Our retirement plans are ruined…and why this may be good news

By Neil Patrick

We all know the way our careers were supposed to go. Roughly speaking.

We’d get a bunch of qualifications, start work, change employers maybe four or five times, work hard, get promoted and then at around 50 or so have a comfortable cruise towards our retirement at 65. Then we’d be able to relax and enjoy the next 20 or so years.

We’ll that’s all gone now for most of us.

I’m sorry to say that it doesn't make much difference what your employer or financial advisor recommends. If you are a baby boomer in the US, UK and much of the EU, unless you’ve been so successful (or lucky) in your career that you are sitting on a very large pension fund, this version of our life story is a fairy tale.

You probably know this.

In the US, some 82 percent of workers aged 50 and older say it is at least “somewhat likely” they will work for pay in retirement, according to a poll released in October by the Associated Press-NORC Center for Public Affairs Research at the University of Chicago. Almost half of boomers polled now expect to retire later than they previously thought - on average nearly three years later than what they thought at age 40.

And this is just the tip of the iceberg. People have a habit of being unduly optimistic when thinking about their financial position if it’s much beyond the next year or so. It’s a combination of hope and difficulty in facing up to harsh realities.

Some of the other statistics emerging in the US are really horrific.

One in 6 reported having less than $1,000 in retirement savings and 1 in 4 working respondents aren’t saving for retirement outside of Social Security. Some 12 percent of non-retired people reported borrowing from a 401(k) or other retirement plan in the past year. Though 29 percent reported at least $100,000 in savings, some find even that’s not enough.

“All too often, people have a lump-sum illusion. They think, ‘I have $100,000 in my 401(k),’ and they think, ‘I’m rich,’” “said Olivia Mitchell, a retirement specialist who teaches at the University of Pennsylvania.“But it doesn’t add up to much. It certainly is not going to keep them in champagne and truffles.”

Make no mistake this isn’t a blip, or a phase. It’s a demolition of the life expectations of a generation. 

You can go searching for people to blame if you like. There are plenty who must carry at least a portion of the guilt. Personally, I think it’s more important to invest our energies in something more productive and positive.

Like working out what to do about this.

The good news is that humans are much more resilient and adaptable than we sometimes give ourselves credit for.

And when we are confronted with difficulties, we often respond in much more creative ways than we expect.

I have a friend who is 60. Two or three years ago he was on the face of it, doing well in his career in sales. He was the Sales Director for a booming manufacturing business. And much of that success was down to his drive and natural flair at finding clients and keeping them coming back for more. He’d be in his office every morning from about 7am, then from about 10am would be hunting down new clients and working on developing relationships with the current clients.

He was very, very good at his job. And the business was growing largely due to his abilities to win new orders and contracts. But I knew a different side. I knew that he was locked in a war with his boss. There was a huge power and personality fight going on. And this was steadily sapping my friend’s motivation and strength.

His stress levels were through the roof.

In the end he became ill. Very ill. He developed diabetes. He lost weight. He looked like a shadow of the man he used to be.

But he did the most sensible thing he could. He quit his job.

For a while he looked around for other jobs. But at 60, you guessed it, there was no-one interested in hiring him into the sort of job he just left. Especially since he’d quit at it.

Fast forward to today. I had a beer with my friend a couple of weeks ago. He looked strong and fit. He had recovered the twinkle in his eye and the infectious grin that he always used to have. He was happy and healthy again.

He hadn’t been hired into a new job. He’d created his own.

He was always great at DIY. And he loves doing it. He’s simply taken his hobby and turned it into his job. And by doing great work and looking after his customers better than almost any tradesman I ever met, he has far more work stacked up than he can actually do.

He's happier than he’s been for years. He has a job he loves and the customers are queuing up round the block.

Is he worried about his pension and retirement?

I doubt it, I really do.

The spurious historical origins of how we think about retirement

By Neil Patrick

My father retired 25 years ago. He wasn’t an especially high earner. He taught at a University, but he was offered a big financial incentive to retire early. He took the money and settled into a life of golf, gardening, tennis and socialising. A quarter of a century more or less doing what he felt like and more or less worry-free.

That sort of outcome seems a remote possibility for most of my generation.

An Associated Press-NORC Center for Public Affairs Research poll released this week found unsurprisingly that the majority of older workers are delaying their retirement plans. They also report that reaching 65 won’t necessarily mean they exit from the workforce.

