Review – How to Retire Happy

How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire
by Stan Hinden

Stan Hinden, a retired financial writer and popular retirement columnist for the Washington Post, offers the inside scoop on retirement in his book, How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. He bases his advice largely on his own ups and downs after leaving the workforce. He breaks his advice down into 12 major decisions most retirees will face. At the end of each section, he includes a list of all the useful websites mentioned, as well as other suggested readings.

Hinden provides explanations of the financial tools you need for a prosperous retirement – 401(k)s, IRAs, Medicare, stock market investments – in easily comprehensible language. How to Retire Happy illustrates that anyone, no matter what their experience, can make good investment decisions, and keep their nest egg generating income throughout retirement.

Besides finances, Hinden has advice for a wide spectrum of retirement challenges: marital relationships, health challenges, estate planning – his 12 decisions form a comprehensive guide for life during retirement.

Hinden grounds his advice in his personal retirement story. He pulls no punches when it comes to the difficulties he and his wife faced when it came to investment difficulties and declining health.How to Retire Happy includes the author’s story of his wife’s debilitation due to Alzheimer’s, revealing the steep emotional and financial cost of her care. Hinden also details his experience losing $70,000 because of a classic investment mistake – trying to outguess the market. (The novice investor will benefit from learning that even a seasoned financial writer can make big mistakes.) These are just two of many personal experiences that Hinden shares to demonstrate the importance of maintaining a healthy financial portfolio throughout retirement.

My Take
Hinden’s advice is easy to follow, even when he uses financial jargon that may be unfamiliar to some. As someone new to the world of investment and financial portfolios, I found his advice engaging and easy to understand. No matter how much you’ve already planned, or how far along you already are in retirement, Hinden’s work is bound to breathe fresh air into your ideas about how to arrange your life and your finances, post-fulltime employment.

Critique
This book inspires and encourages retirees who haven’t yet decided how to manage their investments and savings. Savvy investors will want to look elsewhere for more in-depth advice.

Conclusion
Readers will appreciate the rich, personal detail Hinden uses to structure his writing. How to Retire Happy contains useful insights for anyone nearing retirement, and is a great place to start for anyone wondering how best to manage their finances during retirement.

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Content Notes:

Decision 1: Am I ready to retire? – This section offers 3 good reasons for retiring and 3 good reasons to not retire. For example, you feel ready to move on, but on the other hand, you know you’ll miss your colleagues. Hinden mentions the possibility for employment during retirement, with a more relaxed schedule that allows the retiree to keep up-to-date with what’s going on in their field. Hinden devotes a longer passage to another possible downside to not going to work every day. If you and your spouse are both retired, how will you arrange your lives for optimum domestic bliss?

Decision 2: Can You Afford Retirement? – Here the author discusses the possible hindrances of a fixed income. In retirement there are no raises, no bonuses at the end of the year. On top of that, Hinden urges the reader to consider what medical expenses could cost, and what Medicare won’t cover. While pensions provide a reliable source of income, many won’t adjust for inflation over the years. The author shares his experience discovering that his living expenses had gone up during retirement. Hinden offers advice about long-term budgeting before retirement, and the advantages and disadvantages with 401(k)s, IRAs and Roth IRAs. He also expounds on the benefits of a tax efficient mutual fund.

Decision 3: When Should I Apply for Social Security? – Hinden explains the purpose of Social Security, and how your monthly Social Security payment will be determined. In this section the author offers advice about the best age to collect Social Security, and takes the reader through the process of applying. Hinden also shares strategies for getting the most out of your Social Security payment. Then, he covers the problems the Social Security Administration may face, and unsuccessful presidential attempts to resolve the issue.

Decision 4: How Should I Take my Pension Payments? – You may have pension options to choose from. Hinden takes you through the pension plan benefit options he received from his Washington Post pension plan. He had to decide what level of spousal benefit his wife would receive, as well as the pros and cons of a monthly payment versus a lump sum. He talks about the concerns he still has, years later, about the option he selected. He also mentions how to find a lost pension, in case you worked for a significant period of time for a company that no longer exists.

