Aging in the 2020s isn’t how Grandma aged

Picture for a minute how your grandparents and great-grandparents lived when they were 60 or 70 compared with how you (if you are a senior) or your parents live today.

My grandfather retired as a federal agent when he was only 58 years old. He enjoyed his hobbies, church, occasional social outings (and a lot of TV) until he passed away 39 years later.  Forty percent of his life was spent in quiet retirement.

Times have changed. We see rock stars touring into their 80s. Three famous actresses, ages 82, 74, and 67, hosted a video chat this month about the environment that drew more than 500,000 viewers. Both presidential candidates are well into their 70s.

One of the benefits of social media is how it has expanded our view of what is possible, especially as we age — and it’s not just about celebrities.

Recently, I joined a Facebook support group for healthy eating. It was surprising how many of the participants had lost drastic amounts of weight (some more than 100 pounds) in their 60s and 70s. Many had completely changed their lives in the process.

Some had carried the excess weight and had been sedentary for most of their lives. Now, many were participating in activities like biking, hiking and water sports. One woman took her first steps after being in a wheelchair for 18 years. The host of the group confirmed that the average age of the plan participant was old enough to be a member of AARP.

There are financial and tax planning implications for this more active, aging demographic. Conventional planning has generally focused on younger families to help them secure their future with investment vehicles for their retirement and insurance.

Planning for seniors, called eldercare, focuses on long-term care and estate planning. What about planning for those who are active now into their 70s and 80s and beyond?

Should I retire?

If you are part of this new aging population, a crucial planning issue to address with your professional team is when (or if) you are going to retire.

Historically, people would retire in their early-mid 60s when they were entitled to receive retirement benefits from their employer and were of age for Social Security benefits. Seniors had to learn to live on a fixed income that was often insufficient to live comfortably. Unfortunately, continuing to work to earn extra income was not usually an option. This changed when mandatory retirement became generally unlawful in the U.S.  and as demand for workers increased.

Now, with a little planning and flexible working arrangements, you have the choice to continue to work for as long as you are able, if your work gives you satisfaction or if you need the income. For instance, one still very sharp 79-year-old attorney came out of retirement a few years ago and now works mornings only. He takes only cases he finds interesting, enjoys the mental stimulation and friendships with his colleagues and always has time in the afternoon for a round of golf.

One client was an expert in a highly technical and physically demanding job. He negotiated a long-term consulting agreement when his employer urged him to stay on even though he felt the job had become too physically demanding. He now trains younger staff and performs quality-control inspections. His income is equivalent to the younger full-time workers, but he only works two days a week and does none of the heavy lifting.

If you own your own business, consult with a valuation expert several years before you plan to retire and work on building the value of the company to potential buyers. You can include in the sales contract a consulting agreement to stay on for as long as it makes sense.

We negotiated a “golden parachute” for a 55-year-old software developer. There were two unusual aspects of the agreement. Included in his contract was a developer license and updates to the software he had co-authored for life. Also, it was agreed that he and his wife would enjoy the same health benefits as the other employees until they qualified for Medicare.

Due to his agreement with the company, the developer made substantially more income during his 20 years of “retirement” as a consultant than he did during his 30 years as an employee. Although he was self-employed, he and his wife had the security of group health benefits, and he saved over $120,000 every year on software licensing fees.

Where should I live?

Another significant aspect of planning is to decide where (and how) you want to live. RV-ing and owning winter and summer residences have been around for a long time. But the attractiveness of spending winters in the desert or Florida may now be waning with news reports of shorter, mild winters and more frequent, powerful hurricanes. Investigate new, lesser-known opportunities for senior living.

Typically, retirees take into account their preferred climate, location of grandchildren, safety and recreational activities when choosing a place to retire. You should also consider tax rates, cost of living, pension tax breaks and opportunities to make extra cash with your hobbies when deciding where to live.

There are now towns that cater to seniors with particular hobbies. For example, Hamilton, Missouri, is considered the world’s capital for quilters. Many of the residents earn additional income selling their quilts.

There are popular YouTube videos made by older couples who have decided to live very well on fixed incomes abroad. Some have become full-time volunteers or missionaries (with the associated tax breaks). Others have become “cruisers,” deciding to live and travel on their sailboats full time. Many have circumnavigated the globe, and some self-isolated this year in the Caribbean. Even if these alternative senior living arrangements seem far out, the videos are entertaining.

Other new housing arrangements that offer social and financial benefits closer to home include tiny houses, university-based retirement housing, co-housing and “multi-gen” housing. Almost one-quarter of the population will be over age 65 by 2060. Employment and housing opportunities for our aging population are expected to continue to expand and evolve over this century.

So, there is nothing inherently special about the historical retirement age of 65. Many of us will live much longer, active lives, and can do so in good health. Maybe 80 will be the new 60?

Michelle C. Herting, CPA, ABV, AEP specializes in estate, trust and gift taxes, and business valuations. She has three offices in Southern California and is president of the Charitable Gift Planners of Inland Southern California.

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