Illness and unexpected expenses strain retired teacher’s finances
After 30 years as a special-needs teacher in public schools, Patricia Ricci looked forward to spending retirement days outside, gardening in the half-acre backyard of her historic home in Orange.
“I didn’t want to drop dead with a felt-tip marker in my hand,” said Ricci, 67.
Her retirement was a race against time. In 2000, Ricci was diagnosed with multiple sclerosis. The disease often takes a couple of decades before the onset of severely crippling symptoms, and Ricci wanted to make sure she would have several active years after retiring.
She was able to retire three years ago. But the disease progressed more rapidly than expected — she now walks with a cane and has difficulty lifting things.
“When you retire you think you’ll do all this stuff,” Ricci said. “But if you get ill you have this gradual realization that you can’t.”
She had to deal with some significant medical bills outside the scope of her Medicare coverage. Last year she spent about $4,000 for a medication until her doctor switched her to a less expensive drug.
There were other unexpected expenses. Shortly after Ricci retired, she got socked with a $10,000 bill to fix a sewer line on her property. Then her two beloved schnauzers needed surgery to repair their hind legs and she put $12,000 in veterinary costs on her credit card.
Although Ricci lives modestly, the bills put a huge strain on her finances.
“I’m quite worried for her,” said Linda Barlow, a certified financial planner in Santa Ana who reviewed Ricci’s finances. “All she has to do is stub her toe and she’s in real trouble. She doesn’t have much of a cushion.”
Summarizing her income and debts, Ricci receives about $57,600 from her pensions annually after taxes. She has $80,000 in individual stocks and retirement accounts. On the other side of the ledger, she owes $124,000 on her mortgage and has $6,000 in credit card debt.
Barlow uncovered a troubling picture as she delved into the details of Ricci’s finances: Her monthly income barely covers her expenses, her home is expensive to maintain and her investments are too risky.
Perhaps most worrisome is that Ricci has done little to plan financially for her long-term care.
“She is definitely not looking at that,” Barlow said.
On a monthly basis, Ricci receives about $4,800 from her pensions. However, she spends all but about $275 of that in an average month. Barlow said that was way too close for comfort.
Ricci’s investments are mostly in individual stocks or growth funds, an allocation Barlow said was too risky for someone her age.
There were no problems with Ricci’s spending habits when it came to buying things for herself. She spends just $75 a month on restaurants and only about $20 on clothing. “Most everything is bare-bones,” Barlow said.
In fact, Ricci generally spends less on those items than she does on her dogs. For them, she spends about $100 a month on food and veterinarian visits. Barlow counseled that when her dogs pass on, Ricci should not replace them. This is not only to save the expense but also because active dogs could cause Ricci to trip and fall.
Barlow said one of Ricci’s primary goals should be to pay off her credit card debt. To that end, the planner suggested that Ricci sell the $16,000 in stock she holds in Walt Disney Co., Quiksilver Inc. and Verizon Communications Inc.
With that money, she could pay off the debt and have money left over.
“Her portfolio isn’t well thought out at all,” Barlow said, adding that only the Disney shares have made money for Ricci.
As for Ricci’s investments in growth funds, Barlow said she should put two-thirds of that money into a highly rated bond fund and the rest into an indexed mutual fund that holds large-company stocks.
Ricci’s 22-year-old son and his girlfriend live with her, which is good because they help out with household chores. But Barlow said they should pay more than they now do toward household expenses. To save more on taxes, Barlow also recommended that Ricci ask her accountant whether she could claim her son as a dependent because he still lives with her and is a student.
There was one more part of her financial picture to deal with, and that was the biggest and most emotional issue — the house.
Ricci’s mortgage payment — about $1,000 a month — is modest, especially considering that it’s a 2,000-square-foot structure. But there are other considerations.
Built in 1921, it was probably the main house on what was then a ranch. The plot now has lush flowerbeds, a woodsy area with native plants, grapefruit trees and a pool.
Taking after her farmer father, Ricci has been gardening actively for more than 20 years. After a long day of teaching she used to think nothing of shoveling heaps of mulch into a wheelbarrow and gardening until dusk.
But now Ricci can’t cart a wheelbarrow and she gardens only sporadically. “I don’t have the endurance I used to,” she said.
Meanwhile, the house and the yard require continual upkeep. Ricci pays nearly $300 a month for a gardener, pool maintenance and other outdoor services, including one that keeps gophers at bay.
Cleaning help for the two-story house costs $170 a month. And its blue-and-maroon exterior will soon need painting, which will cost at least $10,000.
Barlow said the best way to deal with the house would be to sell it. Even in a down market it could go for as much as $750,000, said Orange Realty’s Dan Slater, an expert in the area’s historic district.
After closings costs, commissions and taxes, Ricci could end up with more than $500,000. She could find a more modest place to live that would allow her to cut way back on home care and maintenance expenses. The rest could go toward funding long-term care.
At first Ricci resisted the suggestion that she leave the house. But a few weeks after meeting with the planner, the reality of her situation was sinking in.
“I sort of figured someone would recommend that to me,” she said. “It’s becoming more of a financial burden than I thought.”
Her hope is to sell the home and find a smaller, one-story house in the same neighborhood. She’d still like to have at least a modest garden.
She took to heart other advice from the planner. She is planning to sell some stock to get rid of the credit card debt, and she has started to plan more realistically for her care in the future.
Because of Ricci’s multiple sclerosis, it’s unlikely that she would be able to get long-term-care insurance, said Bonnie Milani, an insurance broker with Milani Insurance in Encino. But Milani advised her to look into the possibility of getting some kind of coverage through the California State Teachers’ Retirement System.
Ricci also began talking with her son about her hopes and expectations for the future.
“I realize what my situation is and I’m making the most of what I have,” she said. “I’m moving on.”
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