Monday, May 29, 2017

How to Make Your Money Last in Retirement

I just finished reading Jane Bryant Quinn’s book "How to Make Your Money Last: The Indispensable Retirement Guide”. Ms. Quinn wrote this book last year and is now 78 years old, so her concepts are not theoretical or abstract. She shares clear, concrete, and very detailed information on how to make your retirement money last which made this book useful and enjoyable to read.


The most basic thing she recommends to do to make your money last is to earn income as long as you can (as old as possible) and not start taking your social security until you are 70 years old. The social security payout increases 8% a year for every year after age 62.

The second way to make your money last is to control spending. The happy place to be in retirement is where your expenses are equal to or less than your income.

For most retirees, their biggest reduction comes from downsizing the cost of their housing. 

Another major expense for many are high stock trade fees and hidden commissions in mutual funds, annuities, and life insurance products. These high costs and hidden fees can eat away as much as 50% or more of the long term value of a retirement portfolio. The best way to avoid this is to use a discount broker and manage investments yourself.

An area of great savings and great risk is Medicare. You can start taking Medicare at 65 and it may be much cheaper than your employers health coverage plan, however, there are big risks to doing this. If you start Medicare, the government will automatically start your social security payments. You have to have the payments stopped or you could lose your 8% lifetime increase. If you miss a payment to Medicare, they cover it with social security and that could impact your start date. You may not even be notified and only find out about it at age 70 when you file for social security. Not a small risk.

Although I have  considered Annuities and Reverse Mortgages foolish things to do, the author pointed out some circumstances where they can be very profitable. The book does a great job of explaining the difference between an IRA, a 401K and a Roth IRA and the tax implications of each. She describes the rules for taxes and inheritances and what income is and is not taxable.

One thing I found surprising is that you can open a Roth IRA at anytime and put in any amount. The earnings are not taxed and, unlike an IRAs, there is no minimum that must be withdrawn each year or maximum that can be withdrawn each year. Even better, the earnings are not taxed when taken out. It actually seems too good to be true, so I recently bought a book on the details of Roth IRAs to see what the downside might be.

The author recommends that you pay off all credit card debt before retiring; apparently people 50 and older have a lot of credit card debt - far more than younger people. She also thinks it is best to avoid buying rentals as a source of income because they are hard to manage.

The book’s detail and depth makes it a slow read but I found the information so useful that I used a highlighter to mark the critical details and consider it an important reference.

I highly recommend this book, five stars.