7 Threats To Your Retirement

By Roger Wohlner posted May 9, 2012

Saving for our retirement becomes more and more challenging each day. Longer life expectancies, fewer traditional pensions, and volatile investment markets are the most obvious challenges. Beyond that, here are seven other threats to your retirement:

Even if you have a traditional pension plan, those benefits can change. Your employer can't take away benefits you've already earned, but benefits going forward can be reduced. Traditional pension plans have experienced losses during the market decline, which will require additional contributions from companies. Companies might reduce benefits for newer employees and/or freeze plan benefits for existing workers. In the latter case, you would cease to accrue any further pension benefits. Keep an eye on your pension plan so you know if your employer makes changes.

Switching jobs can affect your retirement benefits. If you have a traditional pension plan, don't change jobs without considering the impact on your pension benefits. Many plans have a five-year time frame for vesting into a benefit. The same applies to 401(k) plans with matching employer contributions. You may find staying at your job a while longer will significantly increase your benefits.

Don't forget about pension benefits from previous employers. Many employees leave a company without realizing they are entitled to pension benefits. Before changing jobs, check with your employer to find out what benefits you are entitled to. Then keep track of the company so you can claim benefits when you retire.

Early retirement can significantly reduce your retirement benefits. Sure, it sounds great to retire before age 65 with company pension benefits. But don't just look at how much you'll receive when you retire early. Also consider what you would receive if you wait until normal retirement age. Retiring early can dramatically lower your monthly pension benefit for several reasons: You don't have as many years of service, salary increases you would have earned aren't considered, and those extra years of benefits cause a large actuarial deduction in benefit calculations.

You may not be able to count on health insurance benefits after retirement. Due to rapidly increasing costs for health insurance, many companies are either phasing out health insurance benefits for retirees or increasing retirees' share of the cost. While Medicare is still available once you turn age 65, those benefits don't cover all medical costs. Whether or not you can count on health insurance benefits is often a significant factor in deciding whether you can retire before age 65.

Social Security benefits are changing. Normal retirement age is gradually increasing from age 65 to age 67, a change affecting anyone born during or later than 1938. You can still receive reduced benefits at age 62, but the permanent reduction in benefits is increasing from 20 percent to 30 percent. These changes are meant to encourage you to retire at a later date.

Decide carefully before taking a lump-sum distribution. Some traditional pension plans allow lump-sum distributions instead of monthly pension benefits. Use that option with care. While the amount of money might seem large, are you sure you can invest it and earn more than the monthly pension option?

Planning for retirement was never easy. Make sure you have a financial plan in place and that you have considered all of your options before deciding when to retire.

Roger Wohlner, CFP®, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill., where he provides advice to individual clients, retirement plan sponsors, foundations, and endowments. Read more about Roger here.

Baby Boomer Handouts Hamper Saving

The following was shared by  Lisa Ann in Active Aging: Baby Boomerfs living life to the Max on Linkedin
 
Ameriprise Financial in 2007 surveyed three generations—boomers, their children and their parents—and learned that less than half of boomers (44%) were trying to save for retirement while also providing support for their children and parents.

Fast forward to December 2011: The portion of boomers saving for their own retirement has fallen to one in four (24%)—but they’re still helping out their families. More than half (58%) are assisting their aging parents, including helping them pay for groceries (22%), medical expenses (15%) or utility bills (14%).

“It’s disturbing that people are still providing the same, intense level of support, up or down, and they’re five years closer to retirement,” says Suzanna de Baca, Ameriprise’s vice president of wealth strategies. “This is not registering with boomers.”

The phone survey included 1,006 baby boomers—born from 1946 to 1964—who have $100,000 or more in investable assets, 300 parents of boomers and 300 children of boomers who were at least 18 years old. The survey had a margin of error of three percentage points for the boomers and six points for the other two groups.

At the same time that boomers are providing all kinds of handouts to their children—paying utility and insurance bills along with college tuition and car payments—they also have “this weird level of guilt and concern” that their children don’t know how to manage money, de Baca says.

Meanwhile, the children receiving the handouts say their boomer parents haven’t talked to them about money—and that they are worried that their parents won’t have enough savings to retire.

“It seems that the people being squeezed right now are the boomers, and that there are two generations in some serious denial,” she says.

Her advice for boomers struggling with their own retirement-savings goals: “You have to cut the cord. And you have to assume your adult children may not be able to provide for you someday.”

The research found that boomers say that given a choice between paying their kids’ credit-card bills or saving for retirement, they’d save for retirement—“but we found nothing backing up that they’re really doing it,” de Baca says

Gems of Mind numbness

Thanks to Joanne for these gems of Mind numbness

I changed my iPod's name to Titanic. It's syncing now

When chemists die, they barium.

Jokes about German sausage are the wurst

I know a guy who's addicted to brake fluid. He says he can stop any time.

How does Moses make his tea? Hebrews it.

I stayed up all night to see where the sun went. Then it dawned on me

This girl said she recognized me from the vegetarian club, but I'd never met herbivore.

I'm reading a book about anti-gravity. I just can't put it down.

I did a theatrical performance about puns. It was a play on words.

They told me I had type-A blood, but it was a Type-O.

PMS jokes aren't funny; period.

We are going on a class trip to the Coca-Cola factory. I hope there's no pop quiz.

I didn't like my beard at first. Then it grew on me.

Did you hear about the cross-eyed teacher who lost her job because she couldn't control her pupils?

When you get a bladder infection urine trouble.

Broken pencils are pointless.

I tried to catch some fog, but I mist.

What do you call a dinosaur with an extensive vocabulary? A thesaurus.

England has no kidney bank, but it does have a Liverpool.

I used to be a banker, but then I lost interest.

I dropped out of communism class because of lousy Marx.

All the toilets in New York's police stations have been stolen. The Police have nothing to go on.

I got a job at a bakery because I kneaded dough.

Velcro - what a rip off!

A cartoonist was found dead in his home. Details are sketchy

Venison for dinner again? Oh deer!

Thinking about estate planning

I am big believer in the old adage "If you build it they will come."

I was talking to my physiotherapist and she told me she was leaving the clinic to take another opportunity. I congratulated her and said that I believe that opportunities are always knocking at one's door.

The problem is that most of the time, we are not in a receptive state of mind to see them. I said to her that since she had seen the opportunity she was ready to move on and that was a positive situation. I will have another physiotherapist assigned to me and I look forward to that. Change is good.

After that conversation, for some reason I started thinking about estate planning and came across some ideas and information that I think would be useful for that process.  The first is an article in the Wall Street Journal here called the 25 documents you will need before you die. The second is the Estate Document organizer website  The following is from the website and the link to the site is here

Hello, welcome to the Estate Documents Organizer, a master-planned, 3-ring binder with A-Z tabs and easy-fill forms.  I created this system for myself and my family to save time and stress in the estate management process. This modernized documents organizer includes the newly recognized field of digital assets--your "online life." Both my family