The 4 percent rule, which says most retirees can safely spend 4 percent of their retirement savings annually and not run out of money, has been under a lot of scrutiny lately for a variety of good reasons, including the obvious: Interest rates are lousy.
Roger Nusbaum, who is an Arizona-based financial adviser and chief of his local volunteer fire department, reduces the rule to very simple retirement planning math. If you have saved $1 million, you can confidently take out $30,000 to $50,000 a year for as long as you live. But if you feel compelled to spend $80,000 to $100,000, there’s a big likelihood your money is going to run out while you still need it.» Read more
My 102-year-old friend has been struggling with the prospect of losing her two long-time caregivers. One of them is retiring and moving home to Africa. The other is marrying and moving to the West Coast.
My friend’s children, who are themselves past the age of retirement, are urging her to be more flexible about her care arrangements and consider some combination of in-home help and adult day care. But as her doctor says, “People at this age can be inflexible and have a strong sense of entitlement.” So it’s not easy — nor is it cheap. If you were hoping to reach this age, keep that in mind.» Read more
Why is it that more people die when the economy is on the upswing than when times are tougher?
The Center for Retirement Research took on the challenge of answering this question and came up with some really depressing conclusions, released today, that gave me, at least, pause about longevity and retirement planning.
At first blush, researchers proposed that the death rate rises when the economy is good because workers are working longer, sleeping less and eating lots of bad food, such as delivery pizza and burgers. But on closer analysis, people ages 65 and older accounted for 75 percent of the additional deaths. Women older than 65 alone represented 55 percent of the additional deaths.» Read more
Last week, I wrote about the early boomer rush to retirement.
According to a survey by MetLife, 45 percent of 65-year-old boomers are now fully retired, up from 19 percent in 2008. Another 14 percent say they are officially retired but working part time or seasonally. And of those who continue to work, 37 percent say they plan to retire in 2012.
I found these numbers surprising, but among the dozen or so people who commented, many understood perfectly why so many boomers are packing it in early. However you see it, this provides an interesting glimpse at retirement planning.» Read more
Retirement planning is a worldwide issue. The World Health Organization, or WHO, reported last week:
The number of people age 60 and older has doubled since 1980.
The number of people age 80 years and older will quadruple to 395 million by 2050.
Within the next five years, the number of adults age 65 and over will outnumber children younger than age 5.
By 2050, these older adults will outnumber all children younger than age 14.
Given this scenario of an aging population, what can those of us at the epicenter do to help ourselves avoid being victims of this demographic revolution as we slide into retirement?» Read more
If you’re lucky enough to work for state or local government, you might think you don’t have to worry so much about retirement planning since you’ve likely been promised a pension. But in recent years, troubles have been brewing among public pension plans all around the country.
In the last week alone, Plansponsor.com reported problems with three state plans:
New Hampshire: The House of Representatives approved a proposal to put an end to pension plans for public workers and instead offers a 401(k)-type plan. Facing a funding shortfall of $4.1 billion-plus for retirement and medical benefits, last year the legislature raised the retirement age at which future workers would qualify for benefits and increased employee contributions to their pension.» Read more
How do you achieve retirement security in a time of uncertainty? It feels hard to do even rudimentary retirement planning when you don’t know how much money you’ll have to work with or how much it will take to continue to live comfortably when you’re not working.
Doug Carey, owner and principal of the retirement planning firm WealthTrace, published a piece this morning on SeekingAlpha.com that analyzed a 50-year-old couple’s financial situation. He concluded that if they put half their $500,000 retirement savings in equities and half in short-term Treasury bonds, by age 60, when they hope to retire, the money will have grown to $665,000, given a realistic 6 percent return on equities and 2 percent return on Treasuries.
Boomers are leaving the workforce in droves. Given how lousy the economy has been the last few years, I found this a surprising retirement planning phenomenon. My guess would have been that most people would look at their diminished savings and conclude, given the continuing economic uncertainty, to stay on the job. But according to a new MetLife survey, that’s just not the way it is.
MetLife found that 45 percent of 65-year-old boomers are now fully retired, up from 19 percent in 2008. Another 14 percent say they are officially retired but working part time or seasonally.» Read more
If your retirement planning includes a career change, before you go back to school to study for that new career, make sure you will be on the job long enough and earn enough money to make this investment pay off before you hit retirement.
The New York Federal Reserve released data last month showing that of the 37 million people with student loan debt, 11.3 percent are people ages 50 to 59, and 4.2 percent are 60 and older. Of those, 12 percent between the ages of 50 and 59 are late on their payments, and 4.8 percent of those 60 and older are behind.» Read more
Retirement planning isn’t easy. Don’t assume. Assuming without doing the math is a big mistake.
Here are some retirement assumptions that may be true but are just as likely — based on your numbers — to be wrong.
A Roth IRA or 401(k) will save you money in the end. Before you switch or convert your current account, do the math. For young people with their highest-earning years ahead of them, choosing a Roth individual retirement account, or IRA, will almost certainly pay off. But if you are currently in your highest-earning years, skipping the tax break now is likely to turn out to be a costly mistake. Get your accountant to make some projections before you make up your mind.» Read more