Thursday, July 15, 2010

Retirement...it actually may be possible

Many of us (especially those of us SixtyandSingle) are living in fear that we will never be able to retire because we think we've either failed to save enough to stop working or that our savings investments have not performed the way we expected over the past 10 years of dismal market returns.

Fear is the enemy of peace of mine. The sad truth is that the majority of us have never calculated how much money we'll need to retire. You may be surprised at what you find out. That's right, we baby boomers have no idea what it will take to stop working or at least cut back on work as we move into our 60s.
According to a report from Jean Chatzky writing in this month's issue of More magazine, less than half of us have ever tried to figure out a retirement budget.
Doing so is Step No. 1 in planning for the future. Budgeting is a two-part process: Figure out your current household budget then do a comparable retirement budget. Hey, plenty of people have learned how to live well on a small amount of retirement income. Surf the Internet and you'll find lots of ideas for cutting costs including finding a roommate to share housing expenses.
Budget planning for retirement is important especially for women because on average, women live longer than men and may have saved less for retirement.
There are a number of helpful online sources for budgeting, many offering free worksheets. Among them are http://www.nfcc.org/ supported by the National Foundation of Credit Counseling. Also try Getrichslowly.org, a Portland-based online money management blog or betterbudgeting.com and 360financialliteracy.org, sponsored by the CPAs of the world.
Get that budget outline
Once you have a rough budget in hand, Step No. 2 means looking at income streams in retirement. The first place to go to get a handle on income is the Social Security Admininstration. Make a visit in person or go online to determine what your monthly benefit will be from this federal benefit program. There are many variables depending on how long you worked, how much you earned, whether you are married, widowed or divorced and your age. If you choose to retire earlier than your full retirement age, say 66, Social Security will provide less benefit per month.
Managing the transitionThere are ways to manage this complex transition, say the experts. Alan Gustman and Thomas Steinmeier, economics researchers at Dartmouth College and Texas Tech University, report that for a "substantial minority" of Americans retirement is not a simple transition from working full-time to not working at all.
There are options:
- Reduce your work hours at your current employer, earn less money, but have more free time.
- Take another part-time job doing something you really enjoy, but for less money. That way you can ease into full retirement in a few years and delay tapping your nest egg.
- Become self-employed. I know women who have started photography businesses, who are providing Web-based consulting services, who work for nonprofit social service agencies or just work in a retail store part-time. All of these options allow you to step away from that "big job."
Moving to Step No. 3
Figure out the cost of your health insurance if you give up coverage as a benefit of your big job before age 65 when Medicare kicks in. There are insurance brokers who can help you with this. It may not be as expensive as you think. Once you reach 65, you've got Medicare coverage plus the cost of supplemental insurance coverage. Check with your current health care provider to find out what might work best.
There are plenty of women I know who have done the budgeting, cut their living expenses, tapped into Social Security benefits and working part-time. THEY ARE HAPPY!!!
According to Chatzky, the stock market downturn is likely NOT going to stop you from retiring. It's more about fear of the unknown. So take the time to find out what you need to know. Even if you decide that retirement is not for you any time soon, figuring out a retirement budget and determining retirement income will give you peace of mind. Then you can work toward eliminating debt, saving more and generally feeling good about the future. Bottom line:  Retirement is possible.
RESOURCES:
For Budgeting:

nfcc.org for a worksheet.
betterbudgeting.com for a worksheet.
360financialliteracy.org
getrichslowly.org
For Retirement Planning:
choosetosave.org
T.Rowe Price
CNN Money
Motley Fool

Now lets get going!
PS. I'm off on a motorcycle loop to Banff, Canada. Won't be back for a week.  - Julia

1 comment:

  1. GREAT POST! One of the best books on living within ones means is Your Money or Your Life by the late Joe Dominguez and Vicki Robin. It's a life-changing philosophy. More info is available at http://yourmoneyoryourlife.info/

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