Articles tagged with: retire

You Could Retire…But Should You?

It might be better to wait a bit longer.

Some people retire at first opportunity, only to wish they had waited longer. Thanks to Wall Street’s long bull run, many pre-retirees have seen their savings fully recover from the shock of the 2007-09 bear market to the point where they appear to have reached the “magic number.” You may be one of them – but just because you can retire does not necessarily mean that you should.

Retiring earlier may increase longevity risk. In shorthand, this is the chance of “outliving your money.” Bear markets, sudden medical expenses, savings shortfalls, and immoderate withdrawals from retirement accounts can all contribute to it. The downside of retiring at 55 or 60 is that you have that many more years of retirement to fund.

Staying employed longer means fewer years of depending on your assets and greater monthly Social Security income. A retiree who claims Social Security benefits at age 70 will receive monthly payments 76% greater than a retiree who claims them at age 62.1

There are also insurance issues to consider. If you trade the office for the golf course at age 60 or 62, do you really want to pay for a few years of private health insurance? Can you easily find such a policy? Medicare will not cover you until you turn 65; in the event of an illness, how would your finances hold up without its availability? While your employer may give you a year-and-a-half of COBRA coverage upon your exit, that could cost your household more than $1,000 a month.1,2

How is your cash position? If your early retirement happens to coincide with a severe market downturn or a business or health crisis, you will need an emergency fund – or at the very least enough liquidity to quickly address such issues.

Does your spouse want to retire later? If so, your desire to retire early might cause some conflicts and impact any shared retirement dreams you hold. If you have older children or other relatives living with you, how would your decision affect them?

Working a little longer might be good for your mind & body. Some retirees end up missing the intellectual demands of the workplace and the socialization with friends and co-workers. They find no ready equivalent once they end their careers.

Staying employed longer might also help baby boomers ward off some significant health risks. Worldwide, suicide rates are highest for those 70 and older according to the World Health Organization. Additionally, INSERM (France’s national health agency) tracked 429,000 retirees and pre-retirees for several years and concluded that those who left the workforce at age 60 were at 15% greater risk of developing dementia than those who stopped working at 65.3

It seems that the more affluent you are, the more likely you are to keep working. Last year, Bank of America’s Merrill Lynch and Age Wave surveyed wealthy retirees and found that 29% of respondents with more than $5 million in invested assets were still working. That held true for 33% of respondents with invested assets in the $1-5 million range. Most of these millionaires said they were working by choice, and about half were working in new careers.1

Ideally, you retire with adequate savings and a plan to stay physically and mentally active and socially engaged. Waiting a bit longer to retire might be good for your wealth and health.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – tinyurl.com/o8lf6z2 [8/1/14]

2 – money.usnews.com/money/blogs/on-retirement/2015/02/05/6-reasons-you-shouldnt-retire-early [2/5/15]

3 – newsweek.com/2015/03/20/retiring-too-early-can-kill-you-312092.html [3/20/15]

Will Baby Boomers Ever Truly Retire?

Many may keep working out of interest rather than need.

Baby boomers realize that their retirements may not unfold like those of their parents. New survey data from The Pew Charitable Trusts highlights how perceptions of retirement have changed for this generation. A majority of boomers expect to work in their sixties and seventies, and that expectation may reflect their desire for engagement rather than any economic desperation.

Instead of an “endless Saturday,” the future may include some 8-to-5. Pew asked heads of 7,000 U.S. households how they envisioned retirement and also added survey responses from focus groups in Phoenix, Orlando and Boston. Just 26% of respondents felt their retirements would be work-free. A slight majority (53%) told Pew they would probably work in some context in the next act of their lives, possibly at a different type of job; 21% said they had no intention to retire at all.1

