Retirement Planning Red Flags

If we are to believe recent press, baby boomers are in for a rude awakening as we enter retirement. Across the board we read about how our generation has been overly focused on the here and now, gleefully choosing to spend money today rather than save for tomorrow. Boomers are depicted as the “me generation” and our perceived shortsightedness is often blamed for where we are today. And where exactly are we today?

  • $6.6 Trillion difference between where we are today and where we should be for retirement account balances
  • House values are down on average one third and with 1/3-1/2 of boomers net worth accounted for in their homes, this is a big hit
  • Pensions that existed on average for 39% of boomers back in 1980 are now found in only 15% of cases

Many of these situations are the result of financial fallout and the reorganization of our labor force so baby boomers are not completely responsible. But we do shoulder some of the blame. According to Jean Setzfand of AARP, the failure to save has had the biggest impact on boomers who ignored or underestimated their worsening financial situation.  The personal savings rate that back in the 1970’s was 10% came in at negative one percent in 2007. If we have not been saving to prepare to retire, what are we going to do after retirement to get by? Or is retirement even a possibility?

What are the retirement planning red flags that all retiring baby boomers will have to address?

(1)  Living longer so spending more – Americans are living 7.5 years longer compared to 1970 and boomers are an active crowd. The longer we live the more time we have to be active and travel and enjoy life but the more we will spend.

(2)  Medical Expenses – skyrocketing costs for medical coverage and treatment are showing no signs of slowing. Blue Cross recently petitioned for the right to increase premiums 59%. With no end in sight, this red flag is waving feverishly. Once we reach the age of 65, Medicare pitches in but not at zero cost. The average couple age 65 will spend $250,000 in out-of-pocket medical premiums and co-payments. And with no overall limit to out-of-pocket expenses, extended illnesses are always a risk to retirement security.

(3)  Employment challenges – we all hope that the economy will eventually get back on track and unemployment numbers drop. With financial issues, retired boomers will need to work in many cases to make ends meet. But the reality is that the nature of jobs is changing. Our technological advances are doing what they were meant to do, namely automating much that used to require human intervention. Due to this, many jobs that have been recently lost will not likely be refilled. And the added disadvantage of being older comes into play as companies prefer to hire younger employees who cost less to provide benefits to and whose early career path is at a more affordable point.

(4)  Social Security – will social security be there for us? The 75 million baby boomers will put serious stress on the system as soon taxes will not produce enough to cover future benefits. The social security trust fund is projected to be depleted by 2037 – then what? And if we do in fact receive benefits, can boomers wait or will they be forced by financial challenges to start at the earliest possible age of 62 which reduces the monthly amount of benefits received?

(5)  Living situation – currently 2/3 of those between ages of 55-64 still have mortgages to pay with a median balance of $80,000. We all hope to have no mortgage going into retirement but reality is what it is. Will seniors be able to stay in their homes and pay the bills? Or will they be forced to move in with other family members if that is possible? And as boomers age, their needs become greater and sometimes living with family is not an option. Retirement communities offer an option but are not cheap. And nursing homes currently run $70,000 per year for a shared room and $85,000 per year for private rooms.

The retirement planning red flags are plenty and solutions will be difficult to find and implement. Awareness of the problems is the first step but then in most cases it is up to individual retirees to navigate the retirement jungle.

Look for help early to understand exactly where you are and what your retirement will look like. You can still have an impact but with the passing days, the magnitude decreases so get on it now.

Retirement should be our time to do what we want to do when we want to do it. But for baby boomers caught up in the harsh realities of an unsure financial state of affairs, insufficient savings, and rising costs of living, the reality may not be exactly what we were dreaming of.

5 Strategies to Achieve Retirement Security

Old Retirement Strategy: work hard until you reach age 65, save and invest a minimum of 10% of your earnings over that time, and retire to a life of leisure. This strategy worked for our parents and their parents. However, times have changed for those over 65 who will total in excess of one billion by 2030. Read any of the current information on retirement and challenges that retirees will face and it is a different story:

  • 4 in 10 Americans save 0 for retirement.
  • Medical costs are growing at incredible rates – the average couple over 65 will spend $250,000 to cover out of pocked expenses through the course of their retirement.
  • The gap between where retirement savings should be today and where they actually are is $6.6 trillion.
  • Housing values have declined at a time when home equity accounts for one third to one half of retiree total net worth, providing a diminishing resource to draw from.
  • The blessing of a longer life is mixed with the challenge of funding 25-30 years of retired life.
  • Social Security will be around for some time but will likely change in some way to meet the increasing demand, whether in reduced benefits, a later retirement age, or increased taxes on benefits.

