Take-Aways from a Panel Discussion About Retirement

 

I recently attended a webinar about retirement planning that featured a panel of four retired Cooperative Extension educators who did the same type of community education work that I did when I worked for Rutgers Cooperative Extension in New Jersey.

 

Below are my key take-aways:

 

Retire to Something- Everyone on the panel concurred that it is wise to have a post-career plan before you retire, especially after an impactful and time-intensive career. Whether it is working part time, volunteering, starting a business, traveling, or care-giving, the choice is up to you.

 

Schedule “Me Time”- It is easy to get sucked into too many commitments after leaving a full-time job. Everyone just assumes that “you have the time.” It is important to schedule time for yourself and protect your schedule.

 

Do Retirement Savings Calculations- Several panelists noted that they could have retired sooner than they actually did and advised the audience to put some effort into calculating what you need to save during your working years to have “enough” in later life.

 

Prepare for an Orderly Exit- Clean out paper work files and decide what needs to stay at your workplace or what can be copied or scanned for personal use later. This is especially true if you plan to leverage your skills through a post-retirement encore career or entrepreneurship.

 

Buy a Personal Computer- Several panelists had previously only used a computer that belonged to their employer. They spoke about the importance of buying your own laptop or desktop to transfer important files to. Another way to do transfer files is using an external hard drive.

 

Consider Entrepreneurship- Several panelists started post-retirement businesses for meaning and purpose and structure to their day as well as income. Some also were not covered by Social Security during their primary career and started a business to earn Social Security quarters of coverage or to increase their benefits by replacing “0” or low-earning years with higher earnings.

 

Help Your Successors- Not everyone on the panel had a named replacement for their position when they retired. A few did. Either way, panelists recommended leaving an “orientation” letter and a jump drive with important files for their successor.

 

Use Your Leave Time- Take all your vacation days and a sabbatical, if possible, while you are working. Long stretches of time off will prepare you to be away from the office and test family relationships with an extended period of closeness.

 

Don’t Worry About Being Replaced- Every panelist recommended retiring when the time is right for you. Your employer will continue your work responsibilities…or not. That is not your problem. Don’t work longer than you want just to “save” your program or department.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Takeaways From a Conference About Retirement Savings

I recently attended (virtually) a conference about retirement savings sponsored by the Employee Benefit Research Institute (EBRI). Below are some of my key take-aways:

Funded Contentment- I ever heard that phrase before. It means a person’s ability to underwrite a happy and meaningful life. The focus is on having enough money instead of reaching a specific number (i.e., dollar amount of retirement savings). Instead of a “greed is good and more is better” mentality, many retirees want to focus on meaning and purpose in later life.

Narrative Species- One speaker noted that humans are not a “numeracy species” focused on math and numbers but, rather, a narrative species. In other words, people learn best about personal finance (and other topics) through stories and case study examples.

Automatic Non-Decisions- An easy way for people to save money for retirement is to “turn decisions into non-decisions.” In other words, take action once to automate financial transactions such as payroll deductions for a 401(k) or regular automatic deposits to buy stock or mutual funds.

The Impact of Vividness- When people’s “future self” is made vivid through aging apps and other tools, they are more likely to make decisions and sacrifices today to have a better future in later life. For example, they might save and invest more money and eat more healthy food.

RMDs as an Income Withdrawal Strategy- Findings from a study of the effects of increasing required minimum distribution (RMD) age from 70.5 to 72 to 73 were reported using data from a sample of over 3 million IRA owners. The study found that not a lot of people take RMDs until they are required to do so. As the RMD age got pushed back, so did the frequency of people taking later distributions. In other words, changes in RMD age as a result of the two SECURE acts affected investor behavior because many retirees use RMD rules as a default income withdrawal strategy.

Retiree Financial Challenges- Retirees with significant sums in tax-deferred accounts are facing challenges from RMDs, which can trigger tax on Social Security, higher income taxes in general, and higher Medicare premiums call IRMAA. Even still, people have an aversion to withdrawing money from tax-deferred accounts earlier than RMD age.

The Impact of Guaranteed Income- Older adults with guaranteed lifetime income (e.g., pension or annuity) are more likely to spend money and less likely to feel financial stress than those who withdraw money from investments to pay living expenses. The latter group is subject to longevity risk (risk of outliving savings) and sequence of returns risk (risk of withdrawing funds during a market downturn) and tend to hold back on spending. The #1 fear of retirees is running out of money.

