6/27/2011 1:46 PM ET|
8 things to consider before retiring
How wisely you invest your savings and plan for future income will determine when you can afford to stop working. Reviewing these essentials is part of that process.
Save, save and save some more is one of the mantras of retirement preparation. These days, it's been joined by "work, work and work some more." People have responded to investment, employment and housing shocks by deciding to continue working. Some surveys show people are typically adding a full five years onto their employment plans.
This would be a huge financial and lifestyle change for older Americans, if it happens. For years, retirement surveys have found a large gap between when people say they plan to retire and when they actually mothball their office and factory wardrobes. Consistently, actual retirements have occurred nearer age 62, the earliest date at which people can elect to begin receiving Social Security benefits. This has been several years earlier, on average, than the dates pre-retirees say they plan to stop working.
So, first off, let's wait and see what actual retirement patterns look like once the economy has settled into what appears to be a sustained period of disappointingly low growth. Before this can happen, of course, we need to get past the congressional impasse on the nation's debt ceiling and deficit crises while avoiding, let's hope, a repeat visit to Recessionland.
But as you consider your own retirement prospects, here's a checklist of investment and income matters you should review:
Work-retirement tradeoff. For each additional year you work, you should be able to generate an additional two to three years of retirement coverage.
There is, of course, the extra year of work itself. Presumably, you will be spending none of your retirement nest egg during that year, and, let's hope, you will be adding to your savings. Let's say this adds 6% to your nest egg (the 4% you didn't spend and 2% in new savings). You'll also be getting an extra year of earnings on your retirement funds. That should be worth another 6%.
Lastly, you can extend the age at which you begin collecting Social Security. Social Security benefits rise by roughly 8% a year for each year you delay taking benefits between ages 62 and 70. That's 12% more in your nest egg and 8% tacked onto your Social Security income for each year you continue working. The added income may even raise your Social Security benefit if you earn enough to raise your lifetime wage base.
Longevity and retirement. Once you turn 65, you'll live, on average, an another 18 (men) to 20 (women) years, current longevity statistics say. Your retirement savings will need to stretch over a shorter period should you keep working until age 70.
International investments. Traditionally, diversification of retirement investment portfolios has been about asset classes. You made sure there was an appropriate balance between stocks and bonds, and paid attention to the risk and return characteristics within each type of asset. Increasingly, your investment mix needs to become focused on foreign holdings. That's where the world's economic growth will be found, and it's where a good percentage of your retirement funds should be invested as well.
The U.S. dollar. Retirement investments are affected by the dollar in several ways. If the United States is to boost its share of global trade, the dollar's exchange rate will have to decline, at least in the short run. This will add to U.S. prices for imports but stimulate exports and domestic economic growth. Much of our national debt is also held overseas in dollar-denominated Treasury securities.
Interest rates on those securities will rise if foreign investors don't see meaningful progress in attacking U.S. deficits. This, in turn, will drive up all interest rates.
Volatility. Expect a lot of volatility in your investments' performance. This argues for setting aside more reserve funds, so you aren't forced to sell investments at a bad time. Flexibility is essential here, so don't lock too much of your funds in holdings that cannot be changed.
Glide path. As we age, our investment holdings should gradually become less risky and provide better protection against market declines. The changing mix of stocks and bonds is known as a glide path. Make sure you know what the glide path is for your holdings, and do the homework needed to make sure it's an appropriate path for you.
Lots of people don't have a financial adviser and may not be comfortable actively managing their investments. If this describes you, consider investing in target-date mutual funds. They are geared to people of different ages and automatically shift investment holdings to achieve specific glide paths explained in the funds' offering prospectuses.
Higher medical expenses. The biggest failing of most retirement investment plans is underestimating out-of-pocket medical expenses. This will become even more of a problem if Medicare's financial challenges are addressed by shifting more program costs to consumers. When you calculate how much you will spend in retirement, and thus how much money your retirement savings will have to provide you each year, don't ignore medical expenses.
Income spigots. Investment assets don't pay the bills. You will need to convert those assets into regular monthly income. Individual retirement accounts (except Roth IRAs) and 401ks require minimum distributions once you turn 70½. There are tax considerations that can govern which investments you sell and when. Your nest egg conversion, in short, will require a lot of planning. It's best to build your plan several years before you actually retire. (Will your 401k provide enough? Check MSN Money's calculator.)
This article was reported by Philip Moeller for U.S. News & World Report.
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Now on last note they say if you enjoy what you do then you never worked a day in your life. If that is so with you then work
do the math, if you retire at age 62 you have to live to be 77 before you hit the breakeven point of which is the difference between retireing at 62 and your nomal (for me its 66 n 8 months).
What will be your quality of life at age 77 anyway?
These surveys seem more to scare us into delaying retirment and saving the govt payouts.
its not how much you earn as much as how much you spend, and keep after taxes.
I know of 4 guys at my work that DIED before retireing.3 heart attacks and 1 stroke.
bottom line if you do not live high on the hog you will be ok
me, i did 23 years in the reserves so at age 60 i will be getting a check plus i am fortunate to have a job that still pays a pension,
so i will have 3 checks plus regular investments, so at age 62 and i day i am outta here.
The gov't wants you to work until you die, that way they don't have to pay you one red cent of the money you've paid in during your working life. That way they can give it to the parasite illegals.
I'm with "John Doe 2", when I hit 62 I'm grabbing what I can. My house and car are paid for and I don't need an extravagant lifestyle. If I get a severe medical condition, I'll change my name to Juan Valdez and get all my medical bills paid by the govt.
Retiring sounds like a dream , a dream that doesn't ever come round for everyone. At 61 I'm simply don't have the energy of once upon a time. The government says work till your 70. It seem to me the government has lost a state of reality, the older one becomes things change, that is real.
At least FDR had insight, knowing Social Security would help older people retire with dignity and allow younger people jobs, which would boost the economy.
Inflation has really gotten a hold on everything, and it putting our young people in situations of mounting debt. They had to find out the hard way education has a hefty price tag. Banks and Wall Street played monopoly with Main Street. Now people who wanted to retire can't ... And young people are still buying into the rhetoric uttered by those who keep promising them into debt.
Just kills me to see old folks working at Wal Mart that must stand on their feet all day. I even saw one cashier who was on oxygen. I am sure he was really wanting to be working like a young man. This also denies young people from finding employment. (I will add here, that the older employees probably are better workers than young people, however.) I heard a lady once state that she had to make a choice between eating well or getting her much needed medications. So sad, and this is America, the land of plenty.
The budget that you make when you are 62 doesn't work when you are 82. Health care costs go up. Medical plans cover less. The things that you need to buy go up more than the cost-of- living escalators in Social Security. Your kids, (who have a lot of other bills to cover), might help out. People like me deliver meals on wheels and assist with medications. The elderly person feels like s$%t taking all these handouts.
A nursing home paid for by Medicaid is not any place that you would want to put your dog. Trust me. I have seen the insides of 25-30 nursing homes and the Medicaid homes are on par with a kennel.
- Age 55
- Expects to live to 90
- Retires at 65
- Wants full Medical coverage (A, B, D, gap/advantage, dental, etc.)
- Lives in Ohio (national average for health care costs)
- Makes less than $85k per year
All of the previous ... and ... these senators, especially the Republicans have been aching to get their hands on, along with everything else, Social Security funds since the 70's. Fortunately have been unable to do it. Follow the money .. you'll find the motivation. This time they are making a new excuse ... not enough young people to pay in. That's not the 'deal', since we've been paying into this program all our working lives, and that makes us ENTITLED to our benefits now!
It seems to me that anything that is good for U.S. citizens is coming under vicious attack, and they haven't been able to convince anyone with a brain that the country is broke. Nothing makes sense ... billions in bailouts for the very evil and greedy people who have forced a economic breakdown worldwide, tax breaks for companies taking their businesses and their jobs offshore, companies that have lobbied (translate...paid off our congressmen) to avoid paying any taxes to the tune of billions of dollars, companies that refuse to pay their experienced and talented workforce in favor of paying their CEO's millions and even billions per year! What, if you think about it, can one person actually do to justify this sort of salary, while the middle-class disappears, and their employees suffer.. or worse. And these corporations cry that 'they are the same as people'. Hardly!
I took out my Social Security early for the following reasons:
> I haven't trusted any of our leaders since 2000
> I had my life-long business fail due to the worst economic market ever
> Then I lost my great job to downsizing of a very large, established company for same reason... who fired it's older, well-paid, experienced, and expert workers, who were building their business, and hired 17- 20-year-old, inexperienced, unknowledgeable workers, paying them $7.00 / hour, in a 15 hour week !!!
Ms. Senator Kay and her slimy ilk, keep talking about how we have saved for retirement, and how we get medical coverage from our companies, so that we won't need Medicare. WHAT???!!!! I don't know anyone who's company is offering any medical coverage that we can afford at $10./ Hr , part time... which is all that is being offered to anyone over 40 in my community. Translate... Ageism, which our government is doing nothing about either. I think, also that we have had enough damage to our country coming out of the political machine of Texas, thank you!
Those that have been in power, are acting like apes in their attempt to get it back. They are diabolical, greedy, and obviously have a hidden agenda, which, of course, will finally also put the Social Security funds in their claws, and deal a death-blow to a final right we have as citizens who have built this country up during our lives. Theft is simply theft .. and nothing else.
No one is talking about the amount of money (and deaths) this government is spending without our approval, on wars ... aahhhh ' invasions' of other countries for the purpose of gathering oil, running pipelines etc, etc. (Talk about a 'conflict of interest'... I'd like to see our employers allow that...) Trillions of dollars of taxpayers money should be voted on by taxpayers. THEN, we'll be able to enjoy some of the benefits that are doled out in other countries, and then be able to maintain some dignity and quality of life after our long support and investment in this country.
AARP ... shame on you!!! Are you still run by Dick Cheney's cousin, by-the-way?! I'm not
renewing my membership.
What can we do? VOTE WITH YOUR DOLLARS! (No ticket - no ride) No integrity - no support ! Or ... leave the country .
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