The Transition to Retirement

MusingsThanks to Boomers, the definition of "retirement" has changed dramatically and completely. Many Boomers fully expect to keep working well beyond the traditional retirement age, and others look at retirement as not any kind of termination point, but rather as another phase of life. An article appearing on the excellent website, NextAvenue.org, puts retirement into perspective by discussing 7 tips for transitioning into retirement. The article is sponsored by Acts Retirement-Life Communities.

One of the key points made in the article is that it takes time -- probably more time than you realize -- to move into retirement: "It could take months or it could take a few years for you to finally feel comfortable in your new skin. It’s completely natural and understandable for this transition to take a long time. After all, you were involved in the world of work for decades and those habits won’t melt away instantly." Another good point is to view retirement as the beginning of something new, fresh and exciting: "People live much longer than they used to. That means retirement is longer, too. Make the most it by finding a new purpose, setting new goals and generally broadening your horizons in every way you can imagine possible."

I can attest to the accuracy of this advice. I "rewired" in my mid-fifties by leaving a professional career and needed time to transition away from commuting and working in a traditional business setting. My wife and I relocated to a smaller city with a more temperate climate. We decided to start a small service business together and run it for a period of time, which turned out to be about seven years. (We wrote a book about our experience, Let's Make Money, Honey: The Couple's Guide to Starting a Service Business) We always intended to operate it as a transitional business until we were ready to stop working full-time. I then became a part-time independent writer and sometime marketing consultant, in combination with nonprofit volunteering. This transition has been a good one for me. I am very happy working when I want and managing my own schedule. My wife stays busy with nonprofit volunteering and as her mother's primary caretaker.

Obviously, your way of handling this transition may be different from mine, but I do agree it generally takes longer than you think to feel comfortable with this new phase of life. I am fortunate in that I can write both for fun (this blog, for example) and for income, and I know not every Boomer has this luxury. Read the 7 tips in the article -- it will help you gain some insight into transitioning to retirement.


Excellent Resources for Seniors

MediaPeriodically, I like to make Happily Rewired readers aware of free resources that are available to seniors. There is a lot of information on the Internet and, as you well know, not all of it is authoritative. Thankfully, some organizations do careful research so the information they provide is accurate and of high quality. Here are three resources I think you will find helpful:

Retirement Planning Guide for Seniors

This comprehensive online guide from Lexington Law, a law firm, offers helpful information and advice for navigating your finances as you age and will help you organize, plan and prepare for the future. The guide includes the following sections: Organizing your finances, Managing your retirement, Maximizing your senior status, Managing your credit and debt, Avoiding financial fraud, Preparing your estate, Helping the next generation.

Retirement Living Information Center

RetirementLiving.com is a national resource for consumer information related to retirement. The website provides access to an array of resource materials, including where to retire, personal finance, a newsletter, books and online publications, and buyers guides about special products and services. Some of the information on this website includes: Buyers Guides for reverse mortgage lenders, gold IRA accounts, medical alert systems, hearing aids, Medicare supplement insurance and more; retirement planning resources, such as investing for retirement and retirement income; and information about senior living, including retirement communities, assisted living and memory care.

100+ Ways to Save Money on Healthcare Costs

This comprehensive guide for seniors on Dealspotr.com covers basic information about Medicare, but it also has helpful tips about dental care, eye care, savings on prescription drugs, home assistance discounts, and even grocery store and restaurant discounts.

 


Does Money Make You Happy in Retirement?

MusingsAll the talk Boomers hear about having enough money for retirement raises an intriguing question: Does money make you happy in retirement?

Financial advisor Wes Moss, writing for The Balance, studied happy and unhappy retirees and came up with some interesting answers to that question. He found, for example, that retirees who own a BMW, long regarded as a luxury car associated with wealth, are actually pretty unhappy. Similarly, retirees who trade in stocks on their own, which you might associate with having enough money to put some at risk, are generally unhappy.

This led Moss to create something he calls the "Rich Ratio," which is basically "the amount of money you have in relation to the amount of money you need." In his interesting article, Moss offers two examples to demonstrate "how someone with less money saved can actually have a higher Rich Ratio and is probably living happier." His point is that money for money's sake doesn't buy you happiness; money has to have a purpose. Happy retirees, writes Moss, understand that money is not the end goal, it is simply a means for living a happy life.

This is a sensible way to put one's monetary needs into perspective. Wise retirees who have lived a relatively comfortable life during full employment years, not worrying about money, may have a more challenging time maintaining their lifestyle in retirement. Typically, income is reduced during retirement years, so even with substantial savings, it is advisable to reduce expenses as much as possible and preserve a certain amount of capital. This may mean that one's lifestyle expectations need to be adjusted in retirement. Retirees with realistic expectations may find that they don't need as much money as they think to be happy -- and that the key to happiness is not money.

Food for thought.


