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
Just in time for April Fools’ Day, here are five foolish retirement planning mistakes that lots of people make.
Believing in Santa Claus, the tooth fairy and investment returns that are too good to be true. Just this week, the Texas State Securities Board reported that a shyster who bilked $7 million out of elderly investors will get 15 years in jail while his victims will get bupkis.
Thinking that since grandma died at 65, you will too. According to data released by the U.S. Census Bureau this January, average life expectancy is 78.7 years, But that’s the average.
A recent article in The Ledger, a Lakeland, Fla., newspaper, profiled an 88-year-old man who went back to work three years ago after spending more than 20 years in retirement. George DeMarco took a clerical job earning $7.67 an hour to keep from losing his home and to help make ends meet. He cited the rising cost of living and higher gas prices as reasons why his $1,200 monthly retirement income “just wouldn’t cut it.”
The article cites data from the Bureau of Labor Statistics: “The number of employed people 65 and older rose from 4.3 million in 2002 to 7.2 million this year. The number of working seniors 75 and older is now 1.3 million, up 41.2 percent from a decade ago.”» Read more
Retirement planning is much tougher for women than it is for men.
Montreal-based BMO Financial Group offers these statistics about Americans.
Women live longer than men. By age 85, there are six women for every four men. At age 100, the ratio is more than 2-to-1.
Women earn less than men, and that translates into less savings. In 2010, women earned 81 cents for every $1 men earned.
Women have more intermittent work histories. It is hard to get around the fact that women have the babies.
Widowhood or divorce reduces women’s income. The average age of widowhood is 65. In the first year after a divorce, twice as many women than men had an income below the poverty level.
Writer and actress Sandra Tsing Loh has an article in the March issue of The Atlantic magazine called “Daddy Issues” in which she bemoans her 91-year-old father’s longevity because, she says, hiring people to care for him is driving her to the poorhouse.
I added up the costs she mentions, and those alone were about $10,000 a month — a staggering $120,000 a year — for live-in help to look after her incontinent and self-absorbed but otherwise healthy father and her dementia-afflicted 72-year-old stepmother. Loh rages:
My family is throwing all our money away on powdering our 91-year-old dad’s giant-baby ass, leaving nothing for my sweet little daughters, with their thoughts of unicorns and poetry and dance, my helpless little daughters, who, in the end, represent me!» Read more
No health insurance is a problem that can wreck your retirement planning and put real retirement out of reach.
If you’ve lost your health insurance and you aren’t old enough for Medicare but you can’t buy a private pay replacement plan because you have a health problem, take a look at the federal government’s Pre-Existing Condition Insurance Plan website.
The Pre-Existing Condition Insurance Plan is a stopgap until 2014 when the Affordable Care Act really kicks in, and insurance companies will no longer be able to discriminate against potential customers with pre-existing conditions. It is administered by either your state or the federal government, if your state decided not to step up.» Read more
If you’re 65 or getting close, still working and eligible for your employer’s health insurance, you still shouldn’t ignore Medicare.
Medicare is a complex part of retirement planning, says Adrienne Muralidharan, senior Medicare specialist for Allsup, a company that offers help in choosing the best Medicare plan. “A lot of people are completely bewildered by the whole thing,” she says.
Here’s her advice for people who are 65 but still working and not yet enjoying retirement:
If you are eligible for Medicare and working for an employer that offers health insurance and has more than 20 employees, generally, the company can’t legally dump you off its policy.» Read more
If you haven’t considered long-term care during the latter stages of retirement, now’s the time, says Sean Kell, CEO of A Place for Mom, the country’s largest senior-living referral service.
Kell says his organization works daily with the families of people in need of care who scramble to find a solution and are shocked by its price tag. The cost for caring for someone with Alzheimer’s is especially high.
Dealing with the realization that they can’t afford the kind of care they want for their parents — or for themselves — is hard to do, Kell says, especially when people are forced to accept an option they feel isn’t suitable.» Read more
Most people’s retirement planning doesn’t include sharing a home with their children, but in the last few years, faced with an economic downturn, the number of households where junior has commandeered the couch has increased dramatically.
According to an analysis of U.S. Census data by the Pew Trust, 21.6 percent of people ages 25 to 34 are living in multigenerational households. That’s up from 15.8 percent in 2000.
A follow-up survey of these boomerangers indicated that life on mom’s couch isn’t so bad. Some 78 percent say they are satisfied with their living arrangements, and 77 percent are optimistic about their future finances.» Read more
Our friends own a very attractive waterfront home they bought 20 years ago in a Florida beach community. They are now in their 80s, and they’d like to move closer to family, where they believe their retirement will be more comfortable. They could sell the property tomorrow if they priced it competitively — still more than they paid — but they are very reluctant to do that because the market price is much less than they are convinced their home is worth.
When the bottom fell out of the real estate market in 2008, many people thought it would recover, and prices would rise quickly.» Read more