How much money does a 83 year old need to have in savings to avoid running out of money in retirement?
In a previous post (Is Your Parent Afraid of Running Out of Money in Retirement -Part 1), I described how my 83 year old father was living in abject terror of having his money run out before he died. While doing research trying to understand what was bothering my Dad, I stumbled across an article about “Bag Lady” syndrome.
The fear of running out of money and being forced to live on the streets is not uncommon. But, it usually affects women who often depend on and defer to the men in their lives. They have a feeling of being powerless to prevent becoming a Bag Lady. Men’s fears usually have to do with losing jobs, etc.
I tried to reassure Dad that he was comfortably set. Running summaries of his savings accounts and graphing his frugal spending habits, with colorful charts and graphs showing almost horizontal lines extending ten years, did not diminish his fear.
In spite of all my logical arguments that his finances were in good shape, he continued to worry. My father understood, in the core of his being, that once you start spending principal it’s gone and so is the interest you could earn by investing that money.
Dad was managing to live within his modest budget except for certain hospital and medical bills. He had to use his savings to pay for them. The hospital is especially aggressive about collecting its money. If you don’t pay the bill within a certain period of time, the hospital sends it to a collection agency to hound you until you make arrangements to pay. A delinquency because of hip replacement surgery gets treated the same way as a car loan.
So, how much money does an 83 year old need to have in savings to avoid running out of money in retirement?
Like a zen riddle (What is the sound of one hand clapping?), I have turned this question over and over in my mind looking for an answer. My extensive research on the Internet turned up the same cryptic response again and again.
There is no single answer that fits all retirees.
Because cost of living (New York vs. North Carolina) and spending habits (tuna vs. caviar) vary wildly, every major financial website offers a retirement savings calculator that allows each person to insert the dollar amounts for her unique situation. You can play with a variety of scenarios and come up with charts that provide peace of mind or many sleepless nights.
Even if the numbers are all positive, you don’t have an iron clad guarantee.
The cruel, ugly truth is that– even if all of the other calculations are accurate– no one can predict if you will have a prolonged medical crisis that will suck savings out of your accounts faster than . . . [insert your favorite phrase here].
(This is not intended to frighten you. It is time that someone said it. Now, we can look at the steps you can take to deal with it.)
Figure out your elderly parent’s regular monthly expenses and how to cover them without tapping into the principal. You may need the help of a fee based certified financial planner to decide how to invest the savings.
Here are some additional strategies that can help:
1 . Supplemental medical insurance – Medicare pays 80%. The supplemental coverage picks up some amount between 50-90% of the balance. What’s left is a very small co-pay that is so much easier to manage.
2. Prescription drugs – Ask the doctor to prescribe an older, low cost drug or a generic rather than the latest patent wonder drug. Use the mail order prescription service from your supplemental insurance if there’s one to get the lowest possible price.
3. Regular checkups – The doctor can identify problems early so that your parent does not need a trip to the emergency room. If you are the person named as medical power of attorney (see previous post), become familiar with your parent’s medication. Ask questions. Some doctors ignore a senior’s complaint as just “old age.” Don’t settle for that answer.
4. Exercise – Studies agree that daily exercise , just short walks of 10 to 20 minutes, contributes to better health and faster recovery after an illness. Even 80 year olds can benefit from basic strength training and balance exercises.
5. Sleep – Lack of sleep contributes to decreased immunity. Exercise often helps with sleep problems. If aging has changed your parent’s sleep cycles, encourage her to take a regular nap during the day. (40 and 50 year olds can benefit from power naps, too!)
4. Fruit, vegetables and water – Helping our elders have a regular supply of fresh and tasty produce and non-chlorinated water ready when they are hungry or thirsty is one of the lowest cost ways to boost health and vitality. (Check out Jack LaLanne’s website to see what good nutrition and exercise can do for a 90 year old if you don’t believe me.)
5. Supplements – I personally believe in vitamin and mineral supplements. Ask the doctor or pharmacist for advice. In a future post, I’ll discuss which common prescription drugs deplete certain nutrients from the body. The results can be disastrous but the solution costs just pennies in most instances.
6. Family, friends and fun – Ok, you knew this. Studies show that people live longer, healthier lives if they have regular social contact with family and friends. This is particularly important to remember if your parent is living alone in his own home. Oprah, CNN, even Larry King with his wide range of topics, are not substitutes for real, in person, human social interaction. Pets can help, too, if your parent can manage their care. Help your parent get out of the house on a regular basis. Even adult day care can be a spirit lifter for many seniors.
My father died recently. Yes, he made it to the finish line without running out of money.
The last three months of his life were grueling for both of us. His ultimate medical crisis arrived.
More about those final months in the next posts.