Category Archives for Retirement

The Best of…Lack of Guaranteed Income Makes Retire Years Bleak, Study Says

Published in All Pawtucket All the Time on July 18, 2008

Good health, combined with a strong work ethic, keeps sixty-nine year old Herman Brewster looking for full-time job in his later years.  The former Providence School Teacher now works part-time at the state’s Adult Corrections Institute (ACI) as a counselor, a place he once worked at for over 18 years.  Since 2006, Brewster has held a number of part time jobs since he left his full-time teaching position.  He believes a recession along with being almost seventy years old, hinder his chances of landing a full-time position with benefits.

Herman and his wife, Madeline, are life-long Rhode Islanders who have raised two sons in their Eastside residence. Now empty nesters, they are faced with a lower household income.   With less household income, the couple no longer  takes annual vacations or trips, nor do they have discretionary income to purchase Native American pottery for their collection, a once favorite past time.

Madeline, 57, a secretary in the Applied Math Department at Brown University, has now become the major breadwinner of the family, bringing health insurance benefits to the couple.

Cutting Back Expenses

“We have already cut back on our [household] spending,” says Herman, acknowledging that the couple’s belt tightening is due to skyrocketing gas, utility and food costs.  Although the couple is now eating out less to save money, they will splurge weekly by going out for Sunday breakfast, a less expensive alternative when compared to ordering from a lunch or dinner menu.

Herman acknowledges that he cannot even live comfortably now on his Social Security check.  “Fortunately between our two jobs we have not gone into our savings yet,” he says.  When retirement comes, probably in five years, he plans to take income out of his retirement annuity.

While currently walking on a financial tight rope, the Brewster’s ultimate retirement will be made easier because of Social Security payments, combined with their guaranteed incomes, an annuity and pension.  According to a newly released Ernst & Young Study, others may not be so lucky, especially those living only on a Social Security check.

New Retirement Study Released

According to the national economic study released by Ernst & Young on Monday, 54 percent of retirees in theOcean State entering retirement are at high risk of outliving their retirement savings. The study, commissioned by the Americans for Secure Retirement coalition, finds that in order to not outlive savings, the average Rhode  household will have to reduce their standard of living by a whopping 19 percent.  Both national and state-specific data were made available in the study entitled, “Retirement Vulnerability of New Retirees: The Likelihood of Outliving Their Financial Resources.”

“Many Americans envision a leisurely retirement where their lifestyle continues much as before,” said Tom Neubig of Ernst & Young, in a press release heralding the release of the economic study.  “Our work shows that this is not a realistic expectation and that, with the current state of savings, retirees will have to cut back far more on expenditures than they had ever expected.”

The researchers also found that retirees in Rhode Island are much better prepared to have a financially secure retirement if they have a guaranteed source of retirement income beyond Social Security, such as annuities and defined benefit plans. For example,Rhode Island residents who have a guaranteed source of retirement other than Social Security have an 18 percent chance of outliving their assets if they retain their pre-retirement standard of living.  However, those with Social Security as their only guaranteed income have an 80 percent chance of outliving their assets during retirement.

“As a guaranteed source of retirement income, life annuities relieve the risks and burdens of managing a nest egg and can maximize savings’ value over the course of an individual’s retirement years,” adds Joe Reali, Chairman of the Americans for Secure Retirement coalition. “Life annuities are the only vehicle besides pensions and Social Security that provide a steady stream of income for life – a “paycheck for life.”

Other key findings of the study include:

Almost three quarters of middle-income Rhode Island households seven years from retirement (near retirees) can expect to outlive their financial assets if they attempt to maintain their pre-retirement standard of living;

Over half of middle-class Rhode   retirees can expect to outlive their financial assets;

Almost nine out of ten near retirees and eight out of ten new retirees without an employer pension plan in Rhode Island are likely to outlive their assets;

Married couples are more likely to outlive their financial assets, due to their longer joint life spans, than single households. Single females are more likely to outlive their assets than single males;

Near retirees in Rhode Island would have to reduce their standard of living on average by 32% to reduce the likelihood of outliving their financial assets (failure rate) to only five percent;

Finally, new retirees in Rhode Island would have to reduce their standard of living on average by 19% to reduce the likelihood of outliving their assets to only a five percent failure rate

The national study should serve as a warning to many of the 77 million middle income baby boomers — it’s never too late to get your financial house in order.  Guaranteed sources of income can be instrumental help you maintain your pre-retirement standard of living.