Retiring is no longer a no-brainer. And unless you get started now planning and preparing, reviewing and analyzing, balancing and prioritizing, chances of living your satisfying, fulfilling retirement life will be slim.

Know your Net – based upon a comparison of all of your sources of income with all of your expenses, how much are you in the black/red each month? This is your retirement planning 101 – you need to know now what your financial situation will be when you retire and you need to make adjustments where necessary to be net ahead of the game. If you find gaps or areas of concern, you need to take corrective action because they will not go away.

  • Sources of income – Social Security, pensions, retirement accounts (401k, IRA), income from property, investment dividends, inheritance, any income from working after retirement,
  • Expenses – mortgage, health insurance, healthcare out-of-pocket expenses, food, electricity, gas, travel and entertainment, taxes,

Without this basic understanding, the retirement life you anxiously await may be just wishful thinking. You need to realistically analyze the situation to understand what you have in store. Mark Miller wrote a thorough and understandable book “the hard times guide to retirement security” which digs in detail to address all of the variables that impact your retirement security and practical strategies for you to pursue. Mark knows what he is talking about and shares his insights regularly on his blog Retirement Revised.

A healthy senior is a happy senior – we can thank our aging for the collection of physical and mental challenges commonly shared by retired folks. If we sit back (literally) and watch the world go by, we are forced to accept what comes our way. Instead, senior citizens can take action to improve strength, balance, and alertness. Not only will our quality of life improve but we are also striving to avoid debilitating injuries that frequently afflict the elderly such as falling. In addition to exercise, watching what you eat is important. All of the vitamins and minimum this and organic that can be confusing but here is a trick that may help. Good things – vitamins, minerals, nutrients – come with a “minimum recommended daily allowance”. Bad things – salt, fat, sugars, and cholesterol – instead come with “maximum” levels which you want to stay under. In your diet, remember to minimize the max – avoid fat, salt, sugars and cholesterol.

Live beneath your means – I borrowed this one from Bob Lowry and his always insightful blog Satisfying Retirement. A basic but powerful concept -spend less than you bring in. Set a goal to undershoot your budgeted monthly expenditures by 10-20-30%, whatever you can commit to and achieve without living too miserly. By following this strategy, you will have money left over at the end of the month, an emergency fund available for any unexpected surprises should they arise.

Define your retirement career – numerous articles support the widely held attitude that work will not end with retirement. Not solely due to financial concerns, baby boomers that have found an identity in their job and enjoy working plan to keep at it. The interaction with co-workers, recognition by superiors, and the satisfaction of a job well done are things that make them happy and they want to continue. Work can be a positive thing. Remember that retirement can be your time to look at your career and decide if you want to continue down the same path or venture out into something new. Many second careers are started by senior citizens who enjoy working and now have the opportunity to pursue more directly what they really want to do. The path you choose can be creative, curious, outlandish, experimental – don’t shy away from your chance to follow the path less taken.

Always look on the bright side of life – in retired life, the importance of maintaining a positive outlook cannot be over stressed. The world may bombard you with more than you think you can handle. It may feel easier to roll over and give in and become part of the problem rather than part of the solution (sorry, from my days as a sales manager…). But being positive is within your grasp. Only you control how you choose to deal with discouragement. You determine if you view life through half full or half empty glasses. You can blame events around you all you want but you control the smile on your face and your inner peace and your positive effort to start each day .

Getting to retirement is not a given by any means and once retired, maintaining our desired standard of living while paying the bills will turn white whatever hair may be left on our head! The odds may appear stacked against us but in our casino of retirement, we actually can influence how the dice will land or what the next card in the deck will be. By following a careful strategy of planning, saving, adjusting, and accepting the realities of retired life, we can win. The odds tip in our favor and the bells and whistles will resound loudly as that jackpot pays off with a happy, satisfying, and fulfilling retirement life. Good luck!

