Musings

Are You Miscalculating Your Retirement Income?

MusingsAs a Boomer, you have probably found it useful, at one point or another, to calculate the retirement income you think you will need. Unfortunately, not all of those seemingly handy online retirement calculators are as helpful as they may seem.

According to the Retirement Income Industry Association, some online calculators can offer "extremely misleading" data. That's why it may make a difference to use the right calculator.

This useful article from The Balance evaluates and ranks a number of online calculators on the basis of three key criteria: accuracy, usability, and education. Check it out.

In addition, it should be obvious that an online retirement calculator is just one tool. When it comes to something as important as planning for retirement income, many factors come into play, including Social Security payments, Required Minimum Distributions (RMDs) from retirement accounts, and income taxes. While a calculator can give you a rough idea of what you will need, you'd do best to work with a financial planner to get the complete picture.


Number One No More

MusingsNext year for the first time, the Boomer generation will relinquish its position as the #1 generation in terms of percentage of the U.S. population. Taking over will be... who else but the Millennials.

Statistically, it doesn't really matter, but socially, it's a big deal. We are already witnessing the mass cultivation of Millennials with products and services targeting them as Boomers fade in popularity. Similarly, businesses have little compunction when it comes to ejecting a Boomer employee in favor of a Millennial employee.

The Wharton School of Business has something to say about the coarseness of letting Boomers go because of age: "...companies eager to move baby boomers along should be careful what they wish for. For one thing, millennials are less likely to stay in jobs than others, and turnover often carries high hidden costs. For another, few workplaces have mastered a system for transferring knowledge from one generation to the next."

The fact is, age discrimination is widespread across many businesses, putting Boomers in a precarious position because it is difficult to prove and take legal action against an employer who practices age discrimination. According to Wharton professor of legal studies and business ethics Janice Bellace, “It is much more difficult to prove age discrimination than race or sex discrimination." Bellace says the burden of proof that an employee was demoted or fired because of age lies with the employee. “That’s a very heavy burden of proof,” she says. “In real life, if an employer would like to push out an older worker, the employer’s [managers] would have to be idiots not to lay down some paper trail that suggests that there were some other reasons for dismissing the person. It’s even more difficult in a hiring case, because the plaintiff must prove that there was no other reason, except for age, that the employer preferred another candidate.”

Age discrimination will therefore continue to be a big challenge for Boomers, who may need to find non-traditional employment as an alternative, such as becoming self-employed and working on a contract basis.


"Unvarnished Truths" About Retirement

MusingsSome Boomers approach retirement with apprehension, while others are chomping at the bit to start a new life. Jonathan Look decided to retire early -- at age 50 -- and follow his muse. Six years later, he shares some of the things he learned along the way, and they're not all pretty. Still, if you're close to retirement, or already retired, Look's 21 "unvarnished truths" are worth reading and considering. They include such eye-openers as:

  • Money is overrated.
  • Time is your most valuable asset.
  • Your bucket list is crap.
  • You can't make people happy.
  • Negativity wastes life.

Sounds to me like Look is quite the philosopher. Take a look at his entire list of unvarnished truths about retirement on NextAvenue.org. You may not agree with everything he has to say, but he certainly isn't afraid to be thought-provoking. And if you aren't a subscriber to NextAvenue.org, I suggest you sign up for the free newsletter. It is one of the more valuable information sources for Boomers in pre-retirement and retirement.


A Boomer's Sense of Purpose

MusingsHaving a sense of purpose in life offers lots of positive benefits, but "purpose" sometimes seems to be a concept that applies only to one's youth. When we're younger, for example, developing a sense of purpose is often associated with job satisfaction, career success, or starting a family.

Shouldn't Boomers have a sense of purpose too? Yes, of course. In fact, recent research suggests purpose is just as important for Boomers, according to a fascinating article, "How to Find Your Purpose in Midlife." Eric Kim of Harvard's School of Health, for example, found that "people who report higher levels of purpose at one point in time have objectively better physical agility four years later than those who report less purpose." Patrick Hill of Washington University "found important advantages for more purposeful adults, including better cognitive functioning and greater longevity."

Another interesting aspect of research into finding purpose in midlife suggests that a particular kind of purpose is of greater significance to Boomers. According to Anne Colby of Stanford University, research showed "Those who were purposeful beyond the self said their lives were filled with joy and happiness.”