Some 82% of workers aged 50 and older say it is likely they will work for pay in retirement. And 47% of them now expect to retire later than they previously thought - on average nearly three years beyond their estimate when they were 40.

At first I envied my father. All that time. Endless days to spend doing whatever he wanted. But then I thought again. As he became more and more removed from the world of work, I saw how he also became more and more disconnected from how the world was evolving. The biggest change that passed him by was the endless rise of technology and digital media.

He knows how to browse the web with his iPad, but he still cannot send an email. He finds it extremely difficult to interact with web pages to do even simple things like getting his groceries delivered.

And keeping in touch with friends and family is becoming harder too since he refuses to dial a mobile phone number because he’s paranoid about the risk of being charged more for the call than he would be on a landline.

The world is slowly but steadily becoming a more and more alien place for him. And so I’m not so sure anymore that my father’s experience was such a dream ticket after all.

In the beginning, there was no retirement. Because there were no old people. In the Stone Age, everyone was fully employed until age 20, by which time nearly everyone was dead, usually of unnatural causes. An early man who lived long enough to turn grey was either worshiped or eaten as a sign of respect.

By Biblical times, when a fair number of people made it into old age, retirement still had not been invented and respect for old people remained high. In those days, it was customary to carry on until you dropped, regardless of your age group. When a patriarch could no longer farm, herd cattle or pitch a tent, he opted for more specialized, less labor-intensive work, like prophesying and handing down commandments. Or he moved in with his kids.

As the centuries passed, the elderly population increased. By early medieval times, their numbers had reached critical mass. It was no longer just a matter of respecting the occasional white-bearded patriarch. Old people were everywhere, giving advice, repeating themselves, complaining about rheumatism, trying to help, getting in the way and making younger people feel guilty.

To the annoyance of their offspring, they also tended to hang on to their wealth and property. This made them very unpopular with their middle-aged sons, who were driven to earn their inheritances the old-fashioned way, by committing patricide. Even as late as the mid-18th century, there was a spate of such killings in France.

Clearly aging and what to do about it was a becoming a problem.

Otto Von Bismarck

In 1883, Chancellor Otto Von Bismarck of Germany inadvertently created a solution. Marxists were threatening to take control of Europe. To help his countrymen resist this threat, Bismarck announced that he would pay a pension to any nonworking German over age 65. Bismarck was no dummy. Hardly anyone lived to be 65 at the time, given that penicillin would not be available for another half century. Bismarck not only co-opted the Marxists, he set the arbitrary world standard for the exact year at which old age begins and established the precedent that government should pay people for growing old.

It was the physician William Osler who put forward the ‘scientific’ argument that, when combined with a compelling economic rationale, would eventually make retirement seem to be acceptable. In his 1905 valedictory address at the Johns Hopkins Hospital, Osler said it was a matter of ‘fact’ that the years between 25 and 40 in a worker's career are the ''15 golden years of plenty.'' He called that span ''the anabolic or constructive period.'' Workers between ages 40 and 60 were merely uncreative and therefore tolerable. He hated to say it, because he was getting on, but after age 60 the average worker was in his view ''useless'' and should be put out to pasture.

Retirement came in very handy in the United States, where large numbers of aging factory workers were wandering around the Industrial Revolution, slowing down assembly lines, taking too many personal days and usurping the places of younger, more productive men with families to support. It was one thing when an occasional superannuated farmer leaned on his hoe in an agrarian culture -- a few bales of hay more or less didn't matter. But it was quite another when lots of old people caused great unemployment among younger workers by refusing to retire.

The Great Depression made the situation even worse. Retirement was a necessary adaptation and everybody knew it, but the old guys were not going quietly. The toughest among them refused to quit, even when plant managers turned up the conveyor belts to Chaplinesque speeds.

Francis Townsend (right)

By 1935, it became evident that the only way to get old people to stop working for pay was to pay them enough to stop working. A Californian, Francis Townsend, initiated a popular movement by proposing mandatory retirement at age 60. In exchange, the Government would pay pensions of up to $200 a month, an amount equivalent at the time to a full salary for a middle-income worker. Horrified at the prospect of Townsend's radical generosity, President Franklin D. Roosevelt proposed the Social Security Act of 1935, which made workers pay for their own old-age insurance.

