One of the
first things I did, even before meeting with my newly chosen financial advisor,
was put together spreadsheets listing assets and liabilities (and calculating
my net worth), and my income and expenses.
Besides writing them all down in one place, I had to make a number of
decisions on how to handle them.
Our house
We built our
house in 1977 and had made many improvements to it over the years. But we paid off our mortgage in 1995, a year
before our oldest son went off to college.
But I had taken out a home equity line of credit which I had used to
finance many of the improvements. So to
be debt free I needed to pay that off. I
paid it off by cashing in the smaller insurance policies I had, and by selling
all the US Savings Bonds that I had bought during the years when the company
offered them at work (1992-2000). This
made me debt free.
Since then,
one other change has been made to the house.
One of the major additions we had made was to add a second story to the
garage wing of the house that could eventually be used as a “mother-in-law
apartment.” There was a separate stairs
and entrance at the back of the garage and it was set up to contain a separate
kitchen and bathroom, making it pretty self-contained. There was also an access door to it from the
second floor in the main house.
However,
since both my and my wife’s parents remained in their own homes until near the
end of their lives (three of the four died at home, only my wife’s mother went
into a nursing home for the last year of her life), we never used it as an
in-law apartment. Instead, when our
daughter got married, she and our son-in-law began living there and they have
now added four grandsons to the household.
So not only are they using all that space, but they have taken over the
upstairs room that has the access door.
The boys are now getting bigger and the youngest two are outgrowing the
crib and bassinet they are in, so we are converting one of the downstairs
bedrooms to a new master suite for my wife and I. This will give our daughter and family an
additional bedroom upstairs and give my wife and I single-level living, a good
thing to have as we get older and navigating the stairs gets more
difficult.
Insurance
Besides the
smaller policies I sold to pay off our home equity line of credit, I still have
the policy that I bought upon graduation from college over 45 years ago. The policy is with a mutual company, so the
means that annual dividends are distributed to the policy holders instead of to
stock holders. I’ve been using these
dividends to pay my annual premiums for the past two decades, so the policy
basically pays for itself. As the
premiums get larger with my aging, it recently passed the point where the
dividends are large enough, so my cash value will slowly decrease in the coming
years. But I bought it as insurance, not
as an investment, so I will keep it that way for the near future.
As I
mentioned earlier, we also each have long-term care insurance policies. These are not designed to pay for all the
costs in the event that either of us needs to go into a nursing home, or needs
home health care, but they will provide a base level of support. My daughter, who still works in the LTC
industry, tells me that they are good policies to have.
Other Assets and Liabilities
Part of my
retirement package was the continuation of my health insurance until the age of
65 when Medicare would kick in. I’ve
discussed how I made the decision on what to do about Medicare in another blog
post, so I won’t repeat that here.
Although my
IRA is technically another asset, I’m going to discuss it under the income part
of our finances, since that’s one of the sources of income post-retirement.
Chief Learning
Planning for
retirement is not just about income and expenses, your assets are important too
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