January 12, 2016
Retirement Just Might Be Boring
Over the long Christmas holiday, I got a sneak preview of what retirement could be like. Frankly, it was a little boring.
I fully appreciate that most workers don’t have the perk provided by my employer, Boston College, which gives us generous time off between Christmas and New Year’s. By cashing in a few unused vacation days prior to Christmas, I was able to string together 16 glorious days off.
It felt like a lifetime.
After cleaning off my desk, running long-neglected errands, reading a book about the sinking of the Lusitania, wrapping gifts, stocking the pantry, going to a holiday party, exercising at the gym, seeing most of the 2015 Oscar contenders at local cinemas, and getting together with friends, I still struggled to fill my days. It’s even more challenging when the winter cold descends.
I’m developing a better understanding of why some people continue working well into their 60s, even 70s. Research covered in our prior blog posts shows that older workers are more likely to delay their retirement if they have more education. That’s because their jobs are often interesting. I’m a good example – blogging usually doesn’t feel like work. This is much different than trying to continue in increasingly difficult physical work, such as waitressing or working on an assembly line.
At age 58, my growing anxiety about retirement is in stark contrast to my husband’s anticipation that his rapidly approaching retirement – he’s 62 – will be nirvana. After three decades pouring his heart and soul into teaching high school biology in inner-city Boston, he relishes the prospect of a stress-free retirement collecting his pension. I’ve encouraged him to think about how he will be spending his winter days in retirement when activity becomes more important than the relaxation he craves in his time off now. …Learn More
January 7, 2016
Financial Fallout from ‘Gray Divorce’
In the 1960s and 1970s, the baby boom generation had a reputation for breaking down societal norms for behavior – and they’re at it again.
Between 1990 and 2010, the rate of individuals over age 50 who become newly divorced in a year doubled to more than 10 people affected per 1,000 married people, according to Susan Brown, a sociologist at Bowling Green State University. Studies by Brown and others are emerging that show this important trend of “gray divorce” is having negative consequences for baby boomers’ financial security in old age.
“Individuals who go through gray divorce are considerably economically disadvantaged, and they are a growing demographic group,” Brown said. She estimates nearly 650,000 people over 50 were involved in divorces in 2010 alone. …Learn More
January 5, 2016
Few Put Finances First When Retiring
Will you retire when you want to, when you have to, or when you can afford it?
This is crucial, because when Americans retire is more important than it’s ever been to our financial well-being in old age. Yet the research indicates this doesn’t carry enough weight in people’s decisions.
This doesn’t make any sense. The typical combined 401(k)/IRA balance is a slim $111,000 for working households between 55 and 64 years old that have a 401(k). And fewer and fewer retirees have defined benefit pensions, which provide reliable income. More than half of us are at risk of experiencing a decline in our standard of living after we retire, estimate economists at the Center for Retirement Research, which supports this blog.
Yet a recent survey by Fidelity indicated that the majority don’t think about the financial impact of their retirement timing. Retirees and pre-retirees said leisure was a major reason they have retired or would retire – even if they were falling short of their financial goals.
The most powerful route to improving workers’ prospects is to delay retirement, which dramatically increases monthly Social Security benefits and the income that can be withdrawn from a 401(k).
But Mark Zoril, a Minnesota financial planner, said pre-retirees typically do not drill down into their finances, though they have a vague idea of where they’re at. What he often sees is that an important change precipitates the timing of a retirement, whether a friend’s retirement or deteriorating health. …Learn More
December 22, 2015
Readers’ Picks in 2015
Squared Away readers should know this ritual by now. We consult Google Analytics to determine the articles with the most reader traffic over the past year.
This blog covers everything from student loans to helping low-income people improve their lot. But this year’s Top 10 was dominated by one topic: retirement.
Readers’ favorites are listed in order of their popularity, with links to each individual blog:
- Navigating Retirement Taxes
- Medicare Primer: Advantage or Medigap?
- Why I Dropped My Financial Adviser
- The Future of Retirement is Now
- Annuities: Useful but Little Understood
- Winging it in Retirement?
- Fewer Need Long-Term Care
- Misconceptions about Social Security
- Late Career Job Changes Reduce Stress
- Mortgage Payoff: Freedom versus the Math
To stay current on our Squared Away blog in 2016, we invite you to join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here. Learn More
December 15, 2015
401(k)s Tapped for Holiday Gifts
Many Americans have poor habits around saving for retirement, but tapping a 401(k) to buy holiday gifts seems beyond the pale.
Yet that’s precisely what some people do. In a new T. Rowe Price survey of 1,000 adults, 7 percent said they have spent some retirement savings on “holiday spending.” Surprisingly, men are more likely to do so than women, who, the survey indicates, are better at planning ahead for the holiday shopping season.
The survey doesn’t specify whether this spending is on gifts or a sleigh ride to grandma’s house, but it doesn’t really matter. When the commercial pressures of Christmas start eating into long-term saving for retirement, it seems to confirm that it’s too easy to withdraw money from 401(k)s, as a recent study by the Center for Retirement Research concluded.
If tapping into your 401(k) to buy gifts has crossed your mind, don’t do it: these seemingly “small” amounts add up. In total, pre-retirement withdrawals from retirement plans deplete roughly one-fourth of a typical U.S. worker’s account balance over a lifetime, according to the Center, which supports this blog. The most common withdrawals occur when workers change jobs, followed by withdrawals to ease financial hardships.Learn More
December 1, 2015
What Derails a Planned Retirement Date
Workers are feeling very ambitious these days: one in three plans to retire after age 65. In the 1990s, just one in 10 did.
In reality, though, many older Americans today are retiring before they’d planned, resulting in lower monthly Social Security checks, slimmer 401(k) accounts, and more golden years to pay for.
There’s no shortage of research looking into what derails these plans. But, for the first time, a new study ran a statistical horse race among the various reasons known to impact older workers’ decisions. Health issues finished first in the race, followed by layoffs, and a spouse’s early retirement.
In an ideal world, eliminating these major shocks, along with a few less prevalent shocks that were also analyzed, would reduce the share of older workers retiring earlier than planned, from 37 percent to 27 percent. [The remaining factors that were still unaccounted for in this analysis could be anything from not liking one’s job to financial or health events that went undetected by the survey.] …Learn More
November 24, 2015
Social Security Delay: the Value to You
What matters most in retirement is how much money comes in the door every single month. That’s why this blog – and its sponsor, the Center for Retirement Research – hammers away at the wisdom of delaying when you sign up for Social Security in order to increase the size of your monthly checks.
So here’s a very quick project for the long Thanksgiving weekend: insert your birthday and earnings into this new online tool to get an anonymous, back-of-the-envelope estimate of how much a delay is worth to you.
The age you claim your benefits is crucial, because two out of three households rely on Social Security benefits for more than half of their retirement income. Yet the majority of people still sign up before they’re eligible for their full benefit, which is age 66 for most baby boomers. Monthly benefits are increased for every year of delay, up to age 70.
The cool part of the tool, released last week by the Consumer Financial Protection Bureau and the Social Security Administration, is the sliding feature. It shows how much monthly benefits rise if you change your claiming age from 62 to 66 to 70. Click here to try the tool. …Learn More