Parents have spoken: paying for college is affecting their retirement planning.
Two new surveys indicate that the surge in college costs is impinging on Americans’ retirement finances. One survey, by the research firm Hearts & Wallets, found that boomer parents who support their adult children are more likely to delay retirement than parents of financially independent offspring. The second survey, by the mutual fund manager T. Rowe Price, found that half of parents are willing to delay retirement or dip into their retirement savings to fund college.
The surveys included young, idealistic parents as well as parents staring down the barrel of the retirement gun, and parents whose children achieved financial independence years ago. Nevertheless, these responses consistently show a willingness to trade retirement security to pay for their children’s college education.
The findings aren’t shocking, since parenthood is defined by sacrifice. But financial planners offer some tough advice about parental financial obligations, especially for clients zeroing in on retirement. Parents – as opposed to their offspring – have relatively few years left in the labor force to save for retirement.
“There’s going to be a day when you can’t work anymore,” said Kelley Long, a financial planner with Financial Finesse, which provides independent financial education programs and a financial helpline for U.S. workplaces. …Learn More
In this video by KUTT-TV in Anchorage, Alaska, Fred Keller and Judy Foster show off their retirement project: they transformed a 1976 pickup truck into an oversized replica of a Radio Flyer wagon they can drive around town.
While a new red wagon isn’t for everyone, it illustrates an important point: retirees need to find ways to remain active. Older people warn that retirement shouldn’t be viewed exclusively as a time to “relax,” a well-deserved break. People who enter retirement expecting nirvana often find they’re bored stiff, or even depressed, due to an abrupt drop in productivity after decades of working. Retirees also spend a lot of time alone or watching television.
This blog often promotes the benefits of financial health and mental health that come with working longer. When making financial preparations for retirement, preparation should also include thinking about pursuits such as working on a long-neglected project or hobby, writing a family history, or finding a social group, part-time job, avocation, or volunteer work to add structure and purpose to one’s life.
It took Keller and Foster nearly a year to build their vehicle, KTUU reports. When they took it on the road, they discovered another benefit: talking to the people who invariably ask them about their Radio Flyer is a constant source of fun.Learn More
With snowstorms hammering the eastern United States, some baby boomers may be looking for a permanent escape when they retire.
Yet Southern cities did not come out on top in the Milken Institute’s new ranking of the Best Cities for Successful Aging, a ranking based on a fairly comprehensive set of factors important to seniors. Take frigid Iowa City, the No. 1 small city: it gets credit for its transportation and the affordability of its assisted living and adult day care services.
Milken Institute economist Anusuya Chatterjee saw common themes among the top-ranked metro areas. They tended to have vibrant economies, quality healthcare services, opportunities for intellectual stimulation and active lifestyles, and easy access to amenities like grocery stores, transit, and culture.
University towns often fill these requirements, she said. Madison, Wisconsin – home of the University of Wisconsin – was the top-ranked large metropolitan area.
Financial considerations also influenced the rankings, such as living costs and the cost of day services for the elderly or assisted living. Convenience amenities have financial implications too – a monthly subway pass is cheaper than owning a car.
The methodology, explained in more detail later, was more rigorous than what’s typically found in city rankings. Here are other surprising results: …Learn More
In a divorce, splitting up the pension is trickier than dividing the house.
Divorcing couples and their advisers “who aren’t hip to divorce splitting of retirement plan assets often do it improperly,” said Howard Phillips, a Delray Beach, Florida, actuary and author of “Dividing Retirement Plan Assets in a Divorce.” He knows, because he values pensions for couples negotiating their divorce settlements and then drafts the order that will be entered into the court.
Dividing a house is easy. Two realtors pouring over sales of comparable nearby properties can readily agree on a value – once the house is sold, the parties pay the realtor and split the proceeds. But a pension plan’s value greatly depends on how and when it’s counted and the method used to allocate that value between the spouses.
Phillips explained the basics of how defined benefit plans and defined contribution plans – 401(k)s, 403(b)s, and IRAs – may be handled in a divorce during a recent podcast for the Retirement Income Industry Association. The following methods for splitting a pension 50/50 have strikingly different outcomes for the participant in the pension plan and for his or her former spouse:
Defined contribution plans:
Tracing assets: If one spouse comes to the marriage with $50,000 in a 10-year-old 401(k) account, only contributions made during the marriage – and investment returns on the new contributions – are divided. If the plan now has $150,000, the amount that’s divided up can vary widely – or it can be zero if no new contributions were made during the marriage. The remaining balance goes to the spouse who started the 401(k) account. …
Saving should be the centerpiece of any retirement plan today. But a new survey indicates that many Americans on the cusp of retiring have given little thought to the other key issues they’ll face in retirement.
A majority of older Americans recently surveyed by the American College of Financial Services, an educational organization for financial professionals, said they have set a goal for how much money to save to “live comfortably” as retirees. And, when asked to assess their own progress, they feel they’re doing a good job of it. Granted, the survey was limited to a select group of about 1,000 people over age 60, all of whom have at least $100,000 in investable assets.
But the financial risks posed by the transition away from full-time work and a regular paycheck are complex and continual – and preparing for them goes well beyond contributing to a 401(k).
Only a minority of people planning their retirement take into account these important financial issues: …Learn More
Retirees in one Orlando-area community sustain a lively conversation about every topic under the Florida sun, a conversation that threads through their rounds of horseshoes, dinner dances at the club house, and senior yoga.
But one subject must be handled with great discretion: hunger.
Judy Cipra knows this, because she and her late husband, Fran Cipra, started, and she continues to operate, Fran’s Pantry to collect money and buy groceries for 18 seniors who struggle financially in the Palm Valley retirement community, where my mother also lives.
“If you call me and you tell me that you need food, I don’t ask any questions,” Cipra said. “You just get it.”
Cipra said people reliant solely on Social Security are often embarrassed to be barely getting by. Some fill their food gaps with soda crackers and peanut butter, she said.
But hunger among seniors is not uncommon. About 15 percent of Americans age 60 and older were threatened with hunger in 2012, according to the National Foundation to End Senior Hunger. And as the baby boom population ages, the number of these “food insecure” seniors is continuing to rise, exposing growing numbers of retirees to health problems and depression stemming from not having enough to eat. …Learn More
For a growing share of older Americans, housing expenses have become an increasingly large financial burden.
One in three Americans over age 50 were carrying a severe or moderate housing cost burden in 2012, up from one in four in 2000, according to a new study by Harvard’s Joint Center for Housing Studies and AARP. The Center defined a severe burden as housing costs that consume more than half of household income; a moderate housing burden takes between 30 percent and 50 percent of income.
The Center’s report, “Housing America’s Older Adults – Meeting the Needs of An Aging Population,” warns that the nation is unprepared for both the financial and non-financial housing challenges that will accompany the coming explosion in the elderly population. Aging baby boomers will require better access to public transit, handicap access, assisted living facilities and other special services and amenities, and many will need subsidized housing.
Housing is often an older person’s largest single expense. And because housing costs are largely fixed (think mortgage payment, taxes, insurance, upkeep and utilities), they can become a growing burden for people as they age and become more vulnerable to reductions in income. Incomes often decline toward the end of their working years and decline again when they enter retirement. Pensions and Social Security benefits fall again when one spouse dies.