8/18/2011 12:05 PM ET|
5 threats to your retirement dreams
When you decide to retire, make sure you have your bases covered so you can enjoy the years ahead. Here's what you need to consider as you prepare.
This year, approximately 77 million Americans who were born between 1946 and 1964 -- aka baby boomers -- will turn 65. That means lots of folks have dreams of retirement on their minds.
But while TV commercials make it look worry-free and so appealing -- sailing off the island coast or golfing at the country club -- the decision to retire can be a lot more complicated and difficult than the ads would have us believe. Here are several important matters to consider before plunging into retirement.
The most important thing to consider is money. Will you be able to afford life after employment? If you've planned for this moment-- either through 401k or IRA contributions, pensions or other investments -- at you've given yourself a head start. (Are you saving enough for retirement? Find out with MSN Money's calculator.)
But have you devised a Plan B in the event that those investments turn sour? Recent history has shown us that the financial markets are volatile, housing is still unstable and the economy is not yet recovered. Even if you can float on rough seas for now, will there be enough for a long-term storm?
State Farm estimates that the average person will need 70% to 80% of his or her income to maintain his or her present lifestyle. Sit with a financial planner to review your personal situation. It could mean the difference between cruising cross-country in a vintage convertible and driving yourself deeper into debt.
The ideal retirement plan includes being healthy enough to enjoy yourself. If you don't already get regular exercise and have other healthy habits, you would be wise to do so sooner rather than later. That means healthy eating habits, making regular visits to your health care professional and adopting an active lifestyle.
Your health is tied not only to your physically well-being but also your financial well-being. Health expenses can add up quickly and will significantly eat into your savings.
Your children have moved out, and you don't want to spend your free time maintaining a big home. But what are your options? It's a buyer's market right now, so you don't want to rush into a sale. If possible, wait for the right opportunity to get the price that works best for you and your future. If and when you do sell and move to a condo or apartment, will you be able to make the emotional transition to a smaller space after living in a large home? Research "55-and-over" communities, which are designed to meet the needs and lifestyles of an older population.
Another consideration in relocation is family. Can you move away from children and grandchildren without feeling a tug?
4. Your time
You've worked your entire adult life, so you pretty much have a routine: when to rise, when to eat meals, how to manage daily chores and when to go to bed. With retirement, all that regimentation goes out the window. Believe it or not, lots of people have a hard time adjusting to a schedule-free day.
Experts say one of the best moves is to stay involved somehow -- volunteer, do some consulting, take up a hobby, join a club, take classes at a community school or college, even get a part-time job. In fact, according to the Centers for Disease Control and Prevention, the life expectancy for the average American is almost 78 years, which gives most of us lots of time to do whatever it is we enjoy.
5. Estate planning and insurance
Let's face it: None of us wants to think about the inevitable. But it will surely put your mind at ease to know that when you die, your assets will be distributed according to your wishes. Speak to your attorney about setting up a will, trusts and custodial accounts for grandchildren and children. Not only will this type of planning ensure that your wishes are followed; it will also help save your loved ones and beneficiaries from dealing with estate taxes at the time of your death.
Also, consider purchasing insurance policies that cover long-term care, which can protect your assets in the event of a health crisis. (How much will long-term care cost? Get an estimate with this MSN Money calculator.)
The bottom line
The decision to retire requires careful thought. But by answering some very important questions -- and being realistic -- your retirement dreams can come true.
This article was reported by Angela Daidone for Investopedia.
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70 to 80% of current income, is a complete lie. This article is a con job. If you own your residence and live in a decent property tax state, you can live very well on $2000 a month with no problems. The most punitive tax when retired is property tax, because it never goes away. Keep your car till it falls apart. My two cars have both a 100,000 miles on them and they have been garage kept since I got them 12 years ago. I'll have them till I die, they still look brand new. I rent a car for cross country stuff, no reason to ruin your own car when renting is so cheap. I only drive in this college town less than 2000 miles a year. Any couple who spends more than $300 a month on groceries are lousy shoppers, who buy junk instead of fresh food. You eat out lunch more than dinner, no big deal. I live in a 350,000 paid for home, my house insurance is $800 a year, my car insurance for 2 cars is $650 a year because the cars are old.
