May 16, 2018

Are you ready for 8,000 days in retirement? Part II

Retirement tips, how to navigate the most difficult medical and lifestyle decisions of your lifetime.
Dawn Doebler, CPA, CFP®, CDFA®

In our last article, we reviewed the work of the MIT AgeLab which suggests that many retirees will experience a longer and more complex retirement lifestyle than they expect.

Their work introduces the notion that an average retirement today could last 8,000 days (nearly 22 years), separated into four main phases. They said that “retirement planning as we know it is being replaced by longevity planning, a concept that requires holistic thinking from the individual, family and societal perspectives.”

Each of the four phases of retirement offers a different set of challenges and decisions that we may face, and the AgeLab team offers suggestions on how to prepare for each phase. The four phases include:

  1. Honeymoon Phase
  2. Big Decision Phase
  3. Navigating Longevity Phase
  4. Solo Journey Phase

Last week, Nina Mitchell’s article focused on the decisions and planning many individuals and couples navigate in the first two phases. One could argue that those phases are less challenging and more enjoyable than the last two phases, which require us to accept the inevitability of the aging process.

During the latter phases of retirement, we can expect to face some of the more difficult medical and lifestyle decisions of our lifetime.

Dr. Joseph Coughlin, who heads up the MIT AgeLab, and his team suggest that, in addition to considering the significant financial resources needed for the last two phases of retirement, we should ponder other types of resources required to live well.

Nonfinancial resources to consider may include maintaining your cognitive abilities, preserving physical well-being and enjoying social networks that keep you connected. Once you’ve fully retired and enjoyed the Honeymoon Phase and moved through the Big Decision Phase, you may begin to face medical challenges that inevitably push you into Phase 3: Navigating Longevity.

"Retirement planning as we know it is being replaced by longevity planning, a concept that requires holistic thinking from the individual, family and societal perspectives," said @MIT Agelab
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Phase 3: Navigating Longevity Phase

If you’ve procrastinated on assessing either your asset sufficiency or how you’ll age in place, this can be a challenging phase — it’s often entered as a result of an unexpected change in physical health.

When this happens, it can be helpful to seek the input of your financial adviser and attorney to ensure your finances and legal documents are in order. If you are facing medical or long-term care decisions, you may also want to solicit the help of a professional care manager or other health care experts.

In this phase, it’s also common for a healthier spouse to begin taking on the role of caregiver. If they are unable to care for a failing spouse, then another family member may need to step in to lend support. Statistics show that 1 in 4 American families provide nearly 21 hours a week of care to a loved one.

If a couple is unmarried and living together, the arrangements may be more complicated.

It can be very helpful to have legal agreements (i.e. cohabitation agreements) in place that articulate what happens should you or your partner need care to avoid disagreements later on. We have other good suggestions in our article “Living together after 50: Are you ignoring the biggest financial risks?

No matter who acts as caregiver, that role may quickly become a full-time job, especially if medical appointments increase in frequency, if dietary restrictions require different eating routines or when medication management is required.

Assuming there are no signs of mental incapacity, at this stage you should confirm that you’ve clearly articulated your wishes for old age.

You’ll want to state your wishes in writing, arrange your financial accounts and execute the legal documents necessary to ensure your wishes are carried out, especially in the event that you lose your cognitive abilities.

The most common actions to take include reviewing your estate plan, designating health care proxies and executing financial powers of attorney documents. And if you have had any changes in your state of residency, make sure your documents will be recognized in your home state. 

Phase 4: Solo Journey Phase

In the best cases, a couple enjoys financial security and maintains their physical health to stay in their home until their later years. In this fourth phase of retirement, abrupt and unexpected health challenges or a death can immediately change the financial situation.

We see this most often when a couple’s main source of income is a pension that ends when one spouse dies, or if the couple depends on both Social Security checks to meet ongoing cash flow needs.

The financial changes that can occur with a serious illness or death may quickly make living alone in your existing home financially prohibitive. The death of a spouse may also require rethinking your living arrangements for safety reasons.

“We don’t really have a script for this phase, which is increasingly common, especially for women,” Coughlin said.

Most women live longer than their spouses — more than 43 percent of women over age 70 live by themselves. This is just one of many reasons we believe more women need to learn how to effectively manage money, or have someone in place who can help them make important decisions after the loss of their spouse or significant other.

This loss also tends to get other family members involved in decisions about your living arrangements, which can lead to disagreements.

One way to mitigate this tension is to take time to outline your wishes in advance. That way there will be no question as to your desires and others will have less opportunity to exert their will.

If you decide to remain in your existing home and live alone, don’t forget to consider how you’ll stay connected to your friends and family.

Using technology

During these last two phases of retirement, staying connected is important both for social stimulation and for staying safe.

Today’s innovative technologies help many seniors remain independent and more self-sufficient. Medical technology and smartphones enable aging Americans to stay connected and remain in their homes longer.

The development of services such as Uber and Lyft allows seniors to more easily give up driving without sacrificing their mobility.

Similarly, apps such as Skype and FaceTime help families stay connected and improve the ability of loved ones to check in periodically to monitor their aging relatives.

Even as seniors increasingly live longer distances from children or others who might support their daily life, entrepreneurs are filling the gap with service businesses such as on-call handyman companies, home relocation services and convenient product delivery options.

For older Americans with chronic medical conditions, technology can also help monitor ongoing medical concerns. This allows many patients to recover outside of the hospital and live independently for longer than in prior decades. Companies including IBM are even developing robots that detect changes in sound or motion to signal potential danger signs for the elderly who live alone.

Get organized 

Technology can also be used to help you get organized and prepared for the day when someone else may need to take over your affairs, either because of physical or mental incapacity. You’ll want to have your financial records and accounts in good order. Your medical history and records should be stored in such a way that other trusted individuals could can gain access if that becomes necessary.

Technology such as electronic document vaults and account consolidation software are some tools you may consider implementing if you haven’t already done so. You might also consider using our In Case of Emergency Checklist to help you document critical financial information should you become incapacitated or pass away.

As you ponder the MIT AgeLab’s work and suggestions, consider that each person will have their own unique experience of retirement. The research is meant to provide insight into the complex topic of how retirement is changing in the face of living longer and more engaged lives and to get you thinking of what that may mean for you and your family. We cannot predict how our later years will unfold, but we can take actions now to increase the chances that our old age will be well-lived.

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Dawn Doebler, CPA, CFP®, CDFA®

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents. Dawn is a weekly contributor to WTOP radio.