Sunday, October 28, 2012

60 & Single Five Years On: Living in retirement

My 65th year has just ended. It’s been five years since I abruptly became 60 and single and began writing about women, money, investing and retirement planning (as well as all the additional challenges women face after age 60) at this blog www.sixtyandsingle.com.
My plan is to post a three-part update on how things have gone financially, emotionally and physically in the past five years. Believe me, there's a lot to write about.
But don’t worry. These posts are meant to inform and inspire those who may just be starting a journey of singlehood after 60. Yes...plenty of change, but wow what a ride!
I began looking into the financial challenges women face after age 60 when I faced those challenges myself. Instead of drifting into old age with my long-time husband, I went through a wrenching divorce when he left to be with another younger woman whom he had met a work. Some men do that.
Baby boomers in general (men and women) are divorcing at twice the rate of the rest of the population. I had no idea.
Angry, hurt and caught by surprise, I began working hard on my new reality -- financially and emotionally. It turns out, like many women I’d really not thought much about retirement.
Retirement was out there in the future somewhere.  Oh, we’d talked about it. We both were saving in our 401(k) programs. We bought vacation property together, traveled, built a new house and had additional savings. I was confident of the future.
As I began embracing my new single life, I learned that because women live longer but earn less money and save less money, they face unique and difficult challenges in their later years. According to the U.S. Census Bureau, nearly half of all American women 65 and older are single and on their own either from divorce or widowhood. The poverty rate among older single women is twice the average rate of those who are married.
So there I was reporting, writing and thinking about women and retirement, and ultimately hosting several workshops to share what I was learning with other women.
A five-year review
What’s happened to me financially in the past five years? A lot… most of it good.
At 63 and one-half, I left my full-time job with benefits and matching 401(k) money as the business news editor of my hometown newspaper. After 26 years in the job, it was time. I was excited about new opportunities to work as a freelance journalist and travel more with Ken, my new boyfriend.
At 64, I began taking Social Security benefits to supplement my part-time work. That was two years before my full retirement age at 66 when I would have received several hundred dollars a month more. Here’s where I made my No. 1 assumption that hasn’t worked out. I assumed that when my mother died I would pay back the benefits I’d received from Social Security, then sign up again at a higher benefits payout rate.
First, my mother hasn’t died. She’s 97 and ticking along just fine in her assisted living home, thank you very much. Secondly, in 2010 the Social Security Administration changed the rules…no more pay backs. So I’m stuck with the lower monthly benefit forever. Never mind.
Meanwhile I merged an Individual Retirement Account and my work-related 401(k) into a single self-directed IRA at Fidelity Investments. So far, so good on that one.
Before making the conversion, I read Peter Lynch’s “
One Up on Wall Street,” and Burton Malkiel’s “A Random Walk Down Wall Street.” My working premise was and still is that I can manage my money as well as a professional broker and do it at much less cost. And, if the S&P 500 Index of the 500 largest companies in the U.S. continues to perform as they have for the past 100 years, I should earn an acceptable return on my retirement nest egg.
I’m proud to say that I’ve earned 11 percent a year over the past two years on my investments, which include Fidelity’s Spartan S&P Index stock fund as well as a variety of higher-paying dividend stocks, a couple of other stock funds and a bit of money in Fidelity’s total bond fund.
My performance with this money would have been better if I’d sold more of the losers sooner. That's something women are less able to do than men (by the way).  For an overview of retirement planning, click here to visit the U.S. Department of Labor Web site on the topic.
Investment winners
My winners include: Coca-Cola Co., up 39 percent over two years; Trimble Navigation, up 197 percent; Bristol Myers Squibb, up 24 percent and Umpqua Bank, up 23 percent since the first of this year. (Full disclosure – I serve on an Umpqua Bank advisory board.).
Losers: PMI, the mortgage insurer that my broker sold me in 2009. PMI is in bankruptcy. I lost every dime. Zumiez, the teen clothing retail chain, down 15 percent and Cisco, the software giant, down 5 percent.
So far I’ve not needed to tap into this tax-deferred IRA account thanks to freelance earnings and other savings. My plan is to let the IRA money grow until tax regulations require that I start taking money out and pay taxes on it at age 70 1/2.  Retirement planning tables assume I will earn 7 percent a year on my IRA nest egg over the next five years. Stock market history suggests I’ll earn less than that.
Here’s negative assumption No. 2: I didn’t realize that the IRS dictates how much you have to withdraw from your IRA at age 701/2. The withdrawal amount is more than I’d planned, especially since I will likely live into my 90s. I’ll just have to reinvest part of it when that happens.
Assumption No. 3: I would spend less money in retirement because my day-to-day expenses will be lower. Yes I’ve certainly spent less on work clothes, on beauty products. I’ve spent less on meals out and to some extent on casual entertainment. I’m donating less to charity than when I had a paycheck.
But my monthly gasoline bill is as much or more. Leisure travel expenses more than make up for cutbacks elsewhere. Ken and I have been to Mexico three times and made a big trip with family this year to Peru to hike the Inca Trail. We hope that more travel is in our future.
Oh and there are the unexpected expenses. This year in the dead of winter, the pump in my deep well burned out. It cost $2,000 to replace it.
