Retirement’s Revolving Door

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Tim and Chris Franson.jpg

In his view, Tim Franson utterly failed at retirement. After twenty years as a vice president at Eli Lilly, Franson and his wife, Chris, a real estate agent, thought they were quietly retiring nearly a decade ago. 

For the first month or so, Franson says, he mostly slept. He wasn’t depressed, just mentally and physically exhausted. Then, “I went crazy,” said Franson. “I’m not very good at sitting around.”

He quickly found himself back at work part time after a friend at a small pharmaceutical company asked him for strategic advice. “Things snowballed from there.”

Today, Franson, 66, consults and works about four days a week, while serving on two for-profit boards and two nonprofit boards.

Welcome to the land of the un-retired — people who thought they were leaving the work world only to return because they sorely missed something about it, besides the money. These people in their 50s through 80s retired on pensions or savings — or both — but ultimately woke up to the fact, there’s more to life than watching Florida sunsets.

This “un-retirement” trend continues to build, according to a 2017 Rand Corp. study showing that 39 percent of Americans 65 and older who are currently employed had previously retired. And more than half of those 50 and older who are not working and not searching for work said they would work if the “right opportunity came along,” the study found.

“We have a mistaken image of life, that we go to school, work for 40 years, then say goodbye to colleagues for the last time and embrace the leisure life,” says Chris Farrell, author of “Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community and the Good Life.” “It hasn’t turned out to be the arc of most people’s lives.”

This is not about older people returning to work because they need the money. This is about older people returning to work because they miss the challenges, the accomplishments and, most importantly, the collegiality.

When retirees are asked what they miss most about pre-retirement life, the number one answer is typically colleagues, says Farrell. “What’s constantly underestimated is that work is really a community. As it turns out, it’s much healthier and more satisfying to work for a bad boss than to sit on the couch and watch TV,” he says.

Franson understands all of this and not that it didn’t make perfect sense for him to retire when he did, at age 58. Lilly offered him a year’s pay and a full pension to take early retirement. Franson had prostate cancer while at Lilly — and though the surgery was successful, he says, “that experience made me sit back and revisit how I wanted to experience my remaining days.” At the time, his children were out of college, and he did not yet have any grandchildren.

Then, life derailed him when his wife, Chris, took ill and died within a few years. Four years ago, he accepted another consulting job in the Indianapolis area to be closer to his children and grandchildren. Franson has no plans to retire from his un-retirement anytime soon.

Laurie Caraway retired in 2013, at age 56, as director of clinical data management at Bristol-Myers Squibb. She picked that age because her father died at 56 before he had a chance to retire from private practice as a surgeon.

Her husband, Scott, a longtime American Airlines pilot, retired along with her. Scott adapted quickly and learned to be a potter. It was summer, and Laura spent the next three to four months biking, swimming and treating retirement like a vacation. Some days, she simply sat on her front porch swing.

Then, the weather changed. The cold autumn reminded Caraway that something had to change in her life. So, she started volunteering in Guilford, Connecticut, with a group that works to uplift academically gifted minority women from disadvantaged communities. That expanded into a part-time, paid position managing the group’s consignment shop.

Caraway was presented with an opportunity to go back — on a short-term contract — to Bristol-Myers Squibb. This encouraged her to send her résumé to Your Encore, a retiree return-to-work program co-created by Lilly, Procter & Gamble and Boeing that matches retirees with employers who need their skills. She landed more contracts to which she can always say “No, thanks” and still have time for yoga class.

“There is life after retirement,” she says. “It’s called work.”

Then, there’s Louise Klaber. She retired at age 65 from a 20-year career in organizational development — but is now working again at age 81.

In 2001, the former New Yorker thought she was living the dream when she arranged to retire in New York City with husband Ralph Walde, a college professor.

September 13 was moving day into their apartment on New York’s Upper West Side. But as the horrific events of 9/11 unfurled, they found they were living in a state of shock. Within weeks, they were both signed up to do volunteer work helping prepare meals for the 9/11 site workers. Their shift: 8 p.m. to 6 a.m., chopping squash, carrots and onions. “It made us feel like we were actually doing something to help,” Klaber says.

