I mentioned in an earlier post that we recently gave some money to elderly (almost 90 years old) relatives who are having financial difficulty. Then today when I was driving around with an 85 year old friend (to visit other Friends of the Library groups' book sales for ideas) she told me a story about a 80+ year old friend of hers who had ended up with no social security, etc. This got me thinking about what many of us fear, but may not take the right steps to prevent, which is outliving our money.
Think about the many decisions that are made throughout adult life that lead to not having money saved for living a long life. I'm not talking about the tragic consequences of outrageous medical expenses or becoming disabled young nor even about long term unemployment which uses up all saved resources. I'm not even talking about the unexpected impact of extremely low rates of return for extended periods like we are experiencing right now.
I am talking about buying more clothes than you can wear, trading up to more expensive cars or houses, and other consumerist, keeping up with the Joneses behavior. Or not participating in retirement accounts where the company also
contributes or putting money away in your own savings vehicles.
An unwillingness to adjust one's lifestyle to fit ones resources creates a cascade of problems in later years. The tragedy of living beyond one's means over a lifetime is that you end up not only with an unsustainable lifestyle, but you also have fewer resources to fund even a reduced level of comfort.
The idea that one can keep on working and generating income until you die is one I hear from lots of baby boomers, but the reality is that very few people in their 80s or 90s are able to work. I know of people in their 80s who still have mortgage payments because
they used their home as a bank earlier in their life rather than
adjusting their lifestyle. There is no way they can produce income so with diminished assets they still have the burden of these payments.
It has been a few years since we sat down with a financial planner and projected our own likelihood of having enough money if we live to be 100 - which is not an unreasonable assumption. We are going to sit down by ourselves in June and really look at the numbers again given how little we are currently earning on our savings/retirement accounts, the increase in medical costs and the cost of living in our current house, and other things. It will be an interesting discussion I'm sure and it is hard to make such long range projections and good decisions when there are so many unknowns. But we have to do it! We might live another 40 years.
How do you approach this difficult area of your financial life? I'd like to hear your thoughts.