Bankrate.com
How to retire well and well off
Tuesday February 26, 6:00 am ET
Alanna Nash
According to a statistic in their book, 57 percent of seniors have assets below $5,000, or less than the cost of one month of nursing home care. And only 19 percent of elderly people claim assets equal to three or more years of the average cost of nursing home care.
"The problems we have in America with obesity and the fact that we're just eating up Medicare and Medicaid with medical expenses because we're not in good shape amounts to a national catastrophe," says Rettick, CEO of Nashville, Tenn.-based Covenant Reliance Producers. "The No. 1 fear used to be dying shortly after retirement. But that's been replaced by the fear of outliving one's assets."
Your health and your finances are intertwined, the book insists, and lack of physical and fiscal fitness is all about risk. Follow these 8 steps, the authors say, and you'll be ready to leverage your longevity.
8 steps to fitness
1. Eat right: long-term insurance for your body
One of every five Americans -- approximately 72 million people -- will be 65 or older by the year 2030. What you do now determines if you are physically or fiscally flabby, the authors say. This step offers instruction on what to eat, how to prepare it, and what vitamins and mineral supplements will help insure your health.
"I just bought a new Corvette," says LaLanne. "Would I put water in the gas tank? How about your human machine? You put the wrong fuel in the human machine, and it's not going to run properly. We have more fat American people than ever before in our history. Did you ever think about 'FAT?' Fatal. Awful. Trouble." Rettick, 54, has adopted his colleague's advice, shedding 20 pounds in the last year and a half.
"I started thinking, 'I'll just eat smaller amounts,'" says Rettick, "but that didn't work because I still loved the fries and hamburgers." When eating in restaurants, Rettick says, he now asks the waiter for suggestions for low carb, low fat foods. "If I'm going to cheat a little bit, I have two or three pieces of dark chocolate at night. Everything in moderation."
2. Exercise for life -- building your body's bank account
Being fit prevents diseases, says LaLanne, and the dividends include saving on medical expenses and ultimately, long-term care costs. In Step 2, LaLanne offers common sense, easy head-to-toe exercises and stretches for men and women.
"Everybody has an excuse: 'I've got a little pain my back, and I can't exercise,'" LaLanne mocks. "There may be 10 exercises you can't do, but there's 100 you can do. Get in the pool! If your spine is screwed up, you can still work your legs and your arms, can't you? You've got 640 muscles in your body, and every one of them is different. I'm not as strong as I was when I was 21, but I'm going pretty damn good for 93. That's what counts."
Rettick found he couldn't keep his commitment to the health club, so he installed a small gym in his house, walking the treadmill 30 minutes every other day, and lifting weights on the alternate days. "Everybody has to find his optimal time to work out. You just have to find out what it is you're willing to do, and make a commitment to follow through. No matter how far down you are physically, exercise can immediately improve your life."
3. Think positive -- you can reverse the aging process
The most important commitment to getting your body or your bank account in shape, the authors say, is to replace the "I can't" mind-set with a positive attitude. In Step 3 LaLanne and Rettick address the defeat of negative self-worth and depression, and encourage social connections and keeping an active mind.
"Our big message is that it's never too late, no matter what age, to control your health and your wealth," Rettick says. "We also want to see you get excited about the better person you can become, both from the physical side and the financial side. You just have to make small changes." No matter how bad you're dug in financially, he says, you can dig out, as Rettick did in the early 1990s when he was two mortgage payments behind and saddled with mounting credit card debt. Then he remembered the positive thinking books that inspired him as a young man: "Think and Grow Rich," by Napoleon Hill, "Psycho-Cybernetics," by Maxwell Maltz, and Denis Waitley's tapes on the psychology of winning.
"To maintain good physical health," LaLanne says, "the correct mental attitude has to go along with it."
4. Plan ahead -- peace of mind and financial security is worth it.
Peace of mind equals quality of life, says Rettick. "If you don't pay attention daily to your body, you won't live long. If you don't pay attention to your finances, your money won't last long. And if you don't do either, you're at the mercy of charity." This step covers the basics of investing, and points a finger at financial sharks.