The prep kitchen shut down shortly after Thanksgiving, and she found part-time paid work assisting people most severely affected by 9/11 find financial aid, mental health assistance or employment. She then contacted ReServe, a national nonprofit that places retired professionals with public service agencies of all sizes, budgets and missions. ReServe linked Klaber with the New York City Law Department, where she has worked part time ever since as an organizational development counselor. What drives her is not the $10-an-hour pay but the professional camaraderie.

A former marathon runner, Klaber still runs almost daily. That, she says, is an important ingredient for staying healthy — but the work is just as important to her vitality.

When will she finally quit working? “Only God knows,” she says. “I’m having way too much fun.”


A Head to Head Match – 401k vs Whole Life Insurance

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Couple sitting on the beach sandIn talking about the best ways to save for retirement, an interesting idea is to compare investing in retirement plans to saving money via a whole life insurance policy. One misconception with life insurance is the myth that someone has to pass away for life insurance to be of any benefit.  

Nothing is further from the truth.

Life insurance inherently has benefits that can be used while you are alive but these never get mentioned in mainstream media. A few television personalities emphatically say that term life insurance is the only way to go because it is inexpensive and the extra money can be used to invest in mutual funds rather than purchasing whole life insurance. This does not work for the majority of people.

The mantra of “buy term and invest the difference” usually turns out to be “buy term and spend the difference.” It simply illustrates that people do not know what they do not know.

Term life insurance is straight forward. It is inexpensive life insurance at younger ages that covers you for a certain number of years (typically 10-30) after which it terminates.

Whole life insurance however is the opposite…it covers you for your whole entire life, is more expensive than term insurance because it accumulates cash value (term life insurance does not). 

The reason whole life insurance premiums are higher than term insurance is because the coverage costs are averaged over your entire life time. Therefore whole life insurance premiums are higher if purchased when you are younger and less costly as you age.

To use a simple analogy, whole life is like buying a house (builds equity) and term is like renting (no equity).

If this were the only difference between the two types of insurance than the television pundits might have a case however the devil remains in the details. A whole life insurance policy should be the foundation of any financial plan, even ahead of a qualified retirement plan (for example, 401k). Lets compare the features.

Qualified Retirement Plans:

Tax deferred/tax deductible; IRS approved; limits on contributions; employer match..sometimes; can invest in the stock market; loan provision (typically limited to 50k and loans must be repaid or become taxable); limited to the plan’s investment options; creditor protection; must have income to contribute; subject to taxation at ordinary income tax rates; no guaranteed retirement income.

Whole Life Insurance:

Tax deferred (not tax deductible); no limits on contributions; tax-free income and withdrawals; no mandatory withholdings; tax free to heirs; penalty free access to money under age 59 1/2; no required minimum distributions at age 70 1/2; has guaranteed costs, expenses and contribution amounts; can take a loan over 50k (no limits) and no loan repayments required; unlimited investment options (i.e. rental real estate); can be used as collateral (i.e. small business loan); estate tax free; liquid (access to funds at anytime without penalty;no hardship required); disability protection (automatic funding of retirement if you become disabled); use as your own bank (a source of financing); self completing (provides income for spouse if you die and college education for children); judgement proof (protection against creditors and lawsuits in many states); potential for dividends (more beneficial than employer match as it can potentially guarantee future tax free retirement income); protection from future income tax rate increases; guaranteed to grow every year (you know what the account will be worth in the future); guaranteed retirement income (if structured correctly); not stock market based (protection against market risk); long-term care benefits (protects against the costs of health care in retirement); retirement income flexibility (allows you to spend down your other assets in retirement); provides money for terminal and chronic illnesses; and last but not least..death benefit money when you need it most.

So why aren’t these benefits ever mentioned by the media? Because it takes too much time to obtain them or is the “status quo” an easier way to inform people? Max out your 401k and buy term insurance. Realizing how difficult it is for people to look outside the box for alternatives from what a person is accustomed to however when looking at the benefits provided by whole life insurance, the extra “perceived” cost (versus term insurance and qualified retirement plan) certainly makes it worth consideration.

