I found this recent, very telling article,”End of Retirement,” about the fact that seniors are having to retire much later in life to provide for a secure retirement. They even chronicled a woman who works half days at a newspaper at the age of 101!
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Watch out ladies! You may not be planning and preparing for long term care properly, according to a report by the American Association for Long Term Care Insurance. Looking at the data though, I cannot see a link between the economic downturn and the ability for women to plan and prepare for long term care. Nonetheless, the takeaway from this data is that long term care and long term care insurance are important issues that very often get overlooked.
In other news, be prepared for a media blitz this Labor Day weekend by the AARP as it attempts to prove to retirees that it is has no political leanings in the Healthcare Reform Debate. They are rolling out with millions of dollars in advertising budget to convince people that they are only looking out to help its members in the Healthcare Debate. This advertising is rolling out because of the fact the AARP lost 60,000 or so members who thought the association was flat out siding with Democratic camp. This is yet another reason why I’m glad I have DVR.
Back to the debate that was discussed in the blog post entitled “A Generational Battle Awaits.” While Obama says he is cutting funding to Medicare to get rid of waste and the excesses of private insurance companies, it seems many seniors and Dem. Rep. Betsey Markey in her address to a Colorado town hall believe that as she stated: “There’s going to be some people who are going to have to give up some things, honestly for this to work.” Who those people are the Representative did not say, but we can pretty much tell it will be those benefiting from Medicare. Yet, to counter these viewpoints, the secretary of Health and Human Services stated in an address: “Health Insurance reform will protect the coverage seniors depend on, improve the quality of care and help make Medicare strong.” What can be seen from these opposing views is that the Obama administration wants to ensure that Medicare stays around, but Medicare will need to be changed, in some cases for the worse, to continue to benefit all of those who are a part of it.In a slight side note, there is a great PBS Frontline website and video entitled “Can You Afford to Retire.” It paints a bleak picture of retirement right now, but shows the truths that need to be addressed.
Great news for those of you who don’t want to wait in line at the Social Security office. If you are at least 61 years and 9 months old and want your benefits to start no more than four months in the future then you can apply for social security benefits online here at social security online. Furthermore, the site has an interesting “Retirement Estimator” that will prepare a personal estimate of your benefits depending on different starting ages.
A new Edward Jones report released this morning has some interesting details on parents saving for retirement and college for their children. The report says that a third of parents are saving equally for retirement and paying for college, a third are putting more money into one than the other and another third aren’t saving for either. To further analyze this data, the report states that younger parents (35-44) are more likely to save for both (37%) than those ages 55-64 (23%). This is interesting data considering retirement and paying for a child’s college education many times come around the same time. So remember that retirement savings are just one of many financial considerations when growing older.
In other news, in regards to a USA Today posting on 401(k)’s it seems that the IRS may just reduce the amount you are allowd to contribute to your 401(k) in 2010 to $16,000. This is truly upsetting news considering now is the time that people are going to have to put as much as they can back into their savings because they had to delve into during the recession. Let your Congressmen know that this should not happen, now is the time to save away for the future!
I grew up in the Great Depression and witnessed my parents’ penchant for avoiding risk. I learned my own lessons as well after I started earning my own money and tried to save it. Someone advised me of a “good” stock broker. He wasn’t good to me. I lost money on every stock he sold to me. I think that his firm directed him to sell the stocks in their own inventory that they considered bad investments.Midway through my working career at Boeing, I became head of corporate planning—a job that required parceling out research and new business budgets to the operating divisions and justifying the investments on the the sales prospects to the company’s board of directors. The total of the budget requests were always higher than we could afford to support while the sales projections from the operating divisions were, when totaled, higher than the customers could afford to spend. They reminded me of the always optimistic projections of my first stock broker.Years later, in retirement, I learned a lot about the various retirement planning methods. Almost all of them used optimistic portfolio returns from history and left out many things that influenced retirement spending and income, and no two gave similar answers. Inserting my standard test values for investment returns, pension, Social Security, tax rates, etc., I found they all gave different results. In fact, some said that no additional savings were required while others would impose staggeringly high monthly savings. These results were published in two, full page, articles in The Wall Street Journal.These programs came from well-known financial firms which seemed reluctant to improve their programs. I still find significant shortcomings after all of these years. The majority do not account for the appreciable costs that bring actual returns to values lower than the indexes for returns, nor do the simpler programs account for reverse dollar-cost-averaging shown by my research and described in J. K. Lasser’s Your Winning Retirement Plan.There are more complex statistical programs that purport to predict the future. They don’t. They should really say they are poor representations of what might have happened in the past. Most are based on fake return statistics and don’t correlate with actual historical inflation at the time of the returns.Together with my wife, we offer modest assistance to some people relying only on Social Security. They consumed their savings too early for various reasons, and now are sorry that they weren’t more conservative in their planning, budgeting, investing and spending. Over the years inflation destroyed the value of the pensions some have. Even then, they didn’t realize that they can’t spend all of their fixed pensions in retirement. It’s necessary to save part of each pension payment so they’ll be able to supplement their income later as inflation destroys fixed pensions income.Then there are Unk-Unks, a term for unknown-unknowns, that is, things you are unlikely to think about in advance, such as household emergencies and events in the lives of your adult children or elderly parents. Retirees have told me their biggest Unk-Unks were the divorce of a daughter with children followed by the need to support elderly parents after the parents exhausted their own savings.There are the things that you could have planned using some very detailed planning. Such planning is used by estimators in the construction industry. When an item was forgotten, we called these OSIFs, short for “Oh, shoot, I forgot,” except we had a stronger word than “shoot.” Forgotten items result in a dollar-for-dollar loss. On www.analyzenow.com I include a special event worksheet in the comprehensive programs that encourages people to include the cost of high value items such as to replace a roof, automobiles, etc. Retirees (and older working people) can gain much by first saving for a future purchase rather than paying for it over time.During my working years, I was very successful managing projects and organizations ultimately becoming president of The Boeing Aerospace Company (1980-1985). I attribute much of my success to being conservative both in work and retirement. Being conservative in retirement planning means using inputs that are low for returns, high for taxes, long life spans, etc. It also means having a significant portion of your assets in conservative securities. You can’t afford to retire on lottery tickets in a retirement portfolio.Bud Hebeler, www.analyzenow.com
And now to add to yesterday’s blog, as a recent businesswire article, “Americans Dramatically Underestimate Health Care Costs in Retirement, First Command Reports” states that retirees need to show some foresight and put extra money for the rising costs of healthcare and clear deficit in Medicare and Social Security spending. So ensure you and your financial advisor discuss and plan on having enough money for rising healthcare expenses and the rising taxes required to fund the government stimulus packages.
