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Are You Ready to Retire?

Are You Ready to Retire?

If you read all the surveys and studies, the answer to the question are you ready to retire is a very loud no!

The recently released Northwestern Mutual Longevity & Preparedness study reveals that Americans appear to be startlingly unprepared financially to live into their 70s, 80s and 90s. Of those surveyed, only 56% said they feel financially prepared to live to 75, 46% said they feel financially prepared to live to 85, and just 36% said they feel prepared to live to 95.

The findings were even worse for women, who on average live five years longer than men. Men, regardless of age, are significantly more likely than women to feel financially prepared to live to age 75 (65% vs. 48%), to 85 (55% vs. 37%), and when it comes to living to 95, (43% vs. 30%). The differences between men and women was also highlighted in a new survey from ING Direct and DailyWorth.com. Nearly eight in 10 women say they lack financial savvy (or they are still learning) about retirement planning. Nearly 30 percent have no idea what their main source of retirement income will be, 40 percent don’t even know what kind of retirement lifestyle they want.

All this begs the question, how do you know you’re ready to retire? There are some tell-tell signs that you’re just about good to go.

There’s a plan in place

You have a formal investment plan and have been actively saving to be ready for retirement. You have enough saved to cover the estimated lifestyle and health care expenses you know you will need in retirement. But you’ve gone the extra step by saving enough to give yourself a cushion for the unexpected.

Social Security can wait

In fact, your savings are such that you will be able to delay taxes. Minimum withdrawals from most retirement accounts don’t become required until age 70 ½. “If you can defer taxes for an extra decade, you can take advantage of more time to compound, tax deferred,” says Grant Cardone, author of If You’re Not First You’re Last. Social Security eligibility starts at 62, but your checks are reduced by 25-35 percent if you sign up at that age. For each year you delay signing up for Social Security between ages 62-70, your benefit will increase by 7 to 8 percent, says Cardone.

The math adds up

You have met with a financial professional to put together a retirement income plan that will allow you to convert your retirement savings into a steady stream of income. This is an important step, says Delia deLisser, director of women’s programs at ING U.S. Many people often need help figuring out how to translate their retirement savings into use for every day spending. Knowing how to safely tap, and when is critical.

You know where you’ll live

The mystery is over. You know where you want to live in retirement. You have determined if you will stay put, or that you will stay in the same town but buy something smaller, or move to another city where expenses are less. You have a good sense that your retirement dollars will lost longer where you’ve chosen to live.

Mindset moved to retirement

Psychologically, you are already gone. You don’t see how you will miss work. You aren’t wondering how you will spend your days. “Just as it’s important to have a financial plan in place for retirement, it is equally important to have a life plan in place for retirement,” says deLisser. Many people have been so busy juggling family, work and other obligations for years, they have no clue about what they would do with free time. That’s not your issue. In fact, you are already planning which classes you would like to take, what organizations you would like to volunteer for, where you like to travel and more.

What’s up do?

You won’t be afraid to ask that question. You are well aware that health care costs can be retirement killers. Recent health care cost estimates calculated by Fidelity Investments are that a 65 year-old couple retiring this year will need $240,000 for medical expenses throughout retirement, which is a 4 percent increase from last year’s $230,000 estimate. You’re not overly concerned because you have access to good health insurance, whether through Medicare or private insurance. While in life there are no guarantees of good health, you are doing your part. You watch what you eat and drink, exercise, get proper rest and keep your stress to a minimum.

Empty nest

Another plus, says Jennifer FitzPatrick, author of Your 24/7 Older Parent, is if you are without financially dependent children, grandchildren or parents. Without those financial obligations, you’ll have less pressure on your no-paycheck lifestyle because it can be tough to say no to family when they are in need.

If all this doesn’t match where you are, then no, it’s not quite your time.

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Paoli2   |     |   Comment #1
Sheryl:  That is a good article but article like that don't sit right with me.  They make it sound like "we" have a choice about when we will retire.  Why don't they tell people the truth about how companies force "early retirement" on good employees just so they won't have to pay them full retirement benefits.  My DP was forced out at the early ge of 57 years old with a group of others in the same age group.  They had NO choice in the matter.  He was able to get sporatic partime work for a while but then nothing.  I had to go back to work and only could get partime work due to my age.  No matter how one follows all the rules and tries to prepare for those "golden" years, you can't be sure you will ever see them.  Being "frugal" is our middle name.  We lost our paid up home due to a hurricane and the flood insurance we paid for over 30 years found a way to get out of paying us for damage.  We now at our age are living in a small apartment in another state paying rent all over again and trying to help a DD who has a chronic illness and needs our help.  This is the reality of "our" golden years.

