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Dealing with the First Year of Retirement
Retirement Planning

Dealing with the First Year of Retirement

by Kendall VanBlarcom
written by Kendall VanBlarcom

The first year of retirement can be the hardest part of this new way of life. Many people find themselves feeling alone. They feel like no one cares too because everyone around them thinks they are envious of their new life of not working and doing whatever they want. The truth is that it’s not all that’s its cracked up to be. Actually, many retirees will go back to work just because they can’t handle the change in their life. Is that the answer, though? Many times, it’s not. Going back to work just brings back the old life. There’s going to be a point in which you’re not going to be able to work anymore, and then you’re going to have to deal with the first year of retirement. It’s best to work through it now. Dealing with the First Year of Retirement

Removing Yourself from Your Brand to Create a New One

Many retirees find themselves feeling lost because they have been referring to themselves in a way that they can’t anymore. For example, they may have identified themselves as “Jim from Ford.” After retirement, you are not from Ford anymore. You are just Jim. Dealing with the First Year of Retirement
Who is this person you are now without your company’s branding? Do you know?
Many people have an identity crisis in the first year of retirement. It’s normal and common among retirees. The only way to solve it is to start creating a new life. The old life is what gave you the identity you had, so now you need to make a new one. One that will give you an identity again that may be similar to the one you had before, but will be unique as well.

Dealing with the Loneliness of Retirement

Everyone gets up, gets ready, and heads out to work. You don’t have to do that anymore. You simply sit at home and you may head out and run some errands. Not exactly the hustle and bustle that you’re used to when you worked.
This loneliness you feel is again, completely normal and common. Chances are, you are feeling the loss of people around you because you are used to having all of them around.
What you can do is try to meet new people that you can incorporate into your new life. If you enjoy playing golf or other activities, you can start to do that during the week. This way you can start to have a daily schedule that will help you feel like you have a purpose. Sure, it’s fun and you may feel as though the day has to be productive, but remember, you are retired.
No one can tell you not to work. If you feel a desperate need to do some work, find something that you enjoy. Find something that may not cause you as much stress as your job did when you did work full time. If you can’t work because of financial reasons, consider volunteering. Many non-profits need your services, so your time will be appreciated.
The emotions that come along with being retired can be hard to deal with, but you can turn them to being more positive. All you need to do is change your life. When you change your life, you change the way you feel about it.
For more information on how you can make it through this stage of life successfully, contact Kendall Van Blarcom. He’s a personal consultant who can help you every step of the way through the first year of retirement and beyond.
Dealing with the First Year of Retirement

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Menopause and Perimenopause Tips
Retirement Planning

