saying it for a long time — the meaning of retirement is changing!
• One great example of this is that about half (or maybe more) of the newest retirement books I’ve read talk about “working” in “retirement”. The old definition of retirement, the one the retirement police will be defending until the bitter end, had no place for work in retirement. In fact, it was impossible for you to work and be considered retired. Times they are a-changing!
• “freedom, leisure.” Freedom is the big one for me. People can choose leisure or they can choose something else, but it’s the freedom of retirement that gives them the choice to do whatever they want.
• “withdrawal, decline.” These are things that can be planned for (at least in part) and be eliminated in many cases. However, the best planning occurs before retirement and unfortunately most Americans seem to be of the mind that “retirement is so easy you don’t have to plan for it.” I’m trying my best to change that mindset so people do at least a bit of planning — which will greatly improve their odds of having an awesome retirement.

Anyone want to suggest the new name for retirement? I’d love to hear some suggestions!

Conclusion

Well, that wraps it up for this book.

I have covered it in much more depth than I have other books because it had so many great insights backed up by data. Most books are long on opinion and short on facts, but this one is long on both.

And, of course, there’s much, much more to the book than what I could share. So if any of the posts have interested you, pick up your own copy then come back here and tell me what you think of it.

There might be some readers who have already read the book. If so, I’d love to hear your opinions of it in the comments below.