Qualified retirement plans, like the 401k, were never meant to be a primary source of retirement savings but were deemed a supplement to social security. 

Whole life insurance should be in almost everyone’s financial plan and definitely deserves a serious look.

Alternatives To Lapsing A Life Insurance Policy

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Nest Eggs       More than 100 years ago, in its landmark, Grigsby v. Russell decision, the U.S. Supreme Court ruled that life insurance is personal property. It can be bought and sold like any other property owned.

This means your life insurance policy has value to you or your family right now, not just when you pass away. Unfortunately, the vast majority of people are unaware of this simple fact.

The problem arises when the policy owner concludes they just can’t afford those premiums anymore, perhaps because they’re now in their retirement years and living on a fixed income. Or maybe they decide they just don’t need the death benefit anymore now that their children are grown, have steady jobs and built families of their own.

So, in the absence of knowledge about any other alternatives, most policy owners in this situation just lapse or surrender the policy back to the insurance company, accepting whatever small amount of cash surrender value is available.

Research available to the Life Insurance Settlement Association indicates that more than 710,000 policies are lapsed or surrendered each year — with a combined face value of more than $57 billion — by American seniors over the age of 70.

It’s important to contact your trusted insurance advisor [since it is their fiduciary responsibility] who can inform you of your options and instill awareness of alternatives to lapsing or surrendering a policy. 

But aside from the fiduciary issue, there is a common-sense test: if a person could lapse a policy for its nominal cash surrender value of $20,000 or able to sell that same policy to an investor for $150,000, they should be entitled to this information.

So, if a person has decided they no longer need or can afford a life insurance policy, what are the alternatives to lapsing the policy and surrendering it back to the insurance company?

Here are the primary options that you should know:

  • Maintain the policy through loans, using the policy or its cash surrender value as collateral;
  • Seek an accelerated death benefit, if possible;
  • Convert the policy to a long-term care health insurance policy, if possible;
  • Assign the policy to someone else as a gift or to a non-profit organization as a charitable contribution;
  • If it is a “term” policy, attempt to convert it to permanent insurance;
  • Reduce the death benefit (a lower “face value”) and the premiums; and
  • Sell the policy to a third-party investor through a life settlement.

As with any financial planning decision, there is no “one size fits all” answer to which of these options is best. The one that makes the most sense for you will depend on the your unique needs and desires as the policy owner — and that is where your trusted advisor, can play an invaluable role to guide you to the wisest decision.

90 percent of seniors who lapse policies without knowing about a life settlement indicated they would have considered that option had they known about it; and that 79 percent feel their advisors should inform them about a life settlement option.

Consider this story: A car dealership owner originally purchased a $488,000 life insurance policy to fund a buy/sell agreement with his business partner. After the business dissolved, his family continued to pay the premiums, but eventually decided the coverage was no longer needed.

He was planning to surrender the policy back to the insurance company for $6,800, then learned he had another option: to sell his policy to a life settlement company for $80,000. That’s more than 10 times what he would have received from the insurance company. The proceeds were divided among his three children, which they used to supplement their income.

If your main motive is to obtain cash in your hands — for retirement needs, health care expenses or simply to invest into other assets — then a life settlement is likely the best alternative. As a life insurance policy owner, when you enter into a life settlement, you can realize an average of seven times the amount of the policy’s cash surrender value, based on an analysis of a 2010 survey by the U.S. Government Accountability Office.

Perhaps that’s why 90 percent of seniors who have lapsed a policy would have considered selling it if they had known a life settlement was an option, according to a survey prepared for the Insurance Studies Institute.

Regardless of what you choose to do, just make sure that you are informed of all options before you lapse that life insurance policy.


The 5 Things To Do First When You Retire

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Smiling Couple of ColorThanks to an entire Internet worth of articles and advice, we generally know what to do in the years leading up to retirement. But what about immediately afterwards?

Here’s five things we’ve learned that you must do upon leaving the workforce for good — and one you should wait on. It turns out that celebration, preparation and even hesitation go a long way.

