Those shiny brochures with the ubiquitous picture of retired couples strolling on the beach beside their golden retriever are inspiring enough. It’s a definition of retirement about which few would complain. But, that definition doesn’t meet everyone’s expectation nor their potential.
Many today, a la the FIRE (financial independence, retire early) movement, are challenging the belief that we must work into our mid-60s to retire happily. On the flip side, many retirees are working in their later years, even if that work is part-time or charity work.
Likewise, it’s time for LGBTQ people to look at our reality and create our own definition of retirement. Our definition, too, may not look like those slick brochures. Older LGBTQ people, for example, are more likely to be single, live alone, be childless and have fewer resources in retirement than our straight peers. More should be done to change that outlook of retirement for the generations that survived HIV/AIDS, increased LGBTQ acceptance and earned marriage equality.
Studies show that a leading financial concern of LGBTQ people is having enough retirement savings to support us through retirement. This concern is based on a few factors unique to us.
The first is that, just as there’s a gender pay gap, there’s a sexual orientation pay gap. Studies show that LGBTQ people, on average, earn less than our straight peers. This makes it harder to save for retirement because a higher percentage of our income, relative to our straight peers, goes toward covering everyday expenses. Because of conscious and unconscious biases, those who appear to be or sound like they’re LGBTQ, are less likely to be hired or promoted, thereby making it harder for LGBTQ people to gain a financial edge. Therefore, it’s unlikely that the sexual orientation pay gap will disappear any sooner than the gender pay gap.
The second is that due in part to the HIV/AIDS crisis of the 1980s and 1990s, many LGBTQ people, especially gay men, didn’t plan to live beyond our forties or fifties. There are many gay men in their 60s and 70s alive today who didn’t expect to reach such milestones and consequently didn’t save enough retirement money. This carpe diem mentality is still pervasive in the LGBTQ community, and changing the associated behaviors is taking time.
Finally, while having children doesn’t guarantee a support system for retirees, it increases the chances of someone being around to care for us when we’re older. Because up to 60% of LGBTQ people either don’t or won’t have children, we must prepare accordingly. Because LGBTQ people can be denied services, including nursing home care, in up to 30 states within the U.S., many LGBTQ people either don’t pursue necessary services or go back into the closet when it’s time to enter a nursing facility.
While times and perceptions are changing, it’s a long arc toward justice as Dr. Martin Luther King once said. Until full equality is achieved, here are nine measures LGBTQ people can take to make retirement easier.
Have Emergency Savings, Even More than the Standard Recommendation
While this recommendation won’t surprise you, it can’t be emphasized enough. Many of the risks above and below are minimized with emergency savings. Because LGBTQ people are at greater risk of being denied employment, services, and housing and because some protections below often aren’t available immediately, it’s helpful to save between six to 12 months’ worth of living expenses in an emergency savings account.
This, of course, is easier said than done for many. That’s why implementing basic personal finance measures, such as budgeting, living below one’s means and spending consciously, is so important.
Pro Tip: Establish either a recurring direct deposit from your employer or electronic funds transfer (EFT) from your bank account into another, dedicated account with no check writing or debit card features.
Invest as Much Attention to Your Cash Flow as Your Retirement Savings
When talking about retirement savings, we’re often talking about investing a portion of each paycheck into a company sponsored retirement accounts, such as a 401(k), or an individual retirement account (IRA), such as a Roth IRA. Those vehicles are helpful but less so as more of the retirement savings burden is being put on individuals with fewer companies offering defined benefit plans, such as pensions. These accounts also offer inadequate retirement security for low-income earners.
The good news is that focusing on your cash flow can compensate for inadequate retirement savings. Robert Kiyosaki, of Rich Dad/Poor Dad, defines wealth as “having enough ‘investment income’ to cover your living expenses.” The greater the investment income, the less reliance is needed on earned or employment income. This diversity of income streams is how many in the FIRE community are retiring earlier than is traditional or giving up 9-to-5 jobs for something better.
There are three types of investment income. The first is paper assets, such as stocks, bonds, mutual funds and exchange-traded funds (ETFs). These are usually housed in the aforementioned retirement accounts.
The second is real estate investments, such as apartments, buildings, and houses. Real estate investing can be done by being a landlord, fixing and flipping homes, living in and flipping homes and other methods.
Finally, there’s investment income generated by personally owned businesses. Such businesses can be either a full-time job, for your primary income, or a part-time job, as supplemental income. A business you own can also be sold when needed to add to your retirement nest egg.
Pro Tip: Tools like Mint let you easily monitor and track your cash flow so you can adjust it according to your retirement needs.
Purchase Long-term Care Insurance
Long-term care insurance (LTCI) issues payouts for medical and assisted living expenses when there aren’t family or friends available or capable of offering such care. Each LTCI plan is different but most trigger within 30 to 180 days after a long-term care incident.
