Looking Different
I'VE ALWAYS ASSUMED my financial life wasn’t so different from that of others—and that made writing personal-finance articles a whole lot easier. I, too, wanted to own a home, buy the right insurance, pay for the kids’ college, and amass enough for a long and comfortable retirement.
On top of that, I wasn’t some financial minority—a highly paid executive, or a successful business owner, or the recipient of a hefty inheritance. Instead, I was like most everybody else, trying to turn an everyday paycheck into something that looked like financial success.
But suddenly, I am the oddball. I’m a 61-year-old with perhaps as little as a year to live, and that means my financial life today doesn’t look like that of anybody I know—in seven key ways.
1. I no longer need to worry about funding retirement. That money I diligently amassed over the past four decades? Almost all of it will end up with my heirs. My carefully considered plans—continuing to work at least part-time, buying a series of immediate-fixed annuities that generate lifetime income, delaying Social Security until age 70—have gone out the window.
Of course, I had no clue my life would take this turn, so it makes no sense to regret the thought and money that I poured into retirement planning. Still, it’s sobering to think that I devoted a big chunk of my life to an endeavor that’ll do me scant good.
2. It doesn’t matter how much I spend—in theory. Should I start splurging? Even before my cancer diagnosis, Elaine and I had two trips to Europe planned for later this year. Since then, we’ve nixed one and revamped the other, so the timing fits with my chemotherapy schedule.
When I made changes to our flights, the airlines dinged me for a few hundred dollars. Supposedly, I no longer need to worry about how much I spend, and yet I couldn’t help but be irked. Yes, even now, my frugality still lingers.
In addition to the European trip we kept, we’ve booked three new trips for 2024. None is cheap. But again, even at this late stage, there’s a limit to how wide I’ll open my wallet. I looked at the price of business class flights, and I just couldn’t bring myself to do it.
I’d like to add a few trips for early 2025. I enjoy the planning and I like to have things on the calendar to look forward to. But for now, caution suggests I should wait until I have a better handle on how fast my health is deteriorating.
3. My portfolio’s time horizon just got longer. I’m not a long-term investor anymore, but Elaine and my two kids are, and at this point they’re the ones I’m investing for. The upshot: I have more than 90% of my portfolio in stocks—because that’s the asset allocation that makes sense for them, given where they are in their career and what other investments they hold.
Two days after my diagnosis, I sat down with Elaine and the kids, and talked to them about my estate. One thing I emphasized to my two 30-something children: They’ll be getting their inheritance far earlier than expected—but, if they’re smart in handling the money, they’ll end up as wealthy retirees. With some three decades to retirement, the money that Hannah and Henry inherit could grow eightfold.
How did I get to eightfold? According to the rule of 72, if money grows at an after-inflation 7% a year, its real value would double after 10 years, quadruple after 20 years and be up eightfold after 30 years. To be honest, I’m not sure the stock market will fare that well. Still, using 7% made the math easy, and I’m hoping the potential growth impressed Hannah and Henry.
4. Estate planning has become my top priority. My financial focus today is on giving away money and getting my affairs in order. In recent years, I’ve been moving to simplify my finances. Yet my diagnosis has made me realize there’s still much to be done.
Indeed, if my life had come to an abrupt end, I now realize my family would have had a surprising amount of work to do to settle my affairs. Fortunately, I can now do a lot of that work for them. Make no mistake: Leaving behind a well-organized financial life is a wonderful gift to your family.
5. I can stop fretting over my retirement’s tax bill. In recent years, I’ve been focused on the hefty income-tax bills I’d face once I reached age 75 and had to start taking required minimum distributions (RMDs) from my retirement accounts. I’d also worried about the Medicare premium surcharges known as IRMAA, or income-related monthly adjustment amount, that would kick in at age 65. But thanks to my cancer diagnosis, living that long is highly unlikely.
With an eye to minimizing both RMDs and IRMAA later in retirement, I’d shrunk my traditional IRA by making large Roth conversions. A lot of number-crunching lay behind those conversions. But like my lifetime focus on retirement, all that thought devoted to future taxes now looks like a heap of wasted time. That said, there is a silver lining: Those conversions will mean a handsome inheritance for my two kids, who are my Roth’s beneficiaries.
6. Many worries of other 60-somethings are no longer my concern. I won’t need to choose between traditional Medicare and Medicare Advantage. I can forget about long-term-care costs. I don’t need to fret over how long I’ll be able to stay in my home or whether I ought to move into some form of senior housing.
These are all topics others in their 60s should be thinking about, and I’ve certainly given them a lot of thought in recent years. Indeed, I’ve paid careful attention to HumbleDollar articles on these subjects, including those by Nancy Fagan, Howard Rohleder, Lucretia Ryan and Kathy Wilhelm. Even now, my web browser’s bookmarks include those for local continuing care retirement communities (CCRCs) that Elaine and I thought we’d visit down the road. But while Elaine will need to ponder the possibility of a CCRC, senior housing disappeared from my list of concerns the moment I got my diagnosis.
7. Social Security has become a different sort of conundrum. I could claim Social Security in January, when I turn age 62. But I won’t.
Instead, my focus is on the best strategy not for me, but for Elaine. How can she get the most out of Social Security? She could claim either her own benefit or she could claim survivor benefits based on my earnings record, with the option of later swapping from one benefit to the other. It’s an intriguing situation—one I’m currently researching and which I plan to write about in the weeks ahead.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier articles.The post Looking Different appeared first on HumbleDollar.
