Arcane but Shrewd Retirement Solution?

Hyacinthe Rigaud’s portrait of King Louis XIV, courtesy of the Getty Open Content Program

Tontines might be a nifty idea for retirement income. Too bad they haven’t been legal here for a century.

Tontine is a fancy word for betting on how long you’ll live – in a good way. Here’s the concept in a nutshell: many people pool their money in return for guaranteed regular payouts for life, similar to an annuity.

The people who live to, say 90, will receive ever-increasing financial payoffs, because the number of participants in the pool will invariably shrink over time.  The catch is that the investors who die young won’t receive as much income as the men and women who live the longest – but they won’t need the money either.

A new study by the Center for Retirement Research (CRR) takes a close look at an idea that is tossed around among finance experts: modifying tontines to use them as a source of retirement income.

Some criticize them as a dubious investment, but they’ve stood the test of time. King Louis XIV of France was the first monarch to raise public funds using tontines, a 1650s creation of Italian financier Lorenzo Tonti. More than a century later, they caused financial hardship among middle-class investors, laying some of the groundwork for the French Revolution.

Tontines made it into American popular culture in the M*A*S*H* television show. Because Col. Potter was the last man standing among his World War I Army buddies, he got the only remaining bottle of brandy from a cache they’d found and drank while camped out in a French chateau. Tontines popped up again in an episode of The Simpsons: grandpa Abe Simpson and Mr. Burns fight over some valuable German paintings in a tontine their Army unit had created back in World War II.

Credit for the idea of a retirement tontine goes to a paper by two professors at York University in Toronto, Moshe A. Milevsky and Thomas S. Salisbury. In his new report, CRR researcher Gal Wettstein agrees that tontines might be a useful way to get regular retirement income – with modifications. …Learn More

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Boomers are Longing to Retire Overseas

Australia, Cambodia, Laos, Thailand, Spain, Portugal, Scotland, Ecuador, Belize, Nicaragua – our readers living all over the world, or planning to, shared their experiences in comments posted to a February blog, “The Ultimate Travel: Retiring Abroad.”

The article profiled a Houston couple on the verge of retiring who are systematically exploring cities that interest them in Panama and Costa Rica. Few blogs have elicited so many comments – no doubt because thoughts of retiring overseas are more fun than worrying about whether the 401(k) account has enough money in it.

The success of retiree Dennis Desmond and his wife’s relocation to Australia makes it hard to resist temptation. “The weather here is incredible, the people are fantastically friendly, and the scenery is wonderful,” Desmond said in his comment.

But the picture isn’t all roses. William Pederson wrote in his comment that he knows five couples who’ve moved overseas and returned stateside. “You get what you pay for,” he said.

Here’s more of the fun stuff, and a few downsides, from our readers: …Learn More

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Dreams of Retirement? Watch for Pitfalls

Early last year, a client who was a month away from retiring walked into Matthew Jackson’s office and asked him to manage his money. Then the client started pulling financial statements out of a folder and slid them across the desk.

“I’m excited for you,” Jackson recalled was his first reaction. “But let’s talk more about what you want to do with your money, rather than want you want to do for your money.”

The client “looked at me and then past me. In 4 or 5 seconds he said, ‘Matt I have no idea.’”

To prod others into weighing this critical question for themselves, Jackson wrote a book, “The Retirement Dreammaker: Master the Art of Retirement Abundance.”

And the dream maker is not Jackson – it’s you.

People facing impending retirement are about to hop on a wild ride that will take them from the emotional high of having the freedom to do whatever they like to an unfamiliar low: no job to give them purpose.  Because of that, Jackson is on a mission to warn baby boomers they need to really prepare emotionally for retirement, just as they should prepare financially. (A financial planner turned financial coach, Jackson’s new book also includes a financial chapter.)

“The ultimate freedom is the freedom to follow your purpose,” he said in an interview.

Jackson’s goal in trying to help people who don’t prepare emotionally is not simple but boils down to this: he does not “pump people up – rah-rah.” He prefers to warn of the six retirement pitfalls: …Learn More

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Stock Market Jitters, Millennials? Relax

Back in December, the Vanguard Group predicted a stock market that would “remain placidly subdued” in 2018.   What a difference two months has made.

A Morgan Stanley analyst, echoing many on Wall Street, has now declared, “The long-anticipated return of [stock market] volatility has arrived.”  The Standard & Poor’s index of 500 stocks slid 10 percent in a few days in late January and early February, bounced back, and then dropped again last week: the S&P declined another 2 percent, and the Dow index was down even more, by 3 percent.

