Frank C. Kilcoyne, CSSC
Volume 14 | May 2007

It's Easy . . . If You're Paul

“Will you still need me, will you still feed me, when I’m sixty-four?”*  Something tells me Paul McCartney doesn’t really have any worries about how he’ll manage to feed himself when he’s older, but me?  That’s a different story.  Lately, I’ve not only been worrying about how I’ll feed myself – but also my loving wife and our four soon-to-be-in-high-school-and-then-college-oh-my-aching-wallet kids.

I recently attended a speech given by a nationally recognized personal finance expert, Terry Savage.  She praised structured settlements (smart woman), and then moved into some other topics that quickly caught the audience’s attention, chief among them: retirement.  Given our family’s demographic, I am open to all the help I can get on how I’m supposed to manage college plus retirement after that.  Ms. Savage focused our attention on one key fact: people are living longer than they used to.  She recommended we all visit a web site www.livingto100.com, so I did.

The purpose of this site is to estimate your life expectancy based on answers you give to a series of questions regarding your lifestyle, health, and family history.   After dutifully (and honestly) answering all questions, the site informed me that I could expect to live to the ripe old age of 94.  While at first delighted by the news, the more I thought about it, the more concerned I became.  How on earth am I ever going to be able to retire and have enough money to make it to my 94th birthday?

Ms. Savage had the answer to that as well: surf on over to www.choosetosave.org and fill out their questionnaire.  I did that too.  I entered my current age of 50, said that I wished to retire at the age of 65, and wanted to be able to pay my bills through age 94.  I used 50% of my current income as a target for retirement, did the best I could with regard to pension and social security information, and answered questions regarding current savings, rates of return on investments, and 401(k) accounts.  Given all that, the website told me that I need to save 24% of my current wages in order to accomplish my goal of retiring at age 65.  Put almost a quarter of my wages into savings?  Doesn’t this thing know my kids still live – and eat – at home?  I guess I will have to adjust my expectations a bit.

Keeping the goal of living on half of my current salary, I went back and took another crack at it.  If I increased my retirement age to 70 and took a little more risk on my investments, I could reach my goal if I save 16% of current wages.  Let’s see, if I can persuade the kids to skip college and join the Army, persuade my wife to bag Christmas, and give up one of the bread slices on my bologna sandwich, this could work!..Not really, so I took another try.  This time I kept half of my salary, still retired at age 70 but adjusted my anticipated return on investment.  When I dialed up the rate of return (and subsequently the investment risk) I learned I could reach my goal if I saved about 10% of my current wages.  This was not the plan I was hoping for, but, with some budget cutting and a willingness to be a bit more aggressive in my investments, it turns out to be doable.  I might just be able to add that bread slice back.

All in all, the “good news” of living to age 94 looks to be a mighty expensive proposition. 

You’re probably asking yourself, “Has Frank finally gone round the bend?  He usually writes about something to do with claim settlements, not his personal financial woes.”  The lesson I took from listening to Ms. Savage and visiting her recommended websites was important: I have been underestimating how much money I need to retire comfortably.

As it turns out, I am not alone in this predicament.  In fact, if you poll the adult population in America, you would find that the majority of us are under-funded for retirement.  Traditional pension plans have all but disappeared; the old idea of putting in your 20 or 30 years and living comfortably on a pension is as outdated as eight-track tapes.  Most of us are ALL ALONE when it comes to planning our retirement. 

This month’s message is this: when resolving personal injury claims, you have the opportunity to give injured folks an incredible leg up on this process.  We deal with people who, through terrible misfortune, are suddenly in a position to receive a substantial sum of money.  They can choose to throw a big party - which will feel great for a day or so - or lay in a guaranteed, tax-free income stream that will feel good for a lifetime.

Twenty three year-olds may not sit long to listen about retirement planning, but forty eight-year-olds snap right to attention.  If, for some reason the one you’re dealing with doesn’t, just send them to the websites I visited.  Believe me, a magic bullet to help educate four kids and still retire comfortably would be a pretty welcome thing right about now (although I’m not yet ready to step in front of a truck to get it.)

When we design periodic payment plans, we try to learn as much about peoples’ lives as possible.  Many face the same pressures we do: as long as the sun keeps coming up in the morning, we all march relentlessly toward retirement.  What better anxiety to relieve than “How will I pay my bills when I’m old?” Allocating now just a portion of one’s settlement to a tax-free, guaranteed income can make a huge difference in the later years.  It’s a simple strategy that really works. 

Want to help someone by solving a truly serious financial problem?  Call Frank C. Kilcoyne, CSSC at 800-544-5533.  I am here to help.  

* The Beatles, "When I’m 64”, Sgt. Pepper’s Lonely Hearts Club Band, 1967, Parlophone/Capital Records