Look before you leap is definitely the mantra. Retirement can be a wonderful period of life — a time of tremendous fulfillment and enjoyment, and planning will make your ability to enjoy it so much greater.

  1. Treat Yourself

First things first. On the way out the door of your office, buy an expensive bottle of wine. You’ve retired! Congratulations! Take a moment to savor the feat, reminisce and look forward to the future you’ve been working towards for years.

And the next day? Take a special vacation trip or visit someone. This will make the transition from work to retirement go smoother. The break with the routine is not so abrupt.

Another advantage to the trip: It gives you the breathing space before you return to the work of deciding how you want to spend your time for the next twenty or thirty years. If you’ve always dreamed of spending a week exploring Iceland, there’s no better time.

  1. Review Your Income Streams

Now that the party’s over, it’s time to get down to business. Ideally, you should have an income strategy before leaving the workforce, including a blueprint for withdrawing Social Security. Once you actually retire, however, you must double-check where your finances stand, and confirm that all plans are up to date.

Make sure you have your cash flow in order. Know how much income you will have and where it will come from (a pension, Social Security, retirement accounts or perhaps a part-time job).

While you’re reviewing, be aware of the potential volatility within your portfolio, the tax implications of all your different revenue streams — and disregard CNBC and Fox Business channels.

During the initial phase of retirement, it’s best to ignore the 24/7 news cycle. News outlets are vying for attention and as a result, their headlines are designed to appeal to an investor’s emotion rather than logic. Hold the course on the financial plan you have set for yourself in retirement.

  1. Start Tracking Your New Daily Expenses

Now that you’re not working, your daily expenditures will change, possibly drastically. It can sometimes take a year or two to adjust to retirement and really know what you will spend on average, and you need to know what your retirement income can support, even in bad market years.

So, from Day 1, prepare a reasonable outline of your monthly expenses now that you are living on your post-retirement income and retirement savings. A rule of thumb is that you shouldn’t pull more than four percent from your retirement savings each year.

While a pen and paper always works for this, financial software can significantly ease the burden of bookkeeping.  You may want to use Quicken and automate your expense tracking so that you know where your dollars are going and can find ways to save money if needed down the road.

  1. Revise Your Estate Plan

As we age, illness and incapacitation become more serious concerns. With that in mind, update your estate plan. Chances are you haven’t looked at your will in years, perhaps decades. Your adult children likely wouldn’t appreciate having a guardian anymore.

Your will (living and otherwise), insurance beneficiaries, medical directive and power of attorney should be reviewed and then reassessed every three or four years after that. That is, unless something significant happens — such as if you move to a different state or there’s a change to any kind of marital status in your family. In that case, start drawing up new documents immediately.

One special note: Checking your estate plan review is vital for retirees who want to spend significant time abroad. Accidents happen overseas and it’s much more difficult to coordinate critical documents and directives from a distance.

  1. Fill Your Calendar With Meaningful Activities

Why did you retire? Now is the time to discover the real reason. Find your passion. Sometimes, too many individuals retire ‘from’ something and not ‘to’ something. While it takes everyone time to get used to retirement, you have to find a reason to get up in the morning, whether it is volunteering, gardening, finding a part-time gig, etc.

Whether your passion lies in genealogy or card games, make sure it involves the following key elements:

  • Connecting with others: Get involved in meaningful activities that will keep you connected to friends, family, and the community. You’ll feel valued, and stave off the loneliness [and related health issues] that can accompany retirement.
  • Making concrete plans:  Many are surprised that their goal of golfing in retirement still leaves significant empty space on the calendar. It’s encouraged for people to consider an exercise where they [fill in] a blank weekly calendar, hour by hour. Seeing that schedule gives you a realistic view of your commitments, provides specific events to look forward to, and prevents aimlessness.

