Retire Early? Work Forever? Both Are Wildly Unrealistic

Writing for Barron's, Sarah Green Carmichael interviewed Teresa Ghildarducci, the Irene and Bernard L. Schwartz Chair in economic policy analysis in the economics department at the New School, and the author of How to Retire with Enough Money: And How to Know What Enough Is.

Regarding the FIRE (financial independence retire early) movement, Ghildarducci said: 

"The person who says, 'I want to retire early,' should probably talk to a therapist, because behind that is probably an uncertainty about what they want to do with their life, or they don’t like their job. But just financially, it doesn’t make sense unless you’re very, very rich, and if you’re very, very rich, you probably have expensive taste. For most people to quit work for 40 or 50 years, it’s just not a plan that can be sustained for anybody, except for people on TV."

What about the people who say, “Oh, I’m never going to retire. I’m just going to work until I’m 90”?
"There’s two kinds of people who say that. There’s the rare pediatrician who loves their work and wants to see a couple of kids a couple of times a week until they’re 90. That’s rare; that’s why you see them in the newspaper"
"The second group are people who are engaged in what’s called cognitive dissonance. They know they don’t have enough money, and so they engage in another kind of fantasy, which is, 'I can work until I die. My employer will want me.' We find in our research that there’s a [level of] enormous age discrimination and that there are a lot of jobs that are so fast-paced in terms of technology skills required that an older worker will just not be able to keep up." There is also the physical requirements of some jobs that cannot be sustained into advanced age.

Research shows: "Most people will stop work before 65 and collect Social Security before 65."
"They were pushed out, or they were laid off, or they had to take care of their spouse or had to attend to their own illness. Most people do not retire when they want to. They retire earlier."

So what is a realistic goal and game plan for retirement planning?
"Here are some rules of thumb. If you’re 30, you should be out of debt, and you should have about half of your salary in the bank. By the time you’re 40, you should have a little more than your annual income in the bank sequestered for your retirement in either a 401(k) or an IRA. By the time you’re 45, you should have two times your annual salary. By the time you’re 50, you should have three.
By the time you’re 65 or so, 63, you should have about eight times your annual salary, if your annual salary is about what you want to live on...."

Read the interview at: https://www.barrons.com/articles/retire-early-or-work-forever-51556397683?shareToken=st1b1d6680257d4fb7ab3787524708bd0c&reflink=smartbrief

 

The freelance retirement crisis no one is talking about

Americans don’t save enough for retirement. And gig economy workers are likely to struggle more than others. 

Freelancers, independent contractors and sharing economy workers may be even less prepared for retirement but those who work in the gig economy have some options if they wish to take advantage of provisions in the US tax code.

• Seven in 10 full-time gig economy workers are unprepared to sustain their lifestyle in retirement
• One in three of them set aside no money for retirement
• One-third associate retirement with anxiety

So what can you do? Check out this link: https://www.fastcompany.com/90243884/the-freelance-retirement-crisis-no-one-is-talking-about 

Empty-Nesters Need to Trim Household Expenses to Save Their Retirement Prospects

"A recent study from The Center For Retirement Research at Boston College tells the tale. In it, BC researchers show that the idea of extra income for parents after kids leave the house is a myth. It's not because parents don't have extra cash on hand when junior moves out of the basement. It's just that mom and dad spend the money quickly, on things like vacations and high-end home projects.
And that's not good for their long-term financial health."
"In short, empty-nesters appear to spend most of the new-found slack in their budget, rather than save it, a choice that will undermine their retirement security," says Irena Dushi, lead analyst and researcher on the study.
See yourself in this mirror? Need inspiration to put those former kid-related expenditures to work for your retirement?  Still supporting junior who is among the many millenials still tapping into the bank of mom and dad? Read: https://www.thestreet.com/story/13665436/1/empty-nesters-need-to-trim-household-expenses-to-save-their-retirement-prospects.html

10 reasons your retirement plan won’t cut it

Food for thought from Robert Klein, CPA, PFS, CFP®, RICP®, CLTC, MBA, MST, the founder and president of Retirement Income Center, a retirement income planning firm in Newport Beach, Calif.
1. Most plans aren't designed to provide sustainable retirement income

