Emily Guy Birken: What to Do in the Five Years Before You Retire

Episode Summary

Executive Summary: Christine Benz and Amy Arnott interview Emily Guy Birkin about her book The Five Years Before You Retire, focusing on how pre-retirees can assess readiness, budget for retirement’s changing costs, plan for healthcare and long-term care, and use Social Security wisely. Birkin argues that retirement success depends less on a perfect nest egg than on realistic expectations, contingency planning, and choosing the right timing for withdrawals and benefits.

Main Topics: Why the five-year window matters (Priority: 5/5): Birkin explains that five years before retirement is late enough to feel real, but still early enough to make meaningful changes to savings, spending, work plans, and benefit timing. Determining whether you have enough to retire (Priority: 5/5): She recommends a two-sided exercise: imagine the dream retirement in detail, then define the minimum lifestyle needed for contentment. Most actual retirements, she says, fall between those two extremes. Social Security timing and solvency (Priority: 5/5): Birkin argues that delaying Social Security is preferable when possible because benefits rise for each year of delay, and she says the program remains highly likely to pay benefits despite future solvency pressure. Budgeting for retirement spending shifts (Priority: 4/5): The discussion highlights categories that may fall in retirement, such as commuting and work-related costs, and categories that may rise, such as travel, dining out, and entertainment. Planning for irregular and lumpy expenses (Priority: 4/5): Birkin stresses forecasting big, infrequent costs like roof replacement, cars, mattresses, and water heaters so retirees are not blindsided on a fixed income. Healthcare and long-term care coverage (Priority: 5/5): She warns against trying to go uninsured before Medicare and discusses options such as COBRA, employer continuation, sharing ministries, HSAs, Roth IRAs, and the limited usefulness of long-term care insurance for most people. Mortgage payoff versus investing (Priority: 3/5): Birkin says the decision should depend on mortgage interest rate: lower rates favor investing for retirement, while higher rates favor paying down debt faster.

Key Arguments: A five-year runway is ideal because it creates urgency without being so short that meaningful course corrections are impossible. Retirement planning should begin with lifestyle goals, not portfolio numbers; desired life and required spending should drive the savings target. People often report happy retirements even with modest assets because happiness depends heavily on expectations and adaptability. If retirement income looks insufficient, the main levers are spending less, working longer, delaying Social Security, or relocating to a lower-cost area. Delaying Social Security is usually beneficial if you can afford to do it because the guaranteed benefit grows and protects against longevity risk. Social Security is politically vulnerable but operationally very likely to persist; younger savers should not make it the core of their retirement plan. Retirees should budget for both routine and irregular expenses because big-ticket replacements can disrupt a fixed-income plan. Long-term care insurance is no longer attractive for most consumers because premiums, exclusions, and limited competition have made it poor value for many households. Healthcare coverage should never be skipped before Medicare, even if it means using less-ideal or more expensive bridge options. Mortgage payoff decisions should be based on the interest-rate comparison between debt cost and expected investment returns.

Data Points: Book timeframe: 5 years before retirement - Central planning horizon of Emily Guy Birkin's book Social Security delay increase: About 8% per year - Approximate benefit growth from waiting to claim Social Security Social Security break-even age: About age 72 - Approximate age when early claiming catches up with waiting until 70 Current projected Social Security shortfall payout: About 70% of promised benefits - Post-shortfall estimate cited for current law projections Social Security solvency issue timing: Around 2033 - Projected date when reserves may be depleted absent legislative changes Full retirement age for people born after 1965: 67 - Current Social Security full retirement age cited in the interview Long-term care insurance sweet spot: $400,000 to about $2 million nest egg - Birkin cites a study suggesting this asset range is where LTC insurance may be most useful ACO/ACA affordability note: Subsidies expired - Mentioned as part of the difficult pre-Medicare health insurance landscape COBRA continuation window: 18 months - Potential bridge coverage option if leaving work near age 65 Potential market return assumption: 8% per year - Birkin's more conservative long-run equity assumption when comparing investing versus mortgage payoff Traditional market return reference: 10% per year - Historical market return figure mentioned as a benchmark File-and-suspend policy change: 2015 - Example of how Social Security strategy rules can change quickly

Pivotal Quotes: "You want to start by dreaming big and then dream small." — Emily Guy Birkin: Advice for assessing whether retirement savings are enough by comparing an ideal lifestyle with a minimum-contentment lifestyle "The tragedy you will experience is living to 120 and not having enough money." — Emily Guy Birkin: Why she prefers delaying Social Security when possible and emphasizes longevity risk "If you start counting on it. That can disincentivize folks in their 40s and 50s from setting money aside for retirement." — Emily Guy Birkin: Her warning against making Social Security a central assumption in early retirement planning

Implications: Listeners should plan retirement around lifestyle, flexibility, and contingencies—not just account balances. The episode suggests delaying benefits, protecting healthcare coverage, and stress-testing budgets will matter more as retirement becomes longer and more variable.