The books and articles make it sound so easy as long as we follow the necessary steps.  WE fell off the steps not by our own doing.  Thanks for the article any way.  Many others will be able to work until in their 60's and get their pensions.  Best of luck to those who can!
outtempster   |     |   Comment #2
Agree with Paoli2. Here in Silicon Valley, CA, for technical people, you should start worrying about that when you hit 48, especially for women. Even though I have a long time to hit that, I do have co-workers that are late 40s and in 50s. There are different ways for companies to let go employees, early retirement, re-deployment, voluntary seperation, re-structuring, lay-off (people in 50s have a bigger chance of get that). If you are in late 50s, after being let go of any of above reason, it's very hard to find a full time job. For most of the people in high tech, I do not think you will have the luxuary to work until 62 or longer. As a matter of fact, some of my friends who hit 40 started to think what they can do if they can't work in high tech any more, what skills they have to pick up a 2nd career. Those are the people who worry about retirement and prepare for it, and I think they will have a better chance compare to people who thinks they can work as long as they want to.
pearlbrown   |     |   Comment #3
I agree with both posters above.  It happens everywhere.  The large company where my late husband worked here in D/FW summoned the over-50's senior project managers in the IT department to a meeting and let them know their services were no longer needed as they were being RIF'd (reduction in force).  The HR manager refused to answer questions and took exactly 2 minutes to dismiss a combined total of about 200 years of solid industry experience from the company.  Had he not passed away nine months before, my husband would have been part of that reduction too.  The people who were RIF'ed eventually found other positions but many had to relocate in order to do so and were lucky to find another job.  
Inforay   |     |   Comment #4
I agree with the previous two comments.  It is unrealistic to expect that your employer will want to keep you on after you reach your mid-fifties.  Many employers are finding ways to force older employees out so they can hire younger ones at much less pay and don't have to pay full retirement benefits.  This is becoming commonplace even in the public sector where generally there was greater job security.  So all these articles which say that the "new retirement age" is 67 years do not take real world factors into account.  They are also based upon the supposition that your health and level of energy will continue to be the same as it was in your younger days.  That is true only for the lucky ones.
bancxman   |     |   Comment #5
Information technology is an increasingly precarious occupation these days. It's the default occupation of choice for a lot of workers because there are still jobs to be had there. The downside is that employers have been increasingly contracting out their IT services to contractors who love to exploit younger and immigrant workers. This results in older more costly workers being laid off. In other words, there isn't a lot of loyalty in business anymore. In my experience, the best way to position yourself for retirement is still to get a government job. That's because you're less likely to be RIFed  and more likely to receive a fixed pension. You will also likely receive health insurance benefits that will carry over into retirement. While congressional Republicans are currently attacking benefits for federal workers, taxpayers are still demanding a lot of services from all levels of government. That translates into long term employment which is the key to funding a successful retirement.
Shorebreak   |     |   Comment #6
"Retirement" is becoming a word with differing meanings for many people these days. There is forced retirement, then there is voluntary retirement. Two different situations, in most cases. It's certainly getting getting rough out there. I'm retired, drawing Social Security and a military pension. Both together just cover my expenses living debt-free in a small city in Texas. So much for retiring and living the life of Riley on the California coast where home used to be. My interest on certificates of deposit used to cover my travel expenses but Ben Bernanke has virtually put a halt to that enjoyment. Oh well, I'll just walk around the neighborhood again.
pearlbrown   |     |   Comment #7
Inforay, your comment describes perfectly what drove my husband's company's actions.  The wholesale substitution of experienced professionals with college hires was their way of increasing their profits by avoiding full retirement benefits.   The company was very committed to college hiring and about six months before the RIF significantly increased the number of fresh graduates they brought in.  They RIF'd the senior talent and "battlefield-promoted" junior people, who weren't ready for the responsibility, to project managers, optimistic that conferring the title automatically gave them the knowledge and experience (I used to call it the "magic wand" theory) needed to do the job.  Their cavalier treatment of their most experienced professionals ended up costing them untold millions in lost revenue due to project overruns, significant and repeated delays in product rollouts (which put them behind the competition in a fast-moving industry), embarrassingly bad software releases, and lots of unfavorable publicity.   

