Retirement

Avoid Retirement Glitches

June 3, 2015 By Twila Van Leer

When it comes to retirement, there are as many “don’ts”as there are “do’s.” Avoiding common mistakes in your retirement planning could help ease you into a happy situation.

Here are suggestions that will help you skirt the pitfalls:

When you consider retirement, don’t be in a hurry to start collecting Social Security. If you request that the monthly benefit start at age 62, the amount will be 76 percent less than if you wait until you are 70. Some people can’t afford to do that, but if you start planning well ahead of your expected retirement, you may be able to delay the initiation of Social Security payments at least for awhile. To determine how much benefit you can expect, visit aarp.org/social security benefits.

Don’t just quit working precipitously. Find a part-time job that you can enjoy and let it help fund your retirement years. It will help in the transition from the daily grind to more leisure and the less you have to dip into your savings, the longer they will last.

Don’t just expect that your lifespan will end shortly after you retire. More than half of Americans underestimate how long they will live. One way to ensure financial security if you live longer than you expect is to invest in a deferred-income annuity. You pay an insurance company a lump sum and then when you need it, you can draw an income from it. You can transfer up to $125,000 from an IRA or 401(k) to purchase an annuity and the amount is not included in mandatory withdrawals after you reach age 70.

It is likely your medical costs will increase with aging. Even when Medicare kicks in at age 65, there will be deductibles and other costs. Many of the elderly purchase a supplemental health care policy to cover the charges not covered by Medicare. To learn the expected costs for health care, visit aarp.org/hccc.

As retirement looms, be careful about making major financial expenditures. Think twice before spending large sums for your children’s education needs or getting them started in life. Large purchases such as a second home or expensive automobiles, etc. can make a large dent in retirement income.

Be aware that Medicare does not pay for long-term care. You might want to consider long-term care insurance if you don’t have family able to accommodate you in case you become ill.

Be wary of scams that target the elderly. After retirement, you don’t have the flexibility in your finances to recoup from a costly scam. Seek advice if you have questions about a proposal someone makes to you. Don’t act quickly. Ask credit reporting companies to put a freeze on your reports so unscrupulous thieves can’t open lines of credit in your name. Check your financial records frequently to spot any unauthorized transactions.

Work at simplifying your finances. Try to consolidate retirement accounts. Be careful not to multiply fees while you consolidate. Some financial firms lower fees for larger accounts.

Be certain that you have accounted for all of your possible retirement pensions. Start with the human relations department of the company from which you retired. If the company no longer exists, check with the Pension Guaranty Corp., which insures private pensions. That agency currently is holding some $280 million in unclaimed pensions owed to almost 40,000 individuals. Search for unclaimed pensions at pbgc.gov. Or contact the federal Employee Benefits Security Administration.

Pay attention to Medicare deadlines. A seven-month period, beginning three months before you turn 65, is allowed for you to sign on to the federal program. Late penalties and delayed coverage can result from failure to meet that deadline. Unless you have post-retirement coverage from your employer, you could find yourself with no health care coverage.

Don’t Be Scared of Retirement

Retirement Coming? Be Sure You’re Ready

May 19, 2015 By Twila Van Leer

For many workers, retirement seems an ethereal, distant eventuality that doesn’t require much thought. Don’t you believe it. It comes and it comes sooner than most Americans are ready for it.

According to a USA Today article, about a third of Americans have less than $1,000 in savings and investments to fund their retirement, aside from a home and defined benefit plans such as pensions. Fifty-seven percent say they have less then $25,000 set aside for retirement, a survey taken by the Employee Benefit Research Institute and Greenwald and Associations noted. Their research results match those generated by other researchers.

Many pin their hopes for a financially secure retirement on working beyond the usual retirement age. But, again, the research shows that isn’t realistic. Some 50 percent of workers leave the workplace before retirement age, 60 percent of that number because of health problems and 27 percent because the nature of their work conditions has changed. Their company has downsized or closed entirely in many instances. Only 23 percent of retirees actually report having continued to work for pay.

Things don’t always work out. It’s better to save now than to rely on nebulous chances to work longer later, the experts advise. How many years you are eligible for a retirement plan through your work is one of the best indictors of how well you will fare financially after retirement.

In the EBRI survey, only 14 percent of those questioned said they felt secure about retirement. They had retirement plans. Conversely, 44 percent who had no retirement plans were concerned about the ability to adequately prepare for retirement.

Many workers simply fail to think about retirement at all. Fewer than half of those surveyed said they and/or their spouses had tried to calculate how much money they would have at retirement. The greatest excuses for failing to save is the cost of living and day-to-day expenses. Debt also is a factor, with 51 percent indicating they had a problem with the level of debt they had incurred. Almost 70 percent of those surveyed said they thought they could save an additional $25 per week more than they currently are doing, but they would have to sacrifice something, such as meals out, to do it. They were advised that the additional savings would amount to some $1,300 a year. But you can’t wait until retirement is imminent to do it.

Bottom line, the experts advise, is living within your means and starting to save early. Ignoring the potential problems until it’s too late serves no purpose. Many financial institutions offer help in calculating what your saving should be to assure a comfortable retirement. The alternative is to plan on spending much less than you earned on the job, live largely on Social Security and seeing savings dwindle quickly after you retire.

Retirement Planning Should Begin When You Are Young

April 25, 2015 By Twila Van Leer

Begin thinking about retirement plans when you first start earning money.

Waiting until retirement is around the corner to get serious about preparing for it is a serious mistake. The ideal time to start thinking about post-employment issues is when you are still in your 20s or 30s.

Consistently setting aside money and then monitoring it to see that it is earning the best possible returns is your best bet for being financially secure when the front porch swing beckons., according to financial planners.

In fact, the Wells Fargo Institutional Retirement and Trust, which tracks trends, has reported that a growing number of workers aged 18 to 39 are participating in employer-sponsored programs aimed at retirement. The percentage taking advantage of their company 401(k) opportunities has risen from 43.9 percent three years ago to 50.4 percent, the trust reported.

Part of that increase can be related to a rise in the use of automatic enrollment in such plans in recent years. However, although the number of participants is increasing, the rate of average deferrals has dipped slightly, from 5.2 percent three years ago to 5.1 percent now. Some employers automatically enroll their workers initially at low deferral rates, such as 3 percent.

Merrill Lynch analysts say that savings trends are encouraging. In the first half of 2014, the number of first-time contributors rose 37 percent. In the so-called millennial generation, the figure went up to 55 percent. That age group makes up 20 percent more of the total working force then it did in mid-2013, the analyst said.

Some forward-thinking people just entering the workforce are making retirement part of their thinking. College students are increasingly asking for advice before they being their careers. Today’s “beginners” are more savvy about financial matters and more apt to be aware of how much they must save now to enjoy retirement later. They are willing to sacrifice a little over the term of their working lives for the sake of a worry-free retirement. Those who are familiar with the data assure younger workers that they don’t have to give up all of life’s pleasures for the sake of retirement security. There is room for both careful, consistent savings and the occasional splurge, they say.

Some younger workers are taking more careful note of how their parents are faring as they leave the job market. They are listening to the nagging concerns that Social Security may not be able to cover all the Americans who will be eligible in the upcoming years.

Consulting with a financial planner at the outset of a career is a smart move. In general, the advice is to invest in safe, tax-deferred plans such as 401(k)s or investment portfolios heavy on stocks.

Including retirement issues in your financial planning may have an effect on your lifestyle, the experts say. Some young people are not including home ownership in their plans. Frugal living through the work years may mean a comfortable future, with more gold in the golden years.

Retirement Planning For Women

January 18, 2015 By Twila Van Leer

Plan carefully for your retirement. — Women, Money & Prosperity: A Sister’s Perspective On How To Retire Well, Written By Donna Phelan

Concerns about having enough savings to finance a worry-free retirement plague many women. According to Donna Phelan, 62, who has guided many women through the process as she has worked with several large Wall Street investment firms. She has even written a book on the topic, “Women, Money & Prosperity: A Sister’s Perspective On How To Retire Well.”

Women tend to earn less than their male counterparts. They save less toward retirement. Many of them take a break from work to rear children and they spend more time taking care of the elderly. All these factors have an effect, Phelan says.

Her response has an acronym, Stackable Income Streams to Empower Retirement Security – SISTERS. The objective is to “stack” as many sources of retirement income as possible. For instance, if a woman has five sources of income, each paying just $12,000 per year, the total for a year is $60,000. Possible sources for this income are Social Security, investments and savings, retirement plans such as 401ks or IRAs, part-time work, inheritance, annuities, home-based or small business, rental property, life insurance and home equity.

She suggests that women get together and pool their information. In some cases, there will be opportunity for collaboration that would improve the retirement outlook for more than one of the parties.

Her tips for building a healthy retirement:

Research your own circumstances. Consider how much in resources you will reasonably have, what kind of lifestyle you would like, whether there are potential sources of income you have overlooked.

Delay retirement as long as reasonably possible. Talk with a professional finance planner and look at alternatives. It may well be necessary to continue generating income past usual retirement age. Working part-time actually can be a good alternative. It keeps you active and healthy. It gives you more time to prepare mentally for retirement.

Pool assets with like-minded women to create a small business. Varied work experiences, say marketing, artistic talent and accounting, might add up to a viable business. Make it home-based if that seems reasonable. Crafts and hobbies can be made into money-making undertakings.

Consider renting out rooms if your home has become larger than you need. Get a roommate or downsize to a less expensive home. Phelan points to the experience of a woman who rented rooms to local art students, using the money to invest in ways that generated more income.

Become financially literate. A professional financial planner may seem a heady step for many women, but the advice can be well worth moving a little out of your comfort zone.

Understand Social Security issues. The longer you delay retirement, the more money you will receive each month. Each year you wait increases your benefit by 8 percent, up to age 70.

Pay off debt as quickly as possible, particularly credit card debt, and create a realistic budget that avoids any further debt.

In a word, become responsible for your own retirement planning. The sooner you begin, the fewer problems you are likely to encounter when the time comes.

Letting The Present Rob The Future

November 6, 2014 By Twila Van Leer

Proper planning for retirement really helps alleviate stress.

The comparative wealth of Americans born into the post-World War II economy is taking a toll on retirement expectations. With the greatest economy known to history, Americans have tended to become a “gimme more” population, a condition that is reflected in soaring national debt and near-depletion of some natural resources.

The national stress is often mirrored in personal finances. Too many Americans are approaching retirement only to find they don’t have the resources to match their expectations for the “golden years.” Now it’s too late to cut expenditures and put more into savings. The alternative is to lower expectations and live more frugally than they had planned.

For those who still can affect the future, there are some common-sense steps that will ease the challenge when retirement arrives:

Savings: Put a percentage of your income into savings and investments to build a cache for the future. The more generous you are to yourself, the greater the expectation you can have of being able to control your life as you age. Recognize the difference between needs and wants and act accordingly.

Housing: In that spirit, consider housing. You may want a mansion, but you need secure shelter for your family. Opting for a smaller home that does not consume a large percentage of your resources will give you more leeway in the future. Consider all the factors, including down payment, interest, mortgage payments and upkeep over the time you expect to live in the home, then decide if luxury now will offset a skimpy retirement fund.

Possessions: Consider the mental costs of owning many “things.” The care and keeping of many possessions can cause considerable stress, which can in turn manifest itself in physical ailments, psychiatrists say. Count the cost of the time you may spend looking after, protecting and replacing excess possessions. An “attitude of gratitude” rather than obsessive collecting will help you toward a balanced life.

Health: Look after your physical health as a foundation for your retirement. Living long but not well is not a good option. Two in three Americans are overweight or even obese. This contributes to increases in such complaints as diabetes, heart disease and some cancers. Surgical remedies for obesity have surged from 13,386 operations in 1998 to 220,000 in 2009.

Overeating is the simple underlying factor in overweight, compounded by lack of exercise. A huge increase in the number of high-calorie foods and drinks consumed by Americans is part of the problem, abetted by too-large servings, according to health experts. They advise eating about half what a restaurant serves. Reduced trips to eateries and an increase in home-cooked meals will be easier both on the budget and on the calorie intake.

In summary, living lean involves having money in reserve, providing for a reasonable retirement and putting needs before wants. It’s an approach to living that can result in a less stressful, more satisfying present and the prospects of a better future.

Retirement

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