Archive for the 'Pre-Retirement' Category

Retirement Health Costs are Higher than you Think

Posted on April 3, 2013 by danni

According to the Center for Retirement Research at Boston College, the above is largely true no matter how high you think they are.

A good rule of thumb for estimating health costs in retirement is that Medicare will, on average, cover 60%, while the remaining 40% come out of the retiree’s pocket. Unfortunately, according to a lengthy paper published recently by professors at UCLA and Harvard, most would-be retirees habitually underestimate the impact that health care costs will have on their finances, either blithely assuming that Medicare will take a larger share of the burden from them or failing to appreciate just how large that 40% liability is likely to be in terms of real dollars.

So how large is it? Large, at least according to the Urban Institute’s calculations. The median retiree will spend more than $6,000 per year on health care costs alone, while a particularly high spender (or one nearing the end of their life) may be spending as much as $14,000 yearly. This is all without counting any significant end-of-life costs (most retirees spend the majority of their lifetime health-care costs in the last eighteen months of their lives.

Given how large health care costs loom in retirement, it goes without saying that any significant underestimation of their impact can have a staggering effect on your retirement security. This isn’t to say that every retiree needs to budget $15,000 a year for such things, but a careful calculation of retirement expenses is impossible without an accurate understanding of the costs you are likely to face. For these reasons, NewRetirement has always recommended the use of a proper retirement calculator, if only to set realistic boundaries, not guesses, on what your expenses are likely to be, and what level of preparation will be necessary to ensure that you have the capacity to meet them.

Whether you use NewRetirement’s calculator or another source of information, nobody should go into retirement armed only with guesswork.

Learn more about the true costs of retirement with the NewRetirement Retirement Calculator.

Learn more about Supplemental Medicare Insurance at NewRetirement.com.

Are You $250,000 Short on Retirement Savings? You Are Not Alone!

Posted on April 3, 2013 by Editorial Team

According to a new study from Ameriprise Financial, there appears to be a significant disconnect between average retirement goals and reality.

While the study suggests that Americans have a positive view of retirement – with 78 percent of respondents expecting to be extremely happy, it seems that most Americans have a gap of $250,000 between their actual savings and what they will need to be comfortable in retirement.

The good news is that it is possible to manage this gap:  create a strong financial plan, work longer, live more frugally and eliminate credit card debt.  You could also consider a Reverse Mortgage or look for opportunities to downsize your home.

Resources:

–>  Do You Have Enough for Retirement?  Find Out by Using the NewRetirement Calculator.

–> Can Working Longer Help You Make Up the Shortfall?

–> Considering a Reverse Mortgage? Estimate Your Loan Amount Now.

Women in Retirement

Posted on August 6, 2012 by Rohith

In general, women tend to earn less and take more time out of the workforce to take care of family members than men. That is why it easy to see that elderly women are at a higher risk of living in poverty during retirement than their male counterparts.

The New York Times reports that women’s household income fell by 41%, on average, when they divorced and by a staggering 37% when widowed. An astonishing statistic that was found after a study was conducted was that the average income for women over the age of 65 was about 25% lower than men’s over the last decade. In addition, the poverty rate for women in this age group was nearly two times higher than men’s in 2010.

The U.S. Government Accountability Office (G.A.O.) has put together numerous potential options that could benefit women in retirement.

Some of the options are:

  • Automatic I.R.A. - Employers who do not offer a retirement plan would be required to automatically enroll employees in an Individual Retirement Account, unless the worker opted out.
  • Expand the Saver’s Credit - This credit could be made “refundable,” meaning that it would reduce the amount of tax owed. And if the amount of the credit exceeds your tax bill, you get to collect that extra cash.
  • Caregiver I.R.A. contributions – This would allow all caregivers to contribute to I.R.A.’s up to the qualified contribution limit, based on the individual’s adjusted gross income in the year prior to becoming a qualified caregiver.