Decision 5: What Should I Do with the Money in Company’s Savings Plan? – Here Hinden discusses in more detail the merits of a 401(k) plan. He reviews the options offered by his own employer- company match, as well as the option to invest his savings. He also discusses “My $70,000 investment mistake,” and offers simple rules to follow for investors who want to avoid making the same mistake. He explains how to withdraw money from your 401(k) to maximize its benefits, weighing the benefit of taking cash distribution versus putting the money in a rollover IRA. He also offers information about how to manage company stock and tips for avoiding capital gains taxes.

Decision 6: When Do I Have to Take Money Out of My IRAs? – To figure out when and how much to take out of the IRA, you must consult life expectancy tables. It is important to get this step right, or you will be penalized. Hinden explains how money you withdraw from IRAs will be taxed.

Decision 7: How Should I Invest in Retirement? – This section begins with the author’s experience calculating how much longer his savings would last. Hinden covers the Five Golden Rules of investment – rules complete newbies to the investing game can use to make wise decisions. Beyond the golden rules, Hinden advises readers to stay informed of the ebb and flow of the stock and bond markets. He explains the many benefits of a high quality dividend-paying stock portfolio. He explains the advantages of a fixed versus a variable annuity, as well as the benefits of a portfolio of exchange traded funds.

Decision 8: What Should I Do About Health Insurance? – To bring home the importance of health insurance, Hinden discusses his wife’s ordeal with breast cancer. Once in retirement, you no longer have your company’s health insurance policy, so in this section Hinden explains the basics of Medicare. Hinden explains the basics of Part A, B, C, and D of Medicare, as well as the possibilities afforded by a Medigap policy. Hinden discusses the advantages of a Medical Savings Account (MSA) through Medicare. He also covers why a Medigap policy could be turned down. For expenses that Medicare and Medigap don’t cover, Hinden explores the possibilities offered by private insurance companies.

Decision 9: What Should I Do to Prepare for an Illness that Requires Long-Term Care? – With Decision 9, Hinden gets into one of the more emotionally difficult parts of retirement, planning in case you or your spouse requires long-term care. Hinden takes the reader through the math the health care costs incurred by his wife’s battle with Alzheimer’s, and the process of picking a Continuous Care Retirement Community (CCRC). For CCRCs, Hinden goes over some different types of CCRC contracts you can expect to see. He discusses what Medicare and Medicaid won’t cover. He also discusses the difficulties of applying for a long-term health insurance policy, and the possibility of Federal Long Term Care Insurance (FLTCIP) for some federal employees.

Decision 10: Where Do I Want to Live After I Retire? – Hinden and his wife consider moving to Florida, for the sake of balmy weather and no state income taxes. The author explains how the idea of living apart from his children and grandchildren, and considering the burden of making new friends and adjusting to a new community, made him and his wife decide to stay in Maryland. He encourages his readers to take their time and do their research before deciding where to spend retirement.

Decision 11: How Should I Arrange My Estate to Avoid Taxes and Avoid Probate? – This section covers the arrangements every retiree needs to put in order. Hinden advocates making arrangements with a funeral home, locking in a price so relatives won’t have to deal with negotiations in the midst of grieving. Also, Hinden stresses the importance of preparing an advanced medical directive to make sure one’s wishes are known in the event of a health crisis. He discusses at length how to avoid probate and income taxes on an inheritance through the creation of a revocable living trust for each spouse, and how to make sure your estate gets to your intended beneficiary. He also reviews some stories of family strife created by ill-planned wills.

Decision 12: How Can I Age Successfully? – In this final section, the author discusses aging outside of finances. He talks about his own heart problems, and how he achieved cardiovascular health through a rigorous exercise regimen. He shares fears about memory loss, and the reassuring discussion he had with a memory expert. The reader is encouraged to find new modes of creative expression in the “liberation phase,” illustrated with examples of influential people who hit their stride in their 70s. How to Retire Happy concludes with “The Dos and Don’ts of Aging,” a few commonsense tips for aging gracefully.