retire

The Number of Americans Working in Their 70s is Rising

June 3, 2019 By Amanda Blankenship 1 Comment

Most people dream of retiring someday, even if you love your job. Many of us daydream about what it will be like to live out your golden years without financial worry and surrounded by family and friends. However, many Americans are finding themselves working in their 70s (and not because they love their jobs).

Why Are People Working in Their 70s?

Over the past two decades, the percentage of individuals working in their 70s have increased from 10 percent to 15 percent. Because people are living longer, many of them are outliving their Social Security and retirement savings. This forces them to go back to work or continue to be in the workforce longer than previous generations.

The increase in the number of folks working during their golden years can also be attributed to the types of jobs available as well. There are not many labor-intensive jobs on the market right now, making senior citizens able to return to work than in recent history.

“Which matters more [the choice to keep working or the necessity to do so] depends on what your history up until that point has been in the type of work you’re doing,” said Katharine Abraham, an economics professor.

A Perk for Employers

Employers aren’t totally losing out on this situation. As it turns out, older employees are more likely to be happy in the workplace and more skilled overall. They also have stronger problem-solving skills than their younger counterparts.

Individuals working more physically demanding jobs may be looking forward to retirement. Many of those continuing to work those careers in their old age are doing so out of necessity. But, if you prepare for retirement well enough, you won’t have to.

How to Better Prepare for Retirement

Education and preparation are key to not joining the ranks of those working in their 70s. This 10-point list gives you a few things to consider to better prepare for your golden years.

Build up emergency savings immediately. Having emergency savings will keep you from racking up debt as well as give you the ability to begin saving for retirement.
Budget for your retirement. Think about how much money you’ll need to retire, where you’ll live, and what kinds of activities you’ll want to do. Then construct a budget for your golden years.
Consider your health insurance options. Without work, health insurance can be expensive. Some pension plans will include health insurance, but not all will. Find out what your options are early on so you can budget for it.
Educate yourself about how retirement income is taxed. Social security and IRA distributions are taxed. You need to learn about how much money you’ll be paying in taxes to construct a budget correctly.
Draw up an income timeline for retirement. After figuring out your budget, draw up a timeline for your income. How much will you need each year? How long will it be until you retire? What if you outlive the funds you have set up?
Use a retirement calculator to lay out possibilities (and a Social Security calculator). Check out an online retirement calculator and determine different possibilities. You can also figure out what your social security income may be with one of the IRS calculators.
Make an investment plan and read up on the best retirement investments. Maybe even hire someone to help you with these investments. Determine your risk tolerance and figure out what investments will help you later in life.
Consider hiring a retirement planner. Be sure to interview a few. Retirement planners can be great in helping you get set up and manage your money during retirement. Just be sure you get the right planner for your needs.
Learn how to earn more from your 401(K). If you can roll your 401(K) over into an IRA and you’re nearing 60, it may be in your best interest to transfer the funds.
Analyze the different pension distribution options available to you. Any decisions you make with your pensions cannot be changed. Be sure you know all of your options before you choose.

These 10 things can help set you up for a retirement where you actually get to retire. With more and more Americans working well into their 70s, it is important to be proactive in your financial planning for your later years.

Readers, what do you think about the increase of Americans working in their 70s?

1/3 of Older Americans Believe They Will Outlive Their Savings

November 4, 2016 By Alexa Mason 2 Comments

For too many older Americans, the concept of an enjoyable and relaxing retirement seems to be slipping away. According to a recent survey, one-third of Americans aged fifty and above believe that they will outlive their savings. Approximately the same amount (34%) of older Americans who had not yet retired believes they are extremely or very financially prepared for their retirement. Many other older Americans are in the middle ground — somewhat prepared and confident, yet anxious about their retirement years.

Whether you are already retired or nearing that point, the survey shows significant anxiety about retirement finances within your age group.

The survey, funded by the Alfred P. Sloan Foundation and conducted by the AP-NORC Center for Public Affairs Research, shows that there is serious concern among respondents about how long retirement money will truly last and what expenses they may face in retirement. That is true even through most seniors report multiple sources of retirement income — 81% have two or more sources and 60% have three or more.

Unexpected medical expenses are one of the largest sources of expense concerns, with exactly half of respondents reporting anxiety about being able to pay them.

