You hear over and over again that your money has to outlive you, even for an hour. When I talk to friends and family about various financial planning aspects, the most feared one is exactly that...outliving money.There is this woman, age 91, that I know. She is a widow, in relatively good health, has a house that is fully paid (no mortgage), has a Social Security check that comes in each month for some $1,800 and a small pension amount from a prior job of about $110 a month. She buys very little food because she goes to a senior center almost every day and they load her up on free food.

As to expenses, she pays around $1,000 a month in taxes and insurance for her house. She has health insurance that costs her some $200 additional each month besides the Medicare and Medicaid coverage. She has no car. So, by and large, her living expenses are rather minimal. It’s practically a wash with her income.

However, she is in a virtual state of panic about her money. Clearly, she is frightened that she will outlive it. Remember, she is 91. Oh, and did I mention that she has some $3.5 million in stock portfolios and in various bank accounts, all liquid money? And yet she still lives in fear.

Not unusual, says a CPA in Miami who handles elderly people such as this lady.

But, let’s back it up a few years and understand some of these concerns and how they can play out. There are three primary ones that seem to abound with most people:

  1. Underestimating what health care costs;
  2. Not understanding the length of life; and,
  3. Contemplating you’re going to be working far longer than expected.

Let’s take that last one first. The Employee Benefit Research Institute Retirement Confidence Survey a few years ago said that some 40 percent of those now retired were forced to quit working because of layoffs or illness. Keep in mind that the average retirement age in this country is 62 but for the most part Baby Boomers in particular figure they will be working much longer than 62. Possibly, but what if it isn’t a reality? Is there enough money to cover you?Next, most people don’t quite understand how long they will live. Many don’t realize that medical technology is increasing and as a result, so is life expectancy. Various insurance companies tell me that a baby born today is spun out to age 120. Think of that 120. In fact, from a personal standpoint, when I had my own financial planning done a few years ago at the time I reached 65, I was spun out by both my financial planner and by my wife’s portfolio advisor to age 90. Hey, we’re talking another 25 years. Again, enough money to cover that period of time?
Finally, consider healthcare costs. There is no question that as these costs rise, many employers are putting them on the shoulders of their employees. And consider those companies that look to drop many retired workers from their health plans? Years ago, you would retire after 30 years with one employer and they would carry you on their health plan No more. And, we haven’t even touched those people who have no coverage whatsoever.

Clearly, long-term health costs can be crippling to any financial plan.

So, what does this all come down to? It really concerns recognition of what is realistic and what could realistically go wrong with a plan. But first there must be a plan. Many people seem to avoid that, going by the seat of their pants, as it may be said. To me, and I’ve been in this business now for some 46 years, a financial plan is essential to any retirement vision.

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