Retirement Lessons to Teach Your Children

by Jeff Dailey
written by Jeff Dailey
Retirement Lessons to Teach Your Children
Many individuals are finding that they must postpone their retirement target dates or cancel retirement because they are not financially ready for it. If you find yourself in such a predicament, you may find solutions to this dilemma if you look carefully. If not, you’ve at least learned a valuable lesson – one that you can and should pass on to your children. Let’s look at some of the sometimes-harsh lessons the current generation of retirees and pre-retirees has to teach. Retirement Lessons to Teach Your Children
Lesson No.1: Don’t Finance Your Children’s Higher Education at the Expense of Funding Your Retirement Nest Egg
Parents often have the best of intentions when they choose to pay for their children’s higher education, but the cost can erode retirement savings and/or negatively impact the parents’ ability to add to their retirement nest egg. For instance, a parent who chooses to take PLUS loans or private loans of $120,000 ($30,000 per year over a four year period) to pay for her child’s college expenses may end up repaying an average of $186,000.
As a parent, it may make you feel good to know that your children will not be saddled with repaying student loans when they starts their journey to financial independence. But, before you get too comfortable with that feeling, consider that your children have several options for financing their education, while you are solely responsible for financing your retirement through retirement savings account, regular savings and social security contributions. (For more on college loans, see College Loans: Private Vs. Federal.)
Lesson No.2: Don’t Overextend Your Debts and/or Ruin Your Credit
Having unmanageable debts can negatively impact your ability to add to your retirement nest egg, as you may find yourself unable to even meet those debt obligations. Debt repayments reduce your disposable income, resulting in a reduction of the amount available for adding to your retirement nest egg. Having too much debt can also result in a poor credit rating.
A poor credit score can negatively impact your ability to get lower interest rates on loans, and higher interest rates mean higher loan repayment amounts. For instance, consider an individual obtaining a $250,000 30-year mortgage. At an interest rate of 7% you would pay total interest of $348,680 and have a monthly repayment amount of $1,663. If that individual was able to obtain the mortgage at 5.5 % due to good credit history, the amount of interest repaid would be $260,840 and the monthly repayment about would be $1,419. The difference of $87,840 in interest repayments could have been added to the individual’s retirement nest egg.
In fact, if the $244 difference in repayment amounts were added to a savings account instead, it could result in an accumulated savings of approximately of $169,000 at a conservative interest rate of 4%. Even at 2%, it would result in a savings of $120,000, which can go a long way in covering expenses during retirement.
Lesson No.3: Prioritize Saving For Retirement
Retirement savings should be added to your budget as a fixed expense and increased as your disposable income increases. However, retirement is often viewed as a distant event that can be put on the financial back burner; by the time these individuals are ready to implement their retirement savings regimen, it becomes burdensome. Consider that an individual who needs to have $1 million in his retirement nest egg at retirement will be required to save more per year for each year that savings are delayed. Let’s look at some numbers to demonstrate this point.

Years to Fund Planned Payment (Per Year) Total Payments Total Earnings @ 5.5% Accumulated Value
1 $947,867.30 $947,867.30 $52,132.70 $1 million
5 $169,835.48 $849,177.42 $150,822.58 $1 million
10 $73,618.74 $736,187.38 $263,812.62 $1 million
15 $42,299.14 $634,487.17 $365,512.83 $1 million
20 $27,184.20 $543,683.98 $456,316.02 $1 million
25 $18,530.19 $463,254.81 $536,745.19 $1 million
30 $13,085.68 $392,570.32 $607,429.68 $1 million
35 $9,454.91 $330,921.74 $669,078.26 $1 million
40 $6,938.71 $277,548.56 $722,451.44 $1 million
Source: www.72.net/CostOfWaiting

If you want to save $1 million, assuming a rate of return of 5.5%, you would need to save $6,938 per year if you start saving 40 years before you aim to retire. If you wait until 10 years later, you would need to save $13,085 per year. The amount grows each year you neglect to save. The higher savings amount for the shorter savings periods may make it much more difficult to meet the savings goal.
Lesson No.4: Don’t Fail to Design a Customized Investment Portfolio
A significant portion of losses on retirement savings can be attributed to improper and unsuitable asset allocation models. For instance, a portfolio with too much allocated to one type of stock (or just stocks in general) can experience a significant loss if the stock market falls. Diversifying investments can help to mitigate risks and use gains in some areas to offset losses in other areas.
There is no one-size-fits-all solution when it comes to investing your retirement savings. Instead, your asset allocation model is affected by factors such as your risk tolerance, retirement horizon and your age. Your portfolio can be designed to include different classes of assets, and different categories within each class. For instance, you may choose to allocate 20% of your portfolio to stocks, and may further break down that percentage into healthcare, energy and other types of stocks so as to further diversify your investments and balance your risks.
Don’t fail to rebalance. As your portfolio experiences losses and gains in different areas, you will need to rebalance your allocations so as ensure that your portfolio continues to be suitable for your financial profile.
Lesson No.5: Look at Alternative Retirement Options
Being behind the retirement eight-ball does not mean that you cannot retire. Instead, it may mean considering alternate options, such as taking nontraditional retirement routes. For instance, you could:

  • Work longer: If you planned to retire at age 65, working for an additional five years could make a big difference. You Social Security payments would increase and the income from working could be used to pay down debts and add to your retirement nest egg.
  • Spend less and save more: Limiting your expenditures to necessities and increasing your savings can make a big difference to the balance in your retirement accounts. For instance, if you reduce your expenses by $250 per month for five years, at a rate of return of 4% you would save about $16,000 extra.
  • Phase-in retirement: Retirement does not have to be a one-shot process. Instead, it can happen gradually. For instance, instead of retiring at age 60, you could continue to work on a part-time basis and gradually reduce your hours over the years until you can afford to fully retire.