It should come as no surprise that older Americans with lower incomes are more anxious about retirement, but anxiety crosses the income lines. 58% of survey respondents with household incomes below $50,000 report anxiety about their retirement nest egg, but so do 40% of respondents with incomes greater than $100,000.

While there are concerns about retirement savings, it’s not for lack of trying to save. Approximately 67% of older Americans that are still working are placing some of their paycheck aside for retirement — but as with anxiety, the responses shift with total income. An overwhelming majority (90%) of those with $100,000 or more in income are saving for retirement, while just under half (47%) of those earning below $50,000 are doing so.

Even with multiple sources of retirement income, Social Security plays an important role in many retirement plans. For 44% of those aged 50 or above, it is expected to be the largest component of income. A majority (54%) of respondents with incomes below $50,000 report that they will rely heavily on Social Security.

Unfortunately, 43% of respondents either plan to start receiving Social Security benefits before their full retirement age (FRA) or have already done so — reducing those critical benefits by anywhere from 6% to 30%. If they are having trouble getting by in the near-retirement years, seniors must make a critical decision. Do they struggle with little margin for error in the early years, or do they collect early and run the risk of outliving their funds? Given the number of early claims, it is no surprise many seniors expect to outlive their savings.

Income sources outside of Social Security are not bringing sufficient security, either. Only around 33% of seniors with retirement investments are very confident or extremely confident that their funds are being managed well — and that is during a prolonged bull market. The lack of confidence is approximately equal whether the accounts are self-managed or managed by others (professional or not).

Are you one of those anxious about retirement funds and expecting to outlive your savings? Feel better through taking action. It’s never too late to trim expenses, divert more of your income toward savings, and invest your savings wisely in a suitably diverse portfolio. Proper planning and action now could prevent financial anxiety when you retire.

Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle.

This article was provided by our partners at moneytips.com.

Photo: Tax Credits

Planning for Retirement: How Long Are You Going To Live?

November 3, 2016 By Doug Carey 1 Comment

How long are you going to live? Figuring out your life expectancy is arguably the first step in creating a successful retirement plan–and also arguably the toughest number to figure out.

Life expectancy tables are easy enough to find on the web. But it’s trickier than just finding a number. You don’t care what your anticipated lifespan was when you were born; you care about what it is for you today. If you’re reading this, you have made it past most of the early dangers that reduce overall lifespan numbers, so those numbers should not matter to you very much.

In other words, you have survived–and so it is likely (to a point) that you will continue to survive.

This Social Security Administration life expectancy calculator can help illustrate. You can punch in your birthdate and gender and SSA will give you a life expectancy number. Take that number with a grain of salt, of course: It’s an average, and does not account for your specific health and genetics.

Source: Social Security Agency

In this case, a 38-year-old male can, today, expect to live to 82. The point to note, though, is the trend in the “Estimated Total Years” column. When today’s 38 year old makes it to 62, that number bumps up to 85; at 67, it’s more than 86. Again, up to a point, the longer you live, the longer you can be expected to live.

Your life expectancy figure is a moving target–definitely not a set-it-and-forget-it thing. That makes things trickier for the purposes of retirement planning: It’s hard to plan for having enough money to last for the rest of your life when the rest-of-your-life number keeps moving.

You Say ‘Uncertainty,’ I Say ‘Flexibility’

One way to handle this moving target is to just plan for what seems like a really conservative life expectancy number. That could be 100 years old, or 105. If you plan for the worst and hope for the best, you should be in good shape, right?

The trouble with this approach is that it could (and most likely would) lead to your working more years than you really need to. Yes, you have certainty (or as much certainty as you can have with this topic) that you won’t run out of money, but is it worth it if you have to work five or 10 or even more years than you otherwise might have (and then die much earlier than 100)?

There is another way. If you can be flexible in your thinking about what you will spend in retirement, you can be more realistic about your life expectancy number–and adjust it along the way as needed.

Here’s what we mean. Conventional wisdom used to say that, to retire, a person with a roughly 30-year time horizon should have a portfolio balance that will allow him or her to withdraw 4% of the portfolio’s value per year, and generate 80% of their pre-retirement income. The so-called “4% Rule” has fallen out of favor in recent years for a number of reasons, not least because fixed income yields are so low. Regardless, the rule should only really have served as an estimate in the first place. It’s not just life expectancy that’s uncertain when it comes to retirement planning. Markets can plunge, economies can stagnate, and inflation can eat away at savings. On the other hand, economies can get hot and the stock market can go along for the ride.

