You Can’t Take It With You

For thousands of years, humans have tried to take their wealth with them to the afterlife. In Viking’s Norse society, when a king died, he was able to take his favorite servant girl with him to the mythical Valhalla. In fact, the girls would fight over who would be killed and sent with their deceased king so they could be married for all eternity to the person who they would never be able to marry in the earthly realm.

While this may sound like a terse example, most of us understand and fear that we are going to run out of money and would like to make sure that we have something left after we pass away. Because of this, we make sacrifices. Oftentimes, those sacrifices are for things that are luxurious or desirable, like vacations, boats or second homes.

In retirement planning, the objective is to set up a budget and fill that budget with your income sources, such as Social Security and your company pension. When you initially retire, you enter into a time period that I refer to as your “go-go years.” My father was born in 1947 and my mother was born in 1950. They both retired in 2014 and the first thing they did was travel to Europe. They went on the seven-countries-in-14-days tour, and they loved it! After that, they took a cruise to Alaska. Following Alaska, they purchased a park model in Arizona so they could avoid the winters of South Dakota and enjoy the pickleball tournaments in Tucson. They had experienced their “go-go years.”

The idea here is to set aside enough money to enjoy some of the things that you just couldn’t or chose not to do when you were working. I often tell clients that this is the most important time in retirement; you still have your health and your gumption to walk around and enjoy Paris, which is poignantly known as “the city of walking.”

My mother spent the necessary money on these trips because she worried that she may not have the good health needed to enjoy these trips and that a potential health concern could arise in the future. Once those worries start to become a reality and you are simply not able to enjoy traveling or boating every weekend, you are entering what I call your “slow-go years.” Primary concerns for this time period are twofold. First and foremost, we are concerned about health care; we want to be certain that we have set up the appropriate amount of insurances and health coverage. Understanding Medicare and the subsequent supplemental policies are essential during this time period.

Think of it this way: If you moved to a new area, you want to establish good relationships with doctors in that area. Likewise, you also want to make sure you have the appropriate amount of life insurance in place, and so on. You might be traveling less here. You might request that the grandkids come to you this year for Christmas instead of traveling to see them.

The second biggest concern during this period is longevity risk. Statistics show that out of every two people who are age 65, only one will live to be age 92. That is 27 years of retirement! That is over a quarter of your lifetime! On one hand, that sounds amazing; those days are to be spent relaxing, spending time with family and grandchildren, and doing what you enjoy doing without having to worry about going to work the next day. On other hand, 27 years can be daunting to think about. How much money will you need to make sure that you can retain the same standard of living for all of those years without having to be a burden to your family?

Once you have enjoyed your “go-go years” and you have endured your “slow-go years,” what do you think you have to look forward to? Your “no-go years,” of course! Some of the things I mentioned, like health care and longevity risk, are magnified during these years. According to the 2015 Genworth Cost of Care Survey, the median cost of a nursing home per year, in Maryland, is $101,379. Assisted living is $46,800. These costs can be immense, but we must mitigate these risks. Long-term care insurance, “linked benefit” investments, and self-insurance are all ways to mitigate these potential costs. The point of the “slow-go years” is to make sure that you have the resources available when you need them, and you can do that simply by having a plan.

I titled this article “You Can’t Take It With You” to make the final point that there is no better day than today. I tell clients all the time that as long as we have a plan in place and that we stick to the plan, it is OK to take that exciting trip or to buy that boat.

This is the time in your retirement when you have the energy to do those fun things that you have always wanted to do, because you never know what tomorrow brings. Some people live by the philosophy that they want the last check they write to bounce, while others feel strongly about leaving some of their wealth to next generations. Perhaps it is essential to add a trip into that plan so that you can go see the Viking king’s grave, where the servant girl eagerly gave her life to spend all of eternity in Valhalla. We can do any of those things, but having a plan and sticking to that plan is key.