Incidents include serious falls, illnesses or other serious medical concerns. Until LTCI triggers, patients are responsible for covering their own expenses. Those prepaid expenses may or may not be reimbursed by the LTCI company. Both the delay between qualifying incidences and payments, and the risk of certain care not being reimbursed, underscore the importance of having the previously recommended emergency savings.
Pro Tip: The younger you apply for LTCI, the greater your chances of qualifying because you’ll have fewer incidences of medical issues that may disqualify you.
Purchase Life Insurance with an Accelerated Death Benefit Rider
We often only think of life insurance when we marry or start a family, but today’s life insurance can provide extra security for those without the traditional nuclear family.
Many life insurance plans come with an accelerated death benefit rider. An accelerated death benefit rider permits tax-free coverage for medical care under certain “critical” or “terminal” conditions. This benefit lets policyholders borrow against their life insurance policy if they’re diagnosed with a terminal or life-threatening illness and acts as an extra layer of care during the final stages of a patient’s life.
Pro Tip: If you’re young and can’t afford whole life insurance, investigate “term life insurance with return of principle” that will be reimbursed to you if your principle goes unused.
Designate a Power of Attorney
Despite marriage equality, family members may still deny the legitimacy of our relationships, which is why powers of attorney (POAs) are important.
There are two kinds of powers of attorney. A financial POA designates an agent to manage your financial matters. A medical POA designates an agent to manage your medical needs. Both agents may be the same or different persons and may or may not be your partner or spouse. Regardless, designating POAs makes clear who’s responsible for making decisions if you become temporarily or permanently incompetent or incapacitated.
Choose either a durable or springing for both types of POAs. A durable POA authorizes an agent to immediately act on your behalf if you become temporarily or permanently incompetent or incapacitated. A springing POA authorizes an agent to act on your behalf only if you become permanently incapacitated, as determined by a medical doctor. Both durable and springing POAs cease when you die.
Pro Tip: Despite the urge to choose a spouse or partner, who’s likely about your age, as your POA, choosing someone younger will help ensure someone will be available to manage your affairs according to your wishes.
Draft a Living Will
Living wills outline medical directives, including end-of-life wishes, if you are permanently incapacitated. These directives should include whether you want to be resuscitated or designate DNR or “do not resuscitate” instruction. Include other preference, such as your choice for the use of feeding tubes and blood transfusions.
As same-sex marriage isn’t recognized worldwide, it’s important for same-sex spouses to draft and carry these documents when traveling outside of the U.S. Even when traveling within the U.S., there are states that haven’t updated the language in their laws to accommodate same-sex marriage. Legal documents, such as living wills, offer the added protections same-sex spouses need.
Pro Tip: Mail copies of your living will and designated POAs via certified mail to family members who might challenge the rights of those you designate to make decisions on your behalf.
Archive All Your Legal Documents, Including Your Marriage License
None of these legal documents help if no one can find them. Save your spouse and the rest of your family distress by archiving all your legal documents in an accessible location and let your loved ones know where to find them.
Pro Tip: Tools like DocuBank and LifeLink electronically store official and legal documents, including health care directives, emergency medical information, and marriage licenses to make them easily accessible from anywhere in the world when you need them.
Research LGBTQ-friendly, Long-term Care Facilities
Updates to the Equality Act to include sexual orientation and gender identity protections have been stuck in Congress since 2015. Thus, most states don’t have protections for queer people in institutions such as nursing homes and there’s inadequate staff-training to care for LGBTQ people. Consequently, we can still be separated from our spouses or forced back into the closet when we need such care.
The protections the Equality Act would provide would eliminate risks that our community faces, including denial of services and physical and mental abuse. Unfortunately, because of the limited options for such services and facilities, they’re expensive.
Maximize Your Social Security Benefits
Two of the many rights to which same-sex couples gained in June of 2015 with marriage equality are the Social Security Spousal and Social Security Survivor Benefits.
The spousal benefit pays the greater of 100% of yours or 50% of your spouse’s earnings while they’re alive, as calculated by the full retirement age of 66 years and two months or 67, as of 2018, depending on your year of birth. Even if one spouse never worked, they’re owed spousal benefit payments, that were originally designed for stay-at-home mothers. If one spouse worked more years or earned more money over their lifetime, the second spouse may benefit more from the first spouse’s Social Security contributions.
The survivor benefit pays the greater of 100% of yours or 100% of your spouse’s earnings if they pass away. As with the spousal benefit, the surviving spouse qualifies for the survivor benefit whether they ever worked or not.
Pro Tip: To qualify for the spousal benefit, couples must be married for at least 12 months. To qualify for the survivor benefit, couples must be married for at least nine months.
Retirement can be a more precarious stage of life for LGBTQ people than for our straight peers. Though not necessarily easier, these are nine measures we can take to reduce our risks. In time, as Dr. King eluded, our relative risks will dissipate. Maybe then we’ll see retirement brochures that look more like our definition of retirement. Until then, we can rely on the above measures.