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Mature Money | How to retire in our pricey paradise. | By Mary Eisenhart

A really nice house for less than $200,000, no state income tax, and Kaiser nearby for medical needs. Plus no sales-- tax within a quick drive. In short, a great retirement setup—that is, if you want to move to Vancouver, Wash.

Which is, in fact, what some clients of Hayward-based financial planner Ed Kofman did recently. Here in the Bay Area, though, everything from housing costs to taxes to health care is through the roof.

Many of us are here by choice, and want to stay—but is that possible, especially if we’ve been avoiding the whole issue, or have seen our nest eggs devastated by economic downturns? Here, local financial planning experts share their Bay Area–specific tips. Short answer: It can be done, but it takes planning, work, and discipline.

“People all across this country make ends meet with very little, so I don’t believe it’s impossible,” says Alameda resident John D. Lee, a financial adviser at SGC Financial in San Mateo. “But you have to be prudent with your money and live within your means. Too many people spend money they don’t have or spend all of their income rather than putting a good chunk away for retirement.”

The challenge for those of us who insist on staying in the lovely cities around the Bay is how to retire here happily, which requires re-examining the old rules, paying attention before it’s too late—and following through with your plans.


Outliving your money is a much greater hazard than it used to be. While the average life expectancy at the turn of the last century was 47 years, today large numbers of people live well into their 90s. For that reason, says Kofman, a certified financial planner at Cal Cap Planning in Hayward, “those contemplating retirement need to think in terms of a longer retirement period, perhaps 30 years or longer. The challenge is to give clients the best odds of having a predictable, inflation-adjusted income that won’t run out before they run out of breath.”

Hence, old-school conventional wisdom may not be a good fit for your particular situation. Your needs could call for an entirely different strategy from someone else’s; find a professional who can help you visualize different scenarios.

“Work with a good planner or wealth manager. You’ll want sophisticated software that can model out decades of the unknown, stress-test your results under various conditions, and handle various return, volatility, inflation, and even tax assumptions,” says Jennifer Schneidermann, vice president and financial adviser at Morgan Stanley’s the Praxis Group in Walnut Creek.

Before you can plan a strategy, you need to define your goals, taking stock of your projected income and expenses. “The key to a successful retirement is figuring out what you can realistically afford to spend in retirement, and actually doing that. This isn’t easy to do,” Schneidermann says.

“People often want to put their heads in the sand, but I believe that avoidance and procrastination are the biggest mistakes you can make,” Lee cautions. “One basic exercise everyone should do is understand where their money is being spent and divide up those expenditures into non-negotiable (rent or mortgage, taxes, health care, food, utilities, insurance) and nice-to-have (vacation, dining out, entertainment, gifts). You should have a strategy to at least cover your non-negotiable expenses plus inflation over your expected lifetime. Then move on to strategies that will also allow you to enjoy as many of the nice-to-haves as possible.”


Whether you currently have a comfortable nest egg or no savings at all, work to secure or improve your position. The time to start saving was, of course, yesterday, but today is better than tomorrow. Kofman says, “Putting money aside will be more difficult for those who lost jobs or income in recent years with the economic malaise we experienced. But a bigger nest egg on the verge of retirement will give them a more comfortable income and more options to consider.”

Some traditional advice still holds true: Put as much as you can in your employer’s 401K or into a Roth IRA. “A Roth IRA is one of the best vehicles to store and grow money,” says Schneidermann, “as money in a Roth grows tax free, is taken out tax free if certain conditions are met, and doesn’t have required minimum distributions.”

“You want to start to prepare your investment portfolio for retirement at least five to 10 years before you actually retire,” Lee advises. “I believe that there’s a huge difference in how your investment portfolio should be allocated when you move from working to retirement. In particular, a bear market early in retirement, combined with having to take withdrawals from your portfolio to live on, can have a dramatic negative impact on how long your money will last. You need a plan that specifically tries to address this risk.”

Many people start taking Social Security benefits as soon as they’re eligible at 62 instead of at their full retirement age (66-67 for most boomers)—but if they can wait, their benefit increases by 8 percent each year up to age 70.

And, while the natural instinct is to move our money to “safer” but lower-yield investments, increased longevity means that isn’t necessarily the best idea. “Over a 20- to 30-plus-year retirement time horizon, inflation will have a major impact on your lifestyle if you don’t find a way to grow your assets and income in retirement,” Lee explains. “The natural emotional reaction of clients as they get older is to start moving all of their money to safe assets like cash, CDs, and Treasury bonds. While that will help preserve your principal, you could likely move backwards relative to inflation. It’s an understandable human emotion (“At my age, I can’t afford to lose any of what I have”), but needs to be balanced with just as much concern for how one can get growth to combat inflation.”

If your health and energy allow, consider taking a part-time retirement job, maybe in a field you’ve always wanted to explore. After all, says Kofman, “the more additional income you have currently, the less you have to rely on your investments initially to finance your retirement, and the more you can allow them to grow.”