Cultural Norms- In some cultures, family members serve as a de facto “emergency fund” for each other. This expectation can hinder the financial progress of those who save. Some people may want to have a place for their money that relatives don’t know about because it is hard to say no to family members. 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Reinventing Retirement: Customizing Your Third Third

 

People’s lives can grouped into three basic chapters: youth/education, career, and post-career (a.k.a., retirement). In the first chapter, our lives are controlled by parents and teachers and, in the second, people have career and/or family responsibilities. 

It is not until the third chapter that many people have the ability to decide what they want to do and who they want to be.

 

People spend about 30% of their adult lives in retirement. I recently attended a presentation called Reinventing Retirement and below are seven take-aways about this final phase of life:

 

Freedom and Flexibility- Later life provides a long-awaited opportunity to “customize” your lifestyle. Of course, people have different tastes, interests, and personal situations that influence what they expect but, for most older adults, it’s about having more time, freedom, and flexibility than before. The question then becomes what to do with that time and freedom.

 

Retirement’s Many Faces- Lifestyles in retirement include completely stopping work, pursuing a new line of work or starting a business, more actively volunteering, spending more time traveling, pursuing hobbies and interests, caring for loved ones, and more. A phrase used several times during the class was “If I’m not dead, I’m not finished.”

 

Current Retirement Trends- Baby Boomers have more discretionary income than previous generations of retirees. They are redefining the meaning of retirement in many ways including retiring later, continuing to work, and unretiring; finding new ways to make and maintain social connections; increased focus on health and fitness; and pursuing lifelong learning.

 

Retiring “To” Rather Than “From”- It can be stressful to leave the working world, particularly for people whose identity was wrapped up in their job. It is, therefore, essential to plan your next move. Without having something to retire to, people can feel a loss of importance and daily time structure and miss work-related interactions and friendships.

 

Ageism and Discrimination- Just because many older adults want to work does not mean they can easily find a job. Ageism and age discrimination in the workplace are commonplace and an AARP survey found that two-thirds of older adults have seen or experienced it. Increasingly, older adults are getting around that problem by working for themselves or buying franchises.

 

The Social Side- Many of today’s retirees do not live in close geographic proximity to family. Instead, they create a sense of family with people who are not necessarily blood relatives. A growing trend among people who choose to relocate is recruiting friends to become neighbors.

 

Life-Long Learning- Intellectual stimulation isn’t just for the young. Continuous learning is an important investment in brain health and a key anti-aging strategy. It can also help older adults discover and develop new talents. There are always new things to learn and try. One recommendation given at the class was to set a goal to try something new every month.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Finding Meaning and Purpose in Later Life

 

The statistics are startling! According to a 2020 study, 28% of retirees suffer from depression. That’s almost 3 in 10 older adults! As blogger Fritz Gilbert wrote in his Retirement Manifesto blog, “that’s a shockingly high number and far too little is written about this problem.” He went on to note that “those forced into retirement (i.e., through downsizing or illness) are especially prone to experiencing the challenge of depression.”

 

One reason so many older adults are depressed is lack of a fulfilling sense of purpose (a.k.a., a motive “to get up in the morning” or, as the Japanese call it, ikigai, loosely translated as an overriding passion that adds joy to life). Gilbert notes, “retirement is a big adjustment, with the loss of many of the non-financial benefits once received from the workplace (sense of identity, purpose, relationships, structure, etc.) coming as a surprise to many.”  

Research indicates that people with a strong sense of purpose are happier, healthier, and live longer. Below are five strategies to navigate retirement to find meaning and purpose in later life:

 

Develop a New Descriptor- As I note in my book, Flipping a Switch, retirees need a new off-the-cuff answer to the “What Do You Do?” question to avoid awkward silences or outdated descriptions of previous work. Responses can reflect new jobs, volunteerism, creative works, or care-giving roles. They can also be humorous; i.e., “whatever I want” or “as little as possible.”

 

Focus on Four Pillars- Research by the investment firm Edward Jones and Age Wave noted that there are four key pillars to a fulfilling retirement: good health, family, a strong sense of purpose, and financial security. The Edward Jones online My Priorities quiz is a useful tool to identify personal values from among competing spending choices.

 

Find Role Models- Older adults who are living a joyful and fulfilling life can provide valuable insights. Take the time to interview them and ask questions like “What is a typical weekday like?,” “What activities bring you joy and purpose?”, “What are new activities that you tried for the first time in retirement?”, and “What part of your former job do you miss the most?”