Rettick became interested in financial services and retirees after watching his own family struggle in the 1980s. First, his maternal grandmother was diagnosed with Alzheimer's, and over the course of seven years lost not only her mental and physical capacities, but also her finances, and ended up living with a relative. Then in 1986, both of Rettick's paternal grandparents became ill and entered a nursing home. His grandmother lived only two years, but his grandfather, "being a tough old German," spent 12 years in private care.
"I learned firsthand how without proper planning you lose everything. You become a prisoner of the state, almost. That just really got under my skin, and I developed a passion for helping people avoid this process. Because with the proper steps, you don't have to go through this. Now I tell people how to avoid paying unnecessary taxes, how to avoid probate, how to stretch assets to last an entire lifetime."
5. Insure your future -- for long-term care
"In my speeches to seminars or groups, I'll say, 'We depend on insurance for a lot of things in our life. How many of you have life insurance?'" Rettick says. "A good amount of hands go up. 'How many have automobile insurance?' All their hands go up. 'How many of you have homeowners insurance?' All their hands go up. Then I'll say, 'All right, how many of you have something will affect one of every two of you, which is long-term care insurance?' And only three or four hands go up. It's interesting how we insure the things that have a low likelihood of happening, but don't insure the one thing that has a high likelihood of happening. People don't want to think about ending up somewhere like assisted living or a nursing home. But almost half of those Americans who are married and reach age 60 will live to age 95.
"If you buy a long-term care insurance policy, you want to get as close to what the true cost of care is today as you can. And make sure you have an inflationary rider because the experts say that with inflation, the cost of care today will double in 10 years, and potentially triple in 20 years. I would shoot for the moon and get lifetime coverage, say $140 a day with a 5 percent inflationary rider. That would be ideal."
The best line of defense is to have a good long-term care policy, Rettick says. But according to AARP, about 25 percent of all applications from ages 55 and above don't qualify because of pre-existing conditions. One possible alternative is a modified endowment contract, or MEC, a life insurance contract that is similar to an annuity in terms of tax-deferred accumulation of your initial premium. However, in an annuity, if the owner passes away during the annuity's accumulation stage all deferred income taxes on growth become due. MECs can avoid that by including a "rider" designed to pass the entire account value to your beneficiaries income tax-free.
6. Annuities -- the path to retirement security.
Annuities often get a bad name, if only in the press, says Rettick, primarily because they're subject to ordinary income taxes, instead of lower capital gain treatment.
"But Albert Einstein said the eighth wonder of the world was the miracle of compounding interest," Rettick says. "So even after paying taxes, you're going to have more money to spend than if you had that money in the bank in a CD, where you're paying taxes every year on that interest. For money that you don't want at risk, this is an ideal account." Rettick advocates fixed indexed annuities which are tied to a popular equities index such as the S&P 500.
7. Investment management -- maximum returns, minimal taxes, fees
"When you go looking for a financial adviser, you'll find there are lots of different designations out there, some of which are important and some of which are not especially valid," says Rettick. "Look for somebody who is insurance and securities licensed. Your normal CFP doesn't understand Medicaid. If you ask somebody what he specializes in and he says, 'I help anybody age 20 to 100,' then he's a generalist, not a specialist. Find somebody who focuses on the pitfalls of retirement and the challenges of making sure your money lasts, especially if you have a catastrophic illness.
8. Tap your home's equity -- you've earned it
"Reverse mortgages once looked like a fad, but they are now endorsed by the government," says Rettick. "If you have a house that's worth $200,000 and it's debt free, that's a good thing. The bad part is that it's not generating any income. If you don't need any additional money, then leave it alone. But if someone needs to pay for long-term care or supplement his Social Security income, a reverse mortgage company will either provide a lump sum of 60 (percent) to 70 percent of the house value, or a monthly income stream that will last for life. Once that person passes away, the house is sold and the company recoups its investment plus interest. The balance goes to the heirs. However, in some situations, you might want to compare an equity line to a reverse mortgage, even though the equity line might have a high interest rate."
