No matter whether you're thinking about retirement or planning to work for years to come, it's never too early to start preparing for the future.

Careful planning can help make the upcoming years more comfortable and less stressful for you and the people you love. You can also take steps to protect your legacy for many years to come.

Choosing a place to live is one of your most important decisions at this stage in life. If you love your home and it's all paid off, you may want to stay right there. Maybe you've even joked that you're only leaving when you're carried out feet first.

If you feel this way, you have lots of company. Federal statistics show that more than 20 million people are older than 65. Of this group, 77 percent are homeowners and 84 percent own their home "free and clear," according to the National Council on Aging. What's more, an estimated 90 percent of senior homeowners want to remain in their own home. If you're among them, think about whether you'll need to remodel your home if you become disabled -- and to put aside money.

It may seem ridiculously premature to think about this, especially if you're fit and healthy. But if you have stairs in your home, quick -- answer this: What would you do if one of you couldn't walk and your bedroom is upstairs? Could you relocate to a room downstairs, or would you need to install a wheelchair lift in the stairwell? You should also think about remodeling at least one bathroom to accommodate someone in a wheelchair so that they can walk or roll in easily. And it's never too soon to install grip bars for safety. (For more information, check out our series on remodeling for disability.)

Besides putting aside money for remodeling, don't forget to plan for the day you may need a home health aide or nurse. If you're a homeowner with a large amount of equity in your home, you can take out a home equity line or a reverse mortgage to pay for caregiving costs. But in order to protect your assets for your children, especially if they are substantial, it's also important to check out long-term care insurance.

Some tips: Be sure that the long-term care company has a good track record, that it's been in the long-term care business for at least 10 years, and -- very important -- that the policy adjusts for compounded inflation. (For more information, please see our story on long-term care insurance.) If it doesn't adjust for inflation, you may pour money into a policy that may eventually pay for one hour of care a day when you actually need caregiving around the clock.

If you're of modest means, you may be able to spend down your assets and receive Medicaid for some type of long-term care, although the kinds of care may be more limited. Be aware, though, that new, stricter rules have been enacted that limit "spending down" in order to get benefits.

None of us wants to be a burden on our children, of course, but long-distance caregiving is often more stressful for children than helping out when they're close by. If your grown children have talked fondly about relocating in the same town and you love that idea, encourage them. The same goes for friends and siblings. Even if you never need their help, you'll get to enjoy a closeness that even the best phone calls and emails can't stitch together.

Many people decide to downsize their home after retirement. Smaller houses, manufactured homes, condominiums, and apartments are not only cheaper than larger houses, they require less maintenance and yard work. But your situation may change as you grow older, and you don't want to move before you've had a chance to explore your options.

An apartment in a senior complex is a popular option for retirees looking to scale back. Most complexes only allow residents who have reached a certain age, but they don't offer meals, medical care, or other services. Some apartments are equipped with handrails and other devices that may come in handy for older residents. And you can count on having much in common with your neighbors.

If you have the finances and the inclination, you might also consider looking into a senior housing community. Such communities often provide tennis courts, walking paths, dance and yoga classes, and other amenities. Like senior apartment complexes, they generally don't offer in-home care, so unless you have a private home health aide, they aren't a good choice for people who have trouble with daily tasks.

If the thought of living only with people your own age seems too limiting, you may want to check out other mixed-use communities instead. Some California developers are promoting urban condominiums for seniors in neighborhoods with young families (across the street from grocery stores and doctors' offices); these pedestrian-friendly "mixed use" apartment buildings are attracting interest from bakeries, wine bars, tea houses, and gyms. In some regions, including Washington state, developers are planning an enclave for seniors in an apartment complex with shops, a movie theater, and a water park, all connected by walking paths.. And if those projects still seem too limiting, and too commercial, more than 80 intergenerational communities have opened across the country, with at least one including a "spirit room" for prayer and meditation.

Still other seniors are pioneering their own visionary communes. In Davis, California, for example, a group of 12 old friends whose average age is 80 have pooled their resources to build town houses around an inner courtyard, a common house with a dining room for communal dinners, and a studio apartment for a skilled nurse to help provide nursing care to the group. This isn't quite the kind of commune the children of the '60s had in mind, but it should fulfill that passion for community just as well.

If you start having trouble cooking meals, getting dressed, or taking care of yourself or your home, you need to reevaluate your options. One choice you have is to ask relatives for help with basic chores. You can also hire someone to mow your lawn, clean your house, or help you with cooking, bathing, and dressing.