 

Use Planning Tools- Activities in later life typically don’t happen without planning. On page 83 of Flipping A Switch is a reproduceable Financial Bucket List worksheet with over dozen lines to list planned activities (e.g., visiting national parks, sky diving, writing a book, starting a business, taking courses, reconnecting with family or friends, and family genealogy). Another popular planning tool is a Retirement Vision Board with photos or clippings that show memories that people want to create in the future (e.g., travel, encore career, and volunteering).

 

Practice Identity Bridging- Not everything associated with peoples’ pre-retirement life needs to disappear after their final paycheck. Far from it! Instead, retirement transition experts recommend asking the question “What activities (e.g., professional association memberships or volunteer roles) do I want to carry over from my past into my future?

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

 

Ten Benefits of Self-Employment in Later Life

 

Almost half of all U.S. workers age 65-69 are self-employed as are over two-thirds (68%) of those age 75-79. For almost four years, I have been a full-time financial education entrepreneur. For 27 years prior, Money Talk was a “side hustle.” For this post, I decided to reflect upon ten benefits of self-employment in later life that I (and other older entrepreneurs) have experienced:

Additional Income- A successful business provides additional cash beyond Social Security and other expected sources of income in later life. Net business earnings can pay living expenses or provide cash for “extras” such as travel and entertainment and home upgrades. Earning $40,000 in business income is equivalent to withdrawing 4% of a $1 million retirement portfolio.

 

Higher Social Security Benefits- This can happen in two ways. First, self-employment income  can replace low earnings from a worker’s teens or 20s in Social Security’s 35-year benefit calculation formula. Second, earning net business income may allow someone to postpone claiming Social Security beyond full retirement age and benefit from delayed retirement credits.

 

Tax Write-Off for Self-Employment Tax- On line 15 of Schedule 2 (for a 1040 form), self-employed workers can write off the deductible portion of their self-employment tax (calculated on Schedule SE), which will lower adjusted gross income (AGI), a trigger for many other taxes.

 

Tax Write Off for Health Insurance- On line 17 of Schedule 2, self-employed workers can take an “above the line” deduction for health insurance, which lowers their AGI. For older entrepreneurs, Medicare Part B and D premiums and IRMAA, for both themselves and their spouse, can be written off against net business income, effectively making Medicare “free.”

 

Tax Deductions- Tax deductions that entrepreneurs can take include continuing education, mileage, home office expenses, professional dues and certifications, and office expenses.

 

Structure, Meaning, Purpose, and Creativity- Entrepreneurship provides structure to an older adult’s day as well as the satisfaction of doing something meaningful, especially if it helps others. There is no boss to “call the shots” and fewer limits on how/when work gets done.

 

Flexibility- Many older adults who want to work in later life also crave flexibility. Self-employment provides this in spades as entrepreneurs set their own work hours and days off.

 

Back-Up Income- When older adults start a business, they often have back-up income sources such as Social Security, a pension, or an annuity. This makes entrepreneurship less risky in later life versus young entrepreneurs who may rely on a business as a primary source of income.

 

Continued Growth and Learning- Entrepreneurship requires older adults to stay mentally sharp by keeping up with the latest information in their field and with technology advances.

 

Better Mental Health- One recent study found that self-employment is negatively associated with depression among aging workers, although this relationship weakened over time. The researchers concluded there are substantial health and well-being benefits to self-employment.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Flipping a Switch: Lessons for Younger Adults

 In 2020, I wrote the book Flipping a Switch to describe 35 transitions experienced by older adults. The target audience was clearly the age 55+ set, but occasionally I am asked if younger adults can also benefit. My answer: an enthusiastic Yes!

Below are eight ways that Flipping a Switch content may be useful to younger readers:

 

Understanding Your Parents Time Horizon- An insightful chapter is Green Bananas, ROLE Calculations, and Lasts, which describes the changed time orientation of older adults who have lived more years than they have left to live. Understanding this mindset is critical.

 

Tax Diversification- Sprinkled throughout the book are references to required minimum distributions (RMDs) and their impact on older adults’ taxes. Younger adults are advised to save for retirement in a combination of tax-deferred, taxable, and tax-free accounts.

 

Savings Check-Ups- Chapter #1 describes “super saver” ants who accumulate large sums during their careers and have difficulty “spending down.” Young adult ants may want to do periodic savings reviews and enjoy bucket list experiences early in life if they can afford it.

