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
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