IT has been under siege in many companies in many ways from outsourcing to RIFing highly seasoned professionals and it's not likely to change soon.  A government position, as bancxman suggests may certainly offer some security and a pension, but even that can be uncertain. 
pearlbrown   |     |   Comment #8
Shorebreak, I also live the life of Riley (if you define Riley as Reduced Income, Lowerered Expectations Yearly) in a small town in Texas and while it may not be the life I planned, I'm grateful for the life I have.  Thank goodness for a loving family, great friends, great neighbors, and good inexpensive entertainment!  Let's hope prosperity. better times and higher interest rates return soon for all of us. 
Shorebreak   |     |   Comment #9
Re: pearlbrown - #8, Saturday, May 12, 2012 - 5:50 PM

I like your "Riley" definition. Certainly small town, or city, Texas is not what I had in mind for retirement but thanks to kind neighbors, excellent medical facilities and a low cost of living, retirement is not too bad here considering current circumstances.
iconoclast   |     |   Comment #10
I feel for the people who are badly treated by employers; in a way, there's a parallel with how savers are treated by the government (i.e., Bernanke's Fed).  Here are the lessons I've learned in my life:

(1)  The system the U.S. has, crony capitalism, is a cruel one.  No one really cares about you, no employer, and no government.  The reality, then,  is every one is on his own.  (Every other system also suffers from the same faults, or alternatively, from a different group of faults, as bad as ours, or in most cases, even worse.)  We all need to teach our children these cold, hard facts of economic life, so they are better prepared to deal with whatever life may throw at them.

(2)  Given (1) above, you have to learn to provide for yourself, using whatever means you have (marketable skills, capital, networks of friends and/or business contacts, etc.).  You must never expect anything from anyone, and assume you are vulnerable to layoff, downsizing, etc.,  at any time and without any warning.  I myself lost my job and career at 35, but had always saved money and was able to learn to make a living by investing the capital I had saved.

(3)  Because no employer will show you any loyalty, you needn't show them any, either.  Your services should be for sale to anyone who will pay you what you are willing to work for.  Again, look out for yourself, always.  If you can do better elsewhere, go there, without hesitation and without remorse.  If you can change jobs or careers to better yourself, be open to that as well.  If another country offers you a better way of life, you might consider "reinvesting" your life energy there as well.  Since "our" government doesn't care about "us" either, it must follow that we don't owe it anything as well.  Once again, everyone is on his own.

(4)  Just as you can't count on any employer, so, too, you can't count on any occupation as furnishing a reliable stream of income into the indefinite future.  The wisest person is one who does what (s)/he reasonably can to have a backup skill set in place if market conditions should cause the primary one to become unreliable.  Ask yourself, every day, what will I do if I lose my job TODAY?  What am I doing TODAY to prepare for this unpleasant possibility?

(5)  Save money, as much as you reasonably can, to guard against setbacks and to eventually furnish the means to provide an income without having to work.  However much you earn, you must spend less than that, so you can save the difference.  Learn to invest and to evaluate risk properly, so you will make bets (all investments, even CD's, are bets of various kinds)  with your capital that are prudent, and that constitute an appropriate risk/reward choice.  Study differernt historically successful methods of investing, and settle on one that fits you temperamentally.  Learn to avod brokers, minimize trading expenses, costs, fees, and taxes.  Always diversify, because, just as in working life, you can never really count on anything.  The most important single thing about investing is, any money put in any single investment, could, in a worst case scenario, be lost.  If you properly diversify, you will never be irrecoverably impacted by any one thing that goes wrong.

(4)  The people on this forum who are relying exclusively on CD's are probably making a serious mistake, as they are putting all their eggs in one investment basket, i.e., they're failing to diversify.  They will ALWAYS be at the mercy of government bureaucrats and politicians like Bernanke, who think nothing of sacrificing them at the alter of their views of what is "necessary."  In short, your financial well-being is in their hands.   If you choose to do that, never forget the risk you are taking.  When times like the present come along, don't cry about the low interest rates.  Instead, do something else with your money, or better yet, do something else with your money BEFORE times like this come along.

Best of luck to everyone out there who's suffering at the hands of either an employer or Mr. Bernanke.
pearlbrown   |     |   Comment #11
This Reuters aricle confirms many of the points made by those who have posted comments: