1. Living Well in Retirement
By Teresa Germann
Master Financial Volunteer
Our class topic this week is Living Well in Retirement
We’ll provide you with information on how much money you will need in retirement, and how to cut costs to live well but economically on a fixed income.
The class objectives are:
To discuss retirement planning decisions, sources of retirement income, and typical spending patterns of retirees that will help you understand retirement reality.
To discuss money management decisions after retirement.
Money Talk: Women's Financial Education Series- Session 4

2. How Much Money Do You Need to Retire?
It depends…
On post-retirement goals & lifestyle decisions
On post-retirement work plans
On availability of employer benefits
On health and life expectancy
70% to 90% of income- often recommended
100% to 110% of income – some retirees’ reality, at least in the initial retirement years.
Studies show that retirees will need to replace between 70 and 90 percent of their pre-retirement income to maintain their current standard of living, and that their savings will need to keep pace with inflation. The specific amount that you’ll need depends on your current and planned retirement lifestyle.
Financial planners like Michael Stein, CFP, author of The Prosperous Retirement, say that many people need % of pre-retirement income in the early years of retirement, especially if they plan expensive activities, like travel. In later retirement years, spending often declines to 70-80%.
Money Talk: Women's Financial Education Series- Session 4

3. Steps to Successful Retirement Planning
Identify/set pre-retirement & post-retirement goals
Estimate length of retirement
Determine assets available
Estimate retirement expenses
Estimate retirement income
Balance expenses and income
Plan for the effects of inflation
Evaluate and revise your plan
Retirement planning is a lot like making travel arrangements. You need to know where you are now, where you want to be, how long before and during your trip (retirement), and an approximate dollar cost.
You will gain a sense of control over the retirement process, if you follow the following eight planning steps:
Identify and set pre-retirement and post-retirement goals.
Estimate the length of your retirement (life expectancy).
Determine your net worth.
Estimate your retirement expenses.
Estimate your retirement income.
Balance expenses and income.
Plan for the effects of inflation.
Evaluate and revise your plan.
Money Talk: Women's Financial Education Series- Session 4

4. Looking Ahead to Retirement
Where do you plan to live?
Will you work part-time? For how long?
What hobbies/activities will you spend free time on?
Will you be caring for family members?
Goals to accomplish before retiring
Goals to accomplish after retiring?
Your retirement goals and plans will influence how much money you’ll need to accumulate to spend during retirement. The good news is that with flexibility, you can adjust
your lifestyle to meet your income in retirement in many
The amount of money needed, in turn, will determine how much you need to save before you retire.
For example, if you decide to work part time after retirement, or move to a less expensive geographic area, you will need less money (than if you didn’t work or didn’t move) because you won’t have to withdraw as much to live on.
Your interests, hobbies, and family care-giving responsibilities, will also affect how much you’ll spend during retirement.
Note to Instructor: Review the list of questions on the slide.
Many experts are questioning whether retirement will continue to be a period of full-time leisure. Surveys indicate that many baby boomers plan to continue working after retirement, for income, socialization, and structure to their day. The concept of retirement will likely be “reinvented” in future years.
Money Talk: Women's Financial Education Series- Session 4

5. Spending Plan Changes at Retirement
Housing costs may decrease (paid off loans)
Work-related expenses will be lower
Home improvements, furnishings lower
No more deductions for SS and pension
Savings & investments may decrease
Disability insurance no longer needed
Life insurance may end
Federal/state income taxes may be lower
Refer learners to Exercise IV-7, Estimated Costs of Living worksheet. Use this worksheet to list current expenses and to project future retirement living costs.
How will your spending plan change in retirement?
Housing costs should decrease as mortgages are paid & many seniors downsize/move to cheaper areas/or move in with family members
Work-related expenses, such as business travel, are lower or may disappear altogether
Home improvement and furnishings costs often cease or are substantially reduced
Deductions for Social Security and/or pensions are no longer deducted from income
Savings/investments usually decrease but, hopefully, do not stop
Disability insurance will no longer be needed; you may also choose to stop or reduce life insurance payments
Senior discounts are available for lots of goods and services
Federal and state income taxes are lower if you are living on less (some social security income & investments may be exempt)
Money Talk: Women's Financial Education Series- Session 4