So these ideas about how and when we participate in work have clear historical origins. But are these rationales still valid today, when life expectancy and health care continues to advance and the world has a whole new set of economic and social challenges at both the macro and micro levels?

Should we accept the norms that have become accepted even though they came about more or less by chance and expediency and are founded on pseudoscientific arguments from the 19th and early 20th centuries?

Personally, I am choosing to adjust my life plan to one that isn’t headed towards a shutdown when I reach 65. Assuming my health permits, I intend to work for the whole of my life.

Even if that doesn’t suit the government.



Some parts of this post have been adapted from an original article by Mary-Lou Weisman form the New York Times March 21, 1999:
http://www.nytimes.com/1999/03/21/jobs/the-history-of-retirement-from-early-man-to-aarp.html

Tips for boomers to find ‘flexible’ jobs

By Andrea Coombes

A growing percentage of Americans say their retirement will entail some paid work, either because they’re worried about their lack of savings or because they want to stay active. But that doesn’t mean retirees are yearning for a 50- or 60-hour workweek.

Sixty-nine percent of workers said they plan to work for pay after they retire, according to the 2013 Retirement Confidence Survey by the Employee Benefit Research Institute.

And more workers said they plan to delay retirement: 36% of workers said they’ll wait until they’re 66 or older to retire (fully 26% said they’d wait until age 70 or older), up from 11% who said that in 1991. Read the study here.

Another 7% of workers said they don’t plan to retire at all.

If you’re among those who plan to continue working but you don’t want to keep going full-tilt, what’s the best way to find a good part-time or work-at-home gig?

The good news is that, anecdotally at least, there are employers out there looking to fill part-time jobs with experienced workers, and a number of websites aim to help people like you find those jobs.

And “part time” doesn’t have to mean a job at a fast-food restaurant or in retail.

“Some of the jobs employers are trying to fill are not what anyone would think of as an average telecommuting job,” said Sara Sutton Fell, founder and chief executive of FlexJobs, based in Boulder, Colo.

“These are high-level roles. They are very well suited to an older demographic who values flexibility and has the skills to bring to the table,” she said.

Some of the current openings on her site include “infrastructure management senior analyst,” firewall engineer, human-resources generalist and senior tax associate, Fell said. Some of the companies posting positions to the site include PwC (formerly PricewaterhouseCoopers), ADP and Xerox.

Tips for finding a job

Visit the job sites. You can search for part-time jobs onRetirementJobs.com, RetiredBrains.com, and Indeed.com, among others.

Meanwhile, FlexJobs only posts jobs that are part-time or flexible as well as professional (meaning they have opportunity for growth). The company vets each posting to make sure it’s legitimate (FlexJobs.com charges job seekers from $14.95 a month to $49.95 a year to see the listings).

Drop by. “If it’s an employer you know you want to work for, particularly if it’s a retail-based job, go in, meet with the manager,” said Kerry Hannon, a Washington-based career expert and author of “Great Jobs for Everyone 50+.” “Dress appropriately, drop off your resume and just say you’re available. Nothing beats a face-to-face meeting with somebody.”

Don’t rule out full-time job postings. For the right candidate, employers may consider alternative work arrangements. “Often, job-sharing arrangements and so forth come up,” said Tim Driver, chief executive of RetirementJobs.com and MatureCaregivers.com, in Boston. “It’s always worth exploring listings that are written as full time.”

Tap your network. Ask people you know whether they know of any part-time or telecommuting opportunities at their workplace—and whether they can put in a good word for you, Hannon said. “Employers love to hire people who they know or the people that work for them know,” she said.

Go beyond the big job websites. Interested in a nonprofit job, for example? “The Chronicle of Philanthropy has a great jobs board—that’s a good place to look for any kind of nonprofit job,” Hannon said, adding that “the nonprofits love part-time workers,” in part because those organizations often face budgetary constraints.

Ask your network about job boards, staffing companies and temp agencies that focus on your city or state. For example, a staffing agency called 10 til 2 focuses on part-time jobs in Colorado.

Hannon pointed to Flex Professionals, which lists jobs with flexible schedules in the Washington, D.C., area, and Special Counsel, which looks to place people in the legal profession.

