Mailbag: “I’m single and retiring soon, how can I make my money last?”
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I've been digging into the research on how people spend in retirement is that when we get our money in some sort of a paycheck, when it just shows up every single month, we feel a lot more comfortable spending it than if it's an asset that we then have to pull out of an account to spend.

Hey everyone, I'm Jean Chatzky. Thanks so much for joining me today on Her Money. You know how much I love diving into your financial questions. And today I am thrilled to bring you another Ask Me Anything episode because there is nothing better than getting to talk with you and answer all of your questions, big and small.

This one is focused on listeners with questions about how to best support themselves in retirement, from how to keep up with inflation to long-term care costs. First up, I'm talking to Liz, a longtime listener who is gearing up for retirement in the next couple of years and is asking all the right questions about annuities, tip slatters, Roth conversions, and more.

and how to ensure she'll have steady income in her golden years. We dig into how to cover your essential expenses, the psychology of spending in retirement, and some powerful tools you might not have considered. Then Bernadette is calling in. As a single woman with no dependents, she wants to make sure she's covered for the years ahead, but wow, that sticker shock is real.

We break down the costs and complexities of traditional long-term care insurance, hybrid policies, and other creative options like deferred annuities. If you're worried about securing your retirement income or wondering how to balance liquidity, peace of mind, and market exposure, this episode is for you. But before we get into it, if you've got any questions about your money, talk to me. Let's jump on the phone. Reach out.

me at [email protected]. We will set up a Zoom. And today, Liz is making my day. She is joining us. Where are you, Liz? Where in the country? Outside of Washington, DC.

So your question is sort of in and around retirement. Tell us a little bit about you, and then we'll get to the details of the question. All right. Well, first of all, I'm a huge fan, Jean, of you. Thank you. Yeah, for years, actually. And now I'm part of InvestFix, which I love. So some of it just spawns a lot of these types of questions. But I live, you know, outside of Washington, D.C. I'm close to retirement, probably 12 to 18 months. And I don't have a pension, but I do have Social Security.

And I do have other investments. I have a Roth IRA and a regular IRA. But I want some more security. Like, I want to know I definitely have a certain amount of money. So the annuities were interesting to me. But for me, you have to chunk out some cash. I definitely wanted the CPI escalators, and that wasn't cheap.

And then do I really need one? My financial planners say, Beth, you probably don't need one, but if you want it for peace of mind, it would be good, right? So then I kind of moved over to this idea of a tips ladder. Because with a tips ladder, I believe I would do it in my IRA, my regular IRA. I wouldn't have to chunk over a bunch of cash.

It does escalate with inflation. It has inflation built into it. And I believe it's somewhat liquid depending upon when you decide to sell it. So it's not like locking up for me a chunk of money. I'm looking to keep my cash to do some kind of Roth conversions, you know, or I have to take my RMDs at 70. So I'm looking at this as an option. And we'd just love to get your thoughts.

Yeah, I think, boy, it's a big, here's what we know. And what Liz is talking about really is making sure that she's got enough of an income stream in retirement while also making sure that she's got enough money to keep pace with inflation and enough to invest so that it can continue to grow, which really handles some of that inflation protection for us.

The idea of knowing that you've got enough money coming in to cover your fixed expenses is really appealing to me. There are, as you said, there are a lot of different ways to do it. You can do it with an annuity. You can do it with tips. You can do it by fundraising.

following the 4% rule or a version of the 4% rule where you invest your money and then pull out no more than 4% of the principal on a annual basis and use that to fund your lifestyle. The thing that I've found really interesting, and I've been digging into the research on how people spend in retirement and

is that when we get our money in some sort of a paycheck, when it just shows up every single month, we feel a lot more comfortable spending it than if it's an asset that we then have to pull out of an account.

to spend. I think that we just have gotten so inundated with these messages of accumulate, accumulate, accumulate, and don't spend your principal, no matter what you do, don't spend your principal, that it gets difficult to dig in. And I wonder how you think you would

I mean, think back to 2022 when the markets were down. How did you how did you cope with that? Do you think if you had needed money out of your portfolio at that time, you would have been able to take what you need and spend it?