6. Spending Plan Changes Likely to Increase Likely to Decrease
Medical expenses
Dental expenses
Health insurance premiums (early retirement)
Travel & entertainment (every day is Saturday!!)
Likely to Decrease
Clothing/commuting/other work-related costs
Employment taxes
Housing expenses (mortgage paid-off; fewer improvements)
Income taxes (maybe)
Some expenses are likely to increase when you retire:
Medical expenses (health problems more likely as people get older).
Dental expenses (benefits from an employer usually cease)
If you’re taking early retirement (before 65), health insurance will need to be purchased until Medicare is available.
Expenditures for leisure, travel, and entertainment may increase, especially in early retirement years.
Some expenses are likely to decrease when you retire:
Automobile insurance (lower rates for driving shorter distances).
Auto expenses (due to less driving)
Utilities/maintenance (if you live in a smaller home).
Income taxes (some states don’t tax pension benefits.)
Money Talk: Women's Financial Education Series- Session 4

7. Average Retiree Spending by Expenditure Category
Monthly Expenditure
Percentage of Total
Housing
$1322
35%
Transportation
$567
15%
Healthcare
$499
13%
Food
$483
Insurance/Pension
$237 6%
Cash contributions
$202 5%
Entertainment
$197
All Other
$293 8%
$3800
100%
Source: BLS 2016 Spending Survey of Older Households, Marketwatch Sept. 8, 2018
Money Talk: Women's Financial Education Series- Session 3

8. Age Banding Model of Retirement Spending
Research into actual retirement trends over past 20 yrs reveals 3 distinct spending intervals.
To do planning for your retirement spending, most experts note that retirees tend to spend the most in their initial years of retirement.
Decade 1 (65-75 yrs): Health and vigor means that the first decade of retirement is when retirees spend the most on travel, entertainment, eating out and other lifestyle choices.
This is the decade when they may build that beach home, buy the timeshare in the Caribbean or splurge on a boat.
Decade 2 (75-85): Discretionary spending tends to end altogether and is supplanted by healthcare costs. However, recent studies have shown that Medicare has moderated increases in
costs for most older seniors, and that the rise in medical costs are not as large, on average, as the decline in discretionary and basic living expenses.
Many seniors move to smaller, more manageable housing, or even move in with family during this decade. So housing costs tend to stabilize or go down. See next chart.
Decade 3: Starting at age 85, discretionary spending continues to decline, but medical costs definitely tick up. This is the decade—for the oldest elders—where the budget-busting
elephant in the room—long-term care, becomes a real issue for many.
Money Talk: Women's Financial Education Series- Session 3

9. Spending Patterns in Retirement Over Time
There have been several recent studies on how retirement spending changes as people age.
- CES Study by BLS from the mid-1970s through mid-2000s consistently show that retirement spending goes down, persistently over time.
-Study by Ty Bernicke in 2005 Journal of Financial Planning used 2002 CES data to show that for every 5 years a retiree aged, his expenditure dropped 15%.
-Center Retirement Research found, looking at a different cohort of CES data, that retiree spending decreased on average !% a year, controlling for other factors
- David Blancette, of Morningstar, in 2013 used data from the Rand Health and Retirement Study in 2013, and concluded that the change in retiree spending was
1% yearly in the first decade of retirement, 2% in the second decade, then slowed to 1% in the final decade of retirement.
-Finally, JP Morgan studied its proprietary data of its clients over 30 years, and came up with spending patterns of relatively affluent retiree households by age,
(Spending per category by age is shown in the chart above). It too, found that retiree spending declined about 1% a year for the first two decades of retirement, then ticked up for the final decade, as health costs rose.
Upshot of all studies is that while retiree costs do climb in the third decade of retirement, they are not as big as the overall decline of basic living expenses and discretionary expenses
a retired couple will see in that final decade. Upshot: Most studies show that Medicare is quite effective in stabilizing health care expenditures in retirement.
Money Talk: Women's Financial Education Series- Session 3

10. 4% Withdrawal Rule & Implications of Age Banding
Fin planners—long recommended a 4% annual withdrawal from 401k or other retirement accts to insure retirees don’t run out of money
Problem is that 4% rule is a very conservative
Assumes retiree lives till 95 yrs old
Many retirees are leaving a lot of retirement joy in the bank
Age banding suggests that withdrawal in early retirement yrs can be somewhat more than 4%

11. 4% Rule and Implications of Age Banding (Continued)
UPSHOT: 4% withdrawal rule is a decent starting point for retirement planning
However, if you don’t exactly hit it, or need somewhat more early in retirement to meet your goals, don’t beat yourself up.
Just be ready to adjust spending later, when you may not have energy/health to travel, incur loads of golfing fees, or for long, expensive nights at the opera.
The emphasis here is that you can adjust your lifestyle/spending to meet the challenges of down markets or other issues. But it is important to have a realistic
View of what your retirement spending will look like over time.
Money Talk: Women's Financial Education Series- Session 3