Renting vs. owning and whether to pay off the mortgage: Conventional wisdom used to dictate paying off your mortgage before you retired. These days, that strategy might backfire. “It’s very common for people in the Bay Area to have the majority of their wealth tied up in the equity of their home,” Lee warns. “For these people, it’s often hard to spend that asset without selling and moving to a cheaper area.”

Also, there might be a better use for your money. “Paying off your mortgage by the time you retire can make sense,” says Schneidermann, “but in some instances it’s better to fix your housing costs with a low-rate 30-year fixed mortgage on a reasonable balance, and keep the funds you would have used to pay off the mortgage in your portfolio growing or earning income for you. You can’t break off a piece of your house to buy groceries or fill up your car, so be careful about where your assets and net worth are, and make sure you have liquidity.”

It may make more sense to rent rather than own, especially if you have a rent-controlled situation, but each option has good and bad aspects: Renting leaves you more vulnerable to inflation, or being forced out if the landlord sells the property. Also, you’re not building up equity in your home. But you’re also not paying property taxes and repair bills. “If you are saving money each month by renting instead of owning,” Lee points out, “and you don’t spend that money, you can build up your own rental equity.”

Handling debt: “I think there is bad debt and good debt,” Lee adds. “Historically low, tax-deductible debt (such as a residential mortgage) is pretty good debt to have. I’m not a big believer in accelerating your mortgage payments if you have a low fixed rate that you can afford, even in retirement. I talk to clients all the time who want to pay off their mortgage before they retire.”

Says Schneidermann, “Carrying credit card debt is almost always bad due to the high APRs, and paying off all credit card balances is one of the first recommendations for anyone trying to improve their financial situation. 

“A key with debt is having an end game for how you plan to pay it off,” she adds. “For example, using a home equity line of credit to update your home’s kitchen and bathroom prior to listing it can make good sense, as ideally what you’re borrowing is tax advantaged, and additive to the value of your home. When you sell the home, you wipe out the debt and hopefully have sold for more than you would have without the upgrades. On the other hand, using home equity lines to buy cars, fund vacations, or pay for other lifestyle expenses is not a good idea.”

Paying for college: Just when you’re starting to focus on retirement, the kids are focused on going to college. Maybe you’ve had 529 accounts for them since they were tiny, and their college funds are in good shape; if not, consult your financial adviser about whether it makes sense to open such accounts now.

Heretical though it may sound, one planning decision is where paying for college fits in the non-negotiable/nice-to-have list. “I’m a proponent of worrying about your retirement first and kids’ college second,” Lee says. “There are loans, scholarships, and work-study for college. The same can’t really be said for retirement.”

Health care and Medicare: Whether you’re already on Medicare or won’t be turning 65 for a while, you need to configure a health-care plan that addresses your particular needs—and keeps up with ongoing industry changes. Consult a planning professional who specializes in health-care strategy.

“I generally recommend people plan to spend $300-$500 per month per person to supplement Medicare,” Lee says. “Medicare supplement insurance plans can help address the gap.”

Just as important, he stresses, is planning for long-term custodial care needs, such as home health care, assisted living, or nursing home care—an issue current and prospective retirees tend to ignore with dire effects. “It’s a ticking time bomb for many individuals, as well as the country as a whole. Unfortunately, it’s also a major challenge for the few insurance companies that offer long-term care insurance policies. But while many people have heard or assume that long-term care insurance is too expensive, policies or strategies can be tailored to fit a budget.”

Traveling now vs. later: There’s a strong consensus that retirees shouldn’t put off taking the trips of their dreams; the healthier and more energetic you are, the more you’ll be able to enjoy. “The caveat is to keep it within your budget,” Schneidermann reminds would-be adventurers. “Experiences do last a lifetime, but once the money is gone, it’s gone.”

If travel is important to you, plan for it. “Many people hold themselves back from certain expenditures like travel because they don’t know if they have enough money,” says Lee. “Thoughtful analysis and projections, while never perfect, can at least give you a higher level of confidence that you can afford to take the trip, or help you understand what tradeoffs you might need to make to do it (like work longer or spend less on other discretionary expenses).”

Many of us get a bad case of deer-in-the-headlights syndrome when confronting these seemingly overwhelming issues. But whatever the status of our retirement planning, we’ll fare better if we get proactive about ensuring that we get to spend our golden years in the place we call home.

Mary Eisenhart, an Oakland resident for several decades, considers the Bay Area home and wants to stay here.

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“People often want to put their heads in the sand, but I believe that avoidance and procrastination are the biggest mistakes you can make.” —Alameda resident John D. Lee, financial adviser, SGC Financial, San Mateo. Photo courtesy John Lee.





.“The key to a successful retirement is figuring out what you can realistically afford to spend in retirement, and actually doing that. This isn’t easy to do.”—Jennifer Schneidermann, Morgan Stanley financial adviser, the Praxis Group, Walnut Creek. Photo courtesy Jennifer Schneidermann.








.“The challenge is to give clients the best odds of having a predictable, inflation-adjusted income that won’t run out before they run out of breath.” —Ed Kofman, certified financial planner, Cal Cap Planning, Hayward. Photo courtesy Ed Kofman.