Check with trade groups and your alumni association to see whether they know of or list flexible jobs. Also, college career centers often offer advice on career transitions, Hannon said. “A lot of them have great career coaches on staff who can help you with interviews and resumes.”

Visit universities’ online job boards. “Most of the big universities have job boards that you can check for part-time or full-time work,” Hannon said.

Avoid the scams

It’s no secret that many workers dream of working at home, and the idea is gaining acceptance among some employers, depending on the job type.

Still, “there’s been slower acceptance of that than even part-time work,” said Jill Ater, founder and chief operating officer of 10 til 2, the Denver-based staffing agency.

“Employers still want to see people, but sometimes you can start off in the office and transition once they learn to trust you,” Ater said. Job seekers might ask in the interview whether working at home is an option at some point. “See how the employer feels about it,” she said.

Unfortunately, the work-at-home dream is a target for scammers looking to separate you from your money, often by collecting fees upfront for equipment or information they say is necessary for their work-at-home “opportunity.”

As part of its premium service ($4.95 a month; you can cancel at any time), RetirementJobs.com offers a “Work at Home Guide” that lists organizations it considers legitimate, plus tips to stay safe.

Here are some other ways to steer clear of scams:

• Avoid ads that read like marketing copy. When looking for work, focus on ads that list a job title. “You want it to be a professional job posting and not marketing copy,” Fell said. “If it looks like they’re trying to get anybody to apply, that’s probably not a professional job posting.”

• Be wary of requests for money. Fell said the scam often goes like this: “We’re going to give you your own computer. We’ll mail that to you, but we do need to install some proprietary software on there, so you need to pay $400 for that.”

• Search for the company’s name on Google to make sure the website address given to you is legitimate. Sometimes scammers create fake websites that mimic real sites, to lure you to provide personal information or to send money. “They’ll mimic the names of the CEO, the director of HR, so the website really looks legit,” Fell said. “Unfortunately, they’re really good at it sometimes.”

• Search the company’s name with the word “scam” or “complaint” to see what others are saying.

• Be wary about sending personal information if the email address doesn't include the company name. “Make sure the job ad has the company domain name in it, rather than a general @hotmail or @gmail,” Fell said.

More resources

Here are some additional resources for finding part-time or flexible jobs:

Common Good Careers recruits for the nonprofit sector. Read more: Boomers: Get job recruiters on your side.

Idealist and Bridgespan also list jobs at nonprofit organizations.

Check out AARP’s page on working after retirement.

Encore.org offers a guide to finding work after 50.

Read more: Taxes, Social Security and your part-time job.

Andrea Coombes is a personal-finance writer and editor in San Francisco. She's on Twitter @andreacoombes.

This post originally appeared here:

http://www.marketwatch.com/story/tips-for-boomers-to-find-flexible-jobs-2013-08-29

In Hard Economy for All Ages, Older Isn’t Better ... It’s Brutal

 

By CATHERINE RAMPELL

Young graduates are in debt, out of work and on their parents’ couches. People in their 30s and 40s can’t afford to buy homes or have children. Retirees are earning near-zero interest on their savings.

In the current listless economy, every generation has a claim to having been most injured. But the Labor Department’s latest jobs snapshot and other recent data reports present a strong case for crowning baby boomers as the greatest victims of the recession and its grim aftermath.

These Americans in their 50s and early 60s - those near retirement age who do not yet have access to Medicare and Social Security - have lost the most earnings power of any age group, with their household incomes 10 percent below what they made when the recovery began three years ago, according to Sentier Research, a data analysis company.

Their retirement savings and home values fell sharply at the worst possible time: just before they needed to cash out. They are supporting both aged parents and unemployed young-adult children, earning them the inauspicious nickname “Generation Squeeze.”

New research suggests that they may die sooner, because their health, income security and mental well-being were battered by recession at a crucial time in their lives. A recent study by economists at Wellesley College found that people who lost their jobs in the few years before becoming eligible for Social Security lost up to three years from their life expectancy, largely because they no longer had access to affordable health care.

“If I break my wrist, I lose my house,” said Susan Zimmerman, 62, a freelance writer in Cleveland, of the distress that a medical emergency would wreak upon her finances and her quality of life. None of the three part-time jobs she has cobbled together pay benefits, and she says she is counting the days until she becomes eligible for Medicare.