The article, which appears in Greater Good magazine, published by the Greater Good Science Center at UC Berkeley, also offers some tips on developing a sense of purpose. Not surprisingly, one avenue that relates directly to purpose is volunteering. Jim Emerman, vice president of Encore.org, advises, “The key things to think about are: What are you good at? What have you done that gave you a skill that can be used for a cause? What do you care about in your community? Those questions really help one focus.”

 


Is the "Spend Safely in Retirement" Strategy Right for You?

MusingsIt's a refrain you hear more and more: Boomers are under-funded when it comes to retirement. The answer may be the "Spend Safely in Retirement" strategy, developed by researchers from Stanford University's Center on Longevity and the Society of Actuaries. According to a recent article in The New York Times, the strategy uses a person's retirement savings to "mimic a steady pension." It includes three steps in combination: Working longer, delaying payments from Social Security, and budgeting withdrawals from retirement savings accounts, such as IRAs or 401(k)s.

Many Boomers already realize they need to work longer, but depending on your anticipated Social Security monthly payment and the total amount available in your retirement savings account, you may be able to work part-time instead of full-time. Even a modest income can help you cover living expenses and offset the need to draw from Social Security too soon. You can draw Social Security benefits as early as age 62, but financial experts advise waiting until age 70, when you are eligible for the maximum amount. (Social Security benefits are based on your work earning history, so the actual benefit amount will vary for individuals.) The key thing to know is that, from age 62 through age 70, Social Security payments increase by 8 percent.

As for your retirement savings, you have likely been accumulating principal and interest in a tax-deferred vehicle. At age 70-1/2, according to current regulations, you must start taking a "Required Minimum Distribution" (RMD) each year, which will be subject to income tax, but presumably at a lower tax rate because your income is now less than during your peak earning years. The RMD is the minimum based on tax regulations, not based on what you might need to live on. That's where the juggling comes in. Steve Vernon, one of the Center on Longevity researchers who came up with the Spend Safely in Retirement strategy, tells The New York Times that a retiree might want to think of Social Security as a monthly "paycheck" that supplements any employment-related earnings, while the annual RMD can be viewed as a "bonus." Whatever way you think of it, it is important to establish a realistic budget you can comfortably live on and see how it matches up with the income you receive from the three sources -- work, Social Security, and retirement savings.

In terms of specific income, the Spend Safely in Retirement strategy will vary widely for every individual or couple, but the strategy is applicable to most people, as long as you can combine some employment income with Social Security income and  payments from retirement savings. Sounds like a sensible way to approach retirement, doesn't it? 


No Surprise: Experts Advise Boomers to Work Longer

MusingsNew year, new goals: If one of yours is retiring from your job, hold on just a minute. Well, make that three to six months.

A recent report entitled "The Power of Working Longer," issued by the National Bureau of Economic Research concludes the following: 

"...delaying retirement by 3-6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point ten years before retirement has the same impact on the sustainable retirement standard of living as working a single month longer. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances."

MarketWatch looked at the report and added the following analysis:

"So why does working longer have such an impact on the standard of living in retirement? Because it bolsters two types of retirement income — Social Security benefits and 401(k) withdrawals, the research says. The longer a person works, the longer Social Security is deferred, which means a higher benefit check. The worker’s 401(k) withdrawal will also be higher from more money in the account. Social Security makes up 81% of retirement income in this case, the researchers said, and 401(k) payments make up the rest."

Bottom line: If you've been thinking about retiring this year, maybe you should hold out just a little bit longer. Experts think it will make a significant difference when it comes to financing your retirement years.


Let Employment Statistics Be Your Guide

MusingsLike many Boomers, you may be in a transitional state in 2018 when it comes to employment. As you consider your work options, it may be wise to review some current employment statistics to get an idea of where opportunities exist. Entrepreneur magazine offers a handy infographic, based on data from Paychex, a leading payroll service, that looks at employment ages in the U.S. in states and industries.

Here are some interesting Boomer-oriented highlights from the data:

  • The five states with the highest percentage of workers 65 and older are, in descending order: South Dakota, Vermont, New Hampshire, Connecticut, and Washington, DC
  • About 23 percent of U.S. adults age 55 and older were working in 2016
  • The top five industries with the greatest percentage of workers 65 and older are, in descending order: Legal; Community and Social Service; Life, Physical and Social Science; Arts, Design, Entertainment and Social Media; Personal Care and Service
  • The top five states with the greatest percentage of MALE workers 65 and older are: Vermont, Connecticut, New Jersey, Kansas, Washington, DC
  • The top five states with the greatest percentage of FEMALE workers 65 and older are: New Hampshire, Vermont, Washington, DC, Connecticut, Hawaii
  • The three leading ways unemployed workers age 65 and older have attempted to enter the workforce are (1) contacted the employer directly, (2) sent out resumes or filled out applications, (3) contacted friends or relatives.