The Dirty Little (Encouraging) Secret About Entrepreneurs

OnYourOwnIt is often assumed that the most successful entrepreneurs in American society are young go-getters willing to take the ultimate risk and start a new business. Well you can substitute the word "youthful" for "young," because it turns out that middle-aged entrepreneurs are more successful than those who are young. Startling to some (perhaps including Boomers), this was demonstrated in a research study conducted this year. "Age and High-Growth Entrepreneurship," a paper written by Pierre Azoulay (MIT), Benjamin F. Jones (Northwestern University), J. Daniel Kim (MIT), and Javier Miranda (U.S. Census Bureau) arrives at the following conclusion:

"Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0. The findings are broadly similar when considering high-technology sectors, entrepreneurial hubs, and successful firm exits. Prior experience in the specific industry predicts much greater rates of entrepreneurial success. These findings strongly reject common hypotheses that emphasize youth as a key trait of successful entrepreneurs."

This conclusion is based on Census Bureau data used to study the ages of founders of growth-oriented start-ups in the past decade.

The authors of the paper write that "all evidence points to founders being especially successful when starting businesses in middle age or beyond, while young founders appear disadvantaged." They go on to say, quite specifically, that "Conditional on starting a firm, a 50-year-old founder is 1.8 times more likely to achieve uppertail growth than a 30-year-old founder. Founders in their early 20s have the lowest likelihood of successful exit or creating a 1 in 1,000 top growth firm."

There can be no doubt about what the research discovered: "We find that age indeed predicts success, and sharply, but in the opposite way that many observers and investors propose. The highest success rates in entrepreneurship come from founders in middle age and beyond."

When you think about it, of course, this makes perfect sense. Why wouldn't someone with greater maturity and deeper business experience be more successful as an entrepreneur?

Still, the research paper, which you can access via the link above, might be useful to you in convincing friends, family, and financial lenders that you can succeed at doing your own thing! This research should be very encouraging to any Boomer who wants to start a business. Not only is it possible for you to do so, the evidence points to the fact that you are likely to be more successful than younger entrepreneurs, despite the typical perception. 


What if You Haven't Saved Enough for Retirement?

MusingsIf you are in your fifties or even sixties and you haven't saved enough for retirement, you are in good company. More than 25 percent of Americans 55 years of age and older have saved less than $25,000, according to the Retirement Confidence Survey by EBRI (Employee Benefit Research Institute).

Writing for CNN Money, Walter Updegrave offers "3 ways to recover from a late start on retirement planning." The three ways are not a silver bullet, by any means, but they make a lot of sense: Very simply, (1) start saving right now, (2) stay employed longer, and (3) "be flexible and resourceful." Updegrave goes into detail about each of the three ways, offering sound advice. It is an article every under-funded Boomer should read.

Obviously, the later you started saving, the more you'll have to make up. Examining sources of income (including anticipated Social Security payments), understanding how to leverage your assets (such as your home), and reducing expenses will all be important in helping you cope.

Updegrave's conclusion is fair warning, but still hopeful. He writes: "I'm not saying it will be easy or that you can put yourself in the same position for retirement you would have been in had you saved throughout your career. But if you combine several of the steps I've outlined here — and keep an eye out for even more ways to generate more post-career income or lower your future expenses — you can still improve your chances of achieving a secure retirement."

 


Identifying Your Ideal Second Act

MediaMy colleague Nancy Collamer specializes in helping Boomers figure out their "second act." I like this concept because it implies Boomers are far from washed up; they have plenty left to be fulfilled and to give to the world. That's one of the reasons I named my blog "Happily Rewired," instead of "Retired."

I highly recommend that you visit Nancy's website, https://www.mylifestylecareer.com/, read her blog posts, check out her book Second-Act Careers, and sign up for her free email newsletter.

When you request the newsletter, you'll also receive a free gift, a workbook entitled "25 Questions to Help You Identify Your Second Act." In it, Nancy makes the point that you should always think about the "why" when you are considering "what" to do next. She gives these examples:

Which of my jobs did I enjoy the most? change the question to: Which of my jobs did I enjoy most - and why?

What were my greatest successes at work? change the question to: What were my greatest successes at work - and why?

What type of people do I like working with? change the question to: What type of people do I like working with - and why?

The workbook covers:

  • Values
  • Skills and Experiences
  • Strengths, Gifts and Talents
  • Hopes, Dreams and (Im)Possibilities

You'll find the workbook very helpful in guiding you toward the future you want.


Why 5 Years Before Retirement is a Key Time

MusingsEvery Boomer's definition of "retirement" is a little different, but we can all agree that it is a time when you need to be more prudent about your finances. That's why many financial experts and advisers believe the best time to start planning for retirement is five years beforehand. Writing for The New York Times, Peter Finch has assembled the advice of financial gurus into a helpful article he calls "Countdown to Retirement: A Five-Year Plan." 

Finch says that the five year mark "is a good time to take a look at your overall asset allocation... a balanced allocation of 50 percent stocks and 50 percent bonds is reasonable for someone expecting to live another 30 years or more." At three years, Finch recommends that we "put aside some time this year to contemplate what retirement will actually mean for you." With two years left before retirement, you should "lay the groundwork" for "some potentially big tax-saving opportunities" that could come your way when you retire. In the last year before retirement, it makes sense to evaluate whether you will continue to work and think about "ways to reduce spending." Also "take another look at your investment portfolio," writes Finch, to see if the savings you have will adequately fund your retirement. If so, "many advisers recommend pulling back on your stock holdings and adding cash and other short-term investments as your final day at work nears."

