Living long is great, but running out of money in your golden years is not that great
On any sunny weekday morning, you are at work sitting in an office with or without a window, while I am on the deck in T-shirt and shorts, sipping my second cup of tea or coffee and leafing through the daily paper or doing other pleasurable things like sending you this e-mail or cycling through the woods. You had to put a suit and battle rush hour, not me. No more memos, no more bosses and no more 9 to 5. Thanks to the UN pension - you too will be able to retire and live without financial headaches.
If you squander the pension lump sum[i] and if you find yourself unable to survive on the reduced pension, you have ruined your financial future.[ii] You will have to return to work and miss, ‘ah, that good life.’[iii]
Of course, it is very easy to go out into retirement between the ages of 55 to 62 and think that you can have a great life and a secure one. Sure, you can. The good news is that you will be living longer. The bad news is that many more of you will survive mortality risk only to face longevity risk instead. To oversimplify, mortality risk is the risk that you will die and your family will run out of money; longevity risk is the risk that you will live a long time and run out of money yourself.
The UN retirement age will be 60 to 62 for most of the UN staff. Today, many retirees will live into their 90s- and a significant number will reach 100. These trends create a tricky financial future. That leads to the next vexing question: What financial arrangements have you for long-term care?[iv] Providing assurance for long-term care needs would provide good financial security for the future. The cost of such care of course, depends on the social structure of the country of residence and the cost of health care on location.[v] However, in the USA, such care can cost anything from $50 to $70k per year today. In addition, health costs outpace inflation.
Providing for long-term care can be easy business if you have the money. One easy way is to seek private insurance at a high premium cost. Undoubtedly, neither AFICS nor AARP addresses the issue of long-term care to the UN public at large. Those organizations are great contact points for sellers to meet buyers. If the UN and the allied agencies could negotiate a group plan for long-term care, (just like the dental and medical plan) then many retirees could also join in and save a bundle on high premiums and the harassment that goes with seeking a private plan.
Many people underestimate the possibility of needing long-term care at some point. Even when people understand that something is a risk, some of them will say, ‘Well, it is not going to happen to me.’ Nevertheless, these are highly variable expenses, and many people would not be able to afford it if they need a lot of care.
Like most other strategies to reduce financial risk, long-term care is not for everyone. Relatively few people buy it or plan for the cost of extensive long-term care. Retirement experts say that long-term care works best for middle class or upper middle class, rather than the truly rich and it is better to buy it early than late. In addition, the other risk is that if someone comes upon a life-threatening disease or injury (that causes severe disability before taking long-term care insurance) and becomes uninsurable, then that person is in a dire financial situation, as no insurance company would insure such an individual. Most people think of long-term care needs as an old-age problem. An accident can bring anyone of us into old-age infirmity in a second.
I have written this short paper today to encourage you to investigate the possibility of a group plan for long-term care insurance as a benefit to UN staff. You will benefit your staff now and in the future and current and future retirees. As a freelance writer, I write on many subjects, akin to providing seed to farmers and hoping they would cultivate and grow the fruits. I hope you will take up this matter with your staff associations, Administration and the UN Secretariat and plant the seeds for long-term care interest to grow. If you are already pursuing this concern, thank you.
Merrill Cassell
UNICEF Alumni
PS: This article may address the issues concerning staff and retirees in living in expensive idustrialized worlds. However, it does not prevent expansion of this thinking to UN staff and retirees living in developing nations.
[i] Some people get a big pot of money and do not know what to do with it. They spend it all, risk it all, or relatives devour it all.
[ii] Many UN staffers do not realize the value of a full pension (other things been equal). Financial experts will encourage you to take your lump sum because they want to invest it so they can earn off your money. It is also tempting for UN staff to take a lump sum and acquire all the good things they were waiting for (ah, the good life). Consider your pension like a fixed annuity, you get a predictable monthly check for a long time – until you die, and your spouse gets 50% of the full pension in case you go to heaven first, if that is the option, you choose (meaning by the good deeds you did on planet earth). Questions of Full-pension Vs. Reduced Pension have already been covered in a previous article in Staff News (Pension Payout: Making the Right Decision, SN Issues Three and Four, December 2001).
[iii] For some folk, continuing to go back to regular work (what they did before) may be the good life for them. Some may go back to work for financial necessity while for others there are other sociological reasons.
[iv] Long-term care insurance policies are very tricky. There can be several exceptions to the fine blue print. When it comes to extracting money out of insurance policies, it is only then that one really learns the rules and exceptions, when it is sadly too late to make amends.
[v] There is a silent and unspoken administrative procedure happening in the health care industry now dubbed “rationing.” When your insurance cannot cover certain medical costs, health administrations may deny you certain tests and medications without you even knowing of it. The same thing can happen when the government is meeting all your health care needs. Unfortunately, some times life becomes an economic question: Is it better to spend X dollars saving the life of a 20 year-old person as compared to a 70 year-old person. The other problem of course is the long waiting time when government is the sole provider of medical services. That reckons why so many Canadians will cross the border to have some medical procedures done in the USA for a fee.
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