The Bottom Line: Teach your children to learn from your mistakes
One of the best ways to impart knowledge to your children is by sharing true life experiences. You can share book strategies and other theoretical mediums with your children, but the lessons they will likely remember and learn from the most are those that are centered on the mistakes you’ve made. If you find yourself behind in saving for your retirement, help your children to understand how you got there and help them to understand the things you could have done differently that would have resulted in more positive outcomes.

By Investopedia
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Retirement Can Hurt Boomer Living Standards
Retirement Planning

Retirement Can Hurt Boomer Living Standards

by Jeff Dailey
written by Jeff Dailey

How retirement hurts living standards for baby boomers

The baby boom generation — aged 52 to 70 — is going into its “Golden Years,” and some boomers would like to keep working or even take a second job to supplement Social Security. Retirement can Hurt Boomer Living Standards
But a study from the National Bureau of Economic Research (NBER) categorically refutes this scenario. The “tax disincentives” of working nine-to-five — or earning an extra $20,000 at the local McDonalds — make employment a lost cause. What they’ll see instead is most of that paycheck vanish into the black hole of the IRS, not to mention state and local taxes.
“You’re better off staying home and eating macaroni and cheese,” said one of the study’s four authors, Boston University economics professor Laurence Kotlikoff.

What seniors need to know about working in retirement

It’s hard to argue with some of the study’s premises. Boomers who take Social Security early at age 62, rather than the full retirement age of 66 – or 67 for those born in 1960 or later — face a huge tax disincentive. For every $2 earned, one is likely to be taken away by a 50 percent marginal (or extra) tax rate on earnings above the recipient’s monthly Social Security check.
And that’s only one of the many ways the tax code can work against boomers who want to earn additional money. They’ll also encounter higher Medicare taxes and other disincentives, said Kotlikoff. “Older people can also lose disability benefits if they make too much money.”
When the NBER study added up all the different federal programs that apply to boomers, the result was a negative number. “Many, if not most baby boomers appear at risk of suffering a major decline in their living standard in retirement,” said the NBER.
“With federal and state government finances far too encumbered to significantly raise Social Security, Medicare and Medicaid benefits, boomers must look to their own devices to rescue their retirements, namely working harder and longer,” the study claimed.
Despite advice to the contrary, about 98 percent of seniors take Social Security prior to age 70 — when they have to and would receive the most money.
“Almost everyone does the wrong thing,” Kotlikoff said. “They take the Social Security money as soon as possible.”

Four in 10 baby boomers have no retirement saving

Not only do they get less, but they face “a plethora of explicit federal and state taxes and implicit taxes arising from the loss of federal and state benefits as one earns more” said the study. That includes Social Security’s complex earnings test and the clawback of disability benefits.
But this doesn’t mean older Americans are stupid. “Most older workers aren’t privileged and need to retire early, either because they’re fired or laid off, or the work is killing them,” said Teresa Ghilarducci, an economics professor at the New School in New York City and an adviser to Democratic presidential nominee Hillary Clinton.
Once “retired,” more than half of retirees find that their savings are inadequate for the 20- to 30-year road ahead and feel as if they’re behind right from the start, according to a study by the Employee Benefit Research Institute. They take Social Security because they need it. Then they look for a part-time job to supplement their income. That’s when they get caught in a squeeze. They find that if they’ve already taken the minimal payout from SS, they won’t earn much from a job.
“Working longer, say an extra five years, can raise older workers’ sustainable living standards,” the NBER study states. “But the impact is far smaller than suggested in the literature, in large part because of high net taxation.”
So in many ways, retirement for boomers is a drag. Pensions, which used to support people after they retired, are vanishing, and 401(k) plans and IRAs work only if people invested in them, and wisely. Most didn’t, according to Federal Reserve data, and those who did may have become victims of recession, the need to draw on their plans to survive or simply made the wrong choice of investments.
Ghilarducci said the answer is increasing Social Security benefits, reforming the pension system and making 401(k) plans “universal and efficient.”
Good luck with that, or with a reform of the tax code, said a New Jersey financial planner whose name was not used for compliance reasons. “The tax code is like a pinball machine,” he said. “One thing bounces into another. And it would be nice if they raised Social Security, but it’s going broke.”
But most disheartening is the way many people see their lives ending — sooner rather than later. “They’re sure they’re going to die young, which is why they take Social Security early,” Kotlikoff said. “Then they don’t have to pay any bills. Death is financial salvation.”
Article Source: CBS, Ed Leefeldt
Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and contributed to the Wall Street Journal and the New York Times. He is also the author of The Woman Who Rode the Wind, a novel about early flight.

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Retirement Planning Crucial for Small Business Owners
Retirement Planning

Retirement Planning Crucial for Small Business Owners

by Jeff Dailey
written by Jeff Dailey

Planning for retirement is crucial for everyone, and it is especially critical for small business owners, the business leaders many cite as the life-blood of the American economy. Retirement Planning Crucial for Small Business Owners
Indeed, according to the U.S. Small Business Administration, small business owners employ half of all private sector employees, pay 44 percent of total U.S. private payroll, and have generated 65 percent of net new jobs over the past 17 years.
The challenge before American small business owners is keeping their companies financially healthy long-term. This is so that small business owners do not over-rely on the sale of their business alone to take care of them in retirement, and so the business will continue to remain a viable employer in the communities it serves. Retirement Planning Crucial for Small Business Owners
Because small business owners and entrepreneurs are busy every day working to keep their businesses running strong, their schedule can often interfere with planning for the future. But in this economy, planning is a must in any business strategy. Without it, business owners may be surprised to find that the ultimate sale of their business may not leave enough for them to live on. This is because the sale timing might be off, or their finances are not strong enough to cover a full retirement.
“Setting a target number – or dollar figure of what is needed to live on for the rest of your life – is important, and it should be determined at least 10 years before you’re ready to retire,” says Tara Reynolds, corporate vice president with Massachusetts Mutual Life Insurance Company (MassMutual). “And as you approach retirement, it’s also a good idea to re-calculate what the business is worth with a proper business valuation to determine how you will need to fund your non-working years, if the value has changed. Having this plan and expectation in place can help you determine the best way and time to retire from your business.”
The average business owner expects to retire at age 68, according to a survey conducted by GfK Custom Research North American for MassMutual in 2011. Yet only one-third of the respondents had a sound retirement strategy to ensure income for life, having access to income when needed, managing potential health care expenses and leaving a legacy to the next generation.
MassMutual financial professional Katheigh Degen of Kansas City offers the following tips to help small business owners stay financially secure during the run up to retirement.
* Anticipate needs – Traditionally, most people need about 70 percent of their current annual income to live comfortably in retirement. Know what your business is worth – both as one entity, and also broken down into smaller parts. Only about 10 percent of business sales involve the entire business as one lump sum.
* Save on the side – You’ve probably heard about diversifying your portfolio, and the same is true with diversifying your retirement plan. Put aside 20 to 25 percent of your gross income in savings outside of the business. This provides you with flexibility as you plan your exit from the business. For example, if you have an heir or employee interested in purchasing the company, they might not be able to afford it all at once, but could take over the helm with smaller payments over a period of time. Having additional savings can help you tide over in retirement while you also receive payments for the business.
* Explore options – As you near retirement, selling off your business in one setting would make everything easy. But as mentioned earlier, it doesn’t always work that way. Knowing your business’ value can help you evaluate offers that come your way, so you can make an educated decision on whether to sell and live comfortably in retirement, or keep working and pursue a better offer.
* Don’t wait too long to find a buyer – Within three to five years of retirement, business owners should start to find a buyer for the business. Of course, this plan demands that the owner set an expected retirement date and stick to it. By waiting too long, owners may begin to experience poor health and low energy, which could affect productivity and potentially the profitability of the company.
Planning for retirement is so crucial, and owning a business can often add complications in timing the retirement perfectly.
“Business owners put so much hard work into building the business and making it strong and viable in the market,” says Degen. “With additional planning in retirement strategy, a good business owner can retire and see the business continue to succeed even after it has been transitioned over to new owners.”