Very little of what markets and economies will do is predictable in the short term. To absolutely plan on the same withdrawal rate, year in and year out, regardless of what the markets are doing, is almost irrational. Adjusting your spending behavior when times are tight, just as you likely do pre-retirement, can make your retirement nest egg last a lot longer–in addition to making intuitive sense.

At the very least you should be running scenarios on your life expectancy in an accurate retirement planning solution, such as WealthTrace, which is available to the public. You can see below how one can change the life expectancy and then view the different results.

Results when life expectancy is 80:

Results when life expectancy is 85:

Dividends To The Rescue

Still, in retirement, the less uncertainty about where your money is coming from, the better. This is where dividend-paying stocks can make a big difference. There are companies that can be counted on to pay–and even increase–their dividends year in and year out, regardless of what the stock market is doing. In the event of a market correction, their stock prices will likely drop along with the rest, but that won’t matter–the dividends should keep coming. We have found in our research that, using Monte Carlo analysis, investing in the best dividend paying stocks can improve your probability of never running out of money by more than 20%!

Here are a just a few companies with long histories of increasing their dividends annually, and there are plenty more like them:

Name	Ticker	Yield (as of 10/14/16)	Consecutive Years Increasing Dividends
Altria Group	MO	3.7%	47
Chevron	CVX	4.3%	28
Coca-Cola	KO	3.2%	54
Southern Company	SO	4.3%	16
Target	TGT	3.4%	49

Let’s Be Realistic

We become more rigid in our thinking as we age. So it might be tough to consider being flexible about something as important as income and spending in retirement. But a certain level of flexibility can lead to more realistic expectations about what we need to save, and could even lead to an earlier retirement.

How Much Money Do You Need to Retire?

March 17, 2016 By Doug Carey 1 Comment

It’s such an important question that is asked again and again: “How much money do I need to retire?” There are over 40,000 searches for this phrase (or some derivation of it) on Google every month. People are desperate to know if they can retire when they want and if they will outlive their money.

How To Answer The Question

There is obviously no simple answer for everybody. The answer for each person begins with “It depends.” It depends on when they plan on retiring, how much they will spend in retirement, and their other sources of income. It also depends on their life expectancy. I have written previously on a similar topic that looks at what it takes to retire early (at age 55).

I’ve also written about ways to get to your retirement number, which starts by maxing out contributions to 401(k) plans if you have that option. Today we want to look at how much money one should have in order to retire comfortably and how to piece the numbers together.

Lots Of Moving Parts

There are a lot of variables that go into the final answer to our question at hand. No human can possibly calculate all of this in their head, which is why it’s great to have software to do this for us. I used the WealthTrace Retirement Planner to run our numbers for this case study. I asked the question, if a couple wants to retire at age 62, how much money do they really need?

Our Study

First, let’s get our assumptions out of the way. I assumed we are looking at a married couple that is currently 55 years old. Here are my other assumptions:

We now need to ask, what do we really mean when we say “this is how much it will take.” Do we mean, they will end their plan with $1 in the bank? Clearly that is a risky proposition. We want them to have a safety buffer, so I will start with the goal of this couple ending their plan (when they have both passed away) with at least $200,000 left over.

Using this as our goal I found that this couple needs $745,000 when they retire. Using the assumptions I outlined above, they will never run out of money and they will have $200,000 at the end of their plan to pass on to their heirs. Below you can see their investment balances over time:

What If Stocks Don’t Do Well?

This is a question that all of us should be asking. If stocks do not return 7% per year, what happens to this couple in retirement? We certainly shouldn’t bank on 7% average returns. So let’s run a few scenarios where rates of return are worse than this. I looked at how much money they would need at retirement given 6% returns, 5% returns, and 4% returns for stocks. Here is what I found:

Our rate of return assumptions are very important when we run this type of analysis. That’s why I always recommend being somewhat conservative with return assumptions. Don’t plug in 9% for your stock returns every year and think your results will pan out. That is dangerous and can lead to bad decisions.

Summarizing Our Findings

Each person and couple are very different. We cannot apply a blanket answer to the question “How much do I need to retire?”. But we can make general statements and look at each person’s individual situation to come up with a good number. One thing is for certain: It’s better to run the numbers than making a guess. Retirement plans are too important to leave to chance.