If you're looking for work, maybe some of these statistics can provide clues that point you in the right direction.

 


What Does 2018 Look Like for Retiring Boomers?

MusingsThe new year is upon us, and it starts with a booming stock market and major tax reform. Is this good news for retiring Boomers?

Retirement expert Mark Miller offers an excellent assessment in his article for Morningstar. He acknowledges that the stock market is at all-time high, but quotes wealth management advisor Michael Kitces, who says instead of withdrawing the traditional 6.5% from investment accounts, "it might be wiser for new retirees to just start with a lower initial rate of around 4%."

Miller also cautions that Social Security and Medicare, while they remain unchanged on the new tax law, could undergo some changes in the future. According to Miller, there is the possibility that the full benefit age for Social Security could eventually be raised to 69 from the current 66. It is already going up to 67 for those who were born in 1960 or later. 

Everything, it seems, has a positive and negative side. For example, with the Fed continuing to raise interest rates, low-risk investments such as CDs may benefit, but the cost of borrowing would go up. It is also a fact that those individuals entering retirement have more debt than ever before, in part because of home mortgages.

There is more to keep an eye on in 2018. Read Mark Miller's excellent article for more details... and consider subscribing to his highly informative e-newsletter, Retirement Revised.


For Some, Retirement and Work Don't Mix

MusingsAs much as we Boomers like to believe we have reinvented retirement, there are some forces we are pushing hard against with limited success. The reality of the American job market, lack of sufficient retirement savings, and other challenges are vexing for Boomers who want to work in their retirement years.

Each year for the past eighteen years, the Transamerica Center for Retirement Studies (TCRS) has a retirement survey of American workers. This year's survey results, published in December 2017, reveal some interesting and, in some cases, troubling attributes of aging Boomers. Some key findings of the survey:

  • Only 26 percent of Boomers plan to immediately stop working and retire when they reach what they consider to be retirement age. Already, two-thirds of them are working or plan to work past age 65 or do not plan to retire, and 54 percent plan to continue working after they retire.
  • 38 percent of Boomers expect Social Security to be their primary source of income when they retire, while 39 percent expect that primary source to be retirement savings.
  • The median savings of all household retirement accounts for Boomers is $164,000.
  • Only 42 percent of Boomers are keeping their skills up to date so they can continue to work past 65.
  • Only 28 percent of Boomers have a backup plan for retirement income if they're unable to work prior to their planned retirement.

Next Avenue's Richard Eisenberg did an excellent analysis of the survey with some pertinent comments from Catherine Collinson, the president of the TCRS, and helpful suggestions.

In addition to Boomers, the TCRS survey studied two other generations, Millennials and Gen Xers. You can get a copy of the survey results by downloading a PDF from the link below.

Download TCRS2017

 


Why Phased Retirement is Elusive

MusingsWill the new year be the time when you decide that you'd like to phase out of your full-time job? You can dream, but apparently, it isn't so easily done. While "phased retirement" sounds as if it would be a win-win for both employer and employee, the reality is that gradually phasing out of a full-time job is a concept most U.S. employers are not widely endorsing, at least not yet.

A recent article about phased retirement in U.S. News cites a sobering statistic: Only 6 percent of employers offer a formal phased retirement program. What's more, only 11 percent of Boomers gradually retired from their jobs, according to a 2017 Government Accountability Office report. The article goes on to discuss six challenges of phased retirement:

  1. Negotiating the arrangement
  2. Qualifying for health insurance
  3. A reduction in retirement benefits
  4. Getting a 401(k) match
  5. Unplanned phased retirement
  6. Justifying your reduced schedule.

Challenge number six gets to the heart of the matter. According to Emily Brandon, author of the article, "Those who want to gradually retire may need to prove their continued value by being a consistent high performer, staying up to date with innovations in the field and learning how to use new technology. It can help if you are willing to mentor younger employees and pass on your acquired skills and institutional knowledge."

What it really amounts to is convincing an employer that a phased retirement is not just good for you, but good for the company. Unless an employer believe you and enthusiastically embraces the idea, resigning may be the only real option to retiring from a full-time job.

Read the entire informative article here: https://money.usnews.com/money/retirement/second-careers/articles/2017-11-13/6-challenges-of-phased-retirement