Yeah, I mean, but at the time, I mean, I was full time working, right? I mean, I had money coming in, etc. So it didn't bother me. I kind of knew that this is what happens periodically and ended up actually buying a little bit more, a couple things that I wanted to buy because it was low. Right. So I didn't panic. I was able to kind of ride through that.

I suppose at the time I was working, so there was no need to go into the portfolio for any monies. You know, I was fine working and accumulating cash then. But hypothetically, if you hadn't been working, how do you think you would have reacted? Do you think you would have been able to take out what you would have needed to fund your lifestyle?

I think I would have, but I would have been less, I would have been much more careful, a little bit more jittery about it and not sort of that breathing easy that, okay, I've got this coming in no matter what my expenses are covered. So I would have a little bit of that. If you were sort of weighing...

getting a good enough return to meet your needs, but knowing that the compromise for that is that if the equity markets go crazy, you're not going to capture that upside. Would that make you feel from kind of a FOMO perspective? Would it make you feel like,

or would you be able to handle it? If you had locked up your money to try to earn a steady income. Mm-hmm.

and that money was then not invested in equities, even if you had other money invested in equities, would it make you regretful? Yeah. It's hard to know. It's hard to predict, right? But I think there is a feeling of slight vulnerability as you move to retirement, right? You don't have all the money coming in like you did. I think I might be okay with it. I'm almost better knowing I definitely am covered.

And I would still have market exposure in other assets. So I don't feel like I'd miss out. But yeah, I think I could. I think the tradeoff would be enough to keep me calm. So, I mean, bottom line on this, I actually think whether you do it with tips or whether you do it with annuities, 50%.

Figuring out what your base level of fixed costs are going to be and then using an income tool to cover the gap between what you're expecting from Social Security and what you need to cover those necessities is a smart move. What a lot of people don't realize about annuities is that you can also ladder those.

So when you buy an immediate annuity, a single premium immediate annuity, or what some people call a SPIA, you take a chunk of money.

And you convert it to a paycheck. And that paycheck shows up for the rest of your life. And there are permutations. Sometimes they have an inflation rider. Sometimes they don't. Sometimes there are return of premium guarantees. Sometimes they're not. All these bells and whistles that you might add on, you're definitely going to pay for.

The logic of keeping money in the markets is that's the money that will help you keep up with inflation. And you don't necessarily need to do it with the annuity itself. Right.

Laddering the annuity, though, does provide a layer of inflation protection because when you ladder an annuity, you just cover what you need right now and then add on chunks as you need additional income. And the benefit to doing it that way is that an annuity payout is based on a couple of things. It's based on interest rates.

It's also based on your age. And so the older you get, the more you're going to get from annuitizing the same amount of money. So by weighting and doing it in chunks, that can be beneficial. And so I would...

And I think you're working with an advisor, right? I am. Yeah. So I would have your advisor run scenarios on both and then just compare the costs and compare the returns. I think both are a fine way to go. Would tips be more liquid in your opinion?

Depending upon when you sell them, I suppose. Tips would be more liquid with an annuity that money is basically one and done, right? So there is, you're going into it with a sense that there's no liquidity. Right. Right. And that is not okay for some people. Some people just do not like, that's been the thing that has held the annuity industry back.

that it's in some cases pure insurance. And once you use the money to buy that insurance policy, you'll get the income, but you won't get the chunk of money

back. The other thing that you may want to do, and I'm not sure I think that you may have looked into this, is look into a QLAC, which provides additional income down the road. A QLAC is a Qualified Longevity Annuity Contract. So it's basically a deferred annuity. You use a chunk of money now to buy income down the road, like when you're

80 or even 85. And the thinking with that is by giving the money a considerable number of years to grow from within the product, you buy more income for less. The nice thing about a QLAC is that you can use up to $200,000 from within the

an IRA to buy this longevity annuity. And once you do that, that money no longer gets factored into your required minimum distribution. So it can help you save there. But you need to be of the mindset that you're going to live that long and that you're going to want an additional chunk of money at that point, probably for long-term care or health care, whatever you might need.

Right. And that's a great idea. I'll definitely look more into that for sure. Yeah. So I think it comes down to the return plus the liquidity and whether you feel okay locking up a chunk of money. And I should point out, it's not an either or.