 

Bridge Activities- Several chapters in Flipping a Switch talk about keeping busy and finding fulfillment in later life, including continued work in some capacity. Young adults can lay the groundwork for this with side hustle “bridge jobs” and/or volunteer activities.

 

Social Security Benefits- Younger adults can plan proactively to boost this important source of income in later life by limiting work history gaps and through side hustle income sources for government workers in jobs that do not participate in Social Security.

 

Family Story-Telling- In Flipping a Switch, older adults tasked with sharing family stories were advised to groom a “successor storyteller” to transfer stories, photos, and documents (e.g., Ancestry.com reports and birth/death certificates) to. Interested younger adults should step up.

 

Good Health- Good health is a constant theme as people gain about 2,500 “free” hours when they are no longer working: time for nutritious meal preparation, physical activity, etc. Young adults need to practice good health habits, also, to increase their likelihood of a healthy old age.

 

A Good Ending- The last chapter of Flipping a Switch describes things that older adults can do to assure a peaceful and orderly end to their life. Unfortunately, not all people make it to their golden years, so planning is important at any age. Key tasks include the preparation of legal documents (will, living will, durable power of attorney) and organizing financial records.

 

In summary, a book written for older adults has many useful insights for people in their 20s, 30s, and 40s. The overall message is that everyone has "switches to flip" and that planning ahead for future life transitions is useful. 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Retirement- Now What? Key Take-Aways from a Seminar for Older Adults

Being the author of a book about transitions in later life, I am always on the lookout for new information about this topic. I recently attended a face-to-face class called Retirement-Now What? that focused on the same transitions I wrote about.

The class started with two questions for each participant: are you retired? and are you happy? When it was my turn to respond, I reiterated a long-standing description of my current status: “No, I am not retired. I am a full-time financial education entrepreneur.” I also stated I was happy because I love my work, my short (3 second) commute, my new house in Florida, and the flexibility I have to take time off to have lunch with neighbors, play bocce, or enjoy other pursuits.

 

Unfortunately, not all participants felt the same way. A 74-year-old man stated he was unhappy with his life, three recent moves, a spouse that “doesn’t want to do anything,” and his wife’s dog that keeps him tied to his house. He also noted that he missed the creativity and connections that he received from his previous job.

 

A former nurse (for 42 years) stated that she was “bored out of her mind” and “borderline depressed.” She missed her career and the sense that she was helping others. Another participant had a husband with dementia and was angry that she was forced to retire before she planned. Someone else noted that her husband died in an unhappy state shortly after retiring: “he never developed a sense of himself and golf got boring.”

 

As each participant shared their story, the 84-year-old instructor shared tips from psychological research (she was a former psychology professor!) and her own lived experience. Her basic message was that retirement is a process and that people’s lives will change many times throughout later life. Below are eight take-aways from the class discussion:

 

¨    Retirement Can be Stressful- Program participants noted financial and social/emotional challenges. According to the widely used Social Readjustment Rating Scale (a.k.a., Holmes and Rahe Stress Scale), retirement is #10 on a list of 43 stressful life events including death of a spouse (#1), divorce (#2), marriage (#7), and being fired at work (#8).

 

¨    There Are Many Changes- Participants mentioned living on a reduced income, changes in social interactions, time use challenges (i.e., having nowhere to go), no boss telling them what to do, casual wardrobe changes, and the realization that they are in the last part of their life and may be buying things (e.g., a car or appliance) for the last time.

 

¨    Identity Loss is Common- When people exit the workforce, they are no longer whatever career role they were before and can lose their sense of identity. It is important to replace things that are lost such as new friends and activities (especially in a new location) and new outlets for creativity and service (e.g., freelance work and volunteerism).

 

¨    Retirement is a State of Mind- Retirement is the beginning of a new chapter of life- not the end of it. A key to success is deciding how to approach it and what to do with big chunks of free time that become available. Many retirees want to feel productive, useful, and of value/service to others, so finding ways to make contributions is an important task in later life. As people change over time (e.g., 60s to 80s), people around them can change also.

 

¨    Time Use Planning is Essential- People need structure. The program facilitator suggested organizing time into chunks (e.g., meals, reading, exercise) to avoid feeling totally “adrift.” Time-shift daily activities as needed according to weather conditions (e.g., cold winters and hot summers), medical appointments, and other scheduling needs.

 

¨    Experimentation is OK- Try new things and see what sticks. Continue activities you like and drop those that you don’t. Unlike workplace situations, there is no pressure in retirement to do things perfectly and not make mistakes. The stress that many people feel in retirement is stress that they, themselves, create.