Don’t Make Big Decisions

Retirement is a big change and new retirees should expect to spend some time adjusting. While downsizing and making other lifestyle changes can be a fun and sometimes a necessary part of retirement — to lower the cost of living — this is something that can be put off for a year or more to ease the adjustment period. Instead of buying a new place or paying off the old one in one fell swoop, it’s suggested taking time to consider your new needs: Do you still need to live in a spacious home? Should you downsize to help with your retirement expenses, move to be closer to the grandchildren, relocate to a sunny locale or a less-expensive state?

Another big decision to put off?  Making large cash donations to your children and grandchildren. [Postpone] contributing to a grandchild’s 529 plan or other form of gifting to your grandchildren. Make sure you have your personal finances under control first.

How Much Life Insurance Do You Need?

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Scott and Danielle Nelson

Unpredictable investments and job markets are tough on retirement planning. They also complicate the issue of how much life insurance is right for you. Use our formula to cut through the confusion.

Standard formulas — such as buying coverage equal to eight to ten times your annual income — are inadequate shortcuts. Online calculators are apt to tell you to raise your coverage by $1 million even if you already have insurance. The truth is that life insurance is a personal affair. Two couples may earn equal salaries, but it’s silly to say that someone with four young children should have the same coverage as those with empty nests, no mortgage and a substantial retirement fund.

Moderate inflation and a recovering stock market may tempt you to low-ball your life-insurance needs. But other financial realities, such as puny yields on reinvested lump-sum benefits, may require that you have more coverage, not less. And you’ll likely experience life events that call for changes in your insurance: marriage, parenthood, homeownership, college expenses and retirement. Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life-insurance needs. That’s easier than it sounds, as you’ll see from the following process, because it truly is an art as well as a science.

A simple strategy. The purpose of life insurance is to allow your family members to pay the bills and live their lives as planned despite your absence. That’s why some experts and most online calculators sponsored by the insurance industry seek to figure the chunk of investment capital it would take to replace all of your income for 20 years or longer, held securely in Treasury or municipal bonds and certificates of deposit.

With savings yields low and the prospect of longer life expectancy in retirement, this approach tends to aim high, especially if you assume raises and promotions. Some people are extremely minimalist with insurance. But in reality there is an overabundance of people who end up justifying more insurance is reasonable.

There is a simple strategy to calculate how much coverage to buy and to form a plan that’s easy to update. The idea is to assess whether you need extra coverage or different policies only after you project your life-insurance needs as the sum of four categories.

Final expenses. A funeral, burial and related expenses tend to cost $20,000 to $30,000. Your beneficiaries may be able to get the tax-free proceeds from insurance faster than if they waited for momey from your estate. Use $25,000 as a ballpark number.

Mortgages and other debts. Total your mortgage balance, car loans, student loans and any other debts that would be a heavy burden on your survivors. They may choose not to retire the mortgage, especially if the interest rate is low, but the money should be available so that they won’t face the prospect of being forced to sell.

Education expenses. This calculation can be tricky because you need to consider the cost of college at the time your children enroll. There is a simple solution. College costs have been rising by about 5% a year, which is the same rate you can conservatively expect life-insurance proceeds to grow over time. It’s recommended to research current costs for colleges you’re considering, deciding whether you want the insurance to cover all or a portion of the tab, and adding the amount in today’s dollars to your life-insurance calculation.

Income replacement. Once you cover funeral expenses, debts and education, your family won’t need to replace 100% of your income — and that’s where the art part of the calculation is figured. It’s recommended to cover 50% of current pretax earnings until retirement. You can translate this into a target lump-sum benefit by dividing it by 0.05. For example, if you earn $100,000, divide $50,000 by 0.05, which works out to $1 million. That assumes the insurance benefits will earn 5% a year over the long haul, a conservative figure.

Add all four categories to estimate how much life insurance is appropriate, then tweak the number to reflect personal circumstances. You might increase it if you don’t have a pension, but you could decrease your coverage if your spouse earns a substantial salary. If you or a family member has a troublesome medical history, add $100,000 or even $250,000. If you’re the one with the medical condition, you’ll find it tough to buy additional coverage later at a price you can afford.

