A Retirement Case Study

I recently met up for coffee with a friend, a former coworker, and was informed he was considering returning to the workforce, one year after retiring. Yikes! Multiple health/health care related issues were identified as the precipitating events. A recent accident resulted in broken bones and multiple surgeries. As a result of the accident, there are ongoing costs associated with copayments, physical therapy, occupational therapy, and prescriptions. Also, there has been a 40% increase – from $450 to $630 – in his monthly health insurance premium.

I feel terrible for my friend for the most obvious reason, the accident which has impacted his present physical well-being. But I also feel terrible because it appears as if one of the injuries, to a wrist, may permanently impact its use. Talk about a triple whammy! You’re physically injured soon after you enter retirement, that injury results in unexpected expenses and the injury may impact your ability to return to the workforce, which you may have to do for financial reasons.

While the friend had shared some personal financial information over the years, he was never quite comfortable enough to share all his information and whenever I offered to review his retirement plan and offer some suggestions, he politely declined. In my book, RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit, and in various posts on this blog, I have lamented the fact that talking about money and finances, unfortunately, is something most people are not comfortable doing. In most cases, they are more willing to talk about fiery issues such as race, religion and politics. There is nothing to be embarrassed about if you don’t know something about investing, saving or developing and executing a retirement plan. Even if it is a little embarrassing, isn’t a brief period of a little embarrassment better than being in a position where you can’t leave the workforce at your discretion or finding yourself in a position where you have to return to the workforce, when it will be harder, if not impossible, and most likely not on your own terms?

While the health related expenses are rightly identified as unexpected and burdensome, they are not really the factors which may force my friend back into the workforce. During the course of our conversation over coffee, he shared enough information for me to identify where he went wrong and the real factors. I have discussed each of the following previously, but my friend’s experience provides some useful reminders.

Retirement Dos and Don’ts

Do be willing to open up to someone about your personal finances. Be willing to learn from someone else even if there may be some embarrassment in revealing your salary, confiding that you’re carrying a lot of credit card debt or acknowledging you don’t know the difference between a mutual fund, a stock and an ETF.

Even if you possess a fair amount of personal finance/investing knowledge, it’s always a good thing to have someone to bounce your thoughts/ideas off.

Do Not go into retirement with a mortgage. Unfortunately, my friend has a mortgage that slightly exceeds $100,000. Although I don’t know the monthly payment, I would guess it is about $1,000. No doubt he could use an extra $1,000 to help with the unexpected expenses related to his injury and the increase in his health insurance premium.

Sam Beasley

Do Not underestimate the cost of health care. Health care is one of the largest costs for people in retirement, so planning for these expenses is a critical part of any retirement savings strategy. To help people understand and plan for these costs, Fidelity annually estimates what a 65-year old couple, retiring in the current year, will need to cover health care and medical expenses throughout retirement. The 2017 estimate is $275,000, a six percent increase over last year’s estimate of $260,000.

The six percent increase in 2017 reflects general market trends and expectations for health care costs across a variety of expenses an individual could face in retirement. These include monthly expenses associated with Medicare premiums, Medicare co-payments and deductibles and prescription drug out-of-pocket expenses. It assumes enrollment in Medicare health coverage but does not include the added expenses of nursing home or long-term care.

Do develop multiple streams of income. Once you’re retired, more is absolutely better … and may be necessary. I have previously noted that an individual – such as my friend – should have at least four streams of income. A couple should have at least six.

Related to developing multiple streams of income is Do develop a retirement plan that will generate at least 1.5 times the income you think you will need in retirement. My current plan calls for retirement income that will double our current annual expenses of $70,000 … and that’s before we have to touch our 401(k) accounts.

Final Thoughts

Unfortunately for my friend, it appears as if he jumped out of the workforce too early and was not properly prepared. I’m hopeful that his injuries heal well and will not impact his physical well-being going forward. It would be bad enough if his physical well-being is impacted in retirement. It’s worse if his financial well-being is also negatively impacted.

I plan to again make the offer to review his finances and provide my thoughts on the best way to move forward given his age, employment status, amount of savings and sources of income. Hopefully he accepts and we can find a way to salvage a comfortable retirement.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. Hey, James. I feel sorry for your friend. And I got nothing to offer him. Our healthcare-industrial complex doesn’t give a rat’s ass about anyone’s financial well-being. It’s primary purpose is to exact as much tribute as possible. If that leaves someone destitute and broke…oh, well. You’re friend is fortunate in one regard, however. He has you for a friend. I hope he opens up to you in the future. Cheers.

    P.S. I couldn’t agree more with your two main takeaways. Don’t enter retirement with a mortgage and have at least a quarter of a million dollars of your retirement portfolio dedicated to healthcare. Failing to do these two things will leave you quite vulnerable, as your friend is now sadly aware.

  2. Men typically are that last ones to call out for help, especially when it comes to finances. Would he consider a local CFP? If anything, I’m sure you’ve mentioned to him about your first book that started with the word “broke” and the strides that you’ve made since then. Maybe this would be a good ice breaker in getting him to open up?

    I’ve been working with families and individuals for over 20 years using many of the tools that Morgan Stanley taught me. I would be more than happy to assist if need be…..

    • I just texted him and we’ll soon see if he’s amenable to some planning assistance.

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