That’s assumption No. 4: I didn’t really factor in the extras. One night in late August, I struck a deer with my pickup. That was a $1,700 repair. Three weeks later the clutch went out. That was another $1,700.  Be sure you have emergency cash on hand for those unexpected surprises. So how's it going? It feels a little tight. I am still not comfortable seeing my accumulated wealth going out rather than seeing more coming in. My advice?
Before quitting your full-time job, make sure your living expenses are in line with your projected retirement income. Consider part-time work as a way to avoid tapping into your nest egg too soon. Hold off on taking Social Security benefits as long as possible. Every year you wait gives you an 8 percent increase in monthly benefits. If you take benefits earlier than full retirement age, Social Security will reduce your benefits, if you earn more than certain limits. And don’t assume that you will get to decide when you leave that full-time job. Your employer may decide that for you.
I’ve seen plenty of friends with careers in the banking industry, in insurance sales, you name it, who have been handed a severance package and shown the door after age 60. Many have struggled to find another full-time job.  Many people are excepting lower pay in their new jobs after a lay-off. Meanwhile, age discrimination is alive and well in this economy. A woman I know (over 60) told me she's given up trying to find full-time work after nearly two years of trying.
Pay down debt
Married or single, make sure you don’t go into retirement with a lot of debt. A good friend of mine (a retired teacher) is losing her house where she’s lived for 40 years because she took out a second mortgage in the early 2000s and now can’t handle the payments and property upkeep. All she has is her teacher's pension.
Avoid locking yourself into annuities or other retirement products being pushed by investment brokers until you are sure you know what you’re doing. Get several opinions.  Annuities that pay 7 percent a year on your money are misleading, if not a lie. Annuities can seem like an easy way out but my personal experience with my mother is that they are a rip off. The same with reverse mortgages. Stay away from them!
So what's gone well for me?
Remarrying after 60
After putting together a pre-nup, after writing new wills and buying life insurance on each other, Ken and I married and began combining part-time work with travel adventures. We share expenses using a joint monthly expense account. I am the lucky one because I met Ken thanks to friends who knew both us and thought we’d hit it off. They got that right! Click here for my post on remarrying after 60.
Widowed three years, another friend is starting to date. It's scary. She’s trying to take it slow but when you’re over 60, the tendency is to live it up because we all know that life can be short.
While romance is great, don't ignore the financial and legal implications of marriage. In a community property state, you automatically take on each other's assets AND each other's debt. Make sure you know how your new love manages his investments and his spending style. Make sure you're comfortable and your kids are with all that. Prenups are not just for the rich and famous, says Candace Barh at www.wife.org.
Getting expenses in line with retirement income
So how have I reduced my monthly expenses?
- Refinanced my house mortgage last year down to an $800 a month payment.
- Placed my rural real estate property in a timberland deferred property tax category to cut my local real estate taxes.
- Continued to work part-time as a writer and editor.
- Worked hard to management my investments. I don’t hold on to stock losers like I used to when I had a job. I look for a strong track record and good dividend return. I continue to read a lot about the economy and try to stay up on companies that have earnings promise. I don't jump in and out of markets.
In the past five years, just about everything related to my financial life has changed as I transitioned from a full-time job to part-time work at home and remarriage. Last year I signed up for Medicare (another cost-cutting measure.) In prior www.sixtyandsingle.com blog posts I’ve addressed many of these issues separately.
I will say that when you become “retired,” you become much more concerned about where your money goes. I’d rather keep my house a little cooler and save on the heating bill so I can spend that savings on my next travel adventure. (The fact that 10,000 baby boomers (like me) are turning 65 every day has got to be affecting our economy. As a population group we’re not buying big houses, big cars or even as much shampoo. Across the spectrum, that reduced spending has got to have some kind of impact. I expect economic growth to be slower in coming years but not out of balance with below-average inflation.)
In summary, I am glad I retired. I’m glad my life is moving on as it must and should. There’s plenty to worry about….kids, grandkids, the economy, our health.
Bottom line: There’s a great life after 60 and single. I meet women every day who are on their own, who have embraced their lives, made new friends, found courage inside them selves to move forward, to stay engaged and give love to those who enter their circle of influence. They are making a contribution into their 80s on many fronts. For example, I am just finishing a campaign for public office. Win or lose, the experience has truly been rewarding.
Having enough money in retirement gives you flexibility and confidence but it’s not the most important thing. It’s how you feel about yourself. It's about confidence in the future with or without your spouse. If you are married, talk to your spouse about your finances, your retirement plan and how it will work when he dies.
More importantly talk to yourself. Are you prepared financially to be on your own? If not, get busy figuring it. Start educating yourself!! It's rewarding, even fun to find out that with a little advice and some study, you can do it yourself. As they say at www.wife.org, "A Man is Not a Financial Plan.
- Cheers, Julia


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