A previous article, “What Baby Boomer Women Should Know About Money!” was published January 24, 2014 in The AZ Republic. The article covered four major topics: (1) You should not depend on a marriage certificate for your desired lifestyle; (2) Women should plan to be able to live on their income only; (3) Women must understand Spousal Continuation; and (4) Financial and tax knowledge, not diamonds is a girl's best friend! This article will explore some other financial issues that are important for women.
Do not Overspend on Your Kids. It's admirable to want to pay for your child's college degree, but does that leave you enough for your own retirement? I met a lady, age 60, from Italy that met an American, got married, and then moved to the US She was often divorced, but fortunately pursued a career and got a decent job working in engineering for the State of AZ. She had one son that was going to undergrad college at Gonzaga U. in Spokane, Washington. The estimated 2015 total costs included: full-time tuition ($ 36,040), room ($ 5,040) and meals ($ 4,540); $ 495 fees; and $ 1,074 for books and supplies. When one adds airfare to return to AZ three times a year, and a little for spending money, the total is $ 53,000. She covered this expense for 4 years, at a total cost of $ 212,000. Luckily, she had invested in 4 rental houses starting 20 years ago. To cover his private undergrad college expenses, she sold 2 of her rental houses.
While it's mainly only the middle-class and affluent that even dream of paying for a child's private college costs, I also see what happens at the other end of the economic pyramid. Several years ago, I met a divorced lady, age 70, who lived in a $ 120,000 mobile home in Sun Lakes, AZ. She was surviving on about $ 2,000 of combined monthly income from Social Security and a small pension. She only had about $ 150,000 of life savings. Her semi-unemployed son was living with her. He was not paying any rent and she paid for all the food and most of his car expense. Recently, I heard that he had appropriated for his own needs $ 50,000 and she had spent $ 25,000 on him during the last 3 years. So, her life savings was down to $ 75,000.
Understand the cost of long-term care. According to American Association of Retired Persons and other sources, only 6 percent of those who are age 65 or older own a traditional long-term care (LTC) insurance policy. Americans refuse to buy LTC because they do not think they will need it. However, there's a 50 percent chance that one of the spouses will ever need heavy-duty home care or ever will have to move into an assisted living facility. The normal stay is 3-4 years. The monthly cost can range from a low of $ 3,000 to $ 10,000, depending on whether one wants Motel 6 or Ritz-Carlton facilities and amenities. Let's say that the 3.5 years, at an average cost of $ 7,000 monthly, or a total of $ 294,000. If you do not have LTC insurance, you will have to pay this from your life savings.
Warning: the husband usually dies first. In American, the man typically expects the dutiful wife to take care of him when he has serious illness or needs LTC. Then he dies. She is not only physically and emotionally drained, but fundamental life savings have been used for his care. Now, what does she do? Re-marriage is really not an option, as by age 80, at least 50 percent of women are non-married.
Summary: Over-spending on your kids and not planning for LTC expenses are two major reasons many senior women wind up in financial hardship. Baby Boomer women should make plans to avoid these two landmines.