”Retirement” used to mean one thing – the leisure time that comes after decades of work. But, with the advent of new technology and more research about the psychology of retirement, the definition of retirement can mean something else. This episode we will explore 3 types of retirement as well as looking at 5 signs you may need in-home care.
Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and elder law attorney and Certified Financial Planner™. Through his law firm and independent registered investment advisory company, Victor provides 360º Wealth Protection Strategies for individuals in or nearing retirement.
For more information, visit Medina Law Group or Private Client Capital Group.
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Announcer: Welcome to “Make it Last,” helping you keep your legal ducks in a row and your nest egg secure, with your host Victor Medina, an estate planning and elder law attorney, and certified financial planner.
Victor J. Medina: Everybody, welcome back to Make it Last. I am your host Victor Medina. I’m excited to be here with you today. If you’re listening live, it’s Saturday morning at 7:30 AM.
If you are a podcast subscriber, it could be at any time that you’re listening to this show. Regardless of when you’re listening, I want to say thank you. Thank you for being a loyal follower of the Make it Last radio show.
I’m excited to do these shows. By the response, it seems like you’re all excited to hear them as well. If this is something that you enjoy, that you sit as part your regular schedule, one of the nicest things that you can do is go ahead and share that information with somebody you like and care about.
Give them the opportunity to learn from this as well. It’s something that we do as a little gift to the community. It’s something we do to help educate everybody. It’s not my day job, but I do enjoy the opportunity to share a little bit of my knowledge wider with a greater group of people than I could ever see in my practice or in my businesses. It is a great pleasure to serve you.
I’m excited for this week’s show, because we’re going to cover two topics. One is I’m going to cover three different kinds of retirement. Most people think about retirement as this monolithic thing, and it just is, but we’re going to go a little deep into what covers those, what it actually means, the different kinds of retirement.
I’m also going to cover five signs that it might be time for in‑home care. I don’t know how long the first segment’s going to take. If this goes too long, maybe we’ll push that other segment off to the next show. For the most part, I really did want to focus on three different kinds of retirement.
We’ve got to set this up. We’ve got to set it up the right way because, as I said, most people think about retirement as this big one concept, defined only one way. They’ve been defining in their head that way since they were at working age, that retirement meant something. That’s odd, right?
For most of human history, work was something that you did to survive as long as you were capable. With the advent of the Industrial Age, the Modern Era, we instituted a process of schooling the young to help train them for more sophisticated work to do for the rest of their lives.
While there’s absolutely nothing wrong with being a farmer and farming your land to get food to survive or building your home and renovating it and keeping it in good shape in order to have shelter, with the industrial age in the modern era, people trained to do jobs.
Part of that meant that the longer that people live ‑‑ in part to all of the advances in medical science, and just better taking care of yourself ‑‑ the more likely it is that you’re going to reach a phase in your life where you cannot physical or mentally do work anymore.
In late 1800s, Germany was the first country that instituted this old‑age social insurance program. It predates social security. What it basically is, is a means to providing care for those that can no longer work to provide for themselves.
Of course back then, few were expected to actually rely on the program, because the initial retirement age began at 70 and the life expectancy was only 45 years old.
It was an insurance program, but very few people were going to take advantage of it. As we have gotten the opportunity to be better cared for ‑‑ better health improves, way of quality of live improves ‑‑ retirement has fundamentally shifted. It’s no longer a period of obsolescence where you’re forced to retire because you are no longer a productive worker.
It’s now this other phase of life. For many people, it can take up 20, 25 percent of their life when they’re retiring. This post‑work period of planned leisure, which is the culmination of a lifetime of work and savings, is now this thing called retirement.
As we have now shifted mentally the idea of retirement instead of obsolescence ‑‑ something that you’re no longer serving the greater community ‑‑ to one of leisure, people want to maximize that leisure time, as again, which is sometimes elongated, made much longer, because of the advances in health.
It’s also driven this weird idea that people ought to retire early in order to have more leisure years to enjoy. You will see all the time how to retire at 55, but there’s a trade‑off. The trade‑off is that you retire earlier, it’s going to be necessary to have a more saved because there are more years in retirement to pay for. That, sometimes, comes with trade‑offs like spending less today while you’re working.
The overarching theme was save as much as you can for as long as you can and you’ll be able to retire as early as possible, enjoy as long of a retirement period as you can. That’s been the mantra for a while.
For people who are working, particularly in jobs they don’t like, the idea of having a long retirement of leisure is highly appealing. It’s, as it goes, something they want to go after. Paradoxically, people don’t seem to enjoy it once it arrives.
The reason for that is that human beings are remarkably adaptable to circumstances. If you do any research on your own about the nature of happiness, happiness tends to revert to a stable level even after major life changes and life events.
