Retirement Budgeting: It is Not Safe To Ignore This Step

I received the following e-mail from a regular satisfying retirement reader and commenter.  Except for a little editing and name changes, I've left her message intact. After reading through her concerns, see if you can add anything to my thoughts.

"Bill and I are definitely taking the next step towards retirement and we're getting our business ready to put up for sale.. a big step. Bill is pretty nervous, I am calmer about it. A big leap but we are sooo. ready. The stresses of business and the challenges of staying up to date in an ever changing industry are wearing us out! We're ready to move on to the next phase of our lives.

Reading your blog helps us both to have the large view and not be too scared. We'd feel better if our savings were still making the 7% and the 5% even that they used to, in municipal bonds. (Wouldn't everyone!?) We're having to learn more about investing. "IF" the economy had not taken a slide we probably would have retired several years ago as we had originally planned.. but we're in the same boat as everyone, with interest rates what they are. LUCKILY we did not lose in the stock market dip ten years ago.

One thing we're going to do is sit down and remember what it is like to live on a stricter BUDGET. I wonder if you would address this issue in a blog post? How does one go from having a good bit of discretionary income to living on fixed income again? We certainly did this in our early years, but we have to relearn! Do you and Betty each get an "Allowance" monthly for personal spending? I don't spend much, monthly, but my husband does have a Home Depot habit.

We live frugally but well, but it is still a challenge to return to a stricter kind of budgeting so our retirement funds last..we are weighing that sense of FREEDOM and TIME we will gain (and better health, too, no doubt..) with the minor discomfort of having to watch pennies again. I read that the Frugal Girl and her spouse have a once a month budget meeting-- do you and Betty? Or do your retired readers?

One PLUS of doing this again in our lives (stricter budgeting) is that we are reviewing the importance and meaning of every expenditure, reviewing what kind of travel we REALLY enjoy and get our money's worth from, and just reviewing "meaning" in general-- a good thing!"

Besides writing most of this post for me (!), I seriously appreciate the thought Sue put into her questions and concerns. I'll take a stab at answering them. Like many, she is looking forward to retirement with a healthy mixture of edginess and excitement. With interest income still quite low, and the "normal" investments no longer the safe places we once thought them to be, she and Bill are refocusing on the need to choose how the monetary resources they have are best utilized.

Betty and I do not have a monthly budget meeting. We set our budget on January 1st for the coming year. It is based on last year's expenses, what we think we will need to spend, and what our income will be for the next 365 days. Also, we have a certain amount of money set aside for emergency expenses.

From then on it is my responsibility to keep things in balance. If we get some income we didn't plan on we discuss what we should do with it. If expenses are tracking higher than they should I make suggestions for cuts and adjustments and Betty gives her approval or suggests a modification here or there. I do record everything we spend in Quicken so I am never surprised by an out-of-whack expenses category. I can catch a problem very quickly.

Our total expenses have remained relatively steady over the past 17 years. How is that possible considering the effects of inflation and in areas like health care where costs have gone up a average of 10%-15% a year? The answer is simple: they had to because my income is relatively fixed.

When I retired in 2001 at the age of 52 I had a investment/savings account designed to carry us until I planned to start taking Social Security and withdrawing from my IRA at the age of 64.  We have lived off that savings and investment account through boom and bust cycles. When those investments were making 10% we had extra cash flow. When our average return sunk to 3% or less, we were short. But, because we didn't spend more when times were good we had enough to carry through the tough times. A dozen years ago I had planned that the savings account would run out of money on my 64th birthday. I was one month off.

Over the years we have adjusted budget categories many times. In some years we decide it is time to replace some home furnishings, so another category must be cut. In another year, maybe we decide we would rather cut back our dining out budget so we can spend a bit more somewhere else. Cable TV and the land line phone went away several years ago ago when we realized they weren't worth the money to us.

My clothing budget is 85% less than it was when I was working and I still have money left unspent at the end of the year. I need jeans, a T-shirt, and gym shoes. Heavens, our dry cleaning expenses for last year for both Betty and me was $36....not a month, but for all of 2017. We simply don't buy or maintain clothes than cannot be laundered.

We each get a small sum of money each month (less than $100) that doesn't have to be accounted for. Betty tends to spend hers on the grandkids or the house. I spend mine on stuff for my blog, books and house.