You could do both. You could build a smaller tips ladder and annuitize a smaller amount and know that you are covering your bases that way. Great idea. That's a great idea. Yeah, kind of split the baby. Yeah, exactly. That's a great idea. Okay. Okay.

Very helpful. Yeah, thank you. Thanks. Sure. Any other questions while you've got me here? I think that's it. I mean, long-term care is a concern because I don't have a long-term care insurance policy. So that is a great idea about potentially using that QAC. I do like that idea a lot. Are you single? Yes, I'm single. And kids or no kids? No kids. I have nieces and nephews in the area, but no children.

So a long-term care policy is really important or something doesn't have to be a long-term care policy. It can be a provision that...

provides funds for long-term care if you need it. A QLAC can definitely help with that. You may, based on what I hear you saying about liquidity and not wanting to lock up a big chunk of money, you may want to look at a hybrid long-term care policy rather than straight long-term care, knowing that the assets

will be there for your beneficiaries if you don't need the long-term care yourself. And we're starting to see the rollout of more hybrid policies that couple long-term care with an annuity.

So that if you need long-term care, the money that your annuity is spilling out each month gets bumped up. So you may want to talk to your life insurance agent about that. Yeah, I didn't know that. My mom's 93, so, you know, I think. So you've got longevity. You definitely do. It's in there, yeah. So that's the definite factor. Okay. All right.

All right. Well, good luck with it. Let us know what you decide. And I will see you on the airwaves Monday night in Investing Fix. Indeed. Thank you so much, Jean. And we're going to take a very quick break from our sponsors.

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Okay, so I live in Arlington, Virginia. I am a civil engineer. I work at the airport. I am single. I have no dependents. So I'm just living my life and basically planning for my retirement. I'm a planner, so I'm thinking ahead and thinking of how I should plan it properly. Sounds great. Maybe we've passed each other in the hallways. I feel like I'm in that airport all the time.

I saw something that you were in DC last week. Something you said, was it on the mailbag or in the podcast or something? I don't know where I said it actually, but that's true. I was in DC earlier this week actually for a credit union convention. Oh, it was an investing fix. Yes, that's what it was. Yes, but I do. I feel like I'm in that airport all the time.

What is your question specifically? So my question is, I don't have any dependents and I'm thinking of retirement. And I know one of the things just from listening from your podcast is one of the things we need to start planning is the long term care. And I'm at the age now where I need I have the time and I need to look into it.

So I did have a meeting with the insurance broker and she had all my parameters and she gave me different options on the choices that I can look for. I always know it's going to be expensive, but I still couldn't help but have a sticker shock. So the options she gave me for the long-term care is between $3,800 and $4,500. And for the year, if I sign up now and

And if I don't sign up now, it just goes up every year. And the estimate she gave me is about $150 every year. So I know the sooner, the better. Well, maybe the sooner, the better. How old are you? I am, I'm going to be 53.

Okay. So you are in the sweet spot for looking at a policy. Usually, if we're going to look at a long-term care policy, we want to shop somewhere in our 50s. And if we shop a lot younger than that, we end up paying premiums for too many years where we're not using them. If we shop a lot older than that, by the time we get into our 60s,

Sometimes we've got health conditions that will prevent us from qualifying for these policies. So you're right that this is the right age, and you're also right that this is really important for single people. When we talk about

coverage like disability coverage and long-term care insurance, they're more important for single people than they are for people who are married or in long-term relationships because there isn't that other person necessarily there to take care of us. I actually think even for women in relationships,

There was a story in the newspaper just this week about how the longevity gap between men and women is growing. Women are outliving our partners, outliving men by more years. And that just means we have to really think about having somebody around to take care of us. It sounds to me like this insurance broker talked to you only about traditional long-term care.

Is that right? A long-term care policy where you either use the benefits or you don't, but that's basically what they are. Yeah, she told me to think of it as just like making a car payment. So yeah, you just make the monthly payment and you use it when you have to. So if I stop the policy, then I lose it.

