Friday, July 15, 2011
THE ART OF RETIREMENT
Hello, I’m Bea Bell, and I want to tell you about a funny thing that happened to me when I wasn’t looking. One day I applied for a job; thirty years flew pass and I found myself contemplating retirement. I was no longer that twenty year old woman who dismissed the idea when someone suggested that I save for retirement. That wasn’t on my radar. Retirement was for old people, I thought, and I wasn’t planning on getting old. (And I didn’t, I just got older)
I didn’t do any serious planning until about six years before my anticipated retirement date and it was then that I learned that retirement is serious business. I also learned that it’s never too early or too late to plan life after working.
If you are fortunate enough to have a job in today’s economy, retirement planning should be a goal for you. Ideally, you should start planning for your retirement from the time you enter the workforce. There are many things you should consider before retiring.
First of all, ask yourself what does retirement mean to you? Whether it means playing 18 holes of golf every day; traveling around the world, relaxing on your patio, or having time to spend with your grandchildren you’re going to need money to live, and I don’t know anybody who doesn’t want to live their best life.
Now, these days the financial gurus out there say that you need $1 million or some other astronomical figure in order to retire. How discouraging is that? Don’t despair. For those procrastinators like me who waited before actually formulating a retirement plan, don’t waste time beating yourself up for what you didn’t do. Get busy finding out what you can do now.
Don’t be afraid and don’t guess. Calculate as near as possible how much income you’ll have in post-retirement. You want to be as accurate as possible, so routinely check with your employer to find out how much your monthly pension payments will be based on the years you have worked and your age at retirement. List every resource, including employer pension plans, Social Security benefits, savings, annuity account pay outs and earnings from other investments. Then consider your current expenses. How much of your current disposable income can you devote to paying off credit cards and paying down other obligations? Get rid of as much debt baggage as possible.
I seriously tried to get rid of all of my debt but it wasn’t possible. My total debt required more time and money than I could dedicate before my retirement date. I did pay off as much as possible.
While living your definition of the good life during retirement, there is also the reality of everyday living. You’ve got to consider things such as life and health insurance, (Medicare pays for only 80% of medical cost), utility bills, the upkeep on your home, and if your house isn’t paid for, you must pay your monthly mortgage. All of this has to be covered with your monthly income, and add to that the possibility of outliving the additional income you might have saved. In the end, the only thing you may have to depend on is your Social Security or pension.
Before you retire, decide if you’ll need to take Social Security benefits immediately upon retirement. You should receive a benefits statement periodically from Social Security (or you can ask for one.) This will give you an idea of what your Social Security income will be and when you will be eligible for full benefits. The age to receive Social Security benefits has increased and future changes to the system can be expected. You may consider taking early retirement benefits but be warned, if you do, you will receive reduced payments and your payments will not increase even when you reach full retirement age. Weigh the pros and cons of taking early benefits or waiting until you’re eligible for full benefit payments. The fact that you are eligible for retirement doesn’t mean that the check will automatically appear in your mailbox. You must apply for benefits. Check with your local Social Security office.
Savings may make up a big portion of your retirement income. The question is not whether you can afford to save for retirement, but how can you afford not to save. Hopefully you’ve been saving something over the years. Try to save as much as possible between now and your anticipated retirement date.
Income from annuities and other investments should be included in your income planning. There are many financial instruments that allow you to earn income without disturbing the principle. I’m certainly not a financial planner (remember I’m one of those among you that didn’t get serious about retirement until a little over 6 years prior). However, you should review your investments and at the minimum know the current rate of return. If you plan to leave your investments in place after retirement, review with a financial planner as to whether you’re getting the best rate. Also, determine if you should move to more conservative vehicles.
If your company’s pension plan has retirement savings plans such as a 401 you may want to look into rolling your funds into an Individual Retirement Account (IRA) or a Roth IRA as opposed to leaving the savings in your company. Again, check with a financial planner and your company.
Speaking of rolling over a 401 plan, one of the most important things to remember when you’re considering taking money out of 401 plans is TAXES. Nothing can dampen the enjoyment of that first retirement check than realizing you didn’t allow for taxes. Nothing can make you cry harder than having your 401 payout deposited directly to your bank account only to see the big 20% reduction for taxes. Nothing can put a cloud over you faster than having the month of April roll around and finding out that you’ll spend the rest of the year paying income taxes. I know from experience.
Once you’ve taken care of that business, I want you to remember that the definition of retirement is to “withdraw or give up an office or work”. Following this definition can result in you growing old. My advice is to never withdraw and never stop working in some way, shape or form. Get out, meet people, volunteer, participate in church events, visit family and friends, observe people in the park, join a group that shares your interests or hobbies. Traveling is a great way to spend time. If you didn’t plan for retirement sufficiently to fly to Paris for a week, then gas up the car and look for obscure, interesting or historical places in or near your home town.
As for giving up work, who says that because you’ve stopped one career you can’t start another? Why not dust off your resume and search for a job in a field in which you’ve always been interested? What about starting your own business? Whether it’s a brick and mortar business or a virtual online business, the opportunities are limitless.
The trick to not getting old is to stay mentally fit. A young mind can defy an older body anytime.
Helpful web sites to visit: