Surviving Retirement Without Kids
Seven essential tips for people looking towards retirement
|Written by Tom Yeung, CFA | CDFA|
Investment Advisor & Fund Manager, Jurnex Financial Advisors
Over the past twenty years, it’s become increasingly common for families to retire without kids. Back in 1982, only 2.4% of families remained childless. These days it’s closer to 15%.
And even those with children, over 20% of retirees don’t have kids living within an hour’s drive.
This shift towards voluntary childlessness creates great freedoms for individuals and families alike. However, it also presents a concern for people looking to retire. After all: how do you survive retirement without kids?
Surviving retirement without kids: seven tips
If you’re worried about retiring without kids nearby, you’re not alone. By 2040, AARP estimates that 35% of retirees will either have no children, or none living within close driving distance. But without the traditional family network, what’s the best way to navigate retirement?
In this article, we’ll cover the seven crucial points to surviving retirement without kids, from the financial aspects to the practical.
1. Have an emergency contact
Every family should have a key contact person they can entrust with their affairs in case anything happens. For childless families, this can be any of the following.
- Family. A sibling, nephew or niece
- Friends. Trusted confidants who live in the same city or neighborhood.
- Professionals. Lawyers, accountants, or advisors who are close to the family.
Most importantly, the emergency contact MUST know they are that family’s contact. It’s no good to have an emergency contact who doesn’t realize they’re responsible for checking in on you.
Do quarterly check-ins. I recommend you check in with your emergency contact every three months. That’s because it can be easy to lose touch with your emergency contact.
Use the emergency contact as your executor. Make sure your emergency contact knows what to do in emergencies. I recommend having a binder filled with relevant information, such as account numbers, medical directives, and a list of assets and liabilities for reference.
2. Write up your legal documents
If you’re retiring without children, there are four critical elements to your list of legal documents.
- Durable Power of Attorney. A directive that gives someone at the authority to act on your behalf if you and your spouse both become mentally incapacitated.
- Health care proxy. A document that allows an agent to make medical decisions on your behalf.
- Will. A legal document that states your end-of-life wishes
- Trust. A vehicle that eliminates the expensive probate process for your assets when you pass away.
Many families use their primary emergency contact as their will executor too.
Make sure the executor understands the legal documents
One of the most common mistakes I find is when childless couples believe the executor already knows the couple’s wishes. It’s easy to assume they do. But medical and end-of-life directives can be complicated to make decisions on, especially if they’re not your kids.
For example, if you and your spouse ended up in comas after a car crash, at what point should the health care proxy allow doctors to end treatment?
There are no easy answers to many of these questions. But as long as your executor understands your philosophy, it’s far easier for them to execute your legal documents.
3. Have a long-term care plan
To survive retirement without kids, you must take matters into your own hands. And this involves creating a road map for long-term care.
That’s because, for people with children, it’s easy to get your adult child to survey different retirement homes and do the legwork on your behalf. But if you are without children, imagine trying to run around the country finding the right retirement home when you’re 80 years old!
There are three steps to creating the right long-term care plan.
- Home evaluation. Survey different retirement communities, nursing homes, and long-term care homes in advance. Having a choice of pre-screened retirement homes will help reduce pressure to choose the right one when the time comes.
- Caregiver selection. Similar to home evaluation, choosing your caregiver should happen far in advance when you’re thinking of retirement without kids. You can choose the caregiver yourself, or have your emergency contact do it on your behalf.
- Source of funds. As healthcare becomes more expensive, it becomes more and more important to allocate a sufficient amount of your savings towards Healthcare. Long-term care can cost up to $150,000 per year, and 1/4 people will need more than five years of care.
4. Make your cash last through retirement
Most financial advisors recommend people plan finances until at least 95 years old. That’s because you don’t want to run out of money. But for retirement without kids, it’s even more important to make sure your money lasts. And that means generating sufficient cash flow.