This post is getting a little long, so let me summarize what I believe the key to our financial stability has been:

1. We have no consumer debt, no mortgage, no credit card debt
2. We adjust our expenses to fit within our income, not the other way around
3. We constantly adjust to stay on track
4. We have learned that it doesn't take much for us to be happy

OK, your turn. What hints or tips can you give to Sue and Bill and everyone else? After all, we are all in this together.

The Worst Things About Retirement

For some of us the worst thing about retirement is that it didn't start sooner. After experiencing the freedom and opportunities that become available after work ends, we are happy that the employment stage of life is behind us.

For variety of reasons, others find the transition is less than ideal. Concerns like financial fears, health problems, or relational issues are not my focus this time. Instead, I'd like to look at some things that may be a little less obvious but still make us less than satisfied. Some of these may feel familiar to you. For some reason the pieces of retirement you thought would fit together nicely, don't.

In each segment I have included a link to a post that might help you find some answers.


* After awhile the freshness wears off. Then, every day seems like the one before. This happens when the honeymoon period ends and we realize what is in front of us: a schedule that is up to us to design. Forty hours (or more) every week is now ours to fill. Say what you will about an unpleasant job, at least it came with a structure that required little effort on our part to design. 

Is retirement like a permanent vacation?


* I don't like telling people I am retired. It makes me feel old and not useful. The lack of a clearly defined "role" bothers us. The "What do you do" question was easy to answer. Now, not so much.

Retirement does not mean not working

* I don't have many friends who have retired so I miss seeing people at work or during the day. This is actually two connected issues. If you retire earlier than others the natural tie you would share with retirees is not in place. You lose both your friends at work and can find yourself isolated in social situations. Those who are around during the day tend to be young mothers with their kids or business people rushing from one appointment to the next. Your contemporaries are not around. 

I often wonder about the growing trend of folks in their 30's who want to retire very young. After the initial period of exploration and freedom who will they have as friends? Virtually every one of their peers will have work for validation and friendship.

Finding Friends After Retirement


* I feel stagnant and drifting in place. Being retired can feel like an anchor has been pulled up: the anchor of knowing where to go and what to do each day. Without that structure, you can feel like your mind lacks stimulation and you have left a port with no destination in mind. You are just drifting through your days.

5 Things You Learn About Retirement - After Retirement


* I am the go-to person for babysitting or running errands. Sometimes it can seem as though you are the only person in your relatives' address books. Helping out is something you are happy to do, within limits. Why don't others understand I'm not being unkind or rude? It is just that I didn't retire to become an answer to other people's scheduling problems.

The 10 Commandments of Retirement


* I put on weight since I'm not as active as I was at work. I'm worried about my health. Yes, I know, I had a desk job. But, just the walking around the office, to and from the parking lot, and a quick bite for lunch kept me looking and feeling OK. 

Now, it is too easy to snack when I am bored or have no particular things to do on any type of schedule. I probably watch too much TV, too, which isn't helping. Since I am not interacting with other people as much, maybe I just don't care as much about my appearance or health.

The health concerns that keep us awake


* I just don't have enough to do to fill my days. Obviously, that is part of  several of my other complaints. But, I have never had a hobby and I get tired of reading. At least at work I had something to fill my time without me having to figure out what to do.

What Do Retired People Do All Day?


If you find some of the things on this list fit you, then you are not having the type of experience you expected. You know these are not just minor complaints but things you struggle with every day. 

If these dissatisfactions bother you let me assure you that you are not alone, and these are not frivolous problems. They are very real and important. 

After each item on the list I have put a link to an earlier post that might give you some answers or encouragement that you can turn things around. Please take the time to read the ones that might help.

If you would like a more personal response, I invite you to email me with specific questions and concerns. I would be happy to begin a dialogue with you. No promises that every issue of yours will be solved, but I would love to be able to help you cross at least one thing off your "worst things" list.

Retirement Living Options That Are Not For Everyone

After the post of a few days ago, How To Move to a Retirement Community  I thought it would be fun to look at some options that are very different retirement options that aren't designed for everyone.

One of the really nice things about a satisfying retirement is the freedom that comes from deciding how you live or even where you spend your time. Some of us are happiest staying where we are now, with an occasional trip to add new experiences to our lives. 

But, what about those retirees who have decided to really break the mold? A while back the Wall Street Journal had a story about folks who have picked, shall we say, more unusual retirement options. A few other news stories that filtered across my desk make it obvious that a "traditional" choice may not be so obvious. Consider these:

Live on a Ship

For roughly the same monthly cost as a typical full service retirement community, a small but growing number of people are living for several months or more each year on cruise ships.