12. How to Save on Housing Costs
Downsizing – many retirees find moving to a smaller place economical and liberating
Moving to less expensive area, including overseas
Co-housing with other seniors
Renting out rooms or accessory units: in-law suites in basement, apts over garage, cottages
Renting out property as a short-term rental (VRBO, Homeaway, Airbnb) or to military/fed
Retirement communities, senior affordable housing
Housing is the biggest nut to crack in retirement—its by far the largest expense. If you can get its costs under control, the rest of the retirement spending plan becomes much easier.
Money Talk: Women's Financial Education Series- Session 3

13. Housing Cost Savings, cont.
Look into property tax breaks for seniors
Arl Cty has a r.e. tax relief/deferral program
Energy utility programs for 65+
Solar energy installation
Low cost mobile phone options
Consumer Cellular, Verizon/AT&T 65+ Plans
Negotiate with your cable/internet provider can yield 20% savings—don’t be afraid to switch for a better deal. Neflix, Hulu & Amazon make cord-cutting attractive. Stream for savings!
Arlington property tax deferral program for seniors<100K income. Deferrals for seniors who experience a cut or change in income.
Dominion also gave out free room airconditioners to seniors this summer
Money Talk: Women's Financial Education Series- Session 3

14. Transportation Savings Tricks
Buy used, rather than new, cars and SAVE
Metro—seniors ride for ½ peak fare on subway or $1 on any metrobus ($8.75/wkly)
Uber & Lyft make getting around without a car easier than ever before. UberX for more savings.
Check out bus svc like Megabus Bolt, and Vamoose for inter-city transportation.
Cabs can be cheaper than parking at sporting events or concert venues.
Gas affinity programs with your grocery store—Safeway/HT deals can save you 20 cents a gallon.
MetroAccess is Free, and available for those with disability issues who cannot access regular Metrobuses and Trains
Refer to the WMTA website.
Money Talk: Women's Financial Education Series- Session 3

15. Creative Ways to Save on Food
Cooking at home is most economical
Shop strategically based on weekly circular & fill up the freezer when staples are on sale.
Check out the manager’s special bin for discounted meat, poultry, and fish.
Spices, sauces, some types of produce/seafood, & specialty items are far cheaper in ethnic mkts
Some people swear by couponing: great savings but a lot of work.

16. Food Savings, Continued
Frequent farmer’s markets for better quality and often cheaper produce. Go at the end of the day, vendors want to offload remainders & offer deals.
Go meatless at dinner for several meals a week.
Egg dishes for dinner like quiche and frittatas
Lentils, beans, quinoa are all high protein options
Frozen vegetables are less expensive than fresh and can be even more nutritious.
Shop the perimeter of your supermarket, not the center aisles. Staples are outside, processed in middle

17. Entertainment Deals (Dining Out)
Lunch is cheaper than dinner, & don’t forget early bird & pre-theater specials.
Happy hours are an economical way to eat before a show.
Restaurant guide websites: Eater, Thrillist, TC Ethnic Dining Guide. Washingtonian, NoVa & Arlington mags have cheap eats editions. ArlNow lists local dining deals.
Get on your favs restaurants’ —private offers.
Ethnic restaurants are bargains & interesting. Eden Center for Vietnamese, Koreatown, Bolivian in FC. Explore!
For chain restaurants, Groupon can yield big savings.

18. Entertainment Deals (Plays, Music, Theater)
Washington has volumes of free & low cost ttds. Check WaPo Fri weekend section. Get on Culture Capital’s for Wednesday weekly list of events.
Pay-what-you-can previews for plays (WM & Studio) Shakespeare Theater FFA in Sept & $25 rush tickets.
Free concerts at LOC, Lubber Run, DAR Schlesinger Hall. Festivals & Holiday events. Millenium stage at Kennedy Center. All fed museums are free & many have concerts: NGA summer jazz & winter classical.
Culture at the movies—Met Opera, National Theater, ballet. Check out Fathom Events.