 

¨    The Past is in the Past- Nobody cares (much) about what retirees used to do. This is a difficult transition for many people and contributes to feelings of isolation, uselessness, and “being put out to pasture.” Some of the happiest retirees practice “identity bridging” and find ways to carry over parts of their pre-retirement life into their later years.

 

¨    Key Questions to Ask- The presenter suggested answering the following questions when deciding how to create your life in retirement: Did (Do) I really want to retire? How do I feel about it deep inside? Who wanted to retire: me or someone else (e.g., a spouse)? How do I see myself right now? How do I imagine my new life? What are my talents? What do I like to do? What did I want to do at 30 and never got around to? and What dreams did I not follow?

 This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

The Two Sides of Retirement: Financial and Non-Financial

 Earlier this year, I viewed two very different webinars about retirement. They were actually scheduled at the same time so I recorded one while I watched the other so I could view both.  One webinar sponsored by The American College of Financial Services covered financial topics such as income taxes, required minimum distributions (RMDs), qualified charitable distributions (QCDs), and income-related monthly adjusted amount (IRMAA) Medicare premium surcharges.

The second webinar by Retirement Researcher described six stages of retirement and a host of non-financial considerations. The remainder of this post will summarize key take-aways from each of the two webinars, many of which are also discussed in my book, Flipping a Switch.

Financial Planning Take-Aways

 

¨     Tax Deferral ≠ Tax-Free- RMDS must begin at age 72 and many people start withdrawing retirement savings at this time. However, taxpayers with tax-deferred retirement savings accounts (e.g., 401(k)s, 403(b)s, and traditional IRAs) can begin making penalty-free withdrawals starting at age 59½. The longer people delay RMDs, the more likely their balance will grow, resulting in larger RMD withdrawals in later life that are taxed as ordinary income.

 

¨     Tax Planning is Essential- A webinar speaker noted that taxpayers should always pay taxes at the lowest rate possible. For many taxpayers, that could be now as tax rates are set to increase on 1/1/26 as a result of a sunset provision in the Tax Cuts and Jobs Act. For example, under the TCJA, the 12% tax rate will go back up to 15%, the 22% tax rate up to 25%, and the 25% up to 28%. Many older adults could end up paying much more in taxes soon.

¨     IRMAA Planning Can Help- High-income Medicare beneficiaries with a 2020 modified adjusted gross income (MAGI) income over $91,000 (single) or $182,000 (mfj) pay IRMAA surcharges in 2022. This is because there is a two-year look-back period. The take-away is to try to avoid pushing MAGI above the IRMAA income thresholds. Even $1 of income over five IRMAA breakpoints can cost hundreds or thousands of dollars in extra Medicare costs.

¨     Controlling MAGI- MAGI is the trigger for many extra taxes including IRMA surcharges and taxes on Social Security benefits and net investment income tax (NIIT). Taxable traditional IRA distributions (such as those made for a Roth IRA conversion) and RMD withdrawals increase income and MAGI, which can increase taxes. A qualified charitable distribution (QCD) from a traditional IRA keeps income out of MAGI. Taxpayers must be age 70½ to qualify for a QCD. Planning ahead is key. For example, a taxable Roth IRA conversion at age 63 could increase MAGI enough to trigger IRMAA at age 65.

 

Non-Financial Take-Aways

 

¨     Life Planning is Essential- The webinar speaker, Dan Veto,  noted that many people “just show up” for their first day of retirement with very little advance planning on the non-financial side. Unlike meetings that last 1-2 hours, weddings (a day or weekend), vacations (1-2 weeks), and higher education (4-5 years), retirement can last decades and many people fail to plan. Planning helps reduce uncertainty and increases the likelihood of a desired outcome.

 

¨     Life Expectancy Realities- In 1935, someone who lived to age 65 had a life expectancy of six years. In 2018, a 65-year old’s life expectancy almost tripled to 17 years and, for some, could be 25 or 35 years. That is a lot of free time to fill and to keep busy and engaged. Some people thrive with new-found freedom in retirement while others struggle.

