Today's Guide to Retirement Planning

by David Hays, Doug Hughes

Overview

"The word 'retirement' for today's retirees and soon-to-be retirees means exactly the opposite of what it meant for our parents and grandparents. It now means beginning rather than stopping. What will your next beginning be? Today's Guide to Retirement Planning, a resource for adults ages fifty and over, helps you figure it out. This is a book that actually forces you to prioritize by taking you through a personal and financial inventory to create a plan that you will follow because it's your plan. The section on the big ten major financial planning roadblocks is, by itself, worth the price of admission and invaluable for everyone. This book will guide you with practical advice not only on tax, investment, and estate planning but also in coordinating that with your own personal wish list for your next beginning."

-Ed Slott, CPA, founder of www.irahelp.com

"Baby boomers are reinventing retirement. In Today's Guide to Retirement Planning, financial advisers David Hays and Doug Hughes offer important guidelines for adults on the cusp of this unchartered territory. Throughout our working lives, we tend to focus on how much money we need to save for retirement. But little attention is given to how we will spend our time once we get there. David Hays offers some thoughtful questions to help preretirees envision their next chapter, how to pay for it, and how to adapt if plans change. It's essential reading for future retirees."

-Mary Beth Franklin, contributing editor, InvestmentNews

Product Details

ISBN-13:	9781496968807
Publisher:	AuthorHouse
Publication date:	02/18/2015
Pages:	164
Product dimensions:	6.00(w) x 9.00(h) x 0.38(d)

Read an Excerpt

Today's Guide to Retirement Planning

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By David Hays, Doug Hughes

AuthorHouse

Copyright © 2015 David Hays; Doug Hughes
All rights reserved.
ISBN: 978-1-4969-6880-7

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CHAPTER 1

PLANNING FOR RETIREMENT

Recently a married couple in their early 60s sat down in our office and began talking about their retirement dreams. The couple—we'll call them John and Mary Smith—were nearing retirement after working for more than four decades. John labored as a certified public accountant for several companies, Mary as a high school English teacher.

They were excited about their future, feeling confident that income from Social Security and a $750,000 nest egg would enable them to embark upon a new chapter in their lives. For them, retirement did not mean rocking chairs and TV reruns; siestas and shuffleboard. It meant a gateway to a promising new life brimming with activity and adventure.

John wanted to fulfill a pair of long-harbored dreams—learning Spanish and woodworking. Mary could hardly wait to launch a neighborhood supper club and begin volunteering with a child advocacy group. Together, they spoke with grade school giddiness about their plans to do more traveling, and learn how to ballroom dance.

As they unveiled their retirement aspirations, we couldn't help but notice the sparkle in their eyes and vibrancy in their voices. Together, they had worked more than 80 years in their professions. Now, as the curtain was about to close on their careers, they saw their lives spreading before them like a golden expressway—filled with boundless possibilities.

The Smiths represent a new breed of retirees, those who see their elder years not as a time to sit on the sidelines, but to stay in the game. A time to spread their wings and live in a way that fuels their passions and personalities. A time to make new friends, set new goals, and engage in new activities that foster a sense of meaning and purpose in their lives.

People like the Smiths crave an independent lifestyle that blends pleasure with purpose. They see retirement as the dawning of a new era, one overflowing with fresh challenges and opportunities.

Traditional view of retirement

This new take on retirement represents a distinct departure from the traditional view of retirement—namely that it's a ticket to Take-It-Easyville. This view, largely embraced by our parents' generation, held that retirement was a time to celebrate the cessation of work—sleeping in late and sipping lemonade while lounging in a hammock. The golden years were seen primarily as an extended vacation.

Our parents' retirement planning often focused solely on money—accumulating a large enough income stream through company pensions and Social Security to spend their retirement years in leisure and relative comfort. But they did not give much thought to how they would live those years, and as a result they often felt adrift and rudderless—struggling to find purpose in their lives and fill their days with meaningful activities. To a large extent, this traditional retirement perspective was held by people who worked at the same company for many years, then retired at 65 and began receiving Social Security and a comfortable pension based on a formula that took into account their salary and years of service. They didn't have to put a great deal of thought and planning into their retirement income because it was based on fairly predictable formulas. And for the most part, they didn't worry about getting their financial affairs in order until they were nearing the end of their lives.

Today, there certainly are some people who still embrace the traditional retirement view. Once they put in their 35 years with the company and get the gold watch, they want to do little more than play golf and chill out. They have reached the finish line and they're done. There's nothing wrong with that mindset, but we've found over the years that our clients who "retire to" rather than "retire from" tend to find more fulfillment in their golden years.

We've also seen some folks who begin their retirement devoid of dreams, but after being swarmed with requests to babysit grandchildren at a moment's notice and teach Sunday School and take meals to the sick, they decide they want something more out of retirement. They start thinking about things they've always wanted to do, but never had the time to do, and begin taking steps to turn those longings into reality.