A recent research study concluded that the services on a typical cruise are comparable to those in a retirement community: dining choices, escorts for dances and dining, help with doling out medicines, and daily housekeeping. Cruise ships have a doctor and nurse on board and on call 24/7, as well as a decently outfitted medical facility without worrying about health insurance or copays. Entertainment, fitness centers, libraries, and satellite TV complete the package.

Between cruises, those who have adopted this lifestyle stay with friends or in a short term apartment rental or hotel. Of course living space is at a premium, but as a trade off you spend your time visiting fascinating location anywhere in the world and have your needs and wants taken care of.

Just a month or two ago I saw an article about folks who live on cruise ships full time. For all the reasons noted above, these people have left any land-based living arrangement behind. Click here for an excellent article on the good, the bad, and the ugly of cruise-ship living

Spend part of the year as a Park Ranger

This retirement lifestyle could be considered a type of snowbird living. Folks spent the summer months living in an RV while serving in volunteer capacities at national or state parks. Usually the rental fee for the camping space is free, or deeply discounted in exchange for the help. 

The volunteers may serve as managers of a camping/RV site, teaching interpretative classes, or working in a gift shop. The story I saw told of a couple that spent last summer at Yellowstone, the previous summer at Yosemite, and plan to be at Mt. Ranier this year. During the winter months they pull the RV to a warmer climate or spend time visiting friends. For more information on this option, For more information on this option, click here


Share Housing with others

seniorcohousing.com

If you have an interest in living communally, this may work for you. Residents of these communities have private living spaces, but share kitchen and other facilities.

There are a growing number of such senior developments in the U.S. with more in other countries. I have read predictions that most metropolitan areas will have at least one cohouse development within the next decade. Especially for those who have lost a partner or have no nearby relatives, the sense of family and of sharing one's life with others are major draws.

If this sounds like something you'd like to explore, take a look at CCohousing,org's website.




Live in another country

Moving to a place like Costa Rico, Mexico, Belize, or anywhere else in the world is becoming a reasonable choice for many. Estimates are that over half a million Americans are spending their retirement years outside their home country.

The primary reason is cost. Health care is usually 50-80% less expensive with comparable care. Many doctors in Central or South America, for example, are trained in American schools. Larger cities have modern hospitals and clinics. Housing is usually much less expensive, too. Social Security checks can usually be sent to you, though the rules vary by country.

Another reason folks choose to pull up stakes and start over again is the desire for adventure and a fresh start. Retiring to another country is a major decision that requires serious thought and preparation. It is not something to be done on a whim. Learning a new language and customs while fitting into a new culture can be daunting to some, but amazingly stimulating for others. Interesting? Click here

I've just scratched the surface on this topic. Additional options include some form of extended volunteer work, like the Peace Corp, or building a small apartment on the property of grown children to create a multi-generational situation without sacrificing privacy.

I'd like to know is what do you think? Are any of these ideas (or others I haven't mentioned) logical alternatives to aging in place or a typical retirement community? 

It is kind of exciting that we do have options.

Making It Feel Like Home After a Move To a Retirement Community

Where to retire? From a few years ago, this is a guest post from Sarah Jennings on the steps one can take to make the move to a retirement community as stress-free as possible. Whether a retirement community is in your future or maybe for a parent or relative, I find her suggestions and ideas worthwhile.

After retiring, many people choose to live in active retirement communities. Unlike assisted living homes, retirement communities are designed to keep newly retired individuals living independently but with an array of activities, hobbies, and social events to choose from.

However, as appealing as those services are, it can be hard to adjust to living in a different place than the one where you made memories in raising children, developing your career, and forming the person you are today. It’s often difficult at first to really feel at peace with the decision, but just like any major life change, it’s normal to experience cold feet and second thoughts. Chances are you made the right choice, but just like any species on the planet, being in a new environment is all about learning how to adapt, how to make it a happy retirement choice.

Make it Feel Like Home

As obvious as this tip is, it’s normal for new residents to not decorate and adorn their new home right away, if at all. Remember, your new apartment is your home; it’s not a dorm room where you’ll be moving out it nine months. Don’t be afraid to go all out and really get creative with it as bare walls and naked rooms can make it hard to truly feel at ease.