Provided by: Article Resources

Retirement Planning Crucial for Small Business Owners

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Checklist for Retirement
Retirement Planning

Checklist for Retirement

by Jeff Dailey
written by Jeff Dailey

Are you looking to retire within the next two to three years? If so, it is imperative that you are prepared to make the leap. Retirement can be a fun and exciting time in your life, but only if you are fully prepared for it. We have made a checklist to make sure you are prepared for this new season of life. Checklist for Retirement
 
Before retiring from your job, make sure that you and your spouse are properly covered by health insurance. Not taking this step can be costly and it can have a negative impact on your retirement savings. Checklist for Retirement
Most senior citizens are able to qualify for Medicare. Do you? If so, complete your paperwork and signup right away. You do not want to create any lapses in coverage. If you do not qualify for Medicare yet, be sure to examine other avenues of coverage. Can you purchase affordable health insurance or can you extend your current health insurance plan with COBRA?
Before retiring from your job, make sure that both you and your spouse are covered with the right amount of life insurance. Do you have a private life insurance policy? If not, now is the time to get one. Some employers terminate an employee’s life insurance policy if it was provided and paid for by the company. As your age increases, life insurance is a must, so make sure that you are covered.
If you have been contributing to your company’s 401(k) plan and an IRA, you need to decide when to start withdrawing this money, as well as how you want to do so. Do you want to receive one large, lump sum payment? If you are unsure, it may be best to first consult with a financial advisor. In fact, when doing so, be sure to ask about all rules and restrictions. If you withdrawal your money from your Individual Retirement Account (IRA) before the written guidelines, you may be charged a penalty. Checklist for Retirement
Over the past few years, you likely developed a clear vision of what your years in retirement would look like. Where do you want to live? What type of property do you want to live in? What activities do you want to enjoy? Do you want to start your own small business? Your retirement savings are likely based on your retirement wants and needs. Now is the time to make any last minute changes, as you still have a couple of years to save additional money.
Do you foresee yourself making a large purchase in the near future? These purchases can include a new home or a car. If so, now is the time to make them, especially if you will depend on financing from a professional lender. Some lenders will give loans to those in retirement, but some are also cautious of doing so, due to fixed income living. That is why you are encouraged to make all large purchases before you enter into retirement.
The above mentioned points are just a few of the many that you will want to examine and take action when needed. As a reminder, if you plan to retire in two or three years, you still have time to save for retirement. Contribute any amount that you can to your 401(k) or Individual Retirement Account (IRA). When it comes to retiring, there is no such thing as having too much money.

Checklist for Retirement

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Retirement Planning

Avoiding Retirement Planning Mistakes

by Jeff Dailey
written by Jeff Dailey

MISTAKE #3: GOING IT ALONE

While many investors feel confident about their abilities, less than half got a passing grade on a basic financial literacy assessment, according to FINRA’s Investor Education Foundation. The older the investor, the less he or she is likely to know.
What to Do: Get Professional Guidance
Money management is a lifelong process and there are a lot of things to consider. It might be in your best interest to find a financial professional to help you navigate through it all.
Where can you find a financial professional? Here are some resources to get you started:

  • Financial Planning Association – fpanet.org
  • Certified Financial Planner Board of Standards – cfp.net
  • Securities and Exchange Commission – sec.gov
(Family Features) – If you’re concerned about your ability to retire, you’re not alone. Gallup’s 2009 annual Economy and Personal Finance survey showed that most non-retired Americans, (52 percent), doubt they will have enough money to live comfortably once they retire.