The nice aspect of Finch's article is that it offers advice from a number of sources and is organized year by year. Check it out here: https://www.nytimes.com/2018/07/06/business/retirement-five-year-plan.html


Tax Benefits for Self-Employed Boomers

OnYourOwnWhile there has been controversy surrounding recent tax legislation, it created what could be a boon for self-employed Boomers. The self-employed, contract workers, and freelancers stand to gain in a number of ways because of the way business deductions have been modified.

Writing for AARP, retirement expert Kerry Hannon does a good job of outlining the key tax benefits that may be available to you if you are self-employed, do contract work, or freelance. As with any such advice, though, everyone's situation is different and it always makes sense to consult a tax professional.

Hannon highlights a number of key areas and discusses them, including:

  • The qualified business income deduction: You could be eligible for a tax deduction of 20 percent as a sole proprietor or even if you are part of a partnership, own an LLC, or participate in an S corporation.
  • Higher standard deduction: A higher standard deduction may remove the need to itemize personal deductions.
  • Home office deduction: You could be eligible for a home office deduction (this existed before the new tax law went into effect).
  • New equipment write-off: You can potentially deduct a larger amount for new equipment.
  • Business expenses: Hannon writes that these are basically the same with a few new restrictions.
  • Medical expenses: The self-employed can deduct medical expenses, but the percentage allowed has actually gone down for 2018 and will go back up in 2019.
  • Education and training: Work-related education is deductible with some restrictions.
  • Automobile expenses: Mileage driven for business is deductible at a slightly higher per-mile rate in 2018.
  • Retirement savings: If you're 50 or older, and you don't have an employer retirement savings plan, you can put up to $6500 into a traditional IRA.

Hannon wisely recommends scrupulous book-keeping if you are self-employed. Read her informative article here: 
https://www.aarp.org/work/small-business/info-2018/freelancers-new-tax-bill.html


Retirees are More Frugal Than You Might Think

MusingsWith all the red flags being raised about retirement age Boomers saving inadequately and running out of money, it is comforting to read something positive about the frugality of retirees. Richard Eisenberg, Managing Editor of NextAvenue.org, a great resource for Boomers, reports on recent research by the Employee Benefit Research Institute (EBRI) and the Society of Actuaries (SOA).

EBRI looked at three groups of retirees: Those who retired with non-housing assets of $200,000 or less, from $200,000 to $500,000, and $500,000 or more. The third group, with the most assets, spent only about 12 percent of their assets after 19 to 20 years of retirement. The other two groups spent from 24 to 27 percent of assets during the same time period. These percentages suggest that retirees are more frugal than you might think. About one-third of all retirees actually had more assets after 18 years than when they first retired. However, 35 percent of retirees with $200,000 or less to begin with had less than 20 percent of their assets left after 18 years.

An SOA study of retirees over the age of 85 was also encouraging. Although it was limited to focus groups and not a quantitative survey, the study indicated that the majority of these retirees spent less than their income. Two looming concerns may play a large role in why retirees are watching their pennies. A 2017 study by the SOA indicated that more than half of retirees are worried about (1) healthcare costs and (2) long-term care costs. As much as three-quarters of pre-retirees are worried about these two cost factors as well.

While the research suggests positive outcomes for many Boomers, it goes without saying that Boomers thinking about retirement need to financially plan for their futures, ideally with the help of a financial planning advisor.

 


Boomers and the "Hot" Job Market

OntheClockWith the unemployment rate at its lowest point in 18 years, the job market is "sizzling hot," writes career/retirement coach Nancy Collamer. Reporting on a work conference sponsored by Indeed.com, Collamer heard that the job market is tight and talent is hard to find, although wages are generally not going up in keeping with the labor demand.

Still, a robust job market should be good news for Boomers, shouldn't it? Well, yes and no. On the positive side, a Boomer with experience in a field considered desirable by employers may have an easier time than ever securing a part-time or full-time position. On the negative side, there is still plenty of age discrimination, and there is little Boomers can do about it. The fact is employers can interview all they want for an open position, and once they have several candidates available, more often than not they will pick younger over older.

Dust off your resume if you're in a job that you'd like to leave, or if you want to re-enter the workforce. If an employer cannot fill a position and your background and experience are an excellent fit, the market is such that you could be offered a full-time position. Keep in mind, however, that your salary expectations may have to be adjusted. Also, there is always the possibility that you can work part-time or become a contract worker if you don't want a full-time position or, at the very least, you may be able to negotiate flexible hours.

Interestingly, this might be an ideal time to see if your former employer needs help. In an article for The New York Times, Claudia Dreifus profiles several retirees who returned to work years after retiring because their employers had open positions they needed to fill. For example, a 60-year old registered nurse who retired was rehired by a hospital as a freelance nurse for 24 hours per week at a respectable $60 per hour.

A booming job market could be good for some Boomers -- but not for all. That's why it still makes a lot of sense to explore freelance work or self-employment as an option if you want to continue to work.