Entries for June 2008

Long-term care is likely to be most Americans' greatest expense of all in retirement. A private room in a nursing home costs $76,460 annually on average, or $209 a day, and Medicare typically won't cover it.

Long-term-care insurance can help protect you from some of these unpredictable costs. It can be used to pay for nursing home expenses, adult day care, and in-home help for seniors with chronic conditions or who need extra help recovering from an illness.

While researching this article about how to be frugal in retirement, I asked Rich Gray, author of The Frugal Senior: Hundreds of Creative Ways to Stretch a Dollar and the editor of FrugalWorld.com, to share his favorite money-saving tips for retirees. Here are some that Gray E-mailed to me:

Keep a spending diary. Write down everything that you buy, no matter how small. At the end of the month, go through it and add up all like items to get a good picture of where your money goes. If you do this for several months, modifying your spending as you go, you'll be pleasantly surprised at how much your spending shrinks over time.

Hard work and being a team player may not be the qualities that get you your next job, according to Jack Heyden, a partner at the aptly named Gray Hair Management, a networking firm for older workers. The key to getting a new job after middle age is to explain how your past job performance improved the bottom line of the company, says Heyden, who was president of a banking association for 13 years until he was laid off in 1999 as part of a merger at age 53. He is the coauthor of Winning the Job Race: Pathways Through Transition with his equally gray-haired partner, Scott Kane. I called Heyden at his Deerfield, Ill., office to ask him what advice he has for older workers who find themselves suddenly jobless in a slow economy. Excerpts:

If you find yourself unexpectedly laid off after age 50, what should you do?
You have to take a quick step back and evaluate yourself in terms of professional strengths and weaknesses as a person. Articulate your value by putting together the paperwork necessary to go out and get a job—a résumé. Most people, they don't do a very good job of articulating their value. In order to do that, you have to look back at the jobs you've had and figure out what you did that added value to the business you worked for. Too often people [give] their job description rather than the end results they were able to deliver.

You'd think rising gas and grocery prices might cause workers to skimp on their 401(k) contributions. But that's only half correct. The faltering economy has some Americans saving less and others tucking away more for retirement. At least that's the confounding result of a new survey.

While it's unsurprising that 15 percent of people in IRAs and workplace retirement plans have lowered their contributions and 73 percent kept theirs the same, a surprising 16 percent say they have actually increased the amount they're saving as a result of the current economic downturn, found a Bankrate.com survey of 1,004 adults done by GfK Roper Public Affairs & Media.

More than a million Americans found themselves unable to deal with their debts last year and filed bankruptcy. Older Americans on fixed incomes are often hit hardest by debt. People 55 and older accounted for 22 percent of all those in bankruptcy proceedings in 2007, up from only 8 percent in 1991, according to a new AARP Public Policy Institute paper.

Bankruptcy rates generally dropped after the bankruptcy law was amended in 2005 to make declaring yourself insolvent more difficult. But "the financial condition of seniors is serious enough that they are going bankrupt anyway," says University of Michigan Provost Teresa Sullivan, a coauthor of the paper. For most people who declare bankruptcy, she believes, "it's not the case that they have done something wrong. It is that something has happened to them that they didn't foresee."

During the bull market of the late 1990s, 401(k) plans outperformed traditional pension plans. But this decade has brought a reversal of fortune: During both the 2002 bear market and the 2003-2006 bull market, traditional pension plans outpaced 401(k)'s, according to an analysis by consulting firm Watson Wyatt Worldwide.

The study of companies with both a defined-benefit (traditional) retirement plan and a 401(k) plan found that traditional pension plans beat 401(k) results by 1.6 percentage points in 2006. Money invested at the start of the 12-year period from 1995 through 2006 was worth nearly 14 percent more in the traditional pension plan, Watson Wyatt found.

Sudden illness or a layoff can instantly change your retirement plans. I've been writing about how some retirees and older workers coped with health problems, job loss, and care-giving responsibilities. Here's a recap of the stories told so far:

• Forced Into Early Retirement From Corporate America
• Cutting Back on Work to Take Care of Mom
• Second-Career Plans Scuttled by Illness
• Retiring Into an Uncertain Job Market
• Keeping Busy to Ward Off Alzheimer's Disease
• Picking Out a Job for the Pension
• When Illness Ambushes Retirement Plans

If you'd like the story of your unplanned retirement featured in an upcoming post, please write me at retire@usnews.com. Include your phone number. Or you can discuss your story in the comments section.