No one can predict the future, of course – not Vanguard or Morgan Stanley.  “Time will tell,” the analyst said.  But while baby boomers have been thrown around by the stock market and witnessed a recovery in their portfolios, young adults might not be so chill.

Here are some earnest words of comfort, Millennials: you are truly the lucky ones. …Learn More

geriatric care manager

Geriatric Help Eases Family Discord

Family harmony and your parent’s desires are the top priorities during their final years of life – not long-simmering sibling arguments or what you may feel is best for him or her.

That’s why it’s critical for the entire family to gather around parents for caring and gentle conversations before a crisis occurs, such as a medical emergency or sudden cognitive decline.

Jennifer B. Warkentin

“These are the kinds of conversations that need to happen while a parent is still able to discuss the options and make their wishes clear,” said Jennifer B. Warkentin, a clinical psychologist specializing in geriatric care.

The Conversation.

Numerous conversations will actually be required to sort out myriad potential needs as a parent continues to age. The issues are both simple and complicated, from contacting Meals on Wheels and installing a shower chair to putting parents’ financial affairs in order, finding a suitable home health aide, and preparing legal documents.

Some parents are eager to have this conversation so they can get things squared away.  More often, however, the conversations are tricky, because they make parents uncomfortable with a perceived “role reversal,” said Warkentin, who works primarily with elderly people in skilled nursing facilities in Boston’s western suburbs. She also has clients in independent and assisted living facilities. …Learn More

geriatric care manager

What’s a Geriatric Care Manager Anyway?

Staging your parent’s 90th birthday party, accompanying him or her to a doctor’s appointment, or finding the best long-term care facility for the right price – geriatric care managers do all this and much more.

Geriatric care managers come into the profession with expertise ranging from gerontology and nursing to social work and psychology, and they bring a unique perspective to caring for the elderly. Their first loyalty is to your parent and her well-being, though they want to work closely with everyone involved – parent and adult children – to meet the parent’s wishes.

Suzanne Modigliani

Suzanne Modigliani

Suzanne Modigliani, an aging life care specialist near Boston, handles “all spheres of an individual’s life – physical, cognitive social, emotional, financial, community and family.”  She’ll even make referrals to geriatric care managers for a parent living in a different city.

An elderly person’s top choice for a caregiver is, logically, their spousedaughters are typically next. And credentialed geriatric care managers are not cheap: they charge anywhere from $100 to $200 per hour, depending in part on an area’s cost of living – hourly charges can be $400 in Manhattan.

So how do adult children know if their parent could benefit from having a geriatric care manager? Modigliani advises them to be on the lookout for unusual behaviors such as growing difficulty with routine financial matters that the parent has always handled, or a bare refrigerator at mom’s house during holiday gatherings.

Unfortunately, it’s often a medical or other crisis that suddenly alerts siblings to problems that have been developing for a while.  Waiting until a crisis, when tensions are high, is usually the worst time to deal with emotional issues – including finding a good care manager. Geriatric care managers have experience and can help smooth over these situations. …Learn More

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The Ultimate in Travel: Retiring Abroad

retirees photo

Tami Fincher dives into projects head first. Two years into a 5-year plan to retire early in Central America, her short list – so far – is Boca Chica and El Valle de Antón, in Panama, and Guanacaste Province, in northern Costa Rica.

She and husband Stephen Fincher are making their plans to join the growing number of Americans-turned-expatriate retirees. In 2016, more than 603,200 Social Security checks were mailed to retirees, their spouses and widows living abroad. They are moving as much for the adventure as for the lower cost many countries offer.

An exotic retirement isn’t for everyone. Even if they could save on living costs, people who’ve never been keen on international travel might prefer to remain close to home and grandchildren.   But the baby boomer wave is pushing up the number of U.S. retirees living abroad – by 11 percent in five years, according to the U.S. Social Security Administration, which tracks its pension checks sent overseas. Ex-pat’s favorite countries include Japan, Mexico, France, Thailand, and Colombia. (More are listed on the next page.)

To assess the pros and cons of Costa Rica vs. Panama, the Finchers made their first exploratory trips, to Costa Rica last June for their 20th anniversary and to Panama over the New Year’s holiday. If Tami, age 53, has her way, they’ll retire in about three years and sell their Houston home to relocate. …Learn More

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