And how much coverage did this policy buy you? She said it's $6,000 a month. Let me sort of explain to you what we're looking to cover. And then I want to talk about the fact that traditional long-term care is not your only option. So when we think about the amount of time that a person, a woman like us, is likely to need care,

It's generally about three years. Three years in a nursing home, three years with somebody coming into our own homes and caring for us. And the amount that is likely to cost is

varies by area. So one of the things you want to look at is what's the cost of long-term care in Virginia? What is it projected to be when you're in your 70s and you need care? What will this benefit grow to, if anything? Is there a cost of living rider in the policy? I hope so.

so that the $6,000 will become $7,000 and $8,000 over time so that it'll increase with inflation to cover the benefits that you need down the road. And then

is that enough to cover what you're likely to need over a three-year time period? We could insure for more years. We could try to bite off a bigger piece of the apple. But as you said, this coverage is really expensive. And so I think it only makes sense to buy a policy that you know that you'll be able to continue to pay for

as long as you need it. And the premiums could go up in the future, not just the amount that they're saying they're going to go up, but they could go up by more. That's something that you want to ask about. Is there any sort of a cap on the amount that the premiums can go up each year? Because if there's not, you want to know that as well.

Did she talk to you at all about a hybrid policy? Yes, she did give me a quote for a hybrid, which is like almost double the price. And basically...

It's something that if I decide to move elsewhere out of the country, it's something that I can still benefit from, which is different from just a traditional long-term care. What kind of a hybrid was it? Was it a life insurance hybrid or an annuity hybrid? I don't think it's a life insurance. I just know it just says hybrid long-term care. Okay. So you're going to want to go back to her and get a little bit more information. When we talk about hybrid long-term care policies...

These are policies that do double duty. So you might buy a life insurance policy that has a bucket of benefits where you can use the benefits for long-term care if you need them. And if you don't need them, then the benefits would go to your heirs. Okay.

An annuity hybrid is a policy that is designed to pay you a stream of income during your retirement. And then if you need long-term care, the amount that you're getting paid generally will go up by a certain amount. So you get your paycheck plus an additional bump for the long-term care should you need it. People...

often like these hybrid policies because unlike traditional long-term care, which is sort of like homeowners insurance, you just pay for it and you hope that you're never going to need it, but if you never use it, you never get anything back. With these hybrid policies, you get something back, which is why they're so much more expensive. So

I would agree with her, what I think she showed you. You don't need life insurance. You don't have any dependents, so there's no other life that you're protecting with your income. But an annuity hybrid might make sense for you. So...

you should dig a little deeper into the cost of that policy and the benefits of that policy and and see if those numbers make sense. Was it not attractive because it was so expensive? Yeah, yeah, that's what it is. Yeah, so what one thing you could do is just buy a smaller policy.

You could look at a smaller hybrid policy, if that makes sense, and then layer on another annuity down the road. The other thing that you might want to look at is not exactly long-term care insurance, but a deferred annuity.

where you invest some money into an insurance policy now, and it turns on a stream of income down the road when you hit, let's say, age 80. There's no long-term care insurance per se in that, but it is another chunk of money that you can count on receiving whether or not you need it for long-term care once you hit your

80th birthday or 85th birthday. And for that reason, it'll be a little less expensive than a long-term care insurance policy. I can see I'm totally confusing you. No, I'm thinking because you're saying annuity, because on my job, once I hit a certain age, I am eligible for a pension. Okay, good. So can that be towards the annuity you're talking about, or is that in addition to the

It would be in addition, it would be something to fund your long-term care. So in your job where you're eligible for a pension, that's going to be money that will support you in retirement. That's going to replace your regular paycheck and along with any money that you've saved in your retirement plan will spill off income that you'll use to pay your bills, to go on vacation. Okay.

What we're talking about here is trying to cobble together an extra sum of money should you need care. Okay. When we think about the traditional long-term care policy that she presented to you, is that an amount that you think that you could afford on an annual basis going forward, that $3,000 to $4,000? Yes.

Yes, in a way, but it still makes a difference in my monthly expenses that, you know, it's almost like having a car payment. Like if I get a car now, yes, it makes a difference because I have to reallocate some of what I'm saving now and put it towards that.

So yes, it does. And I can afford it, but it does. In terms of what you're saving now, are you on track for retirement when you want it at the level of savings that you want to be? I think so. I would say like I'm thinking, I don't know if I'm going to do it, but my goal is to be, I don't want to say retired, but work optional in, I don't know, three to five years.