Why things have changed

Today things are different. In our company we find that 75 to 80 percent of our clients have this new view of retirement. National surveys reflect the same trend. Only 22 percent of those 55 and older say they view retirement as a "winding down" or "extended vacation;" and when 50-to-75-year-olds were surveyed, 70 percent saw retirement as a time to "stay active and begin a new chapter."

But why this shift in thinking? Part of the answer is that peoples' working histories today look far different that they did a generation ago. Nowadays more people are self-employed, and most of them work for 4, 5, or 6 companies (often in differing capacities) during their careers. As a result, many retire without a significant pension—or no pension at all. And because many folks today are charting a more self-directed career path, they tend to take a more active role in their retirement planning. They have a tendency to take greater initiative in crafting a more active and independent retirement lifestyle.

But there are other factors at play. Due to a heightened awareness of the importance of exercise and a nutritious diet—in concert with significant advances in medicine—people today are enjoying longer and healthier lives. Indeed, Baby Boomers can legitimately expect to spend one third to one fourth of their lives in retirement. When Social Security was established in 1935, the average life expectancy of Americans was 61. Today, the average Baby Boomer will live to 87.

What's more, Americans are retiring earlier. Sixty-five percent are hanging it up before age 65. Early retirement, coupled with longer life spans, means those who focus full-time on fun during that segment of their lives run the risk of becoming bored. Nearly 80 percent of boomers expect to work in some capacity after they retire. Fifty-one percent plan to work full-time, and 28 percent predict they will work part-time.

New retirement opportunities

The new view of retirement affords you with a wealth of fresh opportunities. You may want to continue to work for pay, either full- or part-time. You may want to volunteer with a charity; renew old friendships or foster new ones; do some traveling; or become involved in a service club, faith congregation, hobby, or recreational activity. You may want to reinvent yourself by starting a new career, launching a business, or going back to school.

To help you experience the kind of retirement you really want, it is important to remember that retirement planning should not be focused solely on money. Sure, financial security will widen the scope of your post-career possibilities, but money alone does not guarantee a full, rich and purpose-driven life. It doesn't define your life now, or what it will be in retirement. And contrary to the messages we see in the media every day, you can have a fulfilling retirement without a bank account bulging at the seams. Have you seen the TV commercial featuring folks riding a bicycle, clipping the hedges, and talking with a neighbor—each with a dollar figure attached to their torsos? It's suggesting that if we can just expand our nest egg up to that magical number, we will be happy and fulfilled in retirement.

But no dollar amount can ensure inner satisfaction once we retire. That's because there are many other factors that will determine your happiness quotient. Take the social component, for example. Surveys show the most powerful predictor of satisfaction in retirement is a person's social network, not his or her wealth. One such survey found that two-thirds of Baby Boomers predict their happiness in retirement will stem primarily from their relationships with family and friends.

If it's true that what gives life its richest texture are social connections, then your retirement plan should provide opportunities for you to maintain and enhance your relationships with your spouse, children, grandchildren, and neighbors. It should allow you to deepen your long- held friendships, forge new friendships, and rekindle old friendships.

One of the beautiful things about retirement is that you have the luxury of thinking outside the box. Recently I (Doug) was on a Caribbean cruise and met a retired couple that were on their 23rd cruise. They told me they moved to Florida after retiring—where they kept their bags packed and waited for their travel agent to call them whenever he came across a good deal on a cruise. They were enjoying this particular 5-night tropical excursion for a total of $400 between them because they'd booked it at the last minute to take advantage of a special offer. They explained that because someone else did their laundry, cooked their meals, and washed the dishes, they were free to enjoy one another's company and do whatever they wished. And by eliminating other expenses such as car gas, restaurant bills, and utility costs, they found it was less expensive for them to live on a cruise ship than in their home.

New retirement responsibilities

But there's another side to the "new retirement" coin. Facing the prospect of having more years in retirement—not to mention more financial and lifestyle choices during those years—brings with it more responsibilities. The traditional retirement planning process was fairly easy. You would buy some life insurance from an agent, a handful of stocks from a broker, and some certificates of deposit at a bank. You then factored in your guaranteed monthly income from Social Security and your pension—and waited for those checks to begin arriving in the mailbox upon retirement.

But with changes to Social Security looming on the horizon and fewer and fewer companies offering pensions, you must become more engaged in your financial future. You have to spend more time educating yourself so you can make informed decisions and investment choices in a volatile economic environment. You have to evaluate where you are financially right now, then develop a comprehensive plan designed to make your retirement dreams come true.

The plan must have a cohesive investment strategy that incorporates a balanced mix of financial products—forming a coordinated portfolio that can provide you with a reliable lifetime income stream. It must clearly delineate where your income will be coming from and whether or not it's contractually guaranteed, which investments will pay what kind of interest or dividends and how often, and how a variable annuity might work in conjunction with an income annuity. The days of saying, "I'll just put away $500 a month, get an 18 percent return, and be a millionaire in retirement" are gone.