I take out $5000 a year from my IRA's and with my social security that comes out to $2200 a month. We leave for France and Spain in two weeks. This article is useless and totally false in every way. Find a great college town and move there, it gives you youth and access to medical services.
OMG! This advise was good back in 1955 when I was born. Reality Check: I'm 56, and am in forced retirement, (unemployed) and live in a rural area where jobs are few. I have been unable to find a job for over 8 months. My house is paid off, thanks to the Lord, but I have no 401K or savings, used it to cover medical expenses while unemployed. My wife had a stroke last year and we have on going medical bills. All of our cars are over 15 years old with 200,000 miles on both of them. I have not driven one of them in over 8 months. So what is your advise for someone like me? Keep in mind I have had 2 back surgeries and 1 neck surgery over my working life, that limit my lifting to 20lbs and have retrained myself for office occupations. I have also reduce our expenses by over $400 a month. No cable, no cell phone, no internet, no employment expense, no recreation expense, nor any repairs be made at this time.
I'm consider myself one of the lucky ones. And know this is meant to be a positive post. Just real.
Here is some of the BS advise I have received:
Part-time Job: I don't speak spanish, nor can afford to drive 35 miles one way for $8/hr
Start own business: Sure rent is cheap, 4 of every 10 business in our area over 10 years old have closed their doors. I don't need to mortgage my home for something to do for a year to close doors.
Sell home and move: 20% of home in our community are in foreclosure. I would also have a rent or new house payment the rest of my short life.
Fact: More and more people my age are using credit to the max, medical bills unpaid, and when the collectors come a calling, file Bankruptcy. The new American Retirement Plan.
Something wrong with the statement that THIS YEAR, millions born between 1946-1964 will turn 65.
Lets do the math, doesn't only one year gets that distinction. Wouldnt those born in 1964 turn 47?
A message to WendyMorre and all you other shallow-minded "gold diggers" out there--
"A woman's retirement plan should not be a man"
William, why live anymore if that's how you feel. I've never read such gloom and doom in my life. And this crap about "you must keep working, move your hobby into a job", my god people this is insanity. I don't work, and I LOVE not working. I enjoy cleaning my house, taking care of the garden and such. I work out, ride my 15 speed, and enjoy reading, my working days are over.
The single most important thing in retirement is owning your home, that is a must. If you don't own your home by age 60, your a fool, and a terrible money manager. Being in a lower property tax state is a must, get out of the northeast, they will never leave you alone on property tax.
If your kids need you to help them that's there failure not yours. Tell them to man up, you raised them already, their failure is not your failure. There desires on your money are just that. Their "emergency" does not constitute an emergency on your part. There adults, let them act like one.
I think Americans are their own worst enemy when it comes to saving money and retirement. Of course our government sets a good example. Quit spending money like it's going out of style. It's always spend, spend, spend! Instead of save, save, save. If I don't absolutely need it, I don't buy it. I don't need fancy clothes, I don't need every new gadget that comes along. I don't need fancy food, I don't even go out and eat. Besides you can't take all that useless crap you've collected all your life with you when your dead. I was raised that keeping up with the Jones will break you. Good words to live by. Everything I got is paid for, the only bills I have are the monthly utilities. And I've got money in the bank! I ain't got a lot, but I damn sure got it made!
Well LET those are sound personal principles, trouble is neither the private sector nor government really wants anyone to do it. Why it would sink the economy, and what not. I mean when people stop spending and live within their means we call that a recession. Or being poor. Lot's of people actually do save, because they can't get credit or spend. They usually live in ghettos and are looked down upon. We call these people the "working poor." And we wouldn't want to be a nation of those!