For most families, this exercise will work out to an amount in the high six-figures, possibly even $1 million or more. But don’t be frightened. With term insurance, boosting your death benefit by hundreds of thousands of dollars should cost just a few hundred dollars a year.

For example, a healthy 40-year-old male nonsmoker might be considering a 20-year, $500,000 term policy for $360 per year. But he could buy $850,000 of coverage for $576, or a $1-million policy for $645. Women pay less — just $311 per year for $500,000 in coverage and $558 for $1 million. It’s not as easy as it used to be to qualify for the absolute lowest rates. You can contact EHB Insurance Group for the best rates.

The time factor. Also consider how many years you’ll need insurance. If you’re in fine physical shape, you can buy a new policy and lock in the price for 20 years. Because prices for term have been dropping steadily, you may not pay much more to extend your coverage if you reapply in, say, five years.

Some term policies come with the right to convert to permanent life insurance, which you can keep for the rest of your life regardless of health. Premiums will be higher than for term at the beginning, but they usually remain level indefinitely. The best reason to consider whole-life or universal-life insurance isn’t the accumulating cash value, although that’s part of the structure. The real issue is whether you’ll need coverage beyond 20 or 30 years — or after age 65, when term gets expensive. You might want permanent insurance, for example, if you need to protect children with special needs who will always rely on you (or your estate) for support, or if you want to leave money to a school, charity or your children and you don’t expect to afford it any other way.

You need more life insurance if you…

Tie the Knot – Your new spouse might depend on you even if he or she earns as much or more than you do.

Have a Child – It takes a lot of money to raise a child–and it doesn’t get any less expensive if you’re not around.

Buy Your Dream House – When you settle into your family’s permanent home, guard against its loss in case tragedy strikes.

Are About to Retire – No more insurance from work. If you die, your spouse could lose pension and some Social Security income.

Term vs. Permanent:  the best of both

Term insurance is popular because almost everyone can afford plenty of it. Some young people buy the amount of permanent insurance that fits their budget, rather than the protection they need. That’s not smart.

But it can make sense to combine term and permanent insurance with multiple policies or by buying a convertible-term policy and making a series of conversions over the years. One advantage of a convertible-term policy is that insurers don’t require a new medical exam when you make the conversions. That essentially gives you a pass if you gain weight, develop high blood pressure or even survive a bout with cancer.

Example: a 27-year-old male starts by paying $317 per year for $500,000 of term insurance, and then gradually converts it to whole life $100,000 at a time. If he shifts $100,000 to whole-life at age 28, his annual premium would jump to $1,300. If he shifts to another $100,000 at age 31, his annual premium would rise to $2,600. His premium would gradually increase whenever he shifts money to the whole-life policy, topping out at $7,200 per year at age 40, for the entire $500,000 of whole-life insurance.

As long as the insurer remains strong and solvent, the policy’s cash value will rise every year, as will the death benefit. By age 65, in this example, the benefit is projected to be $990,000 and the cash value $475,000, which can be borrowed, withdrawn or tapped to keep the policy in force without paying additional premiums. This kind of flexibility is extremely attractive to many people.




A New Era of ‘Work Until You Drop’ For Boomers

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Boomer at workWhen Paula Symons joined the U.S. workforce in 1972, typewriters in her office clacked nonstop, people answered the telephones and the hot new technology revolutionizing communication was the fax machine. Remember?

Symons, fresh out of college, entered this brave new world thinking she would do pretty much what her parents’ generation did: work for just one or two companies over about 45 years before bidding farewell to co-workers at a retirement party and heading off into her sunset years with a pension.

Forty years into that run, the 60-year-old communications specialist for a Wisconsin-based insurance company has worked more than a half-dozen jobs. She’s been laid off, downsized and has seen the pension disappear with only a few thousand dollars accrued when it was frozen.

So, five years from the age when people once retired, she laughs when she describes her future plans.

“I’ll probably just work until I drop,” she says, a sentiment expressed, with varying degrees of humor, by numerous members of her age group.

Like 78 million other U.S. baby boomers, Symons and her husband had the misfortune of approaching retirement age at a time when stock market crashes diminished their 401(k) nest eggs, companies began eliminating defined benefit pensions in record numbers and previously unimagined technical advances all but eliminated entire job descriptions from travel agent to telephone operator.