Whether your retirement is 4 or 40 years away, it’s important that you put a strategy in place so that you will be able to retire with fewer worries. To help you get started, here’s how to avoid three common retirement planning mistakes that could cost you money.

MISTAKE #2: UNDERESTIMATING NEEDS

“One mistake people make when they try to calculate retirement needs,” said Jirele, “is that they don’t take inflation into account.”
Jirele said that even small inflation rates can do damage over time. If consumer goods prices rise three percent a year over the next 30 years, for example, items that cost $100 today would cost $134 in 10 years, $181 in 20 years and $243 in 30 years.
So if you’re planning to live on $60,000 a year during retirement, a three percent inflation rate means that in 10 years you would actually need $80,635 a year, and in 20 years you’d need $120,000.
What to Do: Create a Realistic Plan
There are plenty of tools available to help you figure out what your retirement needs will be. You can find online tools and worksheets at these Web sites:

MISTAKE #1: DOING NOTHING

Millions of people are worried about having enough for retirement, but many of them aren’t doing anything about it. Nearly 60 percent of workers don’t know how much they need to save for retirement, according to the 19th Annual Retirement Confidence Survey, released by the Employee Benefit Research Institute.
What to Do: Start Now
“A lot of people think that it’s too early or even too late for them to start saving for retirement,” said Jasmine Jirele, vice president of Market Management and Product Innovation for Allianz Life. “But now, more than ever, people need to take action in order to have a more secure future.”
In addition to participating in employer retirement plans, look into other investment options such as mutual funds, IRAs, bonds and certificates of deposit. “Some workers may also want to consider an annuity for a portion of their retirement portfolio,” said Jirele. “Annuities are contracts between you and an insurance company. You make payments over time, and when you retire, you receive a guaranteed income for life that can help meet your retirement needs.”
 

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Presidential Election Aging Issues
Retirement Planning

Top Presidential Election Aging Issues

by Carol Marak
written by Carol Marak

Questions seniors should ask the candidates about Social Security and Medicare

Whether you’re retired, still working, or in school, be concerned about Social Security and Medicare, because they are in trouble. If you’re like 170 million Americans who contribute to Social Security and Medicare, or one of the 54 million who rely on both, you should demand to know the candidates’ plans. Presidential Election Aging Issues
At the heart of many retiree’s financial security, lies Social Security, but its solvency is at risk. The program celebrated its 80th anniversary, and it continues to help lower the poverty rate among older Americans, in particular, older women. Without benefits, 48% of them would fall below the federal poverty line. But with Social Security, only 11% live in poverty. The program is also the largest children’s benefits program in the nation, so its future has intergenerational consequences.
The presidential elections are around the corner, so it’s a great opportunity for older Americans to speak up and ask each candidate how they plan to save Medicare and Social Security? I’m not here to debate which candidate will serve us best. Instead, I raise a few questions that we should ask to learn how they will save the vital programs?
Since every 18 seconds, the 65+ population increases by one person, the answers are critical. At the moment, the total count is close to 49,445,000, and it’s expected to grow to 83,000,000 by 2050. Watch the live counter http://www.seniorcare.com/featured/aging-america/. For this reason, Mrs. Clinton, and Mr. Trump, I want to know, “What is your vision for older adults, and what role will the government play in our behalf?
The recent trustee report shows that retirees could face a reduction in Social Security payments after 2035. As president, what actions would you take on to save it? Would you increase the payroll tax rate, reduce benefits, privatize the retirement program, or none of the above? If the latter, what is the alternative? Top Presidential Election Aging Issues
Both trust funds, Medicare and Social Security, shows the two will exhaust. Medicare by 2024 under today’s law, and the Social Security by 2033. So, as you see, Mr/Ms. President, we need to know, and we need to know fast.
In the case of Medicare, would you permit reforms in the Affordable Care Act to change how the medical systems deliver care? Will you continue to penalize hospitals if a patient returns within the 30-day window following surgery? Would you encourage health care systems to increase coverage for preventative care? How else do you propose to save Medicare?
So many seniors worry about the high costs of drugs. What do you think about the Medicare Part D prescription drug program? And what would you do about the rising costs of prescription meds?
What’s your plan to eliminate the shortfall? One answer better not be, “Older Americans need to die younger.” I’m sure you’ll find only a handful of volunteers willing to oblige. Most of us aspire to live longer.
Carol Marak, aging alone advocate, columnist, speaker and editor at Seniorcare.com. A former family caregiver, She earned a Fundamentals of Gerontology Certificate from the USC Davis School of Gerontology and writes about personal concerns while growing older.
Top Presidential Election Aging Issues