Herb Weiss is a Pawtucket-based freelance writer who covers aging, health care and medical issues.  This article was published in July 2008. He can be reached at hweissri@aol.com.

The Best of…Preplanning Your Funeral Helpful to Survivors

Published May 23, 2008, All Pawtucket All The Time

           For this aging baby it was stressful attempting to get my elderly parents to preplan and prepay their funerals  After all, my siblings and I were only trying to give them the final say on the little details of their last wishes.  

            In 2001, my father with my mother with early-stage dementia sat together in a Dallas-based funeral home, to prearrange and prepay their funerals.  My eighty-seven year old father checked out the selection of caskets like he would have shopping for a new car in his earlier years.  He lifted the casket’s lid, thoroughly examining the cloth lining and the quality of the workmanship for each casket on display.  Ultimately, he would not choose the less expensive casket, but a nicer one, a little higher up on the funeral home’s price list. All the minute details of their funeral were also hammered out that day but in the end my father backed out of the deal.  A legal technicality over how his name would be listed on the death certificate resulted in my father leaving the funeral home without signing on the dotted line. 

           It seems that my late father’s experience was not the norm because many aging baby boomers and their elderly parents make it through the stressful process of preplanning and prepaying for their funeral goods and services, memorials, burials and cremations.

           According to a 2007 AARP survey 34 percent have engaged in some preplanning for a funeral or burial, and just under a quarter of individuals over age 54  have prepaid at least a portion or burial expenses for themselves or someone else.

         Ted Wynne, funeral director of Pawtucket-based Manning-Heffern Funeral Home, sees a transient society where children are living away from their parents, fueling the increasing demand for preplanning and paying for funerals. “Elderly parents want to take pressure off their children who in some cases live thousands of miles away from making burial arrangements,” says Wynne, who is a former president of the Rhode Island Funeral Directors Association.        

         Without the extras, a basic, traditional, funeral may end up costing around $6,500. The final price increases when you add on the other non-guaranteed price items like cost of flowers, obituary notices, limousines, clergy honoraria, cemetery plots and burial liners or vaults. 

         You can also comparison shop to find the best prices, recommends Wynne.  He notes that the Federal trade commission requires funeral directors to give you an itemized price list (includes all products and services provided by the funeral home) in writing and over the phone.  Wynne adds, when prepaying a funeral that includes non-guaranteed price items, funeral homes can only give the current prices. When death occurs, the survivor will be responsible for paying the price increases.       

            While the right price (identified through comparative shopping) might influence your choice of funeral home, for many older people it’s by reputation and word of mouth recommendations that influence them in making their choice, Wynne adds.

          Wynne, who has worked 24 years as a funeral director at his family’s 130 year old Pawtucket funeral home, says you don’t have to prepay the total price in “one fell swoop.”  Some come in and put a $1,000 down and just continue making smaller payments, he says.

            According to Wynne, preplanned funeral payments can be placed into either insurance or trust-funded plans.  He recommends creating a separate interest bearing trust account in lump-sum or payments held at a local bank. Both the person’s name and funeral home are listed on the account.   On death, access to the account is through a certified death certificate and an itemized funeral bill.  

           For those close to Medicaid-eligible, putting money into an “irrevocable” preneed funeral plan can be a way of legitimately spending down your assets, too.   

.         Before signing on the dotted line find out how your money will be kept, ask about refund, change or cancellation policies, recommends Wynne.  Legal counsel can go over the paperwork details, he says.

         Preplanning and prepaying for your funeral eliminates the stress to survivors, Wynne says, when death occurs.  “Everything is in writing and it is all paid for,” he says. “Now, all the family member has to do is give the funeral home a ring.” 