The New Retirement – Work for Life

For various reasons, many of us will continue to work after retirement. We may want to work in our senior years to stay busy, we may need to work to replace savings lost in recent years, the choice to work after retirement may be ours to make or out of our control. A research study by Friends Provident found51 per cent of UK workers plan to keep working after reaching the minimum retirement age, their main motivation being a desire to stay active after retiring.  “More and more, Americans are choosing to be ‘unretired,’ that is, continue to work full- or part-time after the age when they are eligible to receive full Social Security benefits.”  Regardless of whether these decisions are the result of personal choice or not, the Center for retirement Research at Boston College recently calculated a very scary number representing the gap between where retirement savings should be today and where they actually are. The total deficit was determined to be $6.6 trillion dollars. In many cases, it is no longer a question of why work after retiring – the bottom line is you have to.

The road that is built in hope is more pleasant to the traveler than the road built in despair, even though they both lead to the same destination. ~ Marion Zimmer Bradley

But do not despair! You have worked all of your life and made it to retirement however it may be defined today. There were many positives in your career from the people you worked with to the feeling of accomplishment that came with a job well done. It is not unreasonable to think that some of these same positives can become part of your new retirement career. The trick is to distill the situation to the point where most of the negatives are done away with and you are left with a pleasant, even enjoyable job after retirement.

How to make the best job for your retirement career

If you reach  the conclusion that after you retire you want to work or that you need to work, do not simply resign yourself to a retirement career that is boring or abusive. Over your career, you have honed and perfected many skills. You know what it takes to get the job done and have built a record of successful achievements to prove it. Leverage your background as you make your move back into the working world. Here are a few ideas to help along the way.

1.    Self analysis – no one knows your likes and dislikes better than you so take some time to contemplate what you like to do, what you are good at, what you can do, and what you want to do. Do you work best left to your own devices or do you prefer guidance from a supervisor? Do you prefer to work alone on projects or are you happier in a team environment? Is learning something new and exciting or intimidating for you? Are you a creative force or do you prefer to follow predefined processes? Do you work better at a specific time of day?  As a senior citizen, we may be physically limited as to what we can manually do in a job so that also becomes a consideration.

2.    Analysis of the company – what kind of company and work environment do you want to engage with? Do you prefer a large or small company? Do you want to follow the same career path you were on or do you want to try something new? Is there a particular industry that you want to pursue? What kind of corporate culture is to your liking? Some companies are very formal and political, others more open-door-policy and free-wheeling. How far are you willing to commute? Remember the time spent in transit is a real cost in terms of time away from your family and life.

Once you have a good profile of the type of company you would like to work for, you can start building a list of likely candidates. To dig in deeper, a trip to the corporate website is an excellent starting point. You can find a lot of information by reviewing the company page, reading through press releases, reading executive biographies, and navigating the various products and services. Check social feedback by visiting Twitter or Social Mention or Google. Visit your LinkedIn account and see if you know anyone who has worked or is currently working at the company. There is no better way to check on a company than to talk with someone who has worked there. You want to get an understanding of what it is like to work there before you sign on.

3.    Work toward a defined goal – if you are working after retirement because you want to, your goal is being met. If you are working to improve your financial situation, it is helpful to set specific goals for your retirement career.  Maybe you want to add $X to your savings account. Focus on that, track your progress and reward yourself when you get there. Smaller goals along the way help to keep you on track as you achieve them one after another. If your ultimate goal is to get back to retired life and not work, calculate the amount you need to save to provide you with the additional cash you require. When you get to that number, I hope that all things will be in alignment and you can retire for real! If you can do this and if you want to do this, be careful to avoid getting sucked back into the working rut chasing more dollars than you really need.

4.    Positive attitude – how you choose to face each day in your retirement career is a big determinant of what kind of a day you can expect. It is easy to be happy when you are off to do what you want to do. But even if you are not so lucky, try to think of the good things in your life and enjoy what you do. Work is not always a picnic but how you choose to deal with challenges in your day is mostly up to you. If at all possible, stay positive. Your smile may be the one that turns someone else bad day around!

Anyone who proposes to do good must not expect people to roll stones out of his way, but must accept his lot calmly if they even roll a few more upon it. ~ Albert Schweitzer

No one said life was going to be easy. There are no guarantees that each of us will live a perfect retirement life. This New Retirement Career can be viewed as a curse or a blessing.  In the right work environment, doing what you want to be doing, chances are you will be just fine. So why settle for less?

Don’t forget to pick up a free copy of my Navigating the Retirement Jungle, available upon request by mailing to lovebeingretired@hotmail.com.