Archive for the ‘Retirement’ Category

Worried About Retirement

Friday, May 11th, 2012

On the Simple Dollar a reader Jim posted the following question:

I am 62 years old looking at retiring at 85 based on my status and what others say you need. Scared to death and running out of time. I am a teacher(11 years) as is my wife. I have a little savings less than 50K in IRA’s, myself a pension from the school system and penitence from a former employer, wife has a 401 with the private company she works for. Money is tight, we live check to check. Seems like we spend our money trying to still raise our children and not any additional money for savings let alone gas for our vehicles. 150 year old house we live requires maint Lawyers for a custody battle of grandson and bills from our son as he had a bad accident and getting himself established. We need to buy another car soon for my wife as hers has like 200K miles on it.

 

I didn’t plan earlier and I don’t really have a clear plan now. Late 30′s I had a little money, and some starting about 11 years ago. I was busy chasing carrots and didn’t catch any. I am thinking I will need to work past 66 a few years and file for SS to try help save a little more. Thinking I need to find a business but really fishing for ideas. I have some trade skills as a hearing aid specialist that could lead to some employment on the side. I am hoping to sell this house in about 7-10 years for bit of profit and downsize. We are tied to this area for awhile until our grandson gets older(15 more years)

 

I really go from positive to negative about my situation. I feel grateful for what I do have and where I am, but feel so frustrated that I didn’t do things different with regard to my career decisions but can’t go back so I have to work with where I am and what I have.”

I responded to his post but got stuck in moderation (seemingly forever),  so I’m reposting my suggestion here:

Jim,

You can’t change the past, but you can change what you do from today forward.

>I didn’t plan earlier and I don’t really have a clear plan now.

You can change that by making a plan today. Here is what I would do – evaluate the situation realistically.  It may be scary but facing reality today will be easier than putting it off longer. You mention a pension and some savings- that is at least a start.  I would calculate what I would have to live on retiring at different ages.

The social security website http://www.ssa.gov/estimator/ estimates your SS payments and should be fairly accurate given your age.  Call the manager for your pension and find out concrete benefit information.  Total up your current savings- project your total savings using how much you are currently contributing.  Get some quotes on how much income you could get from a single premium immediate annuity with that savings starting at different ages.  This wouldn’t be a perfect calculation of your income at retirement but it should be a good first pass. If that number is bleak you have a few options- reduce expenses so that the amount is workable, save more to bring the income up, or work longer. Most likely some combination of all three will be your best answer.

>Seems like we spend our money trying to still raise our children

Maybe that is the key of your problem, how much of a difference would that money make to your retirement? Your children and grandchildren will eventually have to fend for themselves as you won’t be around forever. It sounds like you are giving to them at the expense of your retirement savings. Wouldn’t it be better for them to start taking care of their own finances sooner rather than later? Wouldn’t it also be better for them if you ease them into independence by decreasing the amount you give them over the next year instead of an abrupt adjustment when you are no longer able to help them out?  Talk to your kids and tell them about your fears for your future, I suspect they will be willing to pull more of their own weight after they are aware of your situation.

-Rick Francis

What Will the Future You Think of Your Actions?

Monday, May 7th, 2012

Imagine yourself in twenty years, an older wiser self examining your retirement savings.   Are you joyful or fearful?   Are you praising your planning and forethought, or cursing your inaction?  

There is a Chinese proverb that states “The best time to plant a tree was 20 years ago.  The next best time is now.”   This proverb also applies to saving for retirement, and the actions you take today will determine how your future self lives.  If you haven’t been saving for your retirement sign up for a 401K plan and get payroll withholding or open up an IRA account and automatic transfer money to it each time you get paid.  If money is very tight start with just a few percent- that is much better than nothing, but start today!

If you were saving, but are worried you aren’t saving enough- try increasing your savings 5%.  It really shouldn’t make a noticeable difference in your quality of life now, but won’t your future self be much happier?   The next time you get a raise or bonus- put some of it into savings immediately.   A few percent more each year can quickly build up your savings.  Before you know it that twenty years will have passed, and you can look back on today with pride.

Worst Retirment Advice Ever?

Tuesday, April 3rd, 2012

I read this article on yahoo which really bothered me.   The writer asks if great grandpa didn’t retire why should I?  He talks about how more elderly are retiring in the red and 20% of bankruptcies are made by retirees.    Then mentions rising health care costs, stagnant markets, and low savings levels may mean retirement is a thing of the past for most.   His solution- He plans to work the rest of his life, literally dying before retiring.   I thought of a lot of horrible disasters his “plan” could run into but let’s just consider one: What happens if you are no longer able to work due to poor health?

However, what really bothered me about this article is that the writer worked as a financial adviser, and instead of suggesting solutions, he has decided that saving for retirement is too hard so he is going to give up and work forever.   That is the worst advice I’ve ever seen on retirement.  Can we even call it advice?!   Why not suggest a plan that might actually work?   With just a bit of thought I came up with the following:

·         Lower your expenses to save more now and need less in retirement.   I’ve done this and I’m saving over 30% of my income for retirement.  Even now most of my expenses are really wants, not needs.   If I had to I could cut back further, but I want to balance my current quality of life with my future quality of life.  

·         Cut Investment Costs- you can’t control what the market does, but you can pick funds with lower fees to decrease how much of your investments go to the fund managers.

·         Invest in your health by eating better and exercising more; since health care is expensive do your best to be healthy. 

·         Use insurance to prevent misfortune from running your plans.   Specifically disability and term life insurance to replace income.

·         Work a bit longer, retiring closer to 70 than 62 to get the largest social security payment possible.

I’m sure my plan isn’t perfect but at least it IS a plan, even if it didn’t give you an ideal retirement I promise it is a lot better than working until you drop dead.