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Playing with FIRE, Long Term Care, and Remote Work

Updated: Jul 1

I've had a fun week and a half. One of the highlights was recording an episode of the USA Cares podcast. USA Cares is a nonprofit which focuses on meeting the needs of Post 9/11 veterans and their families. We had a great conversation about making the most of resources available to veterans, as well as how to minimize financial mistakes during the military to civilian transition. As a veteran, I enjoy giving back when I have the chance.

Here's the video:

With that, I'll jump into the articles that made me think this week.

I was speaking with a client earlier and he mentioned that he isn't really interested in a traditional retirement. Instead, he wants to be financially independent so that he can focus on the things that are truly important to him. I'm hearing this more and more often, that the traditional career followed by a sudden transition to retirement just isn't appealing.

What is interesting is the freedom to pursue projects, side gigs, and learning...just because you can. Personally, I think the idea of a startup in retirement is interesting. Take away the pressure of success and you actually have a really great opportunity to build something. Learning in retirement is also great. The Donovan Scholars Program offers those over 65 the ability to go back to school. I expect I'll take advantage of that when the time comes around.

Either way, retirement can be more than playing golf and watching Judge Judy.

We live in a rapidly aging world. With advance in medicine, it's likely that many of us will live past 100. While that's great for many reasons, it also brings up certain concerns. One of the biggest concerns is the expense associated with taking care of people later in life. While many people assume that Medicare will cover the cost of their long-term care, the truth is that Medicare won't pay for nursing homes or other long-term care. Instead, the elderly are largely on their own, at least until they qualify for Medicaid. As our society gets older, more and more people will be needing care. This brings up the question as to how we pay for that care.

I don't pretend have the answer. I've used long-term care insurance for clients in the past and it can be valuable in the right situation. It can also be expensive. Many insurers are getting out of the LTC space because the margins aren't there for them. I had clients with Genworth policies in the past and they saw double digit price increases on an almost annual basis. When many of the current policies were written, actuaries weren't able to accurately price the risk. This, combined with decreased bond yields, has led to significant price increases for policies with lower benefits.

For most, the right answer comes down to planning ahead and saving.

The end of the year brings open enrollment, during which we all scratch our heads and try to estimate which healthcare plan will be the best value for us in the coming year. I'll never forget the first time I looked at various healthcare plans, HMO vs PPO, and tried to make sense of it. I had been in finance for a few years and it still gave me a headache. This piece does a great job of highlighting the different options.

The most overlooked benefit I see is the mega-backdoor IRA. Many employees with 401(k) plans have the option to contribute significant ($30k+) amounts to their 401k, then immediately roll those funds into a Roth IRA. The benefit here is that there are no income limits, like with regular Roth IRA's, and the contribution limit is significantly higher. It can be a very cool opportunity.

Remote work has changed our world. Now it's possible for workers to practice geo-arbitrage, taking advantage of big-city pay while living in small towns and paying small town prices. Research is showing that many workers are willing to trade salary decreases for increased workplace flexibility. The flip side to this is that workers in small towns are now able to compete for jobs nationwide, which in theory should increase the labor pool and reduce the gap between job seekers and hiring managers.

With the current state of flux, it will be interesting to see how things settle over the next five years. My expectation is that we'll actually see this change as a net-positive for workers post-pandemic. Add to this the incentives that many towns are paying for remote workers, and I think that workers are going to have more options than ever.

If you have any questions about these topics or just want to chat, let's set up a call.

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