Financial columnist Terry Savage discusses two key issues that should be considered in the retirement planning for both young and old.

I’m Terry Savage, author of the “Savage Truth on Money” and a contributor to  If you’re thinking ahead to retirement, whether it’s in a few years or even a longer time horizon, you’re probably worried about how you can make sure you don’t outlive your money.  That’s a big question.  How do you invest once you’re retired and not contributing anymore and how much can you withdrawal to make your money last as long as you do.  There are programs for that and all major financial planners and mutual fund companies use something called Monte Carlo Modeling to give you strategies for both investing and withdrawal. 

Let’s talk about two big issues that could really impact your retirement, things that you must keep in mind.  The first is inflation.  Remember at only 3% inflation the value of your money, your spending power, could be cut in half in just 25 years, so if you retire at 65 and hope to live into your 90s, you have to take the impact of inflation into account in your investments.  That’s pretty easy to do because over the long run the stock market has always kept up with inflation, or you could use some other inflation hedges, and then there’s one more looming threat and no it’s not a market crash, but another threat that could devastate all your retirement planning, the need for long-term custodial care.  That’s something that Medicare doesn’t cover.  It does cover skilled nursing days after you’ve been in a hospital, but the need for care and doing basic activities that we don’t want to think about not being able to do, getting out of bed, dressing, bathing.  That could cost you thousands.  In fact, nearly $10,000 a month in today’s dollars and far more down the road.  How do you prepare for that?  Well you could save a lot of money and then you’ll find that your kids won’t get an inheritance.  The nursing care company will be the one collecting the money, or you could buy at least a small portion of long-term care insurance, about $200 a day with inflation protection for three years.  That’s not so expensive.  There are new policies that allow you to have both your money, if you don’t use it, in the form of a death benefit on an insurance policy, and long-term care benefit out of the money inside the policy.  Don’t overlook the subject of long-term care insurance just because you’re worried and don’t want to think about growing old.  Growing old is far better than the alternative.  Growing old with enough money to make sure you’re well cared for without eating up your children’s inheritance is the right strategy and that requires long-term care insurance.

I’m Terry Savage and that’s the Savage Truth.