The plan must be comprehensive, containing a number of built-in contingencies that address all kinds of unforeseen scenarios—such as the loss of a job, health problems, disability, death, or changes to Social Security benefits.

There's an old saying in the financial planning world—"The three big risks in retirement planning are that you live too long, die too soon, or get too sick or hurt to work." A comprehensive plan must account for all three of those possibilities.

One more thing, even the best of retirement plans can't be carved in stone. It must be flexible. Due to an ever-evolving economy and the changing circumstances of life, you will need to periodically review your plan and make adjustments.

Start planning now

Whether you possess a new or traditional perspective on how you'll live your elder years, the time to start planning for retirement is now! Your happiness and fulfillment may depend on how well you map out and follow a plan that will take you where you want to go. If you develop a clear picture of what it will take to bring optimum fulfillment to your retirement years, you can start planning the financial strategies you'll need to turn that picture into reality.

You may feel you're just too busy to develop a clear vision of your retirement lifestyle, but just winging it is not good enough. It's like the old saying goes: "If you aim at nothing, you'll hit it every time." You need a plan.

We recently were reminded of this reality when Indiana University offered its employees age 60 and over an early retirement buy-out with a lump sum payment. Our office was inundated with 60-somethings who wanted to discuss the wisdom of accepting the offer. We found there was dramatic difference between those who'd been working with a financial advisor and planning for retirement and those who hadn't. The ones who'd been in planning mode for several years were concerned, but also cool and collected about their impending decision. Those who hadn't given their retirement much thought were visibly stressed out. The looks of concern etched on their faces were palpable—highlighting the needless emotional turmoil folks experience when they fail to formulate a retirement plan.

Taking self-inventory

We want to give you a simple exercise you can use to help you jump start the retirement planning process. It's a series of simple questions about your values, interests, and retirement expectations. Your answers—or the answers of you and your spouse—can help you design your own individual plan for living a meaningful and fulfilling retirement.

This exercise can be particularly helpful to married couples by helping them be certain they're envisioning the same kind of lifestyle in retirement. To assist you in developing a clearer vision of what you truly want your retirement to look like, we encourage you to answer the questions posed in the following nine categories—education and growth, health and fitness, leisure and recreation, spirituality, career and work, financial, home, relationships, and community and charity.

The queries are not meant to be comprehensive, but will hopefully trigger your thought processes and crystallize your plans and objectives in retirement. If you're married, it's helpful if you and your spouse answer the questions individually, then discuss your answers together.

These discussions can uncover conflicting attitudes or expectations that could lead to trouble down the retirement road. Take the matter of risk tolerance, for example. Over the years, we've found that many husbands and wives differ a great deal in their tolerance for financial risk. This often causes tension and conflict within the marriage. If the husband is a risk taker and his wife is not, he might beat his chest when the market is bullish—telling his wife he made the right investment decision. But if the market plunges, the wife might chastise him for being too much of a gambler with their life savings. This unending "blame game" can drive a wedge between them, poisoning their relationship.

You may find that you and your partner have differing thoughts about long-term health care insurance. A husband may feel it's too pricey, but if the wife has seen her parents' lifesavings eaten away when her mother had to enter a nursing home and fork over $75,000 a year for custodial care, she may be convinced long-term health care insurance is a must.

How you want to spend your leisure time must be discussed. Do you want to fish three times a week? Does your spouse plan to spend lots of time with the grandkids? Do both of you want to go on a cruise once a year? If so, the two of you can budget a sum of money each year to cover that expense.

How about your home? We often see people who move into a smaller home or condo when they retire, but oftentimes that smaller home is not necessarily a cheaper home—especially if it has the granite kitchen counter top you always longed for and the master bedroom of your dreams.

The unknowns are endless. Do you want to re-locate to be closer to your children and grandchildren, or is your mind set on snow birding to Florida each winter? Do you want to do more volunteer work or go on short-term mission trips with your church?

And here's a big one. How much financial support, if any, do you plan on giving your children and/or parents? Many of you are part of the "sandwich generation," providing care or financial support to your aging parents while doing the same for your grown children. The 2008 stock market crash cut the value of many elderly people's nest eggs in half, and the ensuing recession left scores of 20-somethings searching in vain for a job. Maybe that's why today's parents feel the age at which their children must be out of their house for good is 27—much higher than the age our parents' would have said it's time for their kids to leave the nest.

(Continues...)

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Excerpted from Today's Guide to Retirement Planning by David Hays, Doug Hughes. Copyright © 2015 David Hays; Doug Hughes. Excerpted by permission of AuthorHouse.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Contents

Introduction, vii,
1 Planning For Retirement, 1,
2 Needs And Expenses In Retirement, 14,
3 Retirement Hurdles, 22,
4 Available Income Sources, 36,
5 Retirement Plan Distributions, 76,
6 Investments, 90,
7 Insurance, Risk Management And Asset Protection, 118,
8 Estate Planning, 138,
About The Authors, 153,