If you need daily help but aren't ready for round-the-clock medical care, you might consider moving to an assisted living complex. In some of them, you won't have to worry about meals or housekeeping, and you can get help with bathing and dressing if needed. Although such facilities don't offer daily medical care, there's usually a nurse on call. Medicaid or Medicare may cover some of the costs of assisted living, but many people have to pay out of their own pockets. Some facilities offer discounts to people who need relatively little assistance. Try to find a place where the residents feel at home and the staff encourages everyone to stay as independent as possible.

Be careful, though: When the General Accounting Office examined 60 assisted living contracts in 1999, it found that one-third of them contained "language that is unclear or misleading" and that 27 percent of the places surveyed had been cited for issues involving inadequate access to doctors, poor hygiene, medication problems, and neglecting to call 911 after a resident fell and severely injured her head.

Check background reports on the facility, and make sure that the contract explains exactly how you can be expelled from a facility. Many places discharge residents whose health deteriorates, for example, so make sure the contract spells out all possible reasons you could be asked to leave.

Someday -- hopefully not soon -- you may need more assistance or medical care than you can get in an assisted living complex. Some people in this situation need nursing home care. (For help choosing a nursing home, see our tips on what you should look at when selecting one, or go to http://www.medicare.gov/NHCompare.) Medicaid will help cover some nursing home expenses if you have a low income. Medicare will cover about 12 percent of short-term nursing home stays if you've been just been released from a hospital.

None of these housing options is especially cheap. Even if you're sailing into retirement with a hefty bank account, you'll have to start thinking about ways to pay for assisted living, nursing care, and other services that may become necessary as the years go by. If you don't have a large nest egg, careful planning becomes even more important. Consider scheduling an appointment with a financial adviser who can help you prepare for the years ahead.

It's never too late to get your financial house in order, and you can also take steps to protect the money you already have. Here are some money-wise tips:

•Watch spending. At any age, it makes good sense to inventory your daily expenses and look for easy ways to save money. (Those $3 lattes really add up!) If you're caught up in credit card debt, talk with a financial adviser about how to pay it off.

•Pay yourself first. That is, deduct at least 10 percent of your earnings before taxes and put it into a retirement account. Remember that you'll pay less on taxes as a result. Putting away 12 percent would be still better -- especially for women, who tend to live longer -- even if you have to put some into an after-tax account. Encourage your children to do the same. You'll feel more freedom to pay for, say, home health care if your children are achieving financial freedom on their own.

•Save. If your company has a retirement savings plan, such as a 401(k), don't just put away the amount an employer will match. Sign up for the highest possible pre-tax contribution.

•Pay off a mortgage. If you have a 30-year fixed-rate mortgage, call your bank to find out how much more you'd need to pay off the mortgage in 15 years. The monthly payment may be higher, but the long-term savings in interest payments could easily run into hundreds of thousands of dollars.

•Help your money earn money. Experts advise having three to 24 months' expenses on hand in case of emergency. That nest egg can earn 5 percent interest or more in a high-interest money market or savings account.

•Invest your retirement funds for growth. Plus, be sure to diversify. Financial advisor David Bach counsels deciding how much should be in stocks by taking your age and subtracting it from 110. He advises investing that much in a stock or stock-based mutual fund, and the rest in something less volatile, such as bonds or fixed-rate securities. Investing in certificates of deposit (CDs) or treasury bills that yield 5 percent interest is generally very safe, since your investment is backed up by the bank or government.

•Compound your savings. Find out how much money you would need in savings and investments in order to live on the interest after you retire. If you're still in your 50s, you may be able to save and invest enough to do just that, thanks to the magic of compounded interest.

•Avoid locking up money in "non-liquid" accounts. In general, you should be able to get your funds out in four days or less. And it always bears repeating: Never invest in a "get-rich-quick" scheme.

•Wait as long as possible to tap into any retirement accounts. Sure, that money is meant for spending during retirement. But for any money you withdraw before age 59½, you have to pay income tax on the withdrawal and a painful 10 percent penalty (unless that money is for one of three major "life events" -- paying college bills for yourself, your children, or grandchildren; using up to $10,000 to finance a first-time home purchase; or covering health insurance premiums, enormous medical expenses, or long-term disability costs).

•Budget. Before you open that retirement account, remember that any dollar you spend today will no longer be earning interest in the account. When you are ready to start living on your retirement accounts, budget yourself a specific amount of money for each year, and keep careful track of your spending. You may not want to start collecting Social Security benefits until you reach "full retirement age" according to the federal agency, even if you're no longer working. The earlier you start collecting Social Security, the smaller the monthly benefits.

•Protect the ones your love. If you are financially able, make sure you have good health insurance, disability insurance, and life insurance. A low-cost term life insurance policy will ensure that your partner and children are well taken care of in case you die prematurely. (Make sure the annual or monthly premium costs are fixed.) Even if you only insure yourself until age 70, that should give your children time to get their financial houses in order.