Working longer may help boomers settle debts. A study published by the Employee Benefit Research Institute in January (Debt of the Elderly and Near Elderly, 1992-2013) shows a 2.0% increase in the percentage of indebted households in the U.S. headed by breadwinners 55 and older from 2010-13 (reaching 65.4% at the end of that period). EBRI says median indebtedness for such households hit $47,900 in 2013 compared to $17,879 in 1992. It notes that larger mortgage balances have been a major factor in this.1

Debts aside, some people just like to work. Those presently on the job expect to stay in the workforce longer than their parents did. Additional EBRI data affirms this – last year, 33% of U.S. workers believed that they would leave their careers after age 65. That compares to just 11% in 1991.2

How many boomers will manage to work past 65? This is one of the major unknowns in retirement planning today. We are watching a reasonably healthy generation age into seniority, one that can access more knowledge about being healthy than ever before – yet obesity rates have climbed even as advances have been made in treating so many illnesses.

Working past 65 probably means easing into part-time work – and not every employer permits such transitions for full-time employees. The federal government now has a training program in which FTEs can make such a transition while training new workers and some larger companies do allow phased retirements, but this is not exactly the norm.3

Working less than a 40-hour week may also negatively impact a worker’s retirement account and employer-sponsored health care coverage. EBRI finds that only about a third of small firms let part-time employees stay on their health plans; even fewer than half of large employers (200 or more workers) do. The Transamerica Center for Retirement Studies says part-time workers get to participate in 401(k) plans at only half of the companies that sponsor them.3

Boomers who work after 65 have to keep an eye on Medicare and Social Security. They will qualify for Medicare Part A (hospital coverage) at 65, but they should sign up for Part B (doctor visits) within the appropriate enrollment window and either a Part C plan or Medigap coverage plus Medicare Part D.3

Believe it or not, company size also influences when Medicare coverage starts for some 65-year-olds. Medicare will become the primary insurance for employees at firms with less than 20 workers when they turn 65, even if that company sponsors a health plan. At firms with 20 or more workers, the workplace health plan takes precedence over Medicare coverage, with 65-year-olds maintaining their eligibility for that employer-sponsored health coverage provided they work sufficient hours. Boomers who work for these larger employers may sign up for Part A and then enroll in Part B and optionally a Part C plan or Part D with Medigap coverage within eight months of retiring – they do not have to wait for the next open enrollment period.3

Prior to age 66, federal retirement benefits may be lessened if retirement income tops certain limits. In 2015, if you are 62-65 and receive Social Security, $1 of your benefits will be withheld for every $2 that you earn above $15,720. If you receive Social Security and turn 66, this year, then $1 of your benefits will be withheld for every $3 that you earn above $41,880.4

Social Security income may also be taxed above the program’s “combined income” threshold. (“Combined income” is defined as adjusted gross income + non-taxable interest + 50% of Social Security benefits.) Single filers with combined incomes from $25,000-34,000 may have to pay federal income tax on up to 50% of their Social Security benefits in 2015, and that also applies to joint filers with combined incomes of $32,000-44,000. Single filers with combined incomes above $34,000 and joint filers whose combined incomes top $44,000 may have to pay federal income tax on up to 85% of their Social Security benefits.5

Are boomers really the retiring type? Given the amazing accomplishments and vitality of the baby boom generation, a wave of boomers working past 65 seems more like a probability than a possibility. Life is still exciting; there is so much more to be done.

Mike Moffitt may be reached at  ph# 641-782-5577 or email:  mikem@cfgiowa.com.

website:  www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – marketwatch.com/story/only-one-quarter-of-americans-plan-to-retire-2015-02-26 [2/26/15]

2 – usatoday.com/story/money/columnist/brooks/2015/02/17/baby-boomer-retire/23168003/ [2/17/15]

3 – tinyurl.com/qdm5ddq [3/4/15]

4 – forbes.com/sites/janetnovack/2014/10/22/social-security-benefits-rising-1-7-for-2015-top-tax-up-just-1-3/ [10/22/14]

5 – ssa.gov/planners/taxes.htm [3/4/15]