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.


Two Helpful Resources: Eating Right and Moving

OntheHouseI'm pleased to say the "Happily Rewired" blog has attracted enough attention that I periodically receive unsolicited input that could be helpful to my readers. Here are two such resources that I think you will find of interest:

  1. A Senior's Guide to Healthy Eating
    The website "Nifty Benefits" has put together a helpful infographic. According to the creator Brenda Snow, "My goal with this guide is to help seniors live a fulfilling life, starting with a foundation of good nutrition. From the limitations that can cause seniors to have poor nutrition, to easy tips to incorporate healthy foods into your lifestyle or the lifestyle of your loved one, this guide has a lot of information that I hope will be valuable to you." The informative guide covers observing good basics and special considerations for older adults.
    Find it here: https://niftybenefits.com/seniors-guide-healthy-eating/
  2. The Senior Citizen's Guide to Moving
    The website "Hire a Helper" has created a comprehensive free guide to moving. The six helpful chapters are:
    - Popular moving options for seniors
    - Planning out your new home
    - How to downsize
    - The emotional impact of downsizing
    - Moving tips for senior citizens
    - Staying connected in a new city.
    Find it here: https://blog.hireahelper.com/senior-citizens-moving/

July Half Price Sale on Couples Business Book

LMMH book cover-jpg BooksIf you've ever thought about going into business with your spouse, you need to read Let's Make Money, Honey: The Couple's Guide to Starting a Service Business. The book has received excellent reviews from book reviewers and readers alike. It tells the story of how a Boomer couple started a small service business and sold it seven years later. You'll find plenty of advice about what to do and what not to do when starting a business with your spouse. Included are details about planning, financing, outfitting, and launching a service business, as well as operations, marketing, sales, customer service, and managing growth. Useful tools to help couples assess their business interests and business compatibility are also included. 

For the month of July only, Happily Rewired is offering the eBook edition of Let's Make Money, Honey: The Couple's Guide to Starting a Service Business at half price -- just $3.50 -- if you order it through Smashwords. You can get the book in any format for any device, including a PDF. 

To get your copy at half-price, simply go to: https://www.smashwords.com/books/view/568837  When you place your order, enter the code SSW50 and you'll pay just $3.50 instead of the regular price of $6.99. This offer is only good from July 1 through 31 at Smashwords so order today!


Insights About Retirement Worth Considering

MusingsHere's an intriguing question that was asked of retiree investors by the well-known mutual fund company, Vanguard: "If you had a do-over, what would you do differently to prepare for retirement?"

Vanguard received hundreds of answers to that question, and Matt Bell of The Balance highlighted some of the primary areas of concern. These areas provide important insights about retirement worth considering for Boomers, since they reflect the opinions of retirees who have already been through this stage of life.

Investing Earlier
A common theme was that retirees should have considered investing earlier than they did. They recognized that compounding works best over a long period of time.

Investment Decisions
Ill-informed investment decisions were another regret. Clearly, it pays to consider investment decisions wisely instead of risking assets on speculative investments. A related regret was investing too heavily in an employer's stock. When it comes to objective investment decisions, a financial advisor is an important resource.

Social Security
Retirees recognized that it may have been short-sighted to take Social Security payments too early. At the very least, waiting until "full retirement age," or age 70 if possible (when you receive the maximum Social Security monthly payout) makes a real difference in income in later years.

Understanding What Retirement Means
Retirees regretted concentrating on only the financial aspects of retirement. Just as important is the psychological impact of retirement. What you will do in retirement becomes a key challenge, one for which many retirees are unprepared.

Instead of second-guessing your retirement and being unprepared, think carefully about it and plan ahead!


Higher Education at an Older Age

OnaWhimA common characteristic of Boomers is their desire to learn for enjoyment. Education seems to become all the more precious as we age; the popularity of adult education courses through such organizations as OLLI (Osher Lifelong Learning Institute) is evidence of that fact.

Sometimes, though, higher education at an older age serves another more practical purpose: To learn new subjects and skills that are directly applicable to employment. There are obvious challenges in returning to college, but it is a route that is becoming far more common than you might think. The payback is in potentially making yourself a more attractive job candidate.

If you are considering going back to school for job-related purposes, you might want to check out this article:  "The Time is Now: Going Back to School at 50." Posted by Maryville College, which has helped pioneer online college courses, the article discusses reasons you might want to return to college, factors to take into consideration, and degrees and career paths that might be available to you. The article links to a "going back to school checklist" and also points to numerous additional resources. Check it out.


"RBG" -- A Must-see Documentary that Destroys the Aging Myth

MediaIf anyone typifies the adage that you are only as old as you feel, it is Supreme Court Justice Ruth Bader Ginsburg. At age 85, Ginsburg often works through the night and spends an hour a day with a personal trainer on a physical regimen that would put people half her age to shame. She has even overcome two of the most serious forms of cancer, colorectal and pancreatic, as well as the loss of her husband Marty to cancer.

Her story is brilliantly told in the documentary, RBG, that recently ran in select movie theaters. If you missed it, this is definitely a film you want to catch when it hits the streaming market. While the documentary includes the standard biographical overview of a celebrity, it speaks to the wonderful relationship she had with Marty, who supported and encouraged her at a time when women were not supposed to be working, much less as attorneys. RBG highlights the remarkable achievements of this slight, quiet woman from Brooklyn, New York, who as an attorney won five of six cases before the Supreme Court, paving the way for the equal treatment of women in our society.

Another aspect of the film is invigorating: It depicts how Ginsburg has become a virtual cult hero among young women, proving that age is no barrier when it comes to greatness. The film offers insight into the personal life of Ginsburg, too, humanizing a Supreme Court Justice in an intimate, endearing way. We see, for example, the warm friendship Ginsburg had with Antonin Scalia, her polar opposite on the Court, and her ability to laugh at herself while watching a Saturday Night Live skit parodying her.

Whether you are a Ginsburg fan or not, it is hard not to respect and admire her after watching RBG. I highly recommend it.


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.