aging gently

As I spent some time in an assisted living facility last week I thought about aging and money. Here are the two most important concepts I came away with:

  1. At the end of your life, money and things are not important. Having friends and family and a rich store of memories will be more important than whether you ever owned a boat. This is the Hallmark Card thought that people bring up when talking about old age and death.
  2. That having been said, the end of your life is a lot nicer if you have some money. I’m not talking about nicer in the sense of having HBO. I’m talking about having a nurse who’s going to change your bedpan when you ring the bell rather than being in an institution where they let you sit in your own crap for three hours because they are understaffed.

I really cringe from time to time thinking about how much money I am hoarding for some far-off "retirement". Unless my savings rate and return rate spike up dramatically in the next 10 years I’ll still work until my mid-60s regardless of what I do now. And of course I could get hit by the mythical bus any day, rendering much of my planning for my sunset years irrelevant (except of course in that these savings would help out my family, but I have life insurance for that and frankly even with savings and insurance Bubelah would have to go back to work). So the ugly little thought creeps into my mind that maybe I should be enjoying this money today. Not buying the latest plasma TV, necessarily, but spending it on a fancy private education for my son, or on illuminating vacations (pyramids, Great Wall, safaris) or on a beach home in Florida. With the amount of money my wife and I save it wouldn’t be an insignificant amount of extra money if we stopped saving tomorrow. That extra money would alter our lifestyle.

However, I think about what I saw last week and realized that if you don’t have lots and lots of money, things can go south quickly. I saw a very nice assisted living complex, filled with relatively happy looking seniors. There was a very pleasant restaurant-style cafeteria, activities and a very pleasant physical complex with bright halls, cheery rooms and clean surroundings. All of this comes at a price; my best understanding was that it runs more than $5000 a month in an area of the country where that is no small amount. To put that in perspective, to generate $5000 per month in net income would require a nest egg of $1,300,000 earning 6% interest (no sure thing unless you want lots of risk). “That’s not so bad”, you think. That means $5000 for basic care. No drug co-payments, no hospital stays, no extra assistant care – all of that is extra. “That’s fine, Medicare will cover that,” you say. I hope you are right, after all of your “fun” 60s and 70s and giving gifts to the grandkids and traveling to Spain and whatnot, just for a place to live. $1,300,000 in the bank when you are 80, for the sake of argument.

All of that might not even be that terrible except:

  1. One or both of us might live far longer due to advances in medicine. Already people are living longer and longer due to artificial hearts, drugs, surgery, you name it. If I live to be 105, or 20 years past what I expect, won’t I run out of money? What happens when I’m 97 and the bank account is tapped out? I hope my son or other potential future children could help, but I may need care past what they could easily provide at home. What then? What if something even more ridiculous happens in the next 20 years (a cure for cancer, for example) and people start living to 120? 130?
  2. One or both of us might have health issues, draining our savings. This might be as simple as needing additional nursing care for non-life-threatening conditions, or as awful as a long lingering illness.

So let’s assume that $2 million (a random large number) would last for 30 years after I reach 65 (remember, 20-25 years for me and 30-35 for Bubelah). How is it even remotely possible to think of saving for 40 years, 50 years of quality living? Is it possible? I sometimes doubt it, particularly considering costs may dip at first when we’re in our 60s and in decent health (assuming we don’t take that super-luxury cruise to Europe), but will probably spike back up again as health problems mount. Could you ever start drawing down on principal to boost your monthly income? Even if you don’t, the principal will rot away with inflation. 40 or 50 years is a long time to hope for $1,300,000+ to carry you. You would have to draw the principle down and hope that the month you drew out the last $18,000 (inflation, remember?) was the month you died.

I don’t know what the answer is. Maybe the answer is spend it while you’re young and hope that this country does something about elder care before you get there yourself…