Patricia was 85 years old and approaching her 25th year of retirement.
By every estimation, her senior years had been a terrific success – even a dream come true. In the early 1990s, she and her husband James, a successful executive for a major U.S. corporation, moved to the Eastern Seaboard to begin a long-awaited and well-deserved retirement.
Their retirement home, which had served dual-purpose in the past as an investment property and family vacation destination, was located less than a mile from the Atlantic shore amid a lush, private, and gated resort island. With an open layout and a breathtaking view of local flora and fauna – deer, wild-turkeys, foxes, bobcats, herons, egrets, ospreys, and the occasional bald eagle – the house had become a favorite gathering place for children, grandchildren, and close friends for decades.
As a retiree, Patricia had thrived.
She had grown to become a respected and influential member of her local community. She was a dedicated volunteer for her church and various non-profit causes. Much of her effort went to helping poor families, the elderly, and others in need. Wholeheartedly, she invested “time, talent, and treasure” into these cherished pursuits: raising funds, providing service, offering leadership, and devoting countless hours of personal time.
As a byproduct of this activity, she accumulated many friends and formed many close and lasting relationships. Her life was an abundance of faith, family, community, and service. Truly, she had achieved a retirement filled with joy, meaning, and deep personal fulfillment.
But, on this mid-December day, all of that was about to change.
Patricia’s husband, James, was a few years older than her. In addition to having been a successful executive, he was also a devoted husband, father, and grandfather. Like Patricia, he too had flourished in an almost storybook retirement. Taking a keen interest in golf as an early retiree, he spent many memorable hours with friends and family on the local island’s pine, oak, and palm-lined links. When not enjoying a round of golf followed by lunch at the island club, he was also a steadfast volunteer and faithful contributor to the local community. For decades, he selflessly offered up considerable executive-level management experience to a broad array of civic, religious, and non-profit endeavors.
In the first years of their retirement, James and Patricia felt confident and secure. With excellent health, a soon-to-be-paid-off family home, and well over $1,000,000 in their nest egg, the future looked bright, even sublime.
To keep watch over financial affairs, the couple hired a local investment firm from their original hometown on the recommendation of friends. The firm charged a “fee” to manage a portfolio of stocks and bonds, and to assist with the disbursement of future income. In time, their original adviser retired and passed their account on to a son who had also become a broker. Later, the firm was sold to a much larger financial institution.
Throughout a significant portion of their retirement, James and Patricia managed to have their nest egg produce well. This was true even through the bursting of the dot-com bubble of 2000–2003, and later – or at least so it seemed – through the market crash of 2008–2009.
Post-2009, however, things weren’t quite the same.
The ability to sustain their overall funds, while maintaining the income necessary to support their lifestyle, began to waver.
Growth seemed insufficient to outpace annual withdrawals for income. This anemic state continued throughout the subsequent decade of generally “upward” moving markets. Slowly, though at first almost imperceptibly, their financial foundation began to erode.
The couple did what they could to hold on. They cut back on expenses – dropping club memberships, scaling back charitable giving, holding onto aging vehicles – all the while maintaining the expectation that, someday, things might turn around. But the hoped-for recovery failed to materialize. Regardless of their collective efforts to remain frugal, their nest egg levels were becoming alarmingly low. Since James wrote the checks and handled most of the couple’s financial affairs, he was the first to see the truth head on.
Finally, in late in 2017, their retirement IRA balance fell to a critical level. And so it was, two weeks before Christmas, James was forced to break the news to Patricia.
“We have to sell the house.”
It is probably best to end this story here.
Unfortunately, for millions of people, stories like this one – or versions thereof – seem likely to become more and more common in the future.
As retirement income planning has shifted from “pension-based” models that promised guaranteed income for life to “portfolio-based” income models which offer no such guarantees, the combination of longer retirements and market volatility are putting more and more retirees at risk when it comes to sustaining financial security.
Even more unsettling is that the brunt of the impact of running out of money in retirement generally does its worst damage at later ages. At such times, it is often too late to dust off a resume and rescue oneself by going back to work.
A critical factor is that no one knows for sure how long he or she will live.
