April 10, 2018
What Would You Do If You Faced This Problem?
You can probably guess what is the #1 concern of retired folks: their health, how it will hold up and how they will pay for it. In the United States our health care system almost guarantees that a large chunk of retirement savings will disappear into the pockets of insurance companies, doctors, hospitals, care facilities, and drug companies.
The second biggest concern is the one I want to focus on with this post: running out of money. Obviously, the #1 concern is a major reason for the #2 fear. Regardless of how dedicated you may have been to saving and investments, a major medical problem, or the need for a nursing home can knock a hole in your nest egg so large, there could be little left.
The other reasons someone could run out of money are less dramatic but still very real. If you spend a lot on vacations under the "I'll see the world while I can" your later years may suffer. If we live through another recession of the severity of 2008-10, your portfolio may not have enough time to recover. Companies go bankrupt and leave a sizable investment of yours worth pennies on the dollar. You may find yourself supporting or caring for a family member or relative.
I don't really need to elaborate why you may face a serious money shortage at some point during your retirement; you have a vivid imagination and can come up with plenty of scenarios on your own. The real question, is what would you do? What can you do?
Obviously, there is no one answer that fits every person and every situation. But, the basic step that must be taken is quite simple to say, and very hard to implement: reduce your outgo to match your income. If only it were that easy.
So, let's think about what you, or a friend or relative, could do if faced with a serious financial shortfall. I have five options. Then, I'd love you to add as many more as you have time to type! There are folks among us whose retirement could very well depend on what ideas we can generate.
1) Change housing. Downsize to a smaller home or condo. Rent an apartment instead of owning a house. Look at manufactured housing communities. Find someone with a spare room to rent. Get a roommate.
2) Go on a financial fast for a month. For 30 days cut your budget to the bone. Only buy what is needed. Cancel, suspend, eliminate, cut out everything else for one month. After the fast, reassess your financial status. When you can, start adding back those things that bring joy and comfort to your life, one at a time.
3) Consider government programs you might have overlooked before. If you qualify, check out Medicaid, food stamps (SNAP), food banks, free clinics, housing assistance, help with utility costs. If you are caring for a grandchild under five, you may qualify for WIC.
4) Get a job, any job. The goal is to tide you over until you get back on your feet, not start a second career. Greeters, an Uber driver, Amazon warehouse worker, fast food counter help...anything to bring in some cash as long as it doesn't cause you to fail to qualify for government assistance.
5) Ask a relative or friend for help. This is usually one of the last choices folks make. A certain stubbornness or pride keep us from asking those who love us to help us.
The number of people who really run out of money during retirement is quite small. Maybe savings and investments are dangerously low. But, even then there will be money coming in. Social Security payments continue along with any pensions that you might be entitled to receive. Medicaid provides basically free medical care since even Medicare costs money each month to maintain coverage and generally doesn't cover dental, hearing, or vision care.
Now, I'd like you to brainstorm. Imagine for a moment this is your situation: you are running low on retirement money. What would you do before things became serious? How would you attempt to solve this problem?