A radio show I heard recently referred to an observation from the author Kurt Vonnegut, who long ago suggested that the U.S. government create a new cabinet post called “Secretary of the Future.”
The czar would predict what the country needs to do to prepare for 20 to 50 years out. The show’s host asked the audience for topics that would most likely contribute to the country’s health.
Sarah loves the house she has lived in for 35 years. She and her husband bought it together and after the couple divorced, Sarah raised her two daughters there. The years have passed quickly and at the age of 72 she wants to downsize. Happily her girls still live nearby with their families so she is going to stay in the area.
Now Sarah is tackling the classic question:
Should she rent or buy her next home?
Sarah will have to consider how her money will serve her better. Can she sell her house and buy another for a lower price, which would help her finance the rest of her living expenses? Or would renting free up more of her capital?
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One flaw with traditional retirement planning is the assumption that your expenses – the type and amount — will be the same (plus inflation) each year, from your final day at work to the end of your life, and that all you have to do is “replace a percentage of your pre-retirement income.” As people live longer, we have proof that isn’t true. Healthcare costs, especially, increase in our late retirement years, and if we don’t plan for them, we risk running out of money.
The solution is to consider retirement as a two-stage process. In the first stage, you do want to cover a reasonable percentage of the final salary you earned before retiring, although the percentage may need to be more than 100%. Your Social Security payments, any pension, interest/dividends and payments from income annuities ideally will cover that. If you need to withdraw principal, make sure it’s for a temporary period and from a secure source.
For the second stage, you will want to maintain those payments to meet your essential living expenses – and add another level of income to cover the gap for things like home healthcare and additional costs that occur as we age. More
In many ways, single women face the same problems as men when they consider how to retire with enough income, with one exception: They worry more.
Women in general are more likely than men to put money into their workplace retirement account and one third of women, according to a survey, said their savings plans are “on track.” But eight in 10 women have concerns about saving enough for retirement, with 54% saying they are “very concerned.”
Their worry is not misplaced. For one thing, it’s more difficult for a single person to save than it is for a couple. And when one member of a two-earner couple loses a job or gets sick it presents difficulties — but it’s not as scary as when you are the sole earner in a household. More
Last month, the Wall Street Journal’s Letters to the Editor was on the topic of retirement.
The letter was titled: “We’ll All Rethink Our Retirement One Way or Another”.
Among several scholars, industry experts and other opinionated people with well articulated arguments, I submitted a proposal, which was published in the Wall Street Journal on March 17. Below is my submission, which argues that with added flexibility to Social Security, we could in turn save billions of dollars in the process.
Along with greater work flexibility, America needs to offer retirees greater flexibility for their Social Security benefit choices by allowing Social Security beneficiaries to delay starting benefits beyond age 70, and to gradually opt into Social Security benefits as part of a “staged” retirement.
In the process, according to my analysis, $200 billion to $400 billion in Social Security outlays could be saved over the next 20 years.
The pitfalls of our Social Security system don’t have to be as dire as they’ve been constructed. A little flexibility can go a long way.