I put at least 10 percent (or is it 15 percent?) of my salary in my 401K every year. I contribute to a ROTH every other year (or so). I own my home — or will in 28 years. I have enough in stocks to carry me at least a few weeks. Financially, I’m not that bad off… am I?
I ask this of my financial advisor, whose primary value seems to be telling me that I should save more. Disappointingly, he can’t make magic of what I have put away thus far. We meet annually to review where I would be financially if I were to retire at an age that increases with every meeting. He routinely poses questions that start with “If you plan to ever stop working…” or “If you’re serious…”
My current retirement plan seems to be not to retire.
But then, as I’ve seen with my parents, retirement can come unplanned and earlier than you think. They did everything right — scrimping and saving, counting their pennies and on their pensions. My father’s retirement came sooner than planned when his company moved and he was offered early retirement. My mother’s turned into disability leave when her MS progressed too far too quickly.
Still, their monthly income, though fixed, paid the mortgage and other bills and they had stocks they could cash in for emergencies. They were fine — for a while.In truth, we don’t need retirement planning; we need disaster preparedness.
At the beginning of this year, though, my father was diagnosed with cancer. The surgeries and treatments and bills have come faster than we are able to process. I went home to help my mother and sister to manage the house while my father was in the hospital. Complications with his surgery turned what was originally supposed to be a week in the hospital into three-going-on-four.
While home, I noticed the growing pile of bills on the dining room table, presumably waiting for my father to handle them. I went to my parents’ home computer, where they have their accounts set up, and started to pay the ones that were overdue. But with the first bill over $200, I quickly realized they didn’t have enough to cover them all.
I went back through their monthly payments and deposits and found that this was neither an error nor an ongoing issue; it was just a matter of recent holiday expenses compounded by new medical bills. In another week, their expected social security deposits would cover these bills — but not by much. I couldn’t help but wonder: What will the bills look like by the time he gets out of the hospital? Or through his chemotherapy?
These are things many of us probably don’t think about when we “plan” for retirement. We plan for a tropical home, weekly games of cards or golf and an annual cruise to somewhere English-speaking. We think about how great it will be to do what we want whenever we want to do it. We, or at least I, never think about not having the money to make these plans happen. We don’t plan for medical emergencies and their skyrocketing costs. In truth, we don’t need retirement planning; we need disaster preparedness.
I’ve read varying figures on what you’re supposed to save, anywhere from 10 to 20 times your pre-retirement annual income. The number is usually based on how you’re living now – and adjusted for inflation. But it doesn’t take into consideration that you, once you’re over 65, will likely double the number of times you visit a doctor or hospital or that 20 percent of your retirement income will be spent on health care.
Every time I visit my magic-free financial advisor, he shows me a number and asks if I could live on that when I retire. It’s less than what I earn now, but I always think, how much will I really need when I’m 70? Surely I’ll cut back on shopping by then because there are only so many loafers and muumuus an elderly woman can own. I’ll be too afraid to travel then, at least not to anywhere more exotic than Florida. And by then, I’ll be forgoing Marc Forgione for the special at Denny’s. Yes, I could make do with that number.
Now, I’m not so sure.
I once wrote that my mother’s MS made me rethink saving for a retirement that may never happen. Don’t wait for the not-so-golden years; travel now and enjoy life while you can. Spend the money, I said. I didn’t mean to spend all your money; just not to be so thrifty that you put off travel or something else you’d love to do until your 70.
However, I now see that it’s just not about putting money aside for a dream. You need to prepare for a different reality. It may be not the best but the worst that you should plan for.