Money After 80

For the past four years, I’ve taught a class called Money After 70, which describes over a dozen changes in the finances of septuagenarians (people between 70 and 79 years old) and those who are older. Recently, a student requested a new class specifically for octogenarians (people between 80 and 89 years old); i.e., Money After 80. The class isn’t prepared yet but below are some thoughts.

 

People age 80 and older often face financial planning challenges that differ significantly from those they encountered during the early years of retirement. Their emphasis often shifts from “go-go” years spending, and perhaps continued employment, to preserving assets, maintaining independence, managing health care costs, simplifying finances, and ensuring a smooth transfer of assets to heirs.

 

Below are five key financial planning issues faced by people age 80+:

 

Remaining Life Expectancy- According to Social Security actuarial tables, an 80-year-old's average remaining life expectancy differs by gender. An 80-year old man and an 80-year old woman have an average remaining life expectancy of 7.6 years (age 87.6) and 9.2 years (age 89.2), respectively. Personal health status and lifestyle choices can significantly impact these numbers, however. Some people live long enough to become nonagenarians (age 90-99) and centenarians (age 100+).

 

Larger RMDs- Required minimum distributions (RMDs) generally become larger as people get older because retirees have fewer remaining years over which to withdraw their retirement savings. Even if an IRA or 401(k) balance remains unchanged, the percentage of a tax-deferred account that must be withdrawn increases each year. For example, it’s 3.77% at age 73 and 4.95% at age 80. As retirees get older, their age-based RMD divisor gets smaller, and their RMD withdrawal gets larger.

 

QLAC Withdrawals- A Qualified Longevity Annuity Contract (QLAC) allows individuals to use a portion of their retirement plan savings to purchase deferred lifetime income. QLACs, therefore, help protect against outliving assets by providing guaranteed income later in retirement when other resources may decline. Under current rules, QLAC payments must begin no later than age 85.

 

CCRC Entrance- The average age of entrance into a Continuing Care Retirement Community (CCRC), also called a Life Plan Community, is generally in the early to mid-80s. Most CCRCs encourage residents to move in while they are still healthy, independent, and able to participate fully in community life. A key financial planning consideration is that many CCRCs require a substantial entrance fee (often hundreds of thousands of dollars) plus monthly fees.

 

Housing Changes- Many octogenarians make key decisions related to their housing. For example, if they decide to “age in place,” they install accessibility improvements such as ramps, grab bars, stair lifts, walk-in showers, and wider doorways. If they are widowed or become more frail, they might opt to move closer to a family support system or into an assisted living facility. The average age of entry into assisted living in the United States is generally in the mid-to-late 80s.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.