The recipe for happiness is pretty straightforward, which is a lack of choices so that your options seem reasonable when you get there because, again, you are mentally able to adapt to all kinds of circumstances. It’s part of your survival skills.
The phenomenon of being able to be happy and lots of different situations is something called hedonic adaptation. It means that while people are working, a life of leisure sounds fantastic. Once you actually get there and you get to the life of leisure, it often becomes boring and routine, and no longer enjoyable.
In other words, you could continue to work towards a goal that you believe will bring you happiness but it’s being on a walk towards the horizon. No matter how long you walk, you will never actually make forward progress because you are just going to adapt to this medium level of happiness.
This is something that people are finding. They’re finding as being true. As a result, there’s a growing number of retirees who are seeking ways to stay active even after retirement. Whether you call it a new retire mentality about what retirement actually means but it’s something beyond this active leisure lifestyle.
Growing entrepreneurialism is significant in the senior category, people over 65. Only about a half of retirees in it in the recent study planned not to work in retirement. This trend is accelerating.
This transition of retirement may mean that you’re moving away from a job or a career, especially if it’s not enjoyable, but it doesn’t necessarily mean retiring from work altogether.
That means that we should change our perspective away from this modern focus of saving early and aggressively towards retirement.
Victor: When I come back from this break, I’m going to talk to you about three different kinds of retirement because whether you’re there in retirement now or it’s something on the horizon, this may change your perspective about what you’re going to do and how you’re going to do it.
All right. Stick with us. We’ll come back right after this quick break.
Victor: Welcome back. If you’ve been joining us this whole time or you’re joining us late, we’re talking about three different kinds of retirement. In the last segment, as a reminder, I gave you the foundation for the concept of retirement and why this concept has been shifting over time.
That’s the nature of our adaptability as humans to be happy, leads both to a survival instinct while here in a job that you hate, but also, being bored and not really enjoying your life of leisure after retirement. All of that has meant that our ideas around retirement has changed.
If you assume for a moment that reaching for this moment of retirement doesn’t actually mean the end of work, but merely the end of a current career or a current job, and maybe opening the door to a new type of work or a new type of way of getting significance.
Potentially, by the way, one where it matters less how much you make, what you end up with are different kinds of retirement.
As a reminder, the traditional retirement is one where mostly you all are familiar with, which is to save early, save often, invest prudently for growth, and as soon as you are financially able, retire.
If you can grow your retirement portfolio fast enough, you can retire early. If not, you’ll have the opportunity to retire in your 60s, when Social Security becomes available and there’s a floor on your income and your ability to live off of money.
That time of retirement is filled with leisure, perhaps engagement to volunteer work, but without anything coming back to you to help sustain you through that retirement financially.
One alternative, though, is a form of semi‑retirement, where work is scaled back but not eliminated. I have a client who is just turning seventy‑and‑a‑half and is dealing with distributions that have to come out of IRAs but is actively working.
The best conversations occur around this idea of, “When is retirement for you? What does that mean?” His response is, “I don’t think there’s any retirement in the future. They’re going to have to kick me out.”
Large part because he likes what he does, he feels valuable there, and there’s really no hardship on him to continue to work. He wouldn’t know what he would do with his time, anyway.
What he scaled back into is a form of semi‑retirement. That’s with an existing job, but you can think of that semi‑retirement including starting a new business. One of the fastest growing franchise areas is in home healthcare.
Most of the people that come into home healthcare are in retirement. This makes sense because they may have an experience dealing with their parent. They might have been in their 50s or 60s, their parents were in their 80s or 90s, and they wanted to start a business to try to help other people.
That segment is this new entrepreneur who is an older, close to retirement person or who might think about it close to retirement, starting a new business, starting a new career.
Taking the expertise that they have developed over years and becoming a consultant or doing part‑time work in their current career where they were doing prior. In essence, semi‑retirement in this context essentially means retirement from the current full‑time job, but not necessarily from any work.
In fact, some level of on‑going and paid work would be anticipated in this structure, which helps both personal fulfillment and wellbeing and provides ways to make money, which can make it easier to either retire earlier or to have money throughout that period.
Another type of retirement, and this would be the third one, is engaging in a series of temporary stepping away from work. You want to call it retirement’s retirement. Basically, it’s a number of brief sabbaticals that occur with some regularity, with some planning for a limited period of time, after which you would return back to the working world.
This could be in a different career, it could be in a different job, but the idea here is that the concept of retirement, the act of withdrawing from the working world doesn’t come when you are obsolete.
