Me, Mom and Longevity Planning

By Cyril Tuohy

I don’t know if it was supposed to happen this way, but that’s the way it turned out. In any case, it’s too late to do anything about it now.

Mom lives in an assisted living facility in Geneva, Switzerland, where she’s well cared for and will be until the day she dies, which could be tomorrow, or 10, or even 20 years from now.

Her problem is that her expenses are higher than her income. Here’s how the rough math breaks down.

She receives monthly income of $1,307 from Swiss Social Security, $2,555 from her defined benefit International Red Cross pension, $122 from French Social Security, and $1,994 from U.S. Social Security Administration, as she worked in the U.S. and was married to an American.

Her total monthly income comes to $6,000.

And now for her monthly expenses: $6,576 for assisted living room and board, $253 in fees, $26 for the telephone, $87 for a pedicure, $1,351 in health insurance premiums, $1,989 in nonreimbursed medical costs, $234 for tax preparation.

Expenses run her about $10,500 a month.

Her monthly deficit between income and expenses amounts to about $4,500, or about $54,000 a year.

Her $360,000 investment portfolio, managed by her brother, needs to generate about $4,500 a month for her to stay solvent.

At this rate, I’m told her assets are going to last her about three years, after which there will be nothing left for me, my wife, my daughter or anyone else.

When her books reach zero balance, the state will take over her expenses courtesy of the Geneva taxpayers. Still, I’m not complaining. We should consider ourselves lucky.

At least she won’t be tossed into the street, nor will authorities come to after me looking to drain my assets in the form of contributions.

A Common Plight

Hers is a common plight, particularly for a generation that never thought much about financial planning. It is too bad because with a little bit of effort – particularly with a son who succeed very well as a financial advisor – mom's plight might have been avoided.

There might have been something left for her only grandchild. Instead, there’s likely to be nothing: no inheritance, no life insurance, little in the way of valuable objects sold at estate sales. Mom will leave no legacy of income planning or effort to anticipate longevity, even when her mother, my grandmother, made her final exit at age of 97.

It would have all been so easy for her, especially when she inherited $400,000 from an aunt back in the early 1990s.

She could have taken $5,000 or $10,000 to segregate away for her son one day, or a grandchild.

Better yet, she might have thought of a life insurance policy. For a few bucks a month, that might have secured $100,000 the day she died.

In 1991, Mom was 63 years old and still relatively young.

She entered retirement after a life of adventure, after living in Switzerland, Italy, France, the United States, Vietnam and Lebanon. Not bad for a woman who never graduated from high school.

A Different Time

Things were different then, I’m told.

Retail mutual funds weren’t very accessible, life wasn’t as expensive as it is now, the 60s were a time to explore and explore she did as a member of the global nomad family.

There were good things too: fine food, interesting people, scintillating conversation, museums galore, grateful memories, some glamour and quite a bit of risk.

But there were longevity products out there, too, many of which would have been a perfect fit for her had she thought about them.

Many years ago, I recall Dad saying something about compound interest, though I’ll never know why he didn’t act on his own wisdom and set something aside early on, as I do with $100 monthly for my daughter.

Small steps over a lifetime is all it takes to leap ahead of longevity.

Time appears to have caught up with Mom's ability to sustain herself financially as her remaining assets gradually succumb to the rising tide of longevity.

So that’s the way things turned out for Mom and she pretty much lived the life she wanted to live.

Mom and I never thought much about longevity back then, never even discussed it. But with time and perspective, I’ve seen the way things turned out for and I’m not sure that’s the way I want things to turn out for me.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].