¨     Stages of Retirement- Just like there are nuances between tweens at age 11 and teens starting at age 13, there are differences among older adults as they progress through their 60s, 70s, 80s, and beyond. Seven stages were described:

o   Euphoria!- A short “Every day is Saturday” and “Freedom from…” phase that usually last months, not years.

o   What, That’s It?- When completely unstructured time becomes unfulfilling and boredom sets in.

o   Re-Engagement-Where people feel a sense of accomplishment through a portfolio of meaningful activities.

o   Grandparenthood- When older adults with grandchildren have a new center of attention for their family.

o   Care-Giving- When care-giving for a spouse or loved one becomes an increasing focus of one’s time.

o   Widowhood- The most stressful life-changing event where married older adults must “copilot” life alone.

o   Decline- Increasing physical or mental impairment that can last weeks, months, or years.

 

There are a lot of “moving parts” in planning your life “to retirement” and then “through retirement.” 

The key to success is planning for both areas of later life, the financial side and non-financials such as daily activities and physical health.

This post provides general personal finance information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Retirement Research Results and Recommendations

 

I recently attended several webinars and listened to several podcasts about issues related to retirement planning and personal finance issues in later life. Below are nine of my key take-aways:

¨     Plans Often Change- According to the 2021 Retirement Confidence Survey (RCS) from the Employee Benefit Research Institute (EBRI), workers said they plan to retire at a median age of 65 and retirees said they actually did at age 62. Thus, people don’t always end their careers when they plan to. According to the EBRI RCS, 46% of the retiree subsample said that they retired earlier than planned and 6% retired later.

 

¨     Waiting to Retire Has Benefits- In addition to providing more time to save money (e.g., in an IRA and/or a 401(k) or similar employer retirement savings account) and earn higher pension and/or Social Security benefits, working longer delays the need to take withdrawals from retirement savings and see balances decline. Postponing withdrawals from tax-deferred accounts also postpones income taxes due on these withdrawals

 

¨     Many Workers Want to Phase Out- According to the EBRI RCS, 51% of workers said that they expect to have a gradual reduction in their work hours over time (like a dimmer switch) instead of an immediate exit from the workforce (like an ‘on-off’ switch). Unfortunately, many employers and/or jobs are not set up to do this and phased retirements often do not occur. Once retired, most people stay retired. It is mostly a “full stop.” Workers who want to continue working often need to develop their own plans to “phase out.” It is risky to plan on continued income from work in later life and then not have that source of income that you are counting on.

 

¨     Certain Expenses Will Likely Increase- Among the budget categories for increased spending in retirement that many retirees do not fully expect are medical and dental expenses and income taxes for retirees with large savings nest eggs once required minimum distributions (RMDs) begin at or before age 72. Travel and entertainment costs and gifts are other household expenses that often increase and are underestimated.

 

¨     Spending Down Savings is Difficult- The EBRI RCS reported that 37% of retirees want to increase their assets during retirement and 42% want to maintain what they have for a total of 79% who want to hold on to their money. Their reasons mirrored those that I wrote about in my book Flipping a Switch: fear of the unknown (e.g., long-term care costs), desire to leave an inheritance, and not wanting to experience the psychological pain of loss that occurs when account balances go down after withdrawals are made.

 

¨     COVID-19 Had Mixed Impacts- A webinar speaker described “push and pull” effects arising from the pandemic. Some older workers had reasons to continue working longer than planned (e.g., more time to save and recover market losses, lenient employer work-from-home policies, and dashed travel plans resulting in a “I might as well just continue working” mindset). Other workers exited the workforce earlier than planned due to layoffs, fear of contracting COVID-19 at work, or a new mindset about priorities for how to spend their time.

 

¨     The Security of a Regular Income- Labor economist Teresa Ghilarducci noted on a podcast that knowing that you have enough money (whatever the amount) to last the rest of your life is more valuable than having that same amount of money in an account that you have to manage. There is much less stress when people know that they have “enough” and do not need to actively manage savings withdrawals.  Fear of running out of money to last their lifetime is a common fear of older adults.

 

¨     Hold Family Conversations- There are many financial issues in later life that require family communication, especially estate planning. As a conversation starter, list key financial data in a notebook or on a financial inventory worksheet. Next, find a quiet, dedicated time to discuss the information with family members. Use non-threatening language to overcome everyone’s reticence to discuss sensitive topics. For example, frame discussions with the mindset of “let’s take care of each other.”

 

¨     Two Regrets in “Old-Old” Age- A podcast speaker spoke about a study that asked 80- and 90-year olds for advice that they would have given to their “60-something year old selves.” Two big regrets surfaced from these elders: 1. They wished they had not bought so much “stuff” in their 60s because they are now running out of money and 2. They wished that they had not quit working as early as they did because they were bored.