This makes it extremely difficult – if not impossible – to precisely budget funds so that your last dollar earmarked for income is spent on your last day.
Due to healthier lifestyles and improvements in medical care, people who reach older ages are now living longer than ever. Because of this, the funds people have managed to save for their retirement must be stretched over longer and longer periods of time. Further, these funds must be positioned to weather the storms destined to occur on the road ahead.
“Ruin” is the term economists use to define running out of money in retirement.
Because women on average tend to live longer than men, they face the highest risk of ruin in their senior years. Concerns about fallout due to life expectancy for women are further compounded by the fact that men often marry women several years younger than themselves.
It’s no secret that dying can be extremely expensive. Medical bills, home care, custodial care, nursing care, and other end-of-life expenses add up. As a result, the first spouse to die in many couples – more frequently, men – will inadvertently take the lion’s share of the couple’s nest egg with them when they go. When this occurs, what happens to the future security of the surviving spouse?
Beyond the physical and psychological impact of experiencing such a difficult loss, many are predicting – accurately, I think – a poverty crisis among women in the coming years.
But it doesn’t have to be this way.
I am glad to tell you that, at least in the case of James and Patricia, there was a happy ending to the story. While they did end up selling their retirement home, fortunately, they were able to do so for a satisfactory price and in a timely manner. The proceeds from the sale afforded them the resources to:
• Secure a source of guaranteed income to safeguard their financial security for life.
• Establish an emergency fund.
• Set aside a portion of funds to remain invested – thereby protecting them from inflation and helping rebuild their financial legacy.
Given the circumstances, James and Patricia were lucky. But not everyone has a resort-island beach home to sell.
What happened to James and Patricia begs two major questions:
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- What caused their long-term financial security to eventually erode and reach a boiling point at such a delicate and vulnerable time in their lives?
- What safeguards could have been put in place in their planning to prevent this from happening?
It turns out, the two biggest fears for people over age 50 are whether they have saved enough for retirement and whether they will run out of money after they retire.
I am writing this blog to tell you that these fears can be overcome.
I am writing to tell you that what happened to James and Patricia can be avoided. I am writing to tell you that the danger of running out of income at a delicate and vulnerable senior age does not have to happen to you or to someone you love – and especially your surviving spouse. There are solutions to these concerns, many of which are uncomplicated, safe, reliable, and based on time-tested principles.
I am also writing to tell you that whatever your current circumstances with regard to retirement, whether you have managed to save well or whether you have found accumulating savings to be a challenge, almost any situation has the possibility of being improved.
Imagine receiving a monthly “paycheck” for life to cover your expenses while simultaneously maintaining your ability to grow wealth throughout your retirement.
Though it may seem difficult to believe, for millions of people, such a reality is within reach.
Of course, achieving success and fulfillment in retirement is about more than just money. It also requires an effort to manage other dynamic elements such as one’s mindset, expectations, and priorities.
As I write this, I am in my mid 50s and have spent the last three decades of my career in the insurance industry – particularly managing healthcare risk for businesses. While I am an active investor in securities, real estate, and various private companies, I am not a stockbroker, wealth manager, or investment “guru.” I can provide no shortcuts to “beating the market,” “hot tips,” or other get-rich-quick investment promises.
Nor would I support offering such advice.
After years of study, personal observation, and reading thousands of pages on the topic of retirement, what follows is a curation of the most important ideas I have discovered. These ideas, expressed as “18 Rules for Retirement Success,” offer solutions to the most pressing concerns for those in and nearing retirement age – especially, how to achieve lasting financial security and peace of mind.
See the sidebar at the top of this page for links to each of the 18 Rules.
If you prefer reading the rules in book form it is now available on Amazon.com.
As you read the rules, be a student and not a follower.
Make sure any direction you choose is built on a foundation of your own conclusions. Only then will you take ownership of your path and obtain the necessary fortitude to see the journey through.
I offer these observations with the sincerest wish that you and those you love – including your spouse, parents, siblings, children, and friends – achieve the most successful, secure, and fulfilling retirement.
Best,
Ted Stevenot
Cincinnati, OH
Questions or comments?
I can be reached at this link – contact Ted Stevenot.