It doesn’t come at the end of the phase of life. It is interspersed within your working life at times where you might be able to enjoy these breaks a little bit more. Where what you do in that activity is not necessarily driven by how well your body is holding up, and whether you’re older, now granted if you’re already older, you may not be able to plan for this type of retirement.
If you’re listening to this and you’re just turning 50, you might think about introducing this kind of retirement because you are, essentially, introducing transitioning between careers.
You’ve got to be deliberate about this because one of the things that older folks face is a working environment, workplace definition. It says as you get older and get more expensive, you may not be as attractive as a candidate coming in.
That might mean planning for staring an own business, or planning for taking a lower salary, or planning for making a career shift where your age is not driving, whether or not somebody hires you, or what it is that you do.
The concept here is that the retirement happens a little bit more frequently. You might get five or six of them over the course of your life expectancy. It could be pure leisure.
It could be coupled with the second type of retirement where you’re doing this part‑time work and leisure, where you’re scaling back for a period of time, and then ramping back up.
Whether it’s a continuation of one career all the way through or five or six different careers, with longer, these mini‑retirements, you can have that as an option going through your career as what you planned.
The reason why it’s important to distinguish amongst these different kinds of retirement is, in large part, because saving for them or marrying those goals, life goals with your financial goals takes a different approach.
Our concept about saving with long‑term investing and not touching the money in passive and compounded growth is really a design for traditional retirement. It means that you need to get this big amount of money that will last you through your retirement with no other income, maybe Social Security, and that’s the goal, to grow that as large as possible.
If you shift into one of these other kinds of retirements, what happens is that you don’t have to generate this big pile, not nearly as all. If your leisure periods are going to be shorter, and temporary, followed by more earning time, which continues at a later age, the reality is that you never need as much for retirement savings.
It only peaks to cover the last decade of your life where work is just no longer feasible, that you’re physically and mentally not capable of working.
When you start to run the money numbers behind this, it drastically reduces the required savings if you’re going to do some form of semi‑retirement or periodic retirement, because your ability to work your human capital is actually worth a ton as a retirement asset.
That you can both work and save at various stages means that the need to have a bunch of this money goes way down. Your withdrawal rate that is safe goes way down because your work in what we call traditional retirement would defray the need for required savings.
It’s said another way. Using those old four percent safe withdrawal rates, that old research, every $10,000 a year of work in a state of semi‑retirement or a mini‑retirement reduces the need for retirement savings to $150,000.
Just earning $20,000 a year to supplement $40,000 a year of a living expense or a withdrawal goal cuts the required retirement savings by $500,000. That should be eye‑opening to you.
This idea that continuing to work or working later actually reduces the need for retirement savings should open your eyes to this as an actual financial planning tool that you can plan for these areas.
$10,000 a year is not a significant amount of money to generate in retirement. You can do that with a traditional part‑time job. $20,000 may be a little bit more difficult but certainly not the amount that you would be making at the end of your career as a professional.
In most of these scenarios, you’re still going to have some period where you don’t work at all and need to supplement your Social Security with all of these savings, but it’s a shorter duration. It’s a shorter duration.
I hope that makes sense. I hope I’m introducing for you new ideas and what retirement is so that you don’t have to look at this big scary thing and that your measure against that big scary thing means success or failure for what the rest of your life means. That’s not too grand of a concept. [laughs]
In either circumstance, I would be remiss if I did not remind you that one of the best ways that you can plan for this is to work with an advisor who is a planner. It doesn’t serve you to work with somebody who’s a product specialist.
What you need ‑‑ and we use this analogy a lot in my practices ‑‑ you need a pilot for the plane. You don’t need a travel agent selling you a ticket.
If you want to get to Hawaii, hire a pilot. A pilot can figure out how to get there even when life changes the weather patterns or what else is going on, emergencies on the plane, things like that. A travel agent can’t do that, so we want somebody who’s a planner.
Victor: When we come back, we’ll have time for a very brief segment talking about five signs, whether or not it’s time for in‑home care. If you have any questions about this segment of the types of retirement, go ahead. You can drop us a line.
Send us an email, send us a comment on the website, and let us know how we can better answer more questions. When we come back, five signs that it might be time for in‑home care, when we come back on Make It Last. Be right back.
Victor: Hey, welcome back to Make It Last. We spent the first two segments talking about three different kinds of retirement.
While we’re in commercial break, it occurred to me that I didn’t cover something that I want to cover briefly, which is a lot of this is dependent on your working capital being consistent all the way through or the ability to engage in your working capital being consistent all the way through.
One of the things that can injure that, of course, is health concerns, disability, and those kinds of restrictions. In a set‑up in which you are planning for semi or mini‑retirements or multiple mini‑retirements, insuring against your disability is a necessary component of making that work.