And I think I'm 80% there. I'm not quite there yet, but the rate that I'm saving, it is achievable. Okay. Last question. Have you looked at whether there are long-term care benefits available through your employer? I did. All I did was I just looked on, because we have a website and a system at the work. I don't think it's offered at all.

So we only have the life insurance, but not long-term care. It may be worth giving them a call to see if it is available. My husband bought his through work.

It was much more affordable that way because it was a group policy. And then when he retired, he was able to continue that benefit. He was able to pay for it privately. So it does cost a little bit more now than it did then, but it was a good way to go about it. I would look at your retirement goals. Make sure that you are sort of on track to accomplish what you want to accomplish and

Figure out if there is a sum of money that you would be comfortable putting into a long-term care policy You can always buy just less insurance and then you can add to that insurance later on and have

having some insurance I think is better than having no insurance because if you do need care, it's just a bucket of money that gives you additional choice in how to get that care rather than relying on Medicaid where the choices are just a lot less in number and you also have to spend down your assets.

In order to in order to qualify. Yeah, I know I said last question, but I'm going to ask you one more. Do you own a home? Yes, I do. I do. And tell me a little bit about that. When will you be done paying your mortgage? What sort of a house is it? Do you expect to stay there for a long time?

So I live in a condo and it's ADA compliant. So if I do stay here, I could do age in place here. I live in a very walkable neighborhood. So I do own a car, but to get around here, I live near the subway. There are buses here so I can age in place where I live.

As far as mortgage is concerned, I would say I have 10 years left to pay. I do put a little bit more on when I make my payment for the principal, I do add a bit more money, but not much because I'm rather saving it towards my brokerage account. The thing that I think many people forget is that when we finish paying the mortgage, we...

have this additional stream of money that we can use for other things. So if you kick the can down the road a little bit on this decision, you can always use the money that you're no longer paying toward the mortgage to pay for your care. Or if you buy a smaller policy now, you will have that money that you're no longer paying toward the mortgage to put to that sort of care if you need it. And if you...

If you do eventually need care, there are other things that will roll off your monthly budget, right? You won't be traveling as much as you travel. You won't be as active. So we think that

As we enter retirement, the money that we spend is going to go toward the same categories that we're spending money on now. It's just not true. Our spending shifts. We spend less on pretty much everything and more on health care the older that we get. Look, I think this is probably a good idea for you to have some sort of benefit. But I don't want to see you put so much into it that you don't feel like you can live your life.

So second opinion, always a good thing.

talk to another agent, get another couple of quotes. And if you want to run them by me, just let Haley know and we can go through the process of sorting them out. I think that people are fascinated by long-term care insurance. And so I'm happy to go through this with you. Thank you. I know that this has been asked to death. I remember listening to one of your podcasts and there was a lady who asked about it, but she, I think it was her and her husband,

So they were evaluating the life insurance. And actually, I got connected through Isabel. Remember, I asked for a name of a financial advisor. Yes. That's how I was able to find a broker through Isabel. And she gave me the quotes.

So, Isabelle is a financial advisor with Edelman Financial Engines, and I had suggested to Isabelle Barrow. She's been on this show, so our listeners may be familiar with her. And I knew that you were in the same area of the country, so I'm glad that she was able to help you. Thank you. Yeah. Thanks for calling. Thank you so much, Jean. This is very helpful. I appreciate it.

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Her Money has two incredible programs, Finance Fix, which is designed to give you the ultimate money makeover, and Investing Fix, which is our investing club for women that meets biweekly on Zoom. With both programs, we are leveling the playing fields for women's financial confidence and power. I would love to see you there.

Her Money is produced by Haley Pascalides. Our music is provided by Video Helper and our show comes to you through Megaphone. Thanks for joining us and we'll talk soon. There are some departments that if you go into them, you have to have really thick skin. And HR is one of them. Here we go again. I know. Here we go again. Right. But you're licking.

Everybody had to attend a mandatory Bible study because that supervisor was a minister and it was approved by HR. Her picture was also on there and her nickname was do me decimal. Oh my God. I also had a college librarian. Her nickname was big tits McGee. Have you ever worked the full day with your kids hidden under your desk? No.

No. Allow yourself. Give yourself the privilege to be human. That's what it is. Just feel it so that you can go through it and come out the other side. Mic drop.