By Chuck Jones

A lot of what's been written about senior citizens and their spending habits centers on how to approach the teetotal retiree, comfortable in his flannel shirt and tennis shoes, and his doting wife, who does laundry in the mornings and watches Oprah and Dr. Phil in the afternoons.

At least the image of the senior has changed a bit. There was a time when retirement meant rocking chairs, not Reeboks. Yet the modern stereotype is still that—a stereotype. Today's senior may not be completely retired. He may have a pension and certainly gets Social Security benefits, but he probably has other sources of income, too, such as money from investments and an annuity. And he's probably not looking for his children to take care of him and his wife because he's bought long-term care insurance (LTCI).

Take the case of Dr. Jerry Langston, a semi-retired oral surgeon who works in northern New Jersey, near New York City. We've changed Langston's name for the sake of privacy.

Langston has been an oral surgeon for 40 years. He is a partner with five other surgeons in a thriving dental practice with three offices. He's married, has two grown children and no grandchildren. About four years ago, when the doctor was 61 years old, he was making $250,000 per year. At this point, however, he realized that he did not want to continue working at the same pace. He wanted to slow down, maybe even retire in the next couple of years. Always the type of person to prepare a plan before taking action, he called someone he knew and trusted who was also an expert on personal retirement planning—his insurance agent, Irving L. Beitler, CLU, ChFC.

Beitler, 52, is a long-time member of the Westchester (N.Y.) AIFA and an agent with New York Life in the Big Apple. He describes himself as a general practitioner—as much at home selling life insurance to people just starting out as he is doing estate planning work for people approaching retirement.

When Langston called Beitler, it was out of habit. The insurance man had been handling the employee benefits for the doctor's practice for nearly 15 years. "He knew he was loaded up with DI [disability income insurance] coverage through the practice," Beitler recalls. "I knew that, too, because I sold it to him. But he knew that if he was going to retire, he didn't need the DI. He had a policy that paid $8,000 per month, which was necessary during his peak earning years. But if you're going to retire, you don't need that. So there was some insurance that needed to be transitioned."

Beitler had a couple of meetings with Langston. "I did a review of his financial situation," Beitler says. "I was already acquainted with it. I had done most of his planning before—a 401(k) plan, a funding buyout, an estate plan." Beitler suggested that the doctor consider buying LTCI. "It fit perfectly into his financial plan," he says. He had been careful in building his assets, and he didn't want to see them eroded by huge nursing home costs. This is a guy who is a plotter, a planner. He does everything by the book.

"After we looked at the coverage he had, but didn't need, and at the coverage he needed but didn't have, he decided to buy separate LTC policies on his wife and himself, drop his DI coverage and use the money to fund the LTC policies."

There was a time when retirement meant rocking chairs, not Reeboks. Yet the modern stereotype is still that — a stereotype.

Lifetime income annuity
While LTCI is a popular and necessary coverage for senior citizens, it's not the only insurance seniors buy. It almost seems that the needs for coverage are as varied as the number of seniors in the United States.

According to the U.S. Census Bureau, the census in 2000 revealed that nearly 35 million Americans are age 65 or over. It also projected that the elderly population will grow and that by 2010, almost 40 million Americans will be 65 or older.

Some of these seniors are relying on monthly Social Security payments to get by, but many are not. Even the Social Security Administration cautions Americans to plan ahead to supplement their retirement income. These supplements include individual retirement accounts, annuities, investments and other products that licensed financial advisors can provide.

Part of the problem, says Jack Dolan, spokesman for the American Council of Life Insurers, is that people don't plan ahead. "Most people don't really know their retirement needs," he says. "They focus on the here and now and fail to plan appropriately."

By the time retirement comes along, Dolan says, those people are reluctant to spend money that will either ensure a stream of income, such as an annuity, or that will protect against the erosion of assets, such as an LTCI policy.

One product that is gaining in popularity among the over-65 set is the lifetime income annuity, Dolan says. "People are realizing now that they are going to live 20 or 30 years after they retire. This was unheard of a decade ago. Most people expected to live 10 or 15 years, then die. So they prepared to spend their assets accordingly. Consequently, outliving their assets is now their No. 1 financial concern.

"This makes an annuity the insurance product best suited for retirees," he adds. "You're going to see this product take off because the tidal wave of aging Baby Boomers is making this a real opportunity."

Not planning properly for retirement is what Dolan terms "financial illiteracy." As an example, he tells a story of an acquaintance who retired nearly 20 years ago. "He retired when he was in his early 60s," Dolan explains, "and he arranged for his pension plan to pay him for 20 years. He figured he'd be gone before the payments ran out. Now he's 80 years old and as healthy as a horse, but his income stream is about to dry up. Now he'll have to start working again for an income. I think people should bet on living a long and healthy life, rather than gamble on dying before their money runs out."

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