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Retirement Planning

Even the Highest Earners Don’t Have Enough

by Kimberly Johnson
written by Kimberly Johnson

A Shocking Thesis

According to the Schwartz Center for Economic Policy Analysis (SCEPA), the majority of American families nearing retirement have inadequate levels of savings. When we examine the data, there is a substantial amount of truth to this thesis. Even the Highest Earners Don’t Have Enough

The Data

Every three years, the Board of Governors of the Federal Reserve System release a massive amount of information about United States (USA) family finances. This triennial bulletin is called the Survey of Consumer Finances. (SCF) Here is some background on the authors of the survey: the Federal Reserve Governors consist of seven officials (five appointed by the President of the United States) that oversee twelve banking regions in the United States.
In the 2013 release of the SCF, the mean value of retirement accounts for families in the USA was$201,300. It is worth noting that the mean has continued to increase in every survey dating back to 1989. With that said, when focusing on age ranges, those families nearing retirement (age 50-64) have accumulated on average $285,200 in their savings accounts. The average income for these families is listed at $103,291. (SCF 2013) The data collected includes all retirement plan accounts held by United States taxpayers, such as 401(k), 403(b), and IRAs.

Setting Retirement Savings Targets

There are many opinions regarding the appropriate amount to save for one’s retirement. These figures vary widely, with Fidelity Investments suggesting a savings of eight times a retiree’s annual earnings by the time they reach retirement. In their research, Fidelity estimates that this amount, combined with Social Security should replace 85% of pre-retirement earnings.
In a more conservative outcome, consulting firm Aon Hewitt analyzed the retirement resources and needs for 2.2 million employees of 78 large companies in the United States. Their findings suggest that a retiree must save eleven times their annual earnings to make it through retirement. This amount of savings combined with Social Security should replace 85% of pre-retirement earnings. A suggested savings amount between the two targets would be a great start.

One Step Further – Are We On Track?

Citing research from the SCEPA, we realize that the majority of American families have in fact, not saved enough for retirement. Let us focus on the specific age group, ages 50-64. In any way you read the data, the bottom 50% of income earners, the middle 40%, and the top 10% have seemingly not saved enough to maintain the 85% of pre-retirement earnings discussed earlier.
 
Even the Highest Earners Don’t Have Enough

Even The Highest Earners Can Be Affected

With an average income listed at $460,852, even families in the top 10% of earners aged 50-64 may not have saved enough. The mean balance for the top 10% registers at $639,825. Perhaps they have invested in other assets, such as real estate, or non-retirement savings accounts. However, it is clear that if a family earns $250,000 annually, they need at least $2 million saved for retirement. Even with high levels of income, there seems to be a wide deficit to cover, which cannot be replaced by Social Security benefits alone.
 
