Retirees struggling to stay afloat: How to keep health and economic issues from draining your savings

By Carmen Cusido

Between caregiving, market fluctuations and health problems, some retirees are living on the edge. Here are some ways to protect yourself.

This article is reprinted with permission from NextAvenue.org.

Dorri Olds, a 61-year-old freelance writer and graphic designer, says she spent almost all of her savings renovating her New York apartment. In an emergency, she says she would sell it and consider retiring outside the US, perhaps to a place like Costa Rica.

But she’s also a caretaker for her 89-year-old mother, who lives half an hour away on Manhattan’s Upper West Side. Olds sees her mother’s health declining and worries that she too may develop health problems as she ages.

“Ideally, I would wait until 70 to collect Social Security; that’s when you get the most money,” Olds says. “But I’m also panicking that the politicians might understand. I’m working harder to find more freelance work.”

Left penniless in retirement

Seniors’ concerns about waiting to collect Social Security are valid given the growing number of older Americans who are expected to face health problems that are not fully covered by Medicare and could deplete their savings.

The number of Americans who are 75 and older is expected to double by 2040, according to the Center for Retirement Research at Boston College. He warns that as physical and mental health problems become more pronounced with age, retirees risk depleting their savings and investments.

Read: Many retirees can’t wait until 70 to collect Social Security benefits, but they could use this strategy

Olds bought her one-bedroom apartment in 1994 when she started working full-time. Over the past two years, she has spent about $65,000 upgrading the apartment, including a new kitchen, repaired ceiling in her bedroom, an upgraded bathroom and fresh paint.

This has resulted in her first experience with credit card debt, as her grocery bills and monthly maintenance fees have also increased. “My apartment is my nest egg,” says Olds. “I’m not going to walk out with a tin cup if I sell my apartment, but I don’t want to do that.”

Wanted to retire

On the other side of the country, Sasha Patterson says she didn’t choose to retire; circumstances forced him into it.

Patterson, 62, quit her job in New Jersey in 2018 to move abroad with her husband, Paul Seaver, who is also 62. At the time, Patterson had worked at the Center on Women and American Politics (CAWP) at the Eagleton Institute of Politics at Rutgers University for 20 years.

“I wasn’t growing in my job and my position was stagnant,” she says. Her husband had lost his job as a landscaper in 2016, so together they decided to move to the West Coast, where houses were less expensive. They sold their home in Maplewood, New Jersey and moved near Seattle.

Patterson says he wanted to do similar work to what he did at CAWP. She made connections at the University of Puget Sound. She attended a conference in February 2020 to continue networking and inquire about consulting work, but the COVID-19 pandemic shut down the venue just weeks later. By the time the U.S. eased quarantine restrictions about a year later, there was no position open for Patterson.

See: ‘Working longer is not a realistic cure for retirement uncertainty.’ It’s time to figure out how long you’ll really be working

Where is the work?

Disappointed, but not yet discouraged, Patterson continued to apply for jobs but received no response. She even removed her graduation dates from her resume, but got almost no response.

Patterson recently began collecting her pension from Rutgers, while her husband began receiving his Social Security benefits. In addition, they have a Roth IRA and some savings from the sale of their New Jersey home, which they put into a Certificate of Deposit.

Patterson says they can survive on a shoestring budget, but emergencies take a toll. When they needed a new roof, Patterson and her husband borrowed $12,000 from a relative.

“I live without a safety net and hope to make it until I start collecting Social Security at age 70,” Patterson says. However, she says the biggest benefit of living in Washington is the state’s Medicaid program. Called Apple Health, it offers free or low-cost coverage to those who meet eligibility requirements.

“We can’t afford a new car and it would be difficult to deal with another household expense, but at least we don’t have to worry about health care,” adds Patterson.

Dip postponed his departure

Despite their different financial situations, both Patterson and Bob Polans face common anxieties about retiring in 2023.

Polans, 70, a CPA and financial planner, advises future retirees. He also plans to retire at the end of the year. Polans, who works at Armanino LLP in Philadelphia, delayed his retirement last year, in part because of the stock market slump and uncertainty about what 2023 would bring.

“I’m seeing a trend among professionals with specialized skills, such as lawyers, accountants and investment advisers, who continue to work part-time in retirement to maintain a level of involvement in their careers and generate additional income” , says Polans. He adds that he too may continue to work a few hours a week after he officially retires at the end of this year.

Polans recommends that future retirees build cash reserves and avoid liquidating investments during market downturns. As for investments, Polans suggests finding the optimal way to withdraw from IRAs, 401(k)s and other tax-deferred retirement accounts, taking the tax bracket into account.

More: Feeling unsure about retirement? 6 ideas to get stuck

He also advises balancing withdrawals from savings and retirement accounts and finding a strategy that minimizes the income tax hit during your retirement years. He adds that it’s challenging to plan around health issues, especially during retirement.

“You can’t keep working if you’re not healthy enough to do it,” says Polans.

One way to prepare for potential health problems in retirement is to buy long-term care insurance, says George Nshanyan, 51, a financial adviser and CFP in the Northridge section of Los Angeles. It’s expensive, but he says unforeseen medical expenses can lead to bankruptcy.

See: Do you need $3 million to retire?

Three categories of pensioners

“I find that people fall into three categories,” says Polans. “One is the higher net worth individuals who have accumulated enough assets and can afford to ‘self-insure’ and pay for such expenses when it comes.

“On the other end of the spectrum,” he continues, “are those who can’t afford any kind of insurance — there’s no room in the budget.”

“For those in the middle,” he adds, “there are a variety of options to plan for medical contingencies, including strategies and products that are not traditional long-term care insurance.”

There are government programs for those who cannot afford long-term care insurance. “In California, for example, Medi-Cal can pay for long-term nursing home and home care costs if you can’t afford a nursing home,” says Nshanyan. “However, these strategies need to be in place before the need arises, so planning is essential.”

Carmen Cusido earned a bachelor’s degree from Rutgers University and a master’s degree from the Columbia School of Journalism. Her work has appeared in Newsweek, Oprah Daily, Refinery29, Health, NBC, CNN, NPR, Cosmopolitan and other publications.