In the meantime, Ms. Zimmerman has fashioned her own regimen of home remedies - including eating blue cheese instead of taking penicillin and consuming plenty of orange juice, red wine, coffee and whatever else the latest longevity studies recommend - to maintain her health, which she must do if she wants to continue paying the bills.

“I will probably be working until I’m 100,” she said.

As common as that sentiment is, the job market has been especially unkind to older workers.

Unemployment rates for Americans nearing retirement are far lower than those for young people, who are recently out of school, with fewer skills and a shorter work history. But once out of a job, older workers have a much harder time finding another one. Over the last year, the average duration of unemployment for older people was 53 weeks, compared with 19 weeks for teenagers, according to the Labor Department’s jobs report released on Friday.

The lengthy process is partly because older workers are more likely to have been laid off from industries that are downsizing, like manufacturing. Compared with the rest of the population, older people are also more likely to own their own homes and be less mobile than renters, who can move to new job markets.

Older workers are more likely to have a disability of some sort, perhaps limiting the range of jobs that offer realistic choices. They may also be less inclined, at least initially, to take jobs that pay far less than their old positions. 

Displaced boomers also believe they are victims of age discrimination, because employers can easily find a young, energetic worker who will accept lower pay and who can potentially stick around for decades rather than a few years.

“When you’re older, they just see gray hair and they write you off,” said Arynita Armstrong, 60, of Willis, Tex. She has been looking for work for five years since losing her job at a mortgage company. “They’re afraid to hire you, because they think you’re a health risk. You know, you might make their premiums go up. They think it’ll cost more money to invest in training you than it’s worth it because you might retire in five years.

“Not that they say any of this to your face,” she added.

When older workers do find re-employment, the compensation is usually not up to the level of their previous jobs, according to data from the Heldrich Center for Workforce Development at Rutgers University.

In a survey by the center of older workers who were laid off during the recession, just one in six had found another job, and half of that group had accepted pay cuts. Fourteen percent of the re-employed said the pay in their new job was less than half what they earned in their previous job.

“I just say to myself: ‘Why me? What have I done to deserve this?’ ” said John Agati, 56, of Norwalk, Conn., whose last full-time job, as a merchandise buyer and product developer, ended four years ago when his employer went out of business.

That position paid $90,000, and his résumé lists stints at companies like American Express, Disney and USA Networks. Since being laid off, though, he has worked a series of part-time, low-wage, temporary positions, including selling shoes at Lord & Taylor and making sales calls for a limo company.

The last few years have taken a toll not only on his family’s finances, but also on his feelings of self-worth.

“You just get sad,” Mr. Agati said. “I see people getting up in the morning, going out to their careers and going home. I just wish I was doing that. Some people don’t like their jobs, or they have problems with their jobs, but at least they’re working. I just wish I was in their shoes.”

He said he cannot afford to go back to school, as many younger people without jobs have done. Even if he could afford it, economists say it is unclear whether older workers like him benefit much from more education.

“It just doesn’t make sense to offer retraining for people 55 and older,” said Daniel Hamermesh, an economics professor at the University of Texas in Austin. “Discrimination by age, long-term unemployment, the fact that they’re now at the end of the hiring queue, the lack of time horizon just does not make it sensible to invest in them.”

Many displaced older workers are taking this message to heart and leaving the labor force entirely.

The share of older people applying for Social Security early spiked during the recession as people sought whatever income they could find. The penalty they will pay is permanent, as retirees who take benefits at age 62 — as Ms. Zimmerman did, to help make her mortgage payments — will receive as much as 30 percent less in each month’s check for the rest of their lives than they would if they had waited until full retirement age (66 for those born after 1942). 

Those not yet eligible for Social Security are increasingly applying for another, comparable kind of income support that often goes to people who expect never to work again: disability benefits. More than one in eight people in their late 50s is now on some form of federal disability insurance program, according to Mark Duggan, chairman of the department of business economics and public policy at the University of Pennsylvania’s Wharton School.

The very oldest Americans, of course, were battered by some of the same ill winds that tormented those now nearing retirement, but at least the most senior were cushioned by a more readily available social safety net. More important, in a statistical twist, they may have actually benefited from the financial crisis in the most fundamental way: prolonged lives.