Even the Highest Earners Don’t Have EnoughSource: Pew Research Center

The Boomerang Generation

If this retirement savings data was not enough to get your attention, the Pew Research Center has determined that for the first time in the modern era, living in a parent’s home is the most common living arrangement for adults age 18-34. The bottom line: it doesn’t hurt to save more, just in case your adult children are part of the 32.1%.

Landon Yoshida , CRPC®, Wealth Manager
www.Apriem.com

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Building Confidence in Your Retirement
Retirement Planning

Building Confidence in Your Retirement

by Jeff Dailey
written by Jeff Dailey

In the next 10 years, the first wave of America’s 76 million “baby boomers” will be retiring, including nearly 9 million here in California, according to the National Center for Health Statistics. Since today’s retirees are generally healthier and more active than their parents, they are looking forward to living longer and spending more time playing with grandchildren, pursuing hobbies, or trying new careers. Building Confidence in Your Retirement
Building Confidence in Your RetirementTheir longevity and vibrant lifestyle also presents financial challenges, however, and many wonder how they will make savings last throughout retirement.
Investors enter retirement with more confidence if they have a thoughtful retirement strategy. Planning ahead helps those nearing retirement prepare for when company paychecks stop coming and the goal of accumulating assets gives way to generating income from those assets. Building Confidence in Your Retirement
Research by Fidelity Investments has shown, however, that the majority of those approaching retirement have not assembled key elements of a retirement plan. Two thirds have not developed a budget of living expenses, for example, while more than three-quarters haven’t created a plan for withdrawing savings. While planning for and managing income in retirement may not sound like fun, it is the most effective way to be confident in the future. Consider the following.

  • CALCULATE HOW LONG RETIREMENT WILL LAST– Since retirement doesn’t have a preset time limit, this step can be particularly challenging. Many people are surprised to learn they are likely to live in retirement just as long as they worked. A 65-yearold couple retiring today, for example, should plan to have enough money to last at least 20 or 30 years. When determining how long your money will need to last, consider that you may live longer than you think-possibly into your 90’s.
  • ESTIMATE RETIREMENT EXPENSES -While planners recommend having 60 percent to 80 percent of income in retirement, each situation is different. It is important to realistically estimate the expenses that are likely in your retirement, including those you consider essential to basic living as well as the discretionary things you want. For example, the average 65-year-old couple retiring today will need $190,000 to cover medical costs over the next 15 to 20 years (assuming no employer-provided health benefits). Medical expenses, combined with mortgage, travel and entertainment costs, may create shortfalls, putting retirees at risk to outlive their savings. Options to bridge the gap include working longer or investing assets to generate supplemental income.
  • PRESERVE AND GROW ASSETS – Fear of a down market can cause some retirees to be too cautious, so they sell virtually all of their stock holdings. While they should protect assets, retirees should recognize that they may also benefit from growth that can come from investing in the markets.

In fact, long-term success may lie in a portfolio that includes an appropriate mix of stocks, bond and cash. The key is to find an asset mix that is age-appropriate and generates enough income to help offset withdrawal requirements and the effects of inflation over time.

  • SIMPLIFY TO STAY ON TRACK-Pre-retirees expect to manage an average of nine sources of income, including Social Security, multiple 401(k)’s, securities, and personal savings, according to Fidelity’s study. These assets are often held in multiple accounts at different institutions, making it difficult to develop and maintain a comprehensive investing strategy.

For example, mutual funds from different firms may hold similar investments, potentially increasing risk to a portfolio through greater exposure to volatile markets or sectors.
Anyone five to seven years from retirement may want to consider consolidating various retirement accounts in one place, or finding a tool that easily provides the entire financial picture in a single view.
Creating a thoughtful retirement strategy involves sharp focus and detailed calculations, and can force couples approaching retirement to face difficult considerations for the first time.
There are many resources available to help investors prepare a retirement strategy. Planning for the future is key, and helps build financial confidence so that you can enjoy the retirement you have worked so hard to achieve. Building Confidence in Your Retirement
www.lqchamber.com/pdf/gem_feb06.pdf

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