        Herb Weiss is a Pawtucket-based writer who covers aging, health care and medical issues. This article was published in May 23, 2008 in All Pawtucket All The Time.  He can be reached at hweissri@aol.com.

The Best Of…Many Opting to Pre-Plan, Pre-Pay for Funerals

Published on February 1, 2003

             For me, it was stressful attempting to get my elderly father and my mother with dementia to enter into a pre-need agreement funeral arrangement.  After all, my three siblings and I were only trying to give our parents the opportunity to have a say in their minute details of their final arrangements.

            With my confused mother at his side, my father choose their caskets like he was purchasing a new car.  He checked under the lid, throughly examined the lining and the wood.  Ultimately, he would not buy the cheaper model, but he chose a nice one, a little higher on the price list.

            Of course, my father told the funeral director their services would be held at Temple Emanuel  with the family Rabbi presiding.  But what type of music, vocal or instrumental did they want played?  Or did they want a visitation or to name their  pallbearers.  Closed or open casket?  All these decisions might have been made right there on the spot, but in the end my father backed out.

           A little technicality over paper work derailed the process, causing my father to not sign on the dotted line and walking out of the funeral home in a huff.

           My father’s experience was not the norm because most aging baby boomers make it through the most stressful process of pre-planning and pre-paying in advance.

           According to a 1998 AARP survey, two in five people age 50 and older reported that they were contacted about the advance purchase of funerals.

           About one-third of those responding said that they had prepaid, or were in the process of prepaying, for funerals or burials.  Of this group, 86 percent had prepaid for cemetery plots, mausoleums, or niches, 58 percent had paid for other burial goods or services and 40 percent had prepaid for funeral services.

          For those prepaying for funerals, 30 percent had funds in trust and 30 percent had funds in life insurance policies.  Sixty percent held title to a cemetery plot, and 15 percent said they had that money in a life insurance policy.

         Ted Wynne, funeral director of Pawtucket-based Manning-Heffern Funeral Home, sees a transient society where children are living in different states, fueling the demand for pre-planning and prepayment.  “Seniors want to take the pressure off their children who live thousands of miles away from making the burial arrangement,” Wynne says.  “Thus, they pay up front or set aside money for future funeral and burial payments.”

        Bradford Bellows, funeral director of D.W. Bellows & Sons, Pawtucket and Bellows-Falso Funeral Chapel in Lincoln, says the seniors in nursing  homes are also good candidates for prepaying a funeral.

        “The family watches their parents’ funds dwindle to a point where they are forced to go on Medicaid.”  Prior to being eligible for Medicaid, the senior or their children should prepay the funeral costs.  Assets given the funeral home are allowed under Medicaid eligibility guidelines prior to going on Medicaid.

           “Consumers must understand that pre-arranging a funeral is not the same as pre-paying one,” Bellows adds.

            By pre-paying a funeral you are actually paying  for a funeral at today’s prices, not tomorrow’s, Bellow says.  “If the funeral occurs in the future, the funds will earn interest which will be used to pay for the cost of the funeral at the time of the death.”

           Bellows offers these tips when pre-paying your funeral.

           1.  Make sure that your social security number is indicated on your savings account or insurance policy where the monies are placed to prepay your funeral.  If the funeral home ever goes out of business or goes bankrupt, the funds are still yours and are safe, and can be easily be transferred to another funeral home.

          2.  When you enroll in the Medicaid program, all the funds in your prepayment account must be used.  Any excess funds will be returned by the  funeral home to the State of Rhode Island, to defray health costs incurred by the state of Rhode Island’s Medicaid program.

         3.  Once the funeral home opens the account or insurance policy, don’t forget to get a copy of the Irrevocable Funeral Trust Agreement, showing the bank or credit union account or the original insurance policy that was issued.  This will give you proof that your advance payment has been set up for your funeral needs.

          Herb Weiss is a Pawtucket-based freelance writer who covers, aging, health care and medical issues.