To be safe, I recommend people live on dividends and cash flow ALONE for as long as possible. Cash flow can involve real estate income, part-time work, social security benefits, and other retirement benefits. That’s because you want to make sure your principal investment is available if you ever need it to pay medical bills for yourself or a loved one.
How much do you need for medical care?
According to Fidelity Investments, the average newly retired 65-year-old couple will need $285,000 for medical expenses. However, this is an AVERAGE. For those with long-term disabilities like Alzheimer’s, dementia, kidney diseases, or diabetes, the costs of care can be far higher. That’s because people with long-term conditions can live for decades but still need constant medical attention.
The good news is that childless couples wouldn’t have had the costs associated with raising a child. It’s not uncommon for couples to have anywhere from $2 million to $10 million in equity by the time they retire. And that money can generate a great deal of income.
As for those who don’t have the savings, it’s always possible to work later into retirement as well.
5. Get your investments in order
People without children must plan carefully for their future. That’s because any financial mistakes you make today can affect your retirement years. When you don’t have kids, there are fewer second chances when it comes to generating wealth in retirement.
- Save enough money. For childless families, I recommend saving at least 20% of your income throughout your career. For most families, the higher savings rate will help you become financially independent far faster.
- Analyze each investment. It’s easy to let your savings run on autopilot. However, for childless families, surviving retirement without kids means needing a nest egg that’s large enough to support you and any helpers you need.
- Find a financial advisor. Planning for retirement without kids means getting your financial house in order. And finding the right advisor can make all the difference when it comes to making sure you’re on the right track.
6. Consider moving to a lower cost place for retirement
The cost of retiring in Washington DC can exceed $120,000 for a couple. That means they will need a nest egg of at least $3 million. And even affluent and high net worth families may decide their savings won’t last as long in a high-cost city.
Fortunately, there’s an option for people who face retirement without kids: you can move to a lower-cost retirement community.
Without families to anchor you to a geographic location, you have the freedom to rebuild your retirement years in a new community.
- What about friends? In the right community, most retirees find themselves making new friends almost instantly. The trick is choosing the right place to move. For instance, if you enjoy nature or the arts, choosing a location that supports those endeavors will make an enormous difference. Your current friends might even join you in your move!
- Where to move? In 2019, Kiplinger performed an extensive study on low-cost tax-friendly retirement states. The list covers places as diverse as Alabama, Texas, and Wyoming. There, retirement costs can be 25% or lower than the national average.
- Consider moving abroad. For the more adventurous, moving to a lower-cost country such as Mexico, Costa Rica, or Thailand can reduce costs even further. For example, people retiring to Vietnam or Belize will see retirement costs get cut almost in half, even after adding in the price of travel.
- Make sure you have a healthcare plan. Fortunately, many low-cost countries still have affordable private healthcare systems that won’t break the bank. Make sure you do your research before moving.
7. Stay engaged
As you look towards retirement without kids, you need to remember that you’re the captain of your ship. Retiring without children, or having none nearby, means that you’re the one who’s fully responsible for your future. And that means staying engaged with your existing family/community, finances, and advisors.
Connect with your existing family, close friends, and community. Studies show that people with close friends or family can be more than 20% less likely to die from illness or other causes.
So not only does having close friends or family improve your health and lifespan. It can also decrease medical bills over time.
- Stay engaged with your finances. Having enough money saved away can help retirees overcome many obstacles. But staying on track of your investments is essential in making sure you’re on the right track. That’s because the better you take care of your money, the better your money will take care of you.
- Stay engaged with your advisors. Retirement without kids means needing to stay engaged with the lawyers, accountants, caregivers, and financial advisors who are involved in your life. That’s because of the better contact you maintain with them, the better they can help you instead of having children.
Where to find more resources
If this seems like a lot of information, don’t worry. The great news is that help is available. That’s because here at Jurnex, we work with individuals and families just like you to make the most out of investing. I’ve helped invest client money for over a decade in the same old-fashioned way. And that’s to seek out great companies in great industries that can you can buy at a discount to their fair value. Sounds too simple to be true? Give me a call today, and I’ll show you that it’s still possible after all these years.
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