Making it feel like a safe, relaxing, and comfortable place you can retreat will really speed up the adjusting process. Hang up pictures of friends and family, set and decorate the table, and get all your old, familiar mementos out and ready to display. However, try to avoid making it look exactly like your old home; let this be a new chapter in your life, and it’s important to let your new home be just that: your new home, not a replica of your old one.

Be a Neighbor

This doesn’t mean a quick wave to the person who lives across from you or an occasional, “How are you?” This is one circumstance where it’s good to be old fashioned; introduce yourself, offer your neighbors some baked goods or a glass of wine, and really get to know them. This is what the term “community” is all about. Getting to know the people who live around you allows for friendships to flourish, and the feeling of familiarity will make easing into your new home go much smoother.

Get Involved

Your retirement community most likely offers a large variety of events and activities to choose from. Avoid being a homebody, and get active. The sooner you start taking advantage of the available activities, the sooner you will warm up to the facility. Getting involved is the best way to meet other residents with similar interests, and making new friends is the key to feeling at home in a new place.

Even just taking a good book down to the lobby to read is a simple way to surround yourself with others. Keeping yourself isolated does nothing but prevent you from experiencing your new life to the fullest, and a large percent of your rent goes to the amenities offered. You might as well take advantage of them and have a good time.

Keep in Contact with Friends and Family

One of the biggest arguments against living in an active retirement community stems from the fear of losing contact with close friends and family. However, it’s all about how you personally make an effort to keep in touch, and most facilities are more than happy to allow your guests to visit and even stay overnight.

Minimizing your contact with friends and family can contribute to resenting your decision later on, but remember you’re not on a desert island; you just changed locations. Have your family over frequently to share meals or attend events, or schedule a coffee date with an old friend or neighbor. Sometimes, nothing is quite as comforting and enjoyable than spending time with a familiar face.

Talk with the Staff

It’s just as important to get to know the staff as it is other residents. It’s a good idea to build a friendly relationship with any them as they’re the ones responsible for taking care of any issues you have with the facility. Also, the employees see new residents move in all the time, so they most likely have some tips and ideas that would be helpful in getting you better acquainted with the place.

Moving into a retirement community is a major life decision, and it can take some time to fully adjust. 

However, by making your new place comfortable, actively reaching out to connect with others, and keeping old ties close, the initial hesitation will ease into a feeling of satisfaction and excitement about your future.


It’s a brand new phase of your life; you might as well do all you can do make it one of the best ones yet.

____________________

Sarah Jennings has been taking care of others her whole life. In 2005, she moved her mother into her family home. She uses her personal experience to share with others about caring for the elderly. She wrote this piece on behalf of Brookdale Senior Living.

Note: Satisfying Retirement  received no compensation for this post or the links included.

Stolen Social Security Benefits: You Must Read This

A good friend of ours had the unimaginable happen. Someone stole his data files and filed a fraudulent Social Security claim for benefits under his name. Because he had not asked to start receiving his benefits, this theft of money and his identity continued for a while.

As you can imagine undoing the damage is a long and laborious process. In a stroke of good luck there were apparently enough red flags raised at the bank selected to receive the fraudulently-filed benefits that they rejected all of the transfer attempts. They alerted the Social Security Administration that there appeared to be a problem. Even so, Social Security has to update his records to show he hasn't filed for benefits and the money paid did not go to him. The process could take 90 days.

The takeaway is simple: if you are over 62 and have not started receiving Social Security benefits you are a prime target of these lowlifes. It is essential that you make sure no one has filed for your benefits. 

The following release from AICPA provides an excellent summary of the problem and what steps you should take to keep your files safe (or as safe as they can be in today's world). The author had his benefits misdirected, too. Even as a CPA he fell victim. In the following he is advising fellow CPA's what to do. His suggestions apply to everyone.

If you or your clients are at or nearing retirement age, you need to know that hackers are targeting social security accounts. I found out the hard way. My career as a CPA Personal Financial Specialist was devoted to advising individuals and families on their most important financial goals, including tax, retirement, estate, risk management, investment and retirement planning.

After decades of helping my clients navigate and manage these important decisions, imagine my surprise when I received a letter in the mail shortly after my 67^th birthday congratulating me on initiating my Social Security benefits. The trouble was, although I had entered the glory years of retirement, I had not yet applied for Social Security benefits, opting to wait until age 70 to receive my benefits. Further digging uncovered the unfortunate fact that a thief had received $19,236 of my benefits. I was dumbfounded.

How did this breach occur? And if I was victimized, who else might be at risk? What can you do to prevent this or respond should this happen to you or your clients?

