Page 45 - Money - November 2018

disability, and health concerns can take a big These costs can be
bite out of your nest egg. /)= &)2',1%6/7 defrayed by long-term-
care insurance, which
83 ,-8 *36 % 1%6%8,32 grows more expensive
-2:)78 %++6)77-:)0= 6)8-6)1)28 to purchase the older
you get.
OE RIHA NEVER PUT his money into DEVISE A SOCIAL
. the stock market. “I didn’t really SECURITY STRATEGY
By 62, determine the
know how it worked,” says the
best time for you to
Saginaw, Mich., farmer, age 100. START EARLY saved up, according to claim Social Security.
By 25, invest in your recommendations by Don’t start collecting
What he did know was the soil and how to company’s 401(k). Fidelity. Accumulating at the earliest
coax navy beans, squash, and corn from Thanks to the power this much might mean eligibility age by
of compound interest, making some difficult default. Your benefit
nothing. He also knew how to build things,
a worker who invests tradeoffs, such as increases by up to 8%
and today he collects a pension from a $5,000 a year from prioritizing your for every year you wait
carpenters union on top of his Social ages 25 to 65 and retirement over your to claim benefits until
earns 6% market children’s college age 70. If you live well
Security check. returns will have savings. into your eighties (and
Steering clear of stocks has worked out $820,238 after 40 beyond!), the bigger
years, according to PLAN FOR YOUR HEALTH payout will be worth
just fine for Riha. He’s lived a frugal life and
an illustration by By 55, figure out a plan the wait.
stayed out of debt, applying for his first J.P. Morgan Asset for long-term care,
credit card only in his late eighties because Management. Someone which Medicare GO DEBT-FREE
who waits 10 years to doesn’t cover. The By the time you retire,
he was tempted by a discount at Sears if he start at 35 will wind up median national cost you should have 10
opened a store card. “I didn’t buy anything with just $419,008 for a semiprivate times your annual
at 65. nursing-home room salary saved,
unless I had the money to pay for it,” he says. was $7,148 a month in according to Fidelity.
Riha’s daughter, Theresa Hoverman, 62, TRIPLE YOUR SAVINGS 2017, while a home You should also have
has inherited her father’s thrifty and By 40, you should have health aide cost paid down all credit
at least three times $4,100 a month, card and other high-
resourceful nature. But she knows that she your annual income according to Genworth. interest debt.
won’t be able to avoid stocks like he did. A
former bus driver, Hoverman has a pension
but isn’t counting on it to meet all her living
expenses, so she and her husband have
plowed as much as they can into his 401(k).
“We’re set pretty well,” she says. you should have in stocks. Generally, retirees
Financial experts agree that tomorrow’s should have between 35% and 55% of their
retirees will need a hefty allocation of stocks, overall portfolio in stocks, says Rich Weiss,
both domestic and international, if they chief investment officer, multi-asset strate-
want to beat inflation. Even at low levels, gies, at American Century Investments.
inflation is a silent killer. At just 2% an- People with healthy nest eggs can afford
nual inflation, the gallon of milk that costs to stick to the lower part of that range, since
you $3.75 today will cost you $6.79 in 30 their portfolios don’t need to generate as
years, according to the Society of Actuaries, much growth, he says. So what’s a healthy
and at 3% inflation, it will cost more than $9. nest egg? The standard rule of thumb for a
But that’s not even the worst of it: Medical 30-year retirement is to have 25 times your
costs rise at a higher rate of 5% to 6% per anticipated annual expenses saved up by the
year, and as you get older, you access more time you retire. If you want to look out 40
and more health care. years, save up roughly 30 times your annual
To outrun inflation, you’re going to need expenses, Weiss says.
a stock percentage that holds constant Those without that much will need a more
throughout retirement, experts say. Forget aggressive stock allocation of up to 55%
the old rule of thumb that you subtract your percent, since you’ll need the extra growth
age from 100 to get the allotment that that stocks provide over the long haul. You

PHOTOGRAPH BY LEAH FASTEN NO VEMBER 2 018 MONE Y. C O M