A Better Way to Meet Late-in-Retirement Expenses?

A visit to my new Income Power calculator at Go2Income.com might raise some questions both financial and existential. Income Power will help you answer them if you let it.

The financial question is easier, so let’s start with that.

People planning for retirement have asked why Income Power provides a path for substantial increases in income and continues that higher level of income beyond age 85, for life.

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Conventional wisdom, they point out, states that living expenses go down as you age.

And it’s true that basic living expenses may not grow, absent inflation, over time. But you can expect other expenses to increase – and increase dramatically.

For example, cumulative unreimbursed medical costs increase from an average of about $250,000 through age 85 to $600,000 through age 95. You can expect caregiver expenses in your home to also increase dramatically late in life.

Look at the numbers

Let’s assume late-in-retirement medical and caregiver expenses of $300,000 during the 10 years between 85 and 95.

1. You can run through most of your savings and let Medicaid pay for it.
2. You can run through your savings and ask your children for help.
3. Or you can purchase insurance, like Medigap or long-term care insurance.

Or you can plan for these expenses using Income Power as a starting point.

For instance, a 65-year-old with $1 million in savings planning to retire at age 70 has an Income Power of $1.5 million through age 85 — and $2.9 million through age 95. That’s $1.4 million for this 10-year period alone; $1,100,000 for living expenses and, say, gifting, and $300,000 for late-in-retirement expenses.

The Income Power calculator crunches the numbers and gives you an initial benchmark of how much lifetime income your savings can generate. Then you adjust the numbers by looking at options such as delaying retirement or including other savings sources. You can discuss your situation with a Go2Specialist who will help you explore all your possible options until you develop a plan that works for you and your specific circumstances.

The unanswerable query

Now for the tougher question: How do you predict how long you will live?

Actually, the answer is not that tough. You can’t.

But Income Power allows you to plan for a long life. And if you are lucky enough to live to 90 or 95, your financial worries will be much fewer. Income Power lets you realistically plan for a longer life, exceeding the averages used by so many other retirement income plans.

Income Power is based on the commercial marketplace for income annuities, which can provide guaranteed lifetime income starting immediately or at a future date of your choice.

The payments are made as long as you live. And if you do live into your 80s and 90s, you are very likely to have large expenses related to health care. If not, you’ll have more money for gifting, travel or just fun. In either case, you won’t be a burden to your kids.

Although you can’t predict the future, you can assume that a long life might include periods when you need help or incur large medical costs. That costs money, and you can prepare your plans to handle it.

Visit Income Power to get an idea of how much income you could create today, and how to customize your retirement to your needs.

This content was provided by Golden Retirement. Kiplinger is not affiliated with and does not endorse the company or products mentioned above.