If you cannot leverage your human capital, it turns out that this won’t work. This won’t work, because you won’t have enough if you can’t generate from somewhere else. Disability insurance is a necessary component of that.
Now, listen. We don’t have a lot of time for this last segment. I’m going to fly through these.
As you know, a big component of what we do every day is help people with elder care planning. When they get older and they get sicker, the idea that they might need help along the way is part of the intersection between legal and financial planning that we do all the time for our clients.
There are five signs that we have noticed over time that could affect whether or not you should consider in‑home care. Whether you’re the spouse that’s taking care of somebody, whether you’re still witted enough to make this decision on your own, or if you are a child who is both a loved one and a caregiver ‑‑ these are five things to look out for.
One of those things that we sometimes brush underneath the rug because we just accept it as a condition of growing older, but as you get new prescriptions or changes in medication, that can lead to a need for in‑home care.
Medications and the dosing of them can be confusing, especially if you’re assigned to take more than one or two. On average, people over 65 fill about 14 prescriptions per year. That’s a lot of pills to keep track of.
If you add for that that the errors of medication that occurred during a transition, especially if you spend time in a hospital, the idea that you might need help with that now becomes a reality. If you’re seeing an increase in prescription medications and a change in the dosage, you might consider in‑home care.
People who are residential nurses are often trained in reconciling the medication you have to take and will work with you to make sure that you’re on the right track. That could be a shorter duration of in‑home care but might be a need there.
The second one has to do with the fear of falling or having a number of recent falls. It is one of the top reasons for hospitalization of the elderly. In fact, the fear of falling is one of the main contributors to the increase of the fall risk.
People wanted to remain independent and stay in their homes as long as possible. That can often come with trouble with balance and fall risks, especially if your home is not set up to deal with that. It can be hard if you’re a loved one or both a spouse or a child to determine what exercises will benefit the person who has a fall risk.
People who are in‑home physical therapists can create an exercise plan that will target health concerns with balance right head on and giving you strategies to concur fears and going through the home like an occupational therapist that will help you figure out how to stay safe in your home.
You get another use of in‑home care not long‑term. It could be a short‑term. People who have problems with mobility and when that mobility concern interferes with everyday activities like laundry and cooking and things like that.
People who are home healthcare aids can perform some of that with you. Physical therapists, occupational therapists can help improve strength so that you can continue to do and manage pain on your own, do more on your own, manage the pain, manage the symptoms. That would be another one.
Number four would be ‑‑ this is huge right now ‑‑ memory problems, things that are dealing with behavior changes that might be linked to cognitive issues. Dementia in elderly people is incredibly common, whether it’s young or old, on the 70 side or on the 90 side.
With it can come confusion, irritability, frustration, the inability to manage medications, performing the activities of daily living.
Bringing in help can stabilize the downward decline. It can help flatten that out. Whether it’s that or the fifth thing, which is assistance with daily monitoring, if you have unstable vital signs and things like that.
Bringing in somebody on a regular basis can actually lengthen the quality of their life, if not lengthen their life at all overall. If you are able to bring in help, the rate of decline flattens out as a curve. It flattens out, because you’re getting the help that allows you to stay healthier for a longer period of time.
In that last component, specifically one where if someone is requiring more help because of the dementia or cognitive issues, it’s one that people delay on too long in my experience. They don’t want to admit defeat because they think that it’s a part of their regular obligations as a spouse or a child to provide on their own.
We’ve seen time and time again that when people bring in help, not only is the sick person’s life better, but the healthy caregiver’s life improves. They get to be a spouse or a child and not spouse‑child, plus home health care aid.
That improves their relationship and improves their happiness in dealing with this person that has increased needs. I would urge you that if you’re spotting some of these, consider in‑home care. It is really affordable, especially compared with the cost of assisted living or nursing care if that is something that comes down the road.
It’s easier to spend the cheap money. Small problem, small solution. Big problem, big expensive solution. Consider in‑home care as you get to that point in time.
We have run out of time for the show for this week. I want to thank you for joining us. Again, if this is a show that you like and enjoy, I urge you to share it with your friends. Either send them the link to the podcast, ask them to listen in on Saturday mornings, or listen on the website as a download or a stream.
We are hoping to taking all of your suggestions for show ideas. If you want to send it to feedback at makeitlastradio.com, go ahead and do that. If you’re interested in any of our services, certainly you can look us up directly, especially if you’re considering these retirements and want to talk to a planner about that.
Anyway, I want to thank you for joining us this Saturday morning or joining us wherever you are, listening to this podcast.
Victor: We will be back next Saturday with Make It Last, helping you keep your legal ducks in a row and your financial nest eggs secure. Thanks for listening. See you next week.
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