Photo: Flickr: Tax Credits

Graphs and charts: Doug Carey

What Happens If I Can’t Retire?

September 9, 2009 By Jennifer Derrick 9 Comments

In financial circles the big push is to get people to save enough money so that they can retire in comfort. That’s a noble goal, but the fact is that more and more people aren’t going to be able to retire, at least not in the way that they dream about. Pensions are a thing of the past, Social Security is iffy at best, and many people simply haven’t saved enough to cover both ridiculous health care expenses and a life of leisure.

We all dream of the life of leisure, the daily golf game, and the fantastic trips, but reality is likely to be somewhat different than our dreams because the money just won’t be there. Nobody wants to talk about what happens at that point. So what happens if you arrive at your retirement age, or you get close, and you discover that you don’t have enough? What can you do, beyond saving as much as possible?

The most obvious answer is to work longer. Putting off retirement for even a couple of years gives you a chance to save even more money. You don’t have to work at your current 9 to 5 job, either. Maybe you take this opportunity to start your own business or take a job in a field you always wanted to try. If you have to keep working, no one says that it has to be in a job you hate. In fact, continuing to work well past retirement age, even if only part time, not only allows you to save more money, it may save your sanity. We all think we want to quit working but a lot of retirees, after living the life of leisure for a couple of months, find that they are bored and that they miss making a contribution somewhere. They miss the socialization, too. If you can find work that you love, you may find that you prefer to keep working.

The other thing you can do is to adjust your expectations for your retirement. In other words, get real with yourself. If you know you don’t have a lot of money, don’t delude yourself. Don’t retire and then go on a binge of trips and leisure activities and drain your resources within the first five years of retirement. Adjust your expectations downward. Realize that you can’t take five luxury trips a year and be happy with one budget trip. Realize that you may have to work and find a way to be okay with that. Accept that you may have to sell the big house and move to a condo. Don’t dwell on what cannot be or waste your remaining time asking “what if.” Get out there and do what you can, but be realistic about it and accept that maybe you have to reduce your expectations a bit.

Retiring into a life of leisure is a fairly recent concept. Our grandparents worked until their health failed and they had no choice but to stop. Maybe they scaled back on their hours, but they still worked. The idea of simply sitting around and doing nothing or traveling full time is a new idea (made possible by a marketing machine that wants to push seniors into all kinds of activities) and it’s an idea that simply may not be possible or even advisable. We live longer now and if you retire at sixty-five, your money may very well have to last thirty years. Unless you have a lot of money, the retirement ideal that is pushed by the marketers is a distant dream. Thanks to rising health care costs, even with the best savings habits in the world you may still not have enough to support yourself without working at all for the remaining years of your life. And if you can? Great, but keeping yourself active and involved in something is likely to keep you healthy and mentally strong much longer than doing nothing but playing golf all day.

The better answer may be to gradually phase working out of your life. Maybe at sixty-five you trade in the 9 to 5 desk job for a job in a museum or something else that you really enjoy. Or you piece together a couple of part time jobs. Then at seventy you scale back to part time hours. At seventy-five, maybe your income comes from a hobby that you can pursue at home and turn into a little cash. Maybe you work at that until your health prevents you from working at all. You can still have some of the joys of retirement on such a plan because you’re working a “job,” no longer chasing a “career” that sucks up all of your time. You can travel and spend time with the grandkids, but still have some money coming in on the side while keeping yourself engaged in society.

Certainly you should strive to save as much as you can during your prime earning years. Whatever your “retirement” consists of, you can bet that big health care expenses are going to be part of it and you’ll want enough money to take care of yourself without subjecting yourself to government assistance. But if you end up having to work a little longer than you hope or you end up with a smaller retirement budget than you dream of, it doesn’t have to be the end of the world. There are positives to a “retirement” that still includes work.

How I Retired Early

August 21, 2009 By Guest Writer 16 Comments

By Retire@50

It’s the dream of many to retire early. This is how I did it:

I had a paradigm shift: It was the early 80s and I was in my early 20s. I was working an entry level job and living paycheck to paycheck. It was difficult to find jobs at the time and I was always living in fear of What if

retire

Why Are People Working in Their 70s?

A Perk for Employers

How to Better Prepare for Retirement

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