There were several other potential ideas listed in the report such as the fact that women tend to benefit from options like annuities that provide lifetime income and that they also depend on social security more heavily than men do. The report also underscored that the difficulties in achieving a secure retirement is a national problem, regardless of gender.

Sources:

 

Why you may NEVER Retire

Posted on May 23, 2012 by Rohith

When you were growing up, you most likely imagined yourself retiring at 65 and getting a secure monthly income from your pension, health care benefits, and social security. However, in this day and age, that is longer the case at all.

Let’s start with retirement pensions. According to this article from Yahoo Finance, between 1998 and 2010, the proportion of companies offering DB (defined benefits pension) plans fell from 67 percent to 17 percent while DC (defined compensation pension) plans rose from 10 percent to 58 percent. The overlying reason companies did this was to cut their costs and unless you have remarkable fortune investing, the DCs will deliver less income after you retire.

The dropping income does not help with retiring either. According to the September 2011 Census Bureau, an average family’s in the U.S fell 2.3 percent to $49,445 in 2010 and has dropped 7 percent since 2000 after adjusting to inflation. These numbers are the lowest since 1996.

The increase in childcare has also delayed retirement for many. According to the Census Bureau, the share of American families with dual-earning couples soared from 20.4 percent to 42.4 percent. This astonishing increase adds to parental stress and boosts childcare expenses for most families.

People’s insufficient returns from their asset portfolio has also caused many to keep working past the age of 65 – stocks have earned slightly more than 2 percent a year in the last decade – the average annual return of the S&P 500 between 2002 and 2012 has been 1.8 percent. Even long term investments do not look promising. The 10 – year Treasury note, for example, only pays 1.72% and to get a measly 2.8% return, you need to put aside your money for 30 years. In a nutshell, due to lower corporate contributions and a shift in the responsibility from the company to the employee to handle investments, annual returns are, on average, 6% to low.

Inadequate savings is one of the overlying reasons people retire later than they would like. According to the Employee Benefits Institute, 17 percent had more than $250,000 saved up in 2011. What is even more astounding is that 60% of the people surveyed had less than $60,000 saved. In short, many Americans do not have enough money saved up in order to retire at their desired age.

Keep these points in mind and plan for a safe retirement by using our Free Retirement Calculator.

 

How prepared are people approaching retirement?

Posted on March 19, 2012 by Steve

Not very – consider some of these stats from a recent NYT article on the impact of the 2008 financial crisis:

  • 36% of American workers age 55 to 64 say they have less than $25,000 in retirement savings
  • 52% of American workers age 45 to 54 say they have less than $25,000 in retirement savings
  • 33% of retirees get more than 90% of their income from Social Security (the avg SS payment is ~ $1,000 per month)
  • 17 % of workers have defined-benefit pensions
  • 39 % have 401(k)’s
  • 53 % of all workers have neither…

To compound the problem some professional investors are predicting lower long term returns for stocks of about 5% vs. 8-9% historically, based on the historical relationship with bonds which are now providing lower returns.

Anyway – some things to consider as you plan your own future.  Good luck!

Is One Million Dollars Enough to Retire?

Posted on January 27, 2012 by Erin

Got a million dollars for retirement?  Think it’s enough?  Think again.  A million dollars sounds like a whole lot of money to most folks, and it is!  But in today’s market, one million for your retirement fund simply may not cut it when you need your money to stretch for your entire retirement.  Why?  Let’s think about it.

The average lifespan of most people today is longer than any point in the past.  Living to age 90 isn’t that unusual anymore, especially with modern medicine.  If you retire at age 62 and live until age 90, that’s 28 years that you will need to fund.  Where you live and the lifestyle you want to maintain can significantly increase the amount of money you will need for retirement.  You also have to take into account the cost of medical care.  Do you have long term care insurance to protect you in case of an unforeseen medical expense?  One hospital stay has been known to throw many people into financial turmoil.

Social Security is unstable and is not enough to live on for many households.  It’s never too late to start preparing for your retirement by looking into Annuities and Long Term Care Insurance as options to help protect yourself.

