Planning Ahead: Dealing With Unknowns In Retirement

While we frequently plan for our estates considering what we leave to our spouses and children, it is probably a fact that we rarely consider the long life ahead either for ourselves or for our spouses as widows or widowers.

When we do think of these planning possibilities we generally think in terms of how much we need to support ourselves comfortably while foregoing regular employment income.

The pandemic made it easier for those contemplating whether retirement should begin now or later to jump in and opt for now. In fact, a recent Forbes article suggested that the current trend referenced as the "Great Resignation" might really largely be a massive move to retirement.

Author Aviva Wittenberg-Cox argues that maybe, to counter this movement, employers should instead more seriously consider taking steps to retain older employees while providing opportunities for them to stay engaged. She notes "The traditional retirement is a move from 100% employed to 100% retired. Overnight." She suggests alternatively employers could "flex the model and offer older employees a range of flexible employment options that can taper over time…"

The implication, although not specifically stated, is that the benefit to employers to retaining experienced workers in some capacity is matched by similar benefits to some retirees in keeping them engaged and also, in some cases, more comfortable with financial uncertainties than the "100% retired" model.

Obviously, there are huge differences for individuals and for couples regarding retirement with some retirees comfortably fixed and others not so much.

For those who opt for "100% retired" there are some choices to be made.

When Do You Take Social Security? The Washington Post recently reported an interesting trend for retiring Americans — retirement while delaying receipt of Social Security benefits.

Author Andrew Van Dan concluded "For better-off Americans, the pandemic economy created some of the strongest incentives to retire in modern history, with generous federal stimulus, incredible market gains, skyrocketing home values and health concerns drawing many Americans into early retirement…The surprising twist? Many of these retirees also opted to put off claiming Social Security benefits…" This observation follows a general tendency that has been building.

The general impression these days is to delay taking Social Security if it does not cause too much of a hardship. You can take Social Security as early as age 62 but could boost your benefit 76% if you wait until age 70. The difference between taking it at what is now full retirement age (66 +) and age 70 is 32%, a fairly generous secure rate of return.

This may be relevant to your spouse's financial survival if your spouse earns less than you since if your Social Security is higher on death than your spouse's, she (or he) may claim on your higher benefit.

While the Washington Post suggests a reason for delay in taking Social Security is closely tied to affluence of the retirees, others have commented it is still too early to tell.

How do you figure how much you need to live comfortably? If you have a trusted financial advisor you may be able to project well into your future making, however, certain assumptions. Two of the greatest are — how long are you likely to live and what is the likelihood you or your spouse will need serious long term medical intervention before you die.

This is not all. You also need to set reasonable goals and expectations. Do you want to travel or mostly remain at home? Do you plan on gifting either to family members or charity and amounts. You need to evaluate whether your decisions make sense based on your goals and experience.

So what do you do? You make reasonable assumptions and build them into your plan. If conditions change, you change the assumptions. This is what we do all the time with clients.

Finally, without knowing how long you or your spouse will live it can be difficult to know how to plan. For some couples, the goal is to leave a large estate for their children and grandchildren. Others are more concerned to assure they or their surviving spouse has enough. You make decisions that of necessity are based on inadequate information about the future which in some ways has probably always been the case.

Janet Colliton, Colliton Elder Law Associates, PC, is a Certified Elder Law Attorney and limits her practice to elder law, life care and special needs planning, Medicaid, estate planning and estate administration and guardianships and is located at 790 East Market St., Suite 250, West Chester, 610-436-6674, [email protected]. She is also, with Jeffrey Jones, CSA, co-founder of Life Transition Services, LLC, a service for families with long term care needs.