Musings

There's a Right Way to Retire from Your Job

MusingsMany Boomers don't have the luxury of retiring from their job. Others are forced out because of age discrimination. Still others decide that it really is time to retire.

There's a right way to retire from your job. In the best of all scenarios, leaving a job will be on your timeframe and will cause no ill will between you and your employer. A truly enlightened employer might even work with you on a phased retirement or a creative arrangement, such as rehiring you as a part-time contractor after you leave your full-time position.

Writing for The Balance, retirement book author and financial writer Melissa Phipps offers ten valuable tips for retiring from your job, among them, "Be sure you really want to retire," "Check out alternative careers," and "Consider phasing in retirement." Phipps points out that some early retirees make the decision to retire because they face an undesirable job situation. This may not be the best reason to retire; instead, you may want to try to work with your employer to improve your job or change it within the same organization. Or, if that doesn't work, maybe it's time to consider pursuing an alternative career instead of retiring.

Before you decide to retire, advises Phipps, make sure you are financially secure and that you have health insurance. It also makes sense to consult with a financial adviser. In addition, anticipate the fact that, even if you retire now, you may want to (or have to) return to the workforce. That means you should get references when you retire and be sure to leave your position on a positive note. Another interesting idea is to "test drive" retirement: If you have the type of job that allows you to take some time off, experiment with the kinds of things you would like to do in retirement and see if it's a lifestyle you would enjoy.


What the CVS-Aetna Merger Could Mean for Retirees

MusingsThe federal government's approval of the CVS-Aetna merger has vast implications for health care in the U.S. It could also have a direct impact on retirees, the most immediate being that Aetna must sell its Medicare Part D prescription drug plans to WellCare Health Plans. CVS already has the largest market share of Medicare Part D prescription drug plans through SilverScript, which is operated by CVS Caremark.

So what does this really mean for retirees? In the short term, if you have a Medicare Part D plan through SilverScript, nothing changes, but if you have a Medicare Part D plan through Aetna, it will be transferred to WellCare Health. Longer term, the merger of the nation's leading retail pharmacy with one of the nation's largest health insurers is a major development in the health insurance industry. According to Washington Post journalist Brian Fung, “The tie-up will allow CVS -- whose retail pharmacy business serves 5 million customers a day -- to turn more of its brick-and-mortar locations into front-line clinics for basic medical services and patient monitoring. By deepening its knowledge of and relationships with patients, CVS has said the combination could help Americans stick with medication regimens and stay out of the hospital."

The advocacy group Consumers Union, a division of Consumer Reports, is skeptical about the merger. A statement issued by its senior policy counsel, George, Slover, reads in part, "This type of consolidation in a market already dominated by a few, powerful players, presents the very real possibility of reduced competition that harms consumer choice and quality. We are concerned that the limited conditions the Department of Justice put on this deal simply are not enough to ensure that CVS-Aetna doesn’t use its outsized resources in ways that stifle true competition and reduce choice at all levels up and down the chain – ultimately leaving consumers with fewer options and higher costs.”

The merger sheds light on the connection between prescription drug providers and insurance companies. OptumRx, for example, is owned by UnitedHealth Group, and Anthem, a Blue Cross operator with a presence in a number of states, plans to open its own pharmacy. Industry watchers are also keeping an eye on the e-commerce giant, Amazon, which has acquired prescription drug provider PillPack.

The CVS-Aetna merger is expected to be finalized before the end of 2018.


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.


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.


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."

 


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


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.

 


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.