Is $1M ENOUGH?

[@randolphh8005]

I’m a little confused on the LTC discussion. You gave them an expense for 20 years out. If that is when they need it then I would guess that most discretionary spending would disappear if one or both needs LTC. And, it also likely means that one would be passing in the same time frame, yet we are still planning for both to make it 30 years? I understand that the surviving spouse’s needs won’t be half, but they will need less. Conversely if they don’t need it, which is pretty likely, they would then have a lot of unspent money, when they don’t need it. In general planning needs to assume on a 30 year horizon from age 65, that they won’t be a couple for at least 5 years at the end. The fact is that the percentage in very old age especially of widows is huge, whereas couples are much less common. I like the discussion of flexibility, but it is silly to prepare for all risks. Fact is most old single people can survive easily on $5000 per month assuming no debt and a paid off residence. The rest is all fluff, and can be jettisoned in those worst case scenarios. Both our moms currently 87yo widows live on $2500 per month. They are definitely barely getting by, but would be ecstatic on $4000 per month. We are looking at an ALF for one here in FL. The cost is $3800 for everything and it is quite nice. She will use her home to supplement her income, so all is good. My wife and I also are retired and we will have a $4500 survivor check when I take at 70. All today’s $. We are a bit above your scenario, but after SS for both at $7000/mo, we won’t have hardly any portfolio “needs”. I continue to see and believe that a lot of these spending strategies are not real world, especially the classic “4% rule” type strategy. Variable spending and needs are the rule, rather than the exception.

[@brindleandbay]

The LTC is for one person only, and the plan does figure for 30+ -- thanks for commenting!

[@marcalvarado1915]

I don’t understand why you would ear mark for long term care when less than 5% of retirees utilize it. Also, I think the FA should encourage using a reverse mortgage should the retiree be one of the unlucky 5%. With many reverse mortgages you can receive up to half of your home’s equity and the loan does not need to be paid back until both owners pass away. Even then only the reverse mortgage amount (plus interest) needs to be paid back so there still maybe equity to leave to heirs. This is what we plan on doing should that time ever come for us.

[@brindleandbay]

Reverse mortgages are under utilized as a LTC option, but something we discuss as a viable option for some people. Definitely cheaper than traditional LTC, but everyone has different goals.

[@theodfw]

This is a great example of how your clients can know the amount they can spend based on future events (like your LTC example) and historical market returns. The five points at the end are a nice small segment also. Thanks for providing this content.

[@brindleandbay]

Thank you!

[@Tony-dx3eo]

Very thought provoking presentation of the concept of risk-based guardrails...thank you Nick!

[@brindleandbay]

Glad you liked it!