Pop’s Parallel Path by Ken Cutler

In honor of my late father’s birthday today, I’ve decided to post an article I wrote many months ago but never released to Jonathan for publication. 

MY FATHER’S FINANCES has some parallels to my own. Like me, he saved his end of year paystubs. Using an inflation calculator, I was able to compare his earnings to mine. He was an accountant who rose to the highest level of his company, while I was an engineer who topped off at senior staff level, at a pay scale roughly equivalent to that of an engineering manager.

Both of us had jobs that paid decently from the outset. Engineering is known for having good starting salaries for new college graduates. As a graduate of the Wharton School of Pennsylvania, Dad was well compensated early in his career also. Neither of us made gobs of money, but our incomes were comfortably above average throughout our working lives. Dad’s income history, adjusted for inflation, tracks closely with mine. One exception: His inflation-adjusted salary pulled away from mine in the last phase of his career, after he was elected president of his company.

My father stopped working full-time at 61. So did I. He was careful with money, but certainly no miser. My spending habits are similar to his. Neither of us ever carried a bank home mortgage. He funded three college educations, at a time when tuition was not so expensive. I paid for two. Both of our wives were primarily homemakers. Despite all of the parallels and similar incomes, I find myself seemingly better situated financially for retirement than he was at my age. Why is that? I can think of three major factors:

Pension. We were both fortunate to be covered by a pension, but mine replaces a higher percentage of my working income than his did. Additionally, I chose a 100% survivor option on my pension. Dad’s pension had no survivor benefits.

Tax-advantaged accounts. Dad worked in an era before 401(k) plans and Roth IRAs were available. He never owned an IRA of any kind. In contrast, I’ve reaped years of tax-free growth from these plans. I also received employer matching contributions in my 401(k) account.

Low fee index funds. Dad’s investments were completely in individual stocks and bonds. He had to pay broker fees whenever he purchased or sold a stock or bond.

For much of his life, index funds were not readily available. Those that were available had higher fees relative to today’s funds.

Financially, Dad’s retirement was a success. He had enough resources to fund both his and my mom’s remaining years after he stopped working full-time. My three sisters and I even received modest inheritances after Mom passed away, 34 years after Dad retired.

Although my wife and I seem to be in even better financial shape at the outset of retirement, I see one big area where we are probably at a disadvantage. Our medical and long-term care expenses are currently unknowns as my wife and I look ahead to the next 20 to 30 years—Lord willing.

My father was treated for cancer and my mom had dementia, an amputation and other major health issues for over a decade before she passed. Still, medical expenses did not make an appreciable dent in my parents’ savings. They had Medicare and Medigap policies that covered almost everything. On the other hand, Mom’s savings did get eroded by several years spent in nursing homes.

There’s a good chance that things won’t go as well for us on the medical expenses front. We don’t have long-term care insurance, so any expenses incurred in that regard would be totally our responsibility. Health care costs have risen faster than inflation in the years since my father passed away.

Availability of providers has also become a concern. The medical practice my wife and I have gone to for years has become woefully understaffed. My dermatologist wouldn’t accept my wife as a new patient.

Last winter, my wife had to reschedule her routine dentist appointment due to a snowstorm that closed the dentist’s office. Her rescheduled appointment was six months out. When she contacted a different dental practice near us, she found she would only have to wait a month. The catch: the cost for a cleaning was $611, and they were not part of our insurance company’s network.