Death rates for people over 65 have historically fallen during recessions, according to a November 2011 study by economists at the University of California, Davis. Why? The researchers argue that weak job markets push more workers into accepting relatively undesirable work at nursing homes, leading to better care for residents.

http://www.nytimes.com/2013/02/03/business/americans-closest-to-retirement-were-hardest-hit-by-recession.html?pagewanted=all&_r=0

Survey: Many Older Workers Not Planning On Retiring Soon, If At All

NEW YORK (CBSNewYork)

A new survey released on Tuesday indicated that many people approaching retirement age have no intention of stopping working.

Forget the rocking chair or a fishing pole – a CareerBuilder survey said 60 percent of people over 60 plan to retire and then look for a new job. Seventy-five percent plan to delay retirement from their current job.

Many people in the West Village said they never plan to retire, 1010 WINS’ Holli Haerr reported.

“I would never retire because I love what I do, and because I have fun, and I never know if I’m working or playing,” said Nathan, an actor who also works at a travel company.

Nathan is 62, takes the jobs he wants and enjoys it.

“I believe, and always have believed, in doing what makes you feel good; what you feel good about doing,” he said. “Actually, I just booked an episode of ‘Blue Bloods,’ so I’m just coming from that audition today.”

How long does Nathan plan to keep working? “Until there’s no breath in my body,” he said.

Al Kuan has two jobs, and he has no plans to give either up. He has no plans to retire “ever, ever,” he told Haerr. Kuan runs his old tour company called Do It Like a New Yorker. He also walks dogs.

“I love it. It gets me outside. It gets me talking to people on the street,” he said.

Kuan said he thinks retirement is hazardous to people’s health.

“I’m never going to retire,” he said. “I think when somebody retires, it’s time to die.”

The CareerBuilder survey included more than 680 workers age 60 or older. One in 10 respondents said they do not expect ever to retire, while 27 percent expected to retire in one or two years.

“We’re seeing more than three quarters of mature workers putting off retirement, largely due to financial concerns, but also as a personal decision made by people who enjoy their work,” Brent Rasmussen, President of CareerBuilder North America, said in a news release.

 “The majority of workers who have talked with their bosses about staying on past retirement found their companies to be open to retaining them. If you’re approaching retirement age but hope to continue working, an open line of communication is very important.”

http://newyork.cbslocal.com/2013/02/27/survey-many-older-workers-not-planning-on-retiring-soon-if-at-all/

Financial Planning for Newly-Single Boomers

by Casey Dowd

This scenario is very familiar to boomers: a couple, married 30-plus years, with three great kids, maybe some grandkids, living in a beautiful home and nearing retirement call it quits and head to divorce court.

Baby boomers turned empty-nesters are increasingly filing for divorce as they find themselves no longer happy with the partner they have spent so many years with.

New research by sociologists Susan Brown and I-Fen Lin of Bowling Green State University find the divorce rate among people 50 and over continues to increase.  For new baby-boomer empty nesters, the divorce rate has doubled over the past two decades with 1 in 4 now getting divorced.

Getting divorced later in life can impact boomers’ financial situations in a very complex manner especially when it comes to dividing retirement accounts.

According to Howard Hook, a certified financial planner with EKS Associates in Princeton, N.J., when it comes to aging and finances, the cards are often stacked against singles -especially newly-solitaire boomers. 

 

Hook offered the following advice to suddenly-single boomers on how they can best protect their assets and navigate their finances when in or approaching retirement:

Boomer: What disadvantages would suddenly-single baby boomers encounter in terms of taxes and deductions? 

Hook: Suddenly-single baby boomer will be paying a higher percentage of tax on their income compared to married boomers.

Here’s an example:

Two households both earning $150,000. Household A consists of a single baby boomer and Household B consists of married baby boomers. Household A will pay 19% more federal income tax than Household B.  

The tax code is written such that more of the taxable income for a household consisting of married taxpayer’s is taxed at lower rates than the taxable income in a single household’s taxable income. 

Another disadvantage for singles is the potential loss of certain tax deductions that may have been taken while married. For example, someone who received the primary residence as part of a divorce settlement would continue to take a deduction for property taxes while the person not receiving the home as part of the settlement would not be able to take the deduction unless they bought another home. 

Boomer: What retirement strategies do newly-divorced boomers not have that are available to married people? 

Hook: The ability to stretch pension benefits over more than one life span. 