Yeah, lol but not really. Somehow it has become a sin to be poor (no worries though. After all they will inherit the earth) and blessed and "prosperous" to be rich, and sit in judgement. Seems someone has changed the rules!
And the rest of us who make up the majority? Well, we keep both sides of that coin afloat. We are told to save and be prepared, and when we do, well, if we stop buying useless junk and fast food millions of jobs will be lost and tax revenues would go down and companies would go bust!
Oh my lord, the fix is in! And us common folk are caught right in the middle of it all
I so hate when they use the 70-80% rule to calculate what you will need...so not true if you have all your debt paid off (ESP YOUR MORTGAGE). Assuming i make it through the next 5 years OK , i will have no house payment. i will go from $4000 a month payment (2475 principle, taxes and insur plus 1525 in extra principle) to a 600 dollar a month payment(taxes and Insur). Thats 15% on my biggest bill!
My last kid will finish his PhD within the next 5 years and both will have been married (so no more education bill). I have no credit card debt or any other loan besides a car.
I will also eventually downsize to a smaller house when this gets to be too much, which will lower my cost even more. And i am already slowing down (LOL) so there should be a little more savings
Medical is the big variable that scares me but already doing what i can about that
First thing folks close to retirement should consider is making certain that
the "facts" they are exposed to are in fact true.
The opening lines on this article state that "This year, approximately 77 million Americans who were born between 1946 and 1964 -- aka baby boomers -- will turn 65. That means lots of folks have dreams of retirement on their minds."
Scary thought for the actuaries at Social Security. In fact about 10,000 boomers born in 1946 will turn 65
in 2011 for every day of the year. The math is straight forward. 10,000 x 365= 3,650,000 not 77,000,000.
As I scanned the comments I noticed that folks gloss over those errors. Many also listen to people who tell
them how to get rich. I lose some clients to those folks. My goal is to help my clients retire with sufficient
assets to cover their basics, plus some fun money for the times when they can still get on and off the bus.
But, most importantly to keep their expenses below their income. Those that buy in do OK. The widow
is also not on the street when Dad passes.
so hate when they use the 70-80% rule to calculate what you will need...so not trueThey also still use 7 or 8% returns as the default setting those wonderful retirement calculators and the "how much home can you afford" one told me 419K not three years ago.
Guess what, folks? That loving spouse sitting across from you at breakfast, could be your retirement's worst nightmare. No-fault divorce laws insure that if he/she becomes an alcoholic or drug addict, they can split with 1/2 your assets, including your pension. I am 50 years old, and have just had my retirement dreams dashed to pieces by an insane spouse, and her accomplice is a deviant court system, seemingly bent on my destruction.
My crime? Letting her stay home for 10 years to raise the kids. (She drank, at least part of that time, btw.) Courts say that after 10 years of marriage, the working spouse must support other in same lifestyle. WTF? What a dupe I was. Don't let this happen to your kids. The laws favor gold diggers. Responsible parties beware!
Where do you get your info. Congress does not pay in to SS they have their own plan which by the way is fully funded. How about we end getting your salary even after your retire from congress for the rest of your life. Come on that is just wasteful.
The biggest threat to retirement, and absent from the author's list, are the policies of the Fed and the government. Retirees/savers are getting crushed with 2 more years of 0% interest per Bernanke in addition to the 2009 -2011 years of nothing.
0% means you have to spend down your savings instead of your savings providing interest income for you. So what happens when your savings are all gone? Will Uncle Ben step up and offer you a spare bedroom in his house so you're not on the street? I think not.
If your Social Security is $15k and a normal 4-5% interest rate spunoff $4000/year from $100k savings, you'd have $19k per year of income to live off of.
The biggest threat to retirement always remains the same:
stupid or lazy sons or daughters in laws with children and no prospects to recover financially
They can either move next to you,extort money to have them remain where they are, or drag down your freedom.This is not a recent phenomenon.
Romantic love means seventeen and eighteen year olds ,or worse,desperate 25 to 35 year old men and women determine your financial health.
All you have to do is examine your families.
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