2. Unable to count on a specific amount of income

3. Lack of uniform contribution amounts

4. Limited allowable contribution amounts

5. Real value of retirement plans is insufficient to cover retirement expenses

6. Most people don't contribute enough

7. Most people don't start early enough

8. Number of funding vs. retirement years  

9. Retirement plan investing is disrupted in down markets

10. Premature withdrawals

You may not have much to say about 1-5 but you can address the other downsides by:

• starting a ROth IRA today or boosting your IRA &/or 401(k) contributions
• start today and help your young adult children start a Roth
• work longer
• dollar cost average automatically and keep it up through the gloom of bear markets
• Don't tap your retirement accounts early!  
• Read the details of Klein's comments at:  http://www.marketwatch.com/story/10-reasons-your-retirement-plan-wont-cut-it-2013-10-07?pagenumber=1

Don't borrow from retirement account to pay for kid's college

A study of 180,000 Fidelity 401(k) account holders revealed that repeat borrowers are middle-aged parents raiding their retirement accounts to pay their children's college expenses. “Once people hit their 40s, we see a big spike in the number of loans taken out in the third quarter” – when college tuition bills are due, says Jeanne Thompson, vice president for market insights at Fidelity. According to Fidelity, nearly 65% of serial borrowers are between ages 40 and 60. Families with children are more likely to dip into their 401(k) accounts multiple times. While 13% of the childless couples in Fidelity’s sample have more than one loan outstanding, the same is true of 18% of parents with one child, 22% with two children, 21% with three children, 35% with four children, and 39% with five or more kids. Moreover, serial borrowing peaks when the oldest child is between 18 and 23—or the age associated with college attendance" according to writer Anne Tergesen. As Tergensen explains, "while 401(k) loans are a cheap and easy source of credit compared with credit cards and personal loans, Fidelity calculates that those with multiple loans can do serious damage to their nest eggs over the long-run, even if they repay the loans. Someone who earns $40,000 and receives 4% annual raises but takes five loans will amass $298,300 in their 401(k) account after 40 years, calculates Fidelity, assuming a 7% annual rate of return and a 6% employee contribution rate. That’s 27% less than the $405,740 the same person would have had with no loans." So think three times before raiding your retirement to pay college tuition. Read more at: http://blogs.marketwatch.com/encore/2013/10/01/why-your-kids-are-bad-for-your-401k/

NOT planning to retire?

Plenty of baby boomers claim their retirement plan is to NOT retire. I suspect most who hold this view do so because they can't afford to stop working, although some truly love their work. About 1/3 of American workers have no employer-provided retirement plan and even more are living paycheck to paycheck. Be aware that plenty of data indicate many retirees had no choice... due to layoff, ill health and other reasons, they did NOT get to choose when to retire. Laid-off 60 somethings are unlikely to get re-employed at their previous pay,if at all. Nonetheless, if you find yourself in the never planning to retire group, you need to read:  "Advice for the new anti-retirees." Heather Struck advises:
TALK TO YOUR SPOUSE
STAY HEALTHY
STAY INVOLVED OUTSIDE WORK
CONSIDER LONG-TERM CARE COVERAGE
HAVE A BACKUP PLAN: Save for retirement, even if you want to keep working. !!   Read the details at: http://www.reuters.com/article/2013/02/07/moneypack-retire-never-idUSL1N0AT9B720130207

Are Grandparents too Generous?

"Grandparents may be threatening their retirement by their generous support of grandchildren, a study suggests. Sixty-two percent of grandparents have given money to grandchildren in the past five years, totaling more than $8,000 on average, according to the MetLife Mature Market Institute study. One-third said they think their support may threaten their own financial security." read details at: http://seniorhousingnews.com/2012/10/10/the-grandparent-giver-generous-to-the-point-of-retirement-insecurity/ 
To read the full MetLife study: https://www.metlife.com/assets/cao/mmi/publications/studies/2012/studies/MMIGrandparentsStudy_WEB.pdf

10 Obstacles to Women's Retirment Goals

Millions of American women of all ages are in desperate need of solid retirement planning advice. Learn the 10 biggest obstacles in this short slide show and see how you compare. 10 Obstacles to Women’s Retirement Goals
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