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June 2014
June 30, 2014
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Retirement Advice From Those Who’ve Been There
Recently retired men and women share experiences

A recent BlackRock Annual Retirement Survey has shown that more than half of current retirees are confident they will be able to live comfortably throughout retirement. On the other hand, only about one-quarter of those workers that are currently below the retirement age are confident they will have enough income during their retirement ages. There are books and binders full of technical advice out there with intimidating numbers, percentages and formulas. Then there is the advice you can actually relate to, based on what truly lies ahead for future retirees, financially and emotionally.

Ninety percent of confident retirees in the BlackRock survey advised to increase their retirement contribution savings whenever you are able to, 87 percent recommended to make the most of your 401(k) plan, 84 percent suggested to estimate your retirement needs before actually retiring and 83 percent said to review your savings strategy on a regular basis. In that same study, less-confident retirees polled had four major regrets:


·         Not making the most of their 401(k)s

·         Not enrolling in the plan early enough

·         Not making a financial plan for saving

·         Not saving the maximum allowed by their plan


Certified Financial Planner Sophia Bera expanded on some of those thoughts. First, as you make more money, you need to save more money.


“Time is your biggest resource — not money,” Bera said. “As your lifestyle increases, you’ll have to put away even more money to keep up that lifestyle in retirement.”


She added that if you start early and form a habit of putting money away, whether or not you are affiliated with an employer, you will have a better nest egg. Anyone is allowed to open an IRA or Roth IRA, and she said one of the biggest mistakes she sees is people failing to take advantage of a 401(k) when they qualify for a company match.


“Looking back, I wish I had started saving for retirement in my 20s. I didn’t start saving until I got a 401(k) through my job at age 40, and I never maxed it out,” testified Robyn, age 62, as told to Colleen Oakley of Forbes. “I should have put aside a small amount with each paycheck, even if only a few dollars per week. With interest accrued over the course of 40 years, I would have accumulated enough of a nest egg to do all of the fun things that I want to do in retirement.”


Joseph F. Coughlin, PhD is the director of the Massachusetts Institute of Technology AgeLab, where plans and decisions about the future of old age are researched. One of the Wall Street Journal’s “12 Pioneers Inventing the Future of Retirement,” Coughlin compiled some advice from over 200 MIT alumni at least 15 years into retirement. The first recommendation was to create a solid financial plan for the future, and keep in mind that retirement years are a marathon run, not a short sprint.


“Retirement requires continuous preparation and maintenance for the decades ahead,” Coughlin said. “It’s not fun and done.”


Coughlin’s colleagues also advised to continue to work for as long as possible and keep expanding your interests. One of them said, “A man has to have a reason to get up in the morning.”


A man also has to be physically capable of getting up in the morning. Women cited the importance of health more than men, but keeping a fit body is important for all genders as you age.


Retirement planning is about more than money. Investing in personal health and well-being enables an active, healthy old age,” Coughlin explained. “Moreover, managing your health saves money: Chronic conditions that require medications or present complications are a threat to both physical and fiscal well-being.”


A final idea Coughlin concluded from the MIT alumni was that a strong network of friends and family are important in a healthy retirement — and not just a ‘physically’ healthy one! One woman noted to him that "establishing relationships with younger people becomes even more important to remain active and to replace friends lost as the years pass."


While Bera’s advice focused on finances in retirement, Coughlin’s transcended money into the realm of quality-of-life. Retired author Joyce Wayne offered some suggestions of her own that qualify as both, based on what she wished she had told her 35-year-old self.


Wayne recommended staying married to one person all your life, of course depending on circumstances. Divorce is very expensive, as is splitting assets, paying alimony, etc. Not only will remaining married to the same person fortify your finances for the future, it will also strengthen your emotional stability, with no family-wide crises or rifts. Along similar familial lines, she advised to have children before the age of 35. That gives you ample time to try to subsidize the rising costs of furthering education for them before you retire. Beyond that, she said to choose a career you can imagine doing for 35 years and stick with it.


“Find your niche and become an expert. I did and it repeatedly rescued me from financial and emotional hardship,” Wayne explained.


She said it is best to secure a job with a defined benefit pension, or one with a union, as union fees are negligible compared to retiring without a healthy pension; to find a financial adviser you can trust, or spend the time and energy learning how to invest wisely on your own; and to buy your dream house right off the bat, within your means, of course. Just like divorce, moving is a huge potential expenditure these days. Finally, Wayne offered that it is imperative for a healthy lifestyle in retirement to develop long-standing interests early on — ones that aren’t expensive to maintain and aren’t dependent upon your job or your family.


“In other words, maintain independence of mind and spirit throughout your life,” she said. “Kids move away. Spouses pass away. Keep something special that belongs solely to you and that you will find satisfaction in during the darkest of times, no matter how your bank account fluctuates.”


The comprehensive advice from retirees determined that planning for a flourishing retirement these days means much more than just saving money and having an IRA. While those are basic aspects, it is also vital to plan to live better physically, emotionally and socially. Just as Wayne concluded, “The overwhelming factor is longevity: not just protecting your physical health and emotional well-being so that you’re able to fully enjoy retirement, but understanding how crucial longevity is to just about every aspect of your life.”


Published by North Shore Trust and Savings
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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.

June 2014

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