At the same time, companies began moving other jobs overseas, to be filled by people willing to work for far less and still able to connect to the U.S. market in real time.

“The paradigm has truly shifted. Now when you’re looking for a job you’re competing in a world where the competition isn’t just the guy down the street, but the guy sitting in a cafe in Hong Kong or Mumbai,” says Bill Vick, a Dallas-based executive recruiter who started in an effort to help baby boomers who want to stay in the workforce.

Not only has the paradigm shifted, but as the generation whose mantra used to be, “Don’t trust anyone over 30,” finds itself now being looked on with distrust by younger Generation X managers who question whether boomers have the high-tech skills or even the stamina to do what needs to be done.

“I always have the feeling that I have to prove my value all the time. That I’m not some old relic who doesn’t understand social media or can’t learn some new technique,” says Symons, who is active on Twitter and Facebook, loves every new time-saving software app that comes down the pike, and laughs at the idea of ever sending another fax.

“Ahh, that’s just so archaic,” she says.

Meanwhile, as companies have downsized, boomers have been hurt to some degree by their own sheer numbers, says Ed Lawler of the University of Southern California’s Marshall School of Business.

The oldest ones, Lawler says, aren’t retiring, and more and more the youngest members of the generation ahead of them aren’t either. It’s no longer uncommon, he says, for people to work until 70+.

“People who would have normally been out of the workforce are still there, taking jobs that would have gone to what we now call the unemployed,” he said.

John Stewart of Springfield, Mo., sees himself becoming part of that new generation that never stops working.

“No, I don’t see myself retiring,” says Stewart, who is media director for a large church. “I think I would be bored if I just all of a sudden quit everything and did whatever it is retired people do.”

Then there are the financial considerations. Like many boomers, the 60-year-old acknowledges he didn’t put enough aside when he was younger.

For more than 30 years, Stewart ran his own photography business, doing everything from studio portraits to illustrating annual reports for hospitals and other large corporations to freelancing for national magazines and newspapers.

As the news media began to struggle, the magazine and newspaper work dried up. As the economy tanked, his large corporate clients began to use cheaper stock photos purchased online rather than hire him to take new ones. Eventually he took his current job, producing videos of pastors’ sermons and photos for church publications. He says he is glad to be one boomer to make a late career change and keep working.

“There were times when the money was really rolling in,” he says of his old business. “But somehow retirement wasn’t really in the forefront of my thinking then, so saving for it wasn’t an automatic thing.”

Steve Wyard, of Los Angeles, says he and his wife have planned carefully for retirement.

He’s worked for 30 years for a company that sells and services commercial washers and dryers, and she’s been with a health maintenance organization for even longer. They’ve invested cautiously, lived in the same house for decades and meticulously paid down the mortgage.

Plus he’s one of the few boomers who figures that, no matter what technology comes along, his job won’t go away.

“Everyone has to do the laundry,” he says.

Still, he and his wife have two sons, 19 and 21, to put through college, and Wyard, 61, sees that pushing back retirement for several years.

Until then he plans to keep working, which is what every physically able boomer should consider doing, says USC’s Lawler.

Union membership, which has been declining for years, now includes only about 10 percent of all eligible U.S. employees, according to the Bureau of Labor Statistics. Meanwhile, the number of defined benefit retirement funds offered by private enterprise have fallen from about one in three employers in 1990 to about one in five in 2005.

With unions no longer in a strong position to fight for benefits like pensions, with jobs disappearing or going overseas, and with Gen Xers and even younger Millennial Generation members coveting their jobs, Lawler warns this is no time for boomers to quit and allow the skills they’ve spent a lifetime building to atrophy.

“My advice is don’t retire,” he says. “If you like your job at all, hold onto it. Because getting back in during this era is essentially impossible.”



Social Security – As Soon As Possible?

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Couple hikingWhen is the best time to start taking Social Security benefits? The answer is not always so simple. Perhaps this article with provide some things to think about as you ponder your choices. 