19. Entertainment Savings (Movies)
Every theater chain has “deal nights”
AMC - $5 Tues; Regal Potomac Yd – Tues - $7.
Anjelika: +55 Thurs -$6, Couples Wed -$7.
If you go to movies a lot, memberships can be a money-saver (example—AMC Stubs costs $19.99/mo. for up to 15 movies).
Free Summer Outdoor Movies – Arl, FC, DC
AFI & museums have classic/foreign films
Recent Bergman film festival at NGA

20. General Tips on Travel
Flexibility is you’re the frugal traveler’s friend. Have a list of places you want to go, & pounce if a deal presents itself.
Consider longer stays (at least a week in large cities) in places that warrant it. Avoid “If its Tues, it must be Belgium” tours.
Dom travel to big cities like NY, LA, Chicago--best between Thanksgiving & Xmas, Jan-Mar (great hotel rates/no crowds).
Consider lower-cost destinations: Central & So America, Asia, Europe outside the main tourist hubs. 2nd US Cities: Austin, NO.
Travel offseason. The advantage of being retired is not having to travel when everyone else does.
Summer in Europe is by far the worst time. Travel during spring & fall.
Best time at the Atlantic beaches is right after Labor Day—the water is warmer, the weather temperate, & the rates significantly lower.

21. Travel Discounts & Deals
Best general travel sites: Travelzoo, ShermansTravel, TripAdvisor
Get to know the discount airlines like Norwegian Air, Primeria, Icelandic, Wow Allegiant, Spirit (if you dare).
Use aggregator sites like Kayak, Skyscanner & the new Momondo to ferret out the cheapest af. Must use Southwest site for its afs.
Become an Airfarewatchdog hound--it’s the web’s best list of cheap airfares. Updated hrly. Register to get lists of cheap domestic & international flights from yr local airport.
Eschew hotels for more spacious home/condo rentals on sites like VRBO, Homeaway, AirBnB, Booking.com, TripAdvisor. To search all: aggregator Hometogo.com. Negotiate rates!
Also check local rental agencies in popular resort areas, which can have specials or be cheaper.

22. Saving on Medical Costs: Prescription Medications
Aggressively compare prices on the meds you use daily
Excellent comparison tool is GoodRX
For Cymbalta, for example—prices range from $6.00 at Kroger to $46.57 at Walgreens & RiteAid
Savings tips tab is a very valuable resource
FamilyWize is another comparison tool & offers a discount card that reduces costs on a variety of me
Inquire about Patient Assistance programs for your particular medication.
Good listing of these is at NeedyMeds.org.
Call manufacturer of yr med for company-specific programs.
Ask dr for assistance--free samples or discount card
Cymbalta prices are for a 30 day supply—savings are over $500 a year for this medication. For Prolia, savings are over $1500 a year. COMPARISON SHOPPING WORKS.
Many doctors/specialists have a relationship with the pharma manufacturers, and can get their patients preferred pricing.
Money Talk: Women's Financial Education Series- Session 3

23. Sources of Retirement Income
Social Security
Employer pensions & tax-deferred savings plans
Personal savings and investments
Taxable accounts
Rental real estate
Tax-deferred accounts (e.g., IRAs)
Other assets (e.g., house, coins, antiques)
Employment earnings
Inheritance
Your retirement income will most likely come from a number of sources:
The government: Social Security, federal and state employee pensions, veteran’s benefits.
Your employer: pension, profit-sharing, and tax-deferred savings plans, such as 401(k)s and 403(b)s.
Your savings and investments: IRA(s), Keoghs and SEPs (for self-employed persons), insurance, stocks, bonds, mutual funds, money market deposit accounts or funds, rental real estate, savings accounts, commissions, fees, or business income.
Your assets: your home, vehicles, collections (coins, art, and antiques) when sold, anticipated gifts and/or inheritances.
Additional earnings: full or part-time employment after you and/or your spouse retire.
Traditionally, retirement funds came from what was called the “three-legged stool”: Social Security, employer-sponsored plans, and personal savings and investments. Unfortunately, many women’s “stools” aren’t supported by three strong legs or, in some cases, even by two. Even with three “legs,” it might be necessary to add a fourth one (continued earnings from paid employment).
Money Talk: Women's Financial Education Series- Session 4

24. Retirement Income Ideas
Part-time jobs--any money you make reduces your withdrawal from savings
Flexjobs.com, Flexforce.com have listings of professional jobs that are part-time or temporary
Seasonal jobs like tax-preparation or working in national parks as a guide/ranger for those who want part of the year off for snow-birding etc.
Consulting, freelance writing, teaching English, tutoring
Online sales on Amazon, Ebay, or Nextdoor
Working in retirement doesn’t have to pay equivalent to your pre-retirement wages. It is a way to reduce your withdrawals, keep your skills sharp, and to socialize with others
Money Talk: Women's Financial Education Series- Session 3

