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Retirement becomes an ever-evolving challenge

Health costs, living longer, investments affect plans

September 05, 2004|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

Nearly four of 10 retirees in an EBRI study this year ended up retiring earlier than planned, often because of poor health or a job loss through a layoff or company closure.

Bernie Lazar of Silver Spring, for instance, says he retired from a part-time job at age 66 because his employer, a restaurant supply company in Washington, shut down.

"If they didn't go out of business, I would still be working," the 82-year-old says.

Question No. 4

What worries retirees?

For most who retire, medical care is the largest concern.

"I'm fortunate. ... I'm not one of these seniors having to cough up $1,000 a month for medications," says Cynthia Anderson, a retired Baltimore County biology and health teacher.

"If my health fails, and I have to start taking expensive medicine, it will be a hardship," she adds. "Basically, my retirement income takes care of me because I don't have heavy medical expenses."

Anderson, 70, also is concerned about long-term care. Her mother has Alzheimer's disease, and Anderson figures she may live into her late 80s or 90s. "I can't put the burden of my care on my son," she says.

The typical stay in a nursing home is 2.4 years, and, as of last year, the average cost of care was $66,153 a year, according to MetLife.

Medicaid will provide care for those who are poor, and the wealthy can afford to pay health costs out-of-pocket. It's the group in the middle, like Anderson, who face the decision of whether to buy long-term care insurance. The older one is, the pricier the policy.

Anderson, who purchased her policy just before turning 65, pays $1,578 a year. "It's like auto insurance," she says. "You don't build equity in that."

Question No. 5

How can family affect a retirement?

"I didn't realize I would have to help my grown children," says Ivene Nelson, 78, a retired administrative assistant in Los Angeles County in California.

Nelson has financially helped two of her four children over the years, including giving her 55-year-old son the down payment for his first house. The helping hand means less for her modest retirement, but she has no regrets.

"I didn't have to help them," she says. "If I need help, they would be ready to help take care of me."

Sometimes, family troubles can derail retirement plans.

Madeleine Greene, 65, an educator with the Maryland Cooperative Extension in Howard County, says she expected to retire five years go, until her son, a single parent, developed cancer. He has recovered, but Greene and her husband, 74, have been raising their 11-year-old grandson.

"There are a lot of people putting off their retirement plans because things happen," Greene says.

Question No. 6

Should you have a mortgage in retirement?

Herbert and Fran Harris sold their home in 2001 and took out a 30-year-mortgage on a condominium. "I don't believe in putting all my money in a house," Herbert Harris says. "I put down what I thought was comfortable. It's silly, if you have any sudden expenses and all that money is tied up in the house. It doesn't do any good.

"You might as well invest your money and earn a better rate of interest," says Harris, whose mortgage rate is 5.75 percent.

Some planners advise against a mortgage in retirement.

"That's a substantial drain of their money," says Jerry Cannizzaro, a financial planner in Oakton, Va. A $1,200 monthly payment, for example, eats up $14,400 a year that they could have spent on other things, he says.

Also, if one spouse dies and income drops, the survivor may struggle to keep up with mortgage payments, he says.

At the very latest, Cannizzaro says, a mortgage should be paid off by age 70, around the time when retirees' health care costs start climbing.

Another advantage to paying off the house is that retirees will be in a better position to get a reverse mortgage if finances take a turn for the worse and they need income, says John Bacci, a financial planner from Linthicum. The loan won't have to be repaid until the borrower permanently moves or dies and the house is sold.

Question No. 7

Retirement is all golf and books, right?

Patricia Cooper of Lynchburg, Va., was an investment banker for most of her career and retired in 1999.

"My thought was I could read every book I wanted to," the 66-year-old says. "That there would be days that I could do nothing but read. The reality is that I'm not happy just sitting all the time."

Today, Cooper is active in her church, performs in two choirs and volunteers with a program that helps low-income people apply for prescription drug assistance. She's interested in medical issues and is thinking about going back to school to be a pharmacy technician.

The happiest retirees aren't necessarily the richest, but those who are active and have goals, whether it's travel or visiting grandchildren, Cannizzaro says.

"You need to know what you are going to do in retirement," he says. "You don't just want to retire and lay down with the remote control and watch 180 cable channels. That's the way you will die earlier."

Question No. 8

What would you advise today's workers?

Many retirees, no matter their income, wished they had saved more and advised others to do so.

"All the old cliches are true," says retired dentist Jung. "The more money you can put away, the better off you are going to be, even if it's only a few dollars. It's the discipline of the thing."

Anyone can save, they say.

"It's not what you make, it's what you can save," says Harry R. Cook, 73, of Towson. "Some earn $100,000 and spend $101,000. So where are you?"

Retirement planning resources

Plenty of online sources are available to help baby boomers and younger workers plan for retirement. Among them:

Request a copy of estimated Social Security benefits at www.socialsecurity. gov.

Get an idea of life expectancy with a longevity calculator, such as the one at www.livingto100.com.

Baltimore's T. Rowe Price Associates offers a Retirement Income Calculator to compute the likelihood of running out of money at retirement at www.troweprice. com.

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