Who is at risk?

All individuals age 62 to 70 who have not yet applied for benefits are at risk, particularly if their personal information was exposed in the Equifax breach. For beneficiaries over age 66.5, the risk is even greater. In my case, a fraudulent application was made one month after I turned 67.

The timing is not coincidental – in fact it reveals that the thief was sophisticated enough to understand the Social Security system. Individuals who have reached full retirement age and have not applied for benefits can receive a retroactive payment from Social Security of up to six months of benefits. So, beginning at age 66.5 (for people born between 1943 and 1954), thieves can access the maximum amount of back benefits.

How did this happen?

While I’m not entirely sure how the thief obtained my personal information, it’s likely that the Equifax data breach, which exposed the vital personal identification data of as many as 143 million consumers, contributed to the identity theft. According to the Equifax website, my personal information was potentially exposed as a result of the breach.

Prior to the Equifax breach, I had frozen my credit with all three credit bureaus, effectively denying any attempts to obtain credit in my or my wife’s names. Despite the freeze, the thief was able to have my benefits direct deposited into an account opened with a bank that proudly advertises at major retailers that they do not perform credit checks prior to issuing prepaid Visa debit cards.

If these stores had done a credit check, in my case, they would have found that I had freezes on all three bureaus and would have then rejected the false application they had blindly accepted with my stolen information.

But Equifax, the bank, and the retailers who market and sell these cards are not the only players involved. There is a flaw in the controls on the Social Security website that, unfortunately, does little to protect the beneficiary.

Beneficiaries who set up a my Social Security account can view their Social Security Statement, update their address and phone number, start or change direct deposit of their benefit payment, and view benefits online. This secure website sends an email or text message with a secure access code to the contact information on file on the website before login can be completed.

However, there is a separate, unsecure website that is not located within the secure my Social Security account, which was the door the thief used to perpetrate the fraud. This website, the Social Security Retirement/Medicare Benefit application, can be used to apply for benefits online.

On the unsecure website, the thief changed one digit of my phone number, entered a fake email address, set up direct deposit information for the bank prepaid card that had been fraudulently opened, and applied for benefits. Although the personal information entered by the thief did not match the information I had previously entered on the secure website, I received no notification of these changes or the fact that a benefit application had been made.

If there is a silver lining, it is that addresses cannot be changed on the unsecure benefit application website, so I received a letter in the mail congratulating me for initiating my benefits. Unfortunately, six months of back benefits and a current month of benefits, totaling over $19,000, had been dispersed to the fraudulent bank card account prior to when the Social Security Administration (SSA) mailed the letter and 11 days before I received it.

What Next?

Whether or not you are a victim of this crime, taking precautionary security measures to protect yourself from a diversion of benefits is critical. The SSA provides recommendations on how to secure your information online. Unfortunately, because of the notification breakdown and unsecure nature of the benefit application website, taking these steps does not ensure that you will not be victimized. At a minimum, I would recommend that you a create a my Social Security account and log in at least annually (more frequently if over age 62) to verify your personal information and benefit status.

If you discover that you or one of your clients has been the victim of a Social Security breach or theft, make an appointment (if you can) or wait in line at your local SSA office immediately. You will be interviewed and required to provide a written statement certifying the circumstances of the fraud. The agent will freeze further payments on your account.

Maintain digital and hard copies of everything that you receive. Furthermore, I was advised to file a police report with a case number, which I have maintained in my files. Finally, I had electronic access to my account blocked.

I just received Form SSA-1099 for the $19,236 that was disbursed out of my account.  I will now have to battle with both the IRS and the Social Security Administration, and eventually Medicare as this additional income would tip me over the threshold for means testing on my Parts B and D premiums.

I urge you to alert your clients of this and other cybersecurity risks. The AICPA Tax Section has a toolkit relating to tax identity theft, including a client identity theft checklist with action steps for recovery that is open to all AICPA members. Consumers can also benefit from materials on the AICPA’s 360 Degrees of Financial Literacy website relating to identity theft. In addition there is a page of SSA recommendations. 

The author of this release is James A. Shambo, CPA (retired), president of Lifetime Planning Concepts, Inc., which is located in Colorado Springs, CO.

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This can be a serious matter and create a real mess in your life. I found this article eye-opening and worth my attentive followup.

Satisfying Retirement provides this post for informational purposes only. No compensation was received nor endorsements implied.