Myth No. 1:  If you wait, you get more…

The older you are when you start, the more Social Security monthly income you receive. The Social Security Administration thus entices people to wait longer. But let’s look at this a little deeper.

Let’s use an example. Assume at age 62 a person’s Social Security monthly income will be $1,000 per month. However, if they wait until age 67, this monthly income increases to $1,500. More is better, right?

Remember that in order to get this extra $500 per month, this individual had to wait five years. So if we calculate the income this person did not receive, it comes out to $60,000 ($1,000 per month for five years).

The proper thing to do in this example is analyze the pros and cons of waiting five years for the extra $500 per month.

Using the example, the pros are simple. Waiting earns you an extra $500 per month, which is a good thing.

Now let’s take a look at the cons. How many months does it take someone to simply break even (from a financial perspective)? Well, if you divide $60,000 (lost income) by the $500 (additional income), it comes out to 10 years.

However, the story does not end here. Remember, by waiting five years this person is now 67 years old. Therefore, in order to accurately calculate the lost income and “break-even” point, you also have to add in the five years this person waited (from age 62–67). Therefore, it really takes this person 15 years to simply break even and justify deferring their Social Security income.

But wait, there’s more …

Some other key factors to consider are:

  • Five years of potential lost interest or growth from the monthly income
  • Five years of lost ability to spend and enjoy the extra monthly income
  • Countless years of lost income due to a possible critical illness
  • Countless years of lost income due to a possible premature death
  • Countless years of lost income due to an unexpected illness or death of a spouse
  • Countless years of reduced purchasing power as a result of inflation
  • Countless years of lost income due to the potential for taxes to go higher
  • Countless years of lost income due to potential reductions, changes, or even the elimination of Social Security income

Myth No. 2:  My income and taxes will be lower in retirement…

Far too often individuals/couples make major mistakes as a result of basing a financial decision upon its tax consequences.

Most of us have heard the argument, “I will be in a lower tax bracket when I retire.” This statement seems to be an amazement for several reasons.

First, why do so many aspire to have a significant income reduction once they reach retirement? Retirement is commonly referred to as the Golden Years, right? This implies that you worked hard and long enough to have saved enough gold to live like Kings and Queens.

Second, when are you more likely to spend more money: While you are working or when you are on vacation? Since the obvious answer is while on vacation, isn’t it fair to say that retirement is supposed to be a wonderful, long, enjoyable vacation from work? Retirement is arguably the time when you have earned the right to spend and enjoy your hard-earned wealth and income.

Yes, more income does mean more taxes, indisputably. However, here is a theory on taxes: Make a lot of money, pay a lot of taxes, and repeat the process.

Again, let’s again analyze the pros and cons.

The main pro for deferring Social Security income is simple. More income means more taxes, and nobody likes paying more taxes.

Now, let’s take a look at the cons using an example:

In 2012, Couple No. 1 earns $50,000 per year. Couple No. 2 earns $500,000 per year.

Couple No. 1 paid less in Federal taxes (15 percent) than the couple earning $500,000 per year (35 percent). In fact, on the surface (excluding any deductions and State income taxes) Couple No. 1 paid a mere $7,500 in taxes, while Couple No. 2 paid a whopping $175,000 in taxes.

However, which of the following retired couples would you rather be:

Couple No. 1: Net Income (after taxes) is $42,500 per year, or $3,542 per month. Couple No. 2: Net Income (after taxes) is $325,000 per year, or $27,083 per month.

But wait, there’s more …

Some other key factors to consider are:

  • Today we are in the sixth lowest tax bracket in history
  • A large majority of people today believe tax rates are going higher
  • There are many reasons a person’s (or couple’s) taxable income can actually increase in retirement (employment income, asset and income growth, inheritances, spouse’s death and rental income, IRA Required Minimum Distributions, loss of deductions, and more).

A bird in the hand

When it comes to determining the right time to take Social Security income, too many individuals and couples conclude it’s in their best interest to delay beginning to take Social Security income so as to increase their future income and/or minimize their income tax.

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