Buying long-term care insurance protects your assets for your children and serves as a hedge against future expenses. (If you are "house rich, cash poor," you can pay for a long-term care policy through a reverse mortgage on your home.)

The insurance covers many different types of care, including in-home physical therapy, in-home nursing care, hospice care, adult day care, assisted living, and nursing homes. If you buy it at a relatively young age, say, in your 40s or 50s -- you can lock in a low fixed-premium rate.

If you decide you're ready for a long-term care policy, shop around for a good plan. First and foremost, look into the track record of the insurance you buy. Check with an insurance rating company or a state agency that regulates insurers' performance to see if complaints have been filed against the company. Some companies have recently been investigated by state insurance officials for withholding reimbursements on legitimate claims or delaying payments during a critical time when a patient needs the money.

Next, look for a company that has been in the business for at least 10 years, carries hundreds of millions of dollars in policies, sells LTC insurance in every state, and offers home care among its benefits. Some examples are John Hancock, Genworth, and Metlife. Be sure to get a policy that cannot be canceled as long as you pay premiums and that adjusts for compounded inflation. You should also get a guarantee that your premiums won't increase just because you're growing older or your health declines. A policy that lets you choose your caregivers, rather than restricting you to hiring from a caregiving agency, is a good idea as well.

Remember that if you're unable to get long-term care insurance due to poor health or financial constraints, you have other options to pay for caregiving, including tapping into your home equity. Reverse mortgages have been used by 13 million Americans to cover long-term care expenses at home, according to a 2005 study by the National Council on Aging.

Unless you expect to live forever, you'd be wise to plan now for the time when you're no longer around. Specifically, you need to establish a will or a living trust. Far too many people burden their loved ones with uncertainty and sticky legal problems because they didn't take the time to put their wishes in writing.

A will is a document that explains how your assets and belongings should be distributed after you die. Although it's technically possible to write a will on your own (as long as it's witnessed and signed by two other people), it's best to hire an attorney to make sure your wishes are both clear and legally binding. You'll also have to name an executor, a person who will be in charge of following through on the instructions in the will and taking care of any financial loose ends you leave behind.

In many states, getting a will though probate court can be both time-consuming and enormously expensive. In these states, it's best both to have a will (in particular, to specify who will take care of your minor children) and to set up a living trust for most of your assets. This process puts all of your assets (except your retirement account, which can pass directly to your spouse) into one trust that can be divided according to your wishes after you die. Done right, a properly handled living trust is less likely than a will to go through legal proceedings or "probate." For this reason, a living trust can save your loved ones tens of thousands of dollars in attorney fees and get money to them immediately rather than months after you die.

Setting up a trust is fairly easy, but you have to be careful to make sure all of your important assets -- such as your house -- are actually included. As with a will, this shouldn't be a do-it-yourself project. Hire an attorney to make sure your legacy is secure.

Whether you decide to write a will or set up a living trust, make sure to include a "living will" -- instructions for your medical care if you're no longer able to make those decisions yourself. If a stroke or an accident leaves you brain-dead, for instance, someone will have to decide whether you should remain on feeding tubes and respirators. As the recent Terri Schiavo case tragically illustrated, the lack of a living will can lead to years of conflict.

As important as putting your end-of-life wishes into writing may be, it is even more important to be sure to discuss your wishes with your immediate family. The better your family members understand your firm wishes, the less likely they are to make decisions that go against them later on.

•Start thinking about where you want to live in the coming years. Will it offer the services you want or need? How will you pay for it?

•Take a look at your spending. Is there any way to save more money today as a cushion for later years?

•If you're over 60, start shopping around for long-term care insurance.

•If you don't have a will or a living trust, find an attorney immediately who can help you put your wishes in writing.

Healthy Aging 101, Part 1: Changing Your Thinking About Aging

Healthy Aging 101, Part 2: How’s Your Health?

Healthy Aging 101, Part 3: Get Moving

Healthy Aging 101, Part 4: Staying Connected

Healthy Aging 101, Part 5: Eating for Good Health

Healthy Aging 101, Part 6: More Rest, Less Stress

Healthy Aging 101, Part 8: Finding Deeper Meaning

-- Chris Woolston, MS, is a contributing editor to Consumer Health Interactive. A former staff writer for Hippocrates magazine, he has written for Health, WebMD, and other journals. He is also the co-author of Generation Extra Large: Rescuing Our Children from the Epidemic of Obesity (Perseus paperback, 2006).

References

First published May 29, 2007
Copyright © 2007 Consumer Health Interactive

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