Companies that offer a pension plan for their employees many times do not allow an un-married person the option of paying the pension over “joint lives”, an option available to a married employee with their spouse. This can be harmful for a recently-divorced person who may be financially supporting a sibling or an older parent who wants reassurance the relative will be taken care of if they pass away.

Singles also lose the ability to maximize the amount of money saved in a qualified retirement account such as a 401(k) or 403(b).The maximum contribution for someone over age 50 to a 401(k) plan is $23,000 (in 2013). A married couple where both spouses are eligible for a 401(k)plan can contribute twice the amount or $46,000 in total.   

Boomer: Why do you find that newly single boomers are largely ignored by financial professionals and how can they get the financial assistance they need? 

Hook: There is a misconception that certain planning strategies do not apply to single people.

For example, one of the reasons for someone to buy life insurance is to provide for a surviving spouse’s needs. There may be an assumption that without a spouse, the single boomer may not need life insurance. This may have been true many years ago, but today, many people find themselves caring for older family members or domestic partners that would need the life insurance. 

One of the most common estate planning strategies to reduce estate taxes is for spouses to create trusts for each other’s benefits in order to maximize the amount of assets that can pass to their beneficiaries free of Federal and / or state estate tax. For a boomer with no spouse, there may be a presumption that there is no need for this trust. However, there are other, non-tax reasons to create trusts (creditor protection, control of timing of distribution of assets after death are two), that make the inclusion of a trust for a single person as important as for a married person.

Boomer: What happens with joint credit cards and installment loans, how can single boomers best deal with these financial burdens? 

Hook: Much depends on the divorce agreement as to who is responsible to pay these debts. Proper planning before the divorce is finalized is crucial to dealing effectively with these issues. 

If the single boomer is saddled with paying debt, care should be taken as to how to pay off the debt. If current income is not sufficient to do so, then the assets received in the divorce become important. Non-liquid assets (such as a home) or retirement assets are not particularly good assets to use to pay off debt. Paying off debt by refinancing a home may make sense, but may not be possible depending upon the ability to qualify for a mortgage. Taking distributions from retirement assets is tax inefficient as taxes need to be paid on those distributions, causing more money to come out of the account to pay the tax than needs to be taken to pay down the debt.

If assuming debt is part of the agreement, then a portion of the assets received in the divorce should be liquid assets not located in retirement accounts.    

Boomer: What should suddenly-single boomers take into financial consideration before selling the home they have jointly owned for 20-plus years?

Hook: When selling a home, boomers need to take into consideration the costs of a new home and the taxes that will be incurred upon selling the existing home.

Someone who has not purchased (or rented) a home for more than 20 years  may not realize the increased costs associated with the initial purchase of a new home (closing costs, repairs and maintenance) as well as the ongoing costs of a new home (property taxes, utilities, etc.)

Income taxes on the sale of the home are also important and tricky. The tax code allows the first $500,000 of gain on the sale of a home considered to have been the primary residence of a married couple in two of the previous five years. This exclusion is only $250,000 for a single taxpayer. Therefore, if the boomer who is about to become single intends to sell the home, it may make sense to do so in a tax year that they can still file as married with their spouse. If this is the case, the single boomer receives the proceeds from the sale. The amount of the exclusion is dependent upon the marital status of the single boomer at the end of the tax year in which the home is sold and not the marital status at the date of sale. Therefore, it may be necessary to delay the final divorce agreement until after Dec. 31 of the year of sale to take advantage of the $500,000 exclusion.

Read more: http://www.foxbusiness.com/personal-finance/2013/02/14/financial-planning-for-newly-single-boomers/#ixzz2L4M5eWDR

Over-50s too optimistic on savings

Nov 30th 2012

The over-50s are "sleepwalking" towards their retirement by underestimating how long they will live and being overly optimistic about how well off they will be, research by pensions experts has warned.

A report by the Institute for Fiscal Studies said savers with a defined contribution pension typically appear to be "somewhat optimistic", and some would have to grow their pension pot by almost 80% to meet their retirement expectations.

The research, backed by the National Association of Pension Funds (NAPF), found that one in four people aged 50 to 64 would need to save more than £60,000 before they retire to achieve the income they expect, and almost two thirds (59%) had never considered how many years of retirement they might need to finance.