25. About Social Security Based on lifetime earnings (35 years)
Must meet work requirement yourself or be married to eligible worker for 10 years
36% of women get benefits on their own record
Benefit estimates available online
Can claim at age 62 BUT reduced benefit and earnings limits
Full retirement age is increasing – 67 if born after 1959, 66+ for most people approaching retirement now
Can let benefit grow to age 70 (+8% per year)
Social Security is the foundation of most women’s retirement income. This leg of the retirement planning “stool” is paid for in equal amounts by you and your employer or totally by you if you are self-employed.
Eligibility for Social Security benefits is generally based on your lifetime earnings record (or your spouse’s earnings record) and your age (you must be at least age 62 to collect a reduced benefit). 35 years of earnings are counted. Social Security benefit statements are now mailed annually to all workers.
Eligibility for Social Security benefits requires meeting the work requirement yourself, or being married for at least ten years to someone who does. Many working women have a choice to receive Social Security benefits based on their own work record or their husband’s. Dually entitled women tend to receive higher benefits based on their husband’s (rather than their own) record. Only 36 percent of women draw benefits based on their own work record.
Between ages 62 and full retirement age (see Table IV-4), earned income may reduce your Social Security benefit. The annual earnings limit ($11,640 in 2004) is indexed annually for inflation. After someone reaches their full retirement age (based on their year of birth), the earnings limit no longer applies and they can earn any amount of money without affecting their Social Security benefit.
“Full retirement age” is slowly increasing to age 67 (refer to ages listed in Table IV-4 in the Guide).
Money Talk: Women's Financial Education Series- Session 4

26. The Ballpark Estimate™
Can do online at
Six easy steps
Three key assumptions:
Percentage of current income to replace
Life expectancy
Inflation and return (pre and post retirement)
Use your green and white statement as guidance (but choose inflation-adjusted numbers)
Other calculators – &
Interesting video from LearnVest
Refer learners to the Ballpark Estimate form. It is a very simple, one-page retirement savings planning tool.
An online analysis and information about the Ballpark Estimate can be found at the American Savings Education Council Web site:
The Ballpark Estimate provides approximate benefits for various income levels, but it is always better to use individual figures provided by the Social Security Administration in the personalized benefit statement that is automatically mailed annually to workers.
To keep the form simple, dates in the analysis, such as the age you expect to retire and the number of years before retirement, are stated in five-year time intervals. You need to round off if you are in between numbers and it is preferable to round down for a more conservative analysis (e.g., 10 years until retirement when you actually have 13 years).
The Ballpark Estimate makes 3 key assumptions: a need for 70% of current income (although you can put in any percentage on line 1), life expectancy of 87, and a constant 3% real rate of return (i.e., rate of return after inflation).
Money Talk: Women's Financial Education Series- Session 4

27. 10 Tips To Prepare For Retirement
Plan for inflation
Practice living on retirement income
Live beneath your means
“Pay yourself first” each payday
Start planning and preparing early
Save and invest wisely
Explore later life career possibilities
Mentally prepare yourself for retirement
Carefully analyze early retirement incentives
Stay invested
1. Plan for inflation to be higher than you think, rather than lower.
2. Practice living on the income you expect to receive during retirement. You may be doing this already. If you are saving/investing up to 20 percent of your income, you are already living at 80 percent.
3. Live beneath your means. Scale back your lifestyle now to make an easier adjustment later on. Remember that all the major purchases you make now will have retirement implications (e.g., car payments after you retire).
4. “Pay yourself first” each payday. Set aside at least 5 percent, perhaps up to 20 percent, of your salary through payroll deductions or automatic investment plans. If you don’t see this money, you can’t spend it.
5. Start planning and preparing early. However, it’s never too late to start.
6. Save and invest wisely. It’s imperative that you stay ahead of inflation.
7. Explore career possibilities you can pursue later in life. Many people turn a hobby into a business or a second job into a retirement job.
8. Mentally prepare yourself for retirement. Take a sabbatical, if possible. Assess your goals and values and relate them to how you would like to live.
9. Carefully analyze early retirement incentive plans. Always compare the offer to what you could receive if you stayed until 62 or 65. Seek professional help before making a decision.
10. Stay invested. Market timing does not work. The solution is “stay the course” and ride out the downturns. It’s a time-proven investment strategy.
Money Talk: Women's Financial Education Series- Session 4

28. Class Wrap-Up Questions? Comments? Experiences?
Hopefully, this class session has:
Increased your knowledge about retirement planning decisions
Increased your knowledge about sources of retirement income
Encouraged you to take action to secure your future
Our guest speaker, an attorney, will discuss estate planning basics and the legal and financial implications of frequent events in women’s lives (e.g., marriage and remarriage, divorce, widowhood).
Note to Instructor: Encourage participants to read the Planning For Future Life Events unit in their class Guide, if possible.
Collect evaluation forms.
Money Talk: Women's Financial Education Series- Session 4