In How to Make Your Money Last – The Indispensable Retirement Guide, Jane Bryant Quinn provides an excellent comprehensive overview of retirement planning. If you want to understand the key areas that will affect your retirement this book is a good read. If you are managing your own retirement, or plan to, I highly recommend this book.
Health Insurance
Health care is an important component of a retirement plan. Jane discusses how to file for medicare and strategies for ensuring you get the best benefit you can.
A few specific items she addresses:
- In-network doctors could bring in out of network providers to assist when you are under for surgery. If you signed the admission form, you potentially gave the okay. You may want to address this upfront with your doctor or write a note on the admission form, but that is likely not a fail-proof.
- Traveling abroad is something that many retirees envision. A normal health insurance policy won’t cover you if you are traveling overseas. A travel policy may be something to consider.
- Simply take care of yourself. No amount of medical expense planning is better than keeping yoursel in the best shape and health you can possibly be in.
Throughout the book she reminds you to consider the effect of your death on your spouse. This is important to remember because many issues such as filing for Social Security or employer pension options involve a trade off between maximizing your current benefit and what your spouse would be left with if you pass away. For example, if you take a lump sum from an employer pension because you are in poor health, you may be robbing a healthy spouse of future income security.
Retirement Plans
The book is broad enough to be a pretty comprehensive overview of what you need to think about when it comes to retirement planning. It also goes in depth enough to be very useful. She even includes a discussion on self-directed IRAs.
Although it won’t apply to everyone, she says “The splendid Thrift Savings Plan… is the simplest, finest, and lowest cost retirement plan on the planet.” I wholeheartedly agree. I am fortunate enough to have access to this plan through the military. The low fees are the single biggest perk to the TSP.
I appreciate that she specifically mentions TIAA. They are one of the better platforms that are providing 403b and IRA accounts to nonprofit organizations and their employees. A lot of teachers, both grade school and higher education, have a 403b with TIAA.
Inherited IRAs receive pretty detailed coverage. This is a very complex area where minor slip-ups from overlooking a rule can have major consequences.
Annuities
She provides an entire chapter on annuities that is good reading for anyone who is considering purchasing one. If you have an annuity and aren’t sure you understand it she provides a good blueprint for you to analyze it. The two best takeaways from the chapter are:
- She helps separate the “good” annuities from the “bad” annuities. Unfortunately, certain types of annuities have been misrepresented by salesmen masquerading as advisors. This hurts the people who buy them, and hurts the people who may could benefit from an annuity. The second group is hurt because they have learned to cringe anytime they hear the word annuity. That’s a good defense mechanism given the state of the annuity industry,
- She points you to immediateannuities.com, an excellent resource for checking on the current level of income you can expect from an annuity.
Retirement Income
In addition to explaining the 4% rule, she provides an overview of the popular caveats and extensions. You can use this information to determine if you should adjust your own withdrawals.
Investments
Regarding investments, I support the tenets laid out in the book. I especially appreciate that she enforces proper diversification beyond simply buying an S&P 500 index fund. International equities, bonds, and total market funds all get fair discussion in the book. Index investing often gets confused with “buy an index and forget about it”. Even passive index investing (which I am an advocate of) involves more than that. A properly constructed portfolio will utilize multiple indexes and be adjusted and re-balanced periodically.
One aside, she mentions that having too many funds makes it hard to re-balance. This can be true, but is largely overcome by portfolio re-balancing software. I use iRebal for client accounts. The do-it-yourself types will be able to use a model with one of the discount brokerages.
I also think she is a little harsh on bond ladders. A bond ladder is a series of bonds that are set to mature at staggered intervals like the rungs of a ladder. Bond ladders are a good way to lock in a known amount of retirement income. A bond fund doesn’t provide this same fixed payment. However, I do understand her point that bond ladders are harder to construct for lower account balances. The discussion is only a page.
Rental Income
As for owning rental property in retirement she gives a really good primer as well. The takeaway is that you have to accept that owning rental real estate isn’t a passive activity like owning an index fund. When she says that “nice guys get their clocks cleaned” – believe her. I own a few rental properties and managed them myself for a few years. I’m a nice guy. I got my clock cleaned, took the clock home, and brought it back for the tenants to clean again. I’ve now turned my properties over to a manager that is a lot meaner (and a female) than I am.
Home Equity and Reverse Mortgages
This is another area, like annuities, where pushy salesmen have potentially turned a useful tool into something to be avoided. Again, Jane describes how reverse mortgages work, when they are good, and when they aren’t. Reverse mortgages aren’t one-size-fits-all and her explanation gives you a good basis for making a decision for yourself. As with most items in the book, she addresses specific concerns relating to spouses and how to avoid wrecking your spouses finances as a final gesture.
Pay particular attention to the reverse mortgage as a line of credit. Increased attention is being given to this strategy as a viable way to stretch your income without putting your home at risk.
Although she discusses it earlier in the book she mentions again the practical aspect of simply downsizing. If you have lived in your home for years then it may be both paid off and too big for your current needs. Downsizing and taking the cash to buy something smaller may be a good choice. You’ll have extra money to live on and less house to manage and keep up.
Life Insurance
Most people purchase life insurance at some point in their life. For many, life insurance is part of an employee benefit package. As you age, your need for life insurance changes both in regards to the amount of coverage and type of policy that you may need. Jane discusses the four basic types of insurance:
- Term Insurance
- Guaranteed Universal Life
- Whole-life
- Universal Polices with cash values
For each type, she explains how it works and when it is appropriate to own. You can read just the section that addresses the particular type of policy you have or are considering purchasing. If you don’t have life insurance or want a more comprehensive understanding of it, read the entire chapter.
Just Tell Me What To Do
In the books final chapter you get a descriptive process for how to put it all together. You may want to refer back into the books content as you work through the steps. That’s ok, because she provides specific references in a few spots to make it easier.
How to Make Your Money Last is a comfortable read. Although it is deep enough to give you actionable takeaways it is written in style that is easy to follow. If you are looking for a comprehensive book that covers the bases of retirement planning this is a good one.