Meanwhile, a third (32%) of private pension holders aged 52 to 64 could not even give a rough estimate of what their pension income in retirement might be.

The report said that women aged in their 50s are underestimating their life expectancy by around four years on average compared with national projections, by putting it at around 84 rather than 88. The study of older people in England also found that men tend to think they will live to be around 83, whereas according to national forecasts they are likely to live to be 85.

Joanne Segars, chief executive of the NAPF, said: "The average saver with a defined contribution pension is being over-optimistic. They need to see their pension pot grow by almost 80% to meet their expectations. That is a huge ask if they are only a few years away from their retirement party."

She added: "Fortunately, people are going to live longer than they think, but they are not planning for it, so they might find their savings and pension do not stretch far enough.

"Millions of people are within a decade of their state pension but have still not thought about how long their retirement might last. It's worrying that so many over-50s are sleepwalking into their old age and are expecting to be better off than they will be."

The NAPF emphasised the importance of shopping around to buy an annuity, which sets the size of someone's pension income for life. The research found that, in recent years, only 28% of people bought an annuity from a provider other than the firm they hold their pension with.

A landmark Government scheme which will eventually see up to 10 million people automatically placed in workplace pensions was launched last month, starting with larger companies.

© 2012 Press Association

http://money-news.money.aol.co.uk/article/2012/11/30/over_50s_too_optimistic_on_savings

Coming age of austerity

By Pat Buchanan

 November 6, 2012
 

“Are the good times really over for good?” asked Merle Haggard in his 1982 lament.

The good times weren’t over. In fact, they were coming back, with the Reagan recovery, the renewal of the American spirit and the end of a Cold War that had consumed so much of our lives.

No matter the winner of the presidential race, it is hard to be sanguine about the future. Demographic and economic realities do not permit it.

Consider: Between 1946 and 1964, 79 million babies were born — the largest, best-educated and most successful generation in our history.

The problem: Assume that 75 million of these 79 million boomers survive to age 66. This means that from this year through 2030, an average of nearly 4 million boomers will be retiring every year. This translates into some 11,000 boomers becoming eligible for Medicare and Social Security every single day for the next 18 years.

Add in immigrants and the fact that baby boomers live longer than the Greatest Generation or Silent Generation seniors, and you have an immense and unavoidable increase coming in expenditures for our largest entitlement programs.

Benefits will have to be curbed or cut and payroll taxes will have to rise to make good on our promises to seniors.

As for the rest of our federal budget of nearly $4 trillion, we have run four consecutive deficits of over $1 trillion. To bring that budget to balance, freezes would have to be imposed and cuts made in spending for defense and other social programs.

Europe has arrived at where we are headed. In the south of the old continent - Spain, Italy and Greece — the new austerity has begun to imperil the social order. In the north, the disposition to be taxed to pay for other nations’ social safety nets is disappearing.

With government in the U.S. at all levels consuming 40 percent of gross domestic product, and taxes 30 percent, taxes will have to rise and government spending be controlled or cut. The alternative is to destroy the debt by depreciating the dollars in which it is denominated — i.e., by Fed-induced inflation. But you can rob your creditors only once. After that, they never trust you again.

There is another social development rarely discussed. Workers who are replacing retiring baby boomers in the labor force are increasingly minorities. Blacks and Hispanics account now for 30 percent of the population — and rising rapidly.

Yet these two minorities have high school dropout rates of up to 50 percent in many cities, and many who do graduate have math, reading and science scores at seventh-, eighth- and ninth-grade levels.

Can their contributions to an advanced economy be as great as were those of baby boomers of the '60s and '70s, whose SAT scores were among the highest we ever recorded?

Moreover, while boomers were almost all born into families where mother and father were married and living together, Hispanics have a 53 percent illegitimacy rate, blacks a 73 percent rate. Among the white poor and working class, the illegitimacy rate is now 40 percent.

And between the illegitimacy rate and the drug-use rate, dropout rate, crime rate and incarceration rate, the correlation is absolute.

Some of us are accused of always “crying wolf.” But it is worth noting that one day the wolf came.

Pat Buchanan is the author of “Suicide of a Superpower: Will America Survive to 2025?”

Read more: http://triblive.com/home/2905605-74/rate-boomers-percent-social-coming-million-age-austerity-baby-buchanan#ixzz2Birpc5Lh