What’s your retirement savings goal?  How far along are you and are you confident you will reach it?  Let us know your thoughts!

Use the NewRetirement Retirement Calculator to see how far away you are to reaching your goal!

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Men and Women When it Comes to Retirement Planning

Posted on January 25, 2012 by Erin

Recently, a study put out by Ameriprise Financial took a look at the different ways men and women plan for retirement.  Not surprisingly, both sexes reported not feeling 100% prepared.  What was a little more surprising was just exactly how different men and women look at retirement planning.

According to the study, 54% of men report investing money into accounts such as IRAs and 401Ks while only 46% of women report the same.  It was shown that men tend to pick a number with which they deem to be their goal for retirement savings.  They work toward this goal and do it mostly through their investments.  Women on the other hand were shown to think not so much about the specific number they want to hit, but the lifestyle they want to have during retirement.  But the study still shows that both sexes are underestimating the amount of money they will need in retirement.  With longer life spans, more expensive medical costs and the uncertainty of Social Security, everyone needs to begin to become more realistic with their retirement planning.

Are you prepared?  See how long your money will last you in retirement.  Use our retirement calculator.

Sign up for one of our informational newsletters.

Being Laid Off Shortly Before Retirement

Posted on January 9, 2012 by Erin

It’s something that many people don’t really think can happen but has become more common over the last few years – being laid off shortly before you retire.  We like to think the chances of this happening are small due to the belief that it’s too outrageous, especially If you are one of those people that has put in many good years at a company.  Who wants to think their employer would be so quick as to lay off someone just before retirement?

Unfortunately, it happens.  The problems associated with losing your job before retirement age are numerous – are you too “old” to get a new job?  Do you have too much experience and require too high of a salary?  Will younger and cheaper candidates undercut you in the job race?  Yet are you too young to receive Medicare or Social Security?  Recently, the New York Times laid out some crafty ways that can help you survive, that you can read here.

Do you know anyone that this has happened to?  What would be your plan if this happened to you?

If you were laid off today, how far would your money stretch?  Find out by using our Retirement Calculator.

Sign up for one of our retirement newsletters!

New Year’s Resolutions

Posted on December 30, 2011 by Erin

It’s that time of year again – Time to make those New Year’s Resolutions!  This year while you’re thinking about all the ways to improve yourself or your life in 2012, don’t forget to add improving your retirement plan to that list!

What do you plan on achieving this coming year to help strengthen your retirement?  Are you going to invest more money into your IRAs of 401(k)s?  Are you going to purchase a lifetime annuity to guarantee income later in life?  Or are you going to look into Long Term Care Insurance to make sure you are covered in case of unexpected medical costs?  There are many small adjustments that you can do to increase the health of your retirement plan.  You can use our retirement calculator to see what a small adjustment can do for you and how far your money will stretch.  We’ll be here in the New Year to continue to help with all of your retirement planning needs – Have a Happy New Year and see you in 2012!

Sign up for one of our retirement newsletters to stay informed during the year!

 

Wealth Gap Between Young and Old Grows

Posted on December 1, 2011 by Erin

Yesterday we told you about a study that showed young investors are no better prepared for retirement than the boomers before them, and that in some cases, are actually less educated about their investments.  Well on Monday, the Pew Research Center released a study that shows the wealth gap between the younger and older generations is indeed getting much wider.

Right now, the gap is the biggest it has ever been in recorded history.  Older Americans are actually increasing their net worth while younger Americans are seeing noticeable declines.  Why is this happening?  Well for starters, kids graduating from college are facing an extremely difficult economy.  Many times people in this age group have no choice but to delay their careers because they simply cannot find work.  Others choose to continue  with their education by going back to school .  Although higher education typically means higher paychecks down the road, the loan amounts that students today are acquiring are much larger than the generations before.  The fear is that if this trend continues, this younger generation will never be able to play catch up and the future for both them and the country’s economy may be dim.

How far along are you with your retirement planning?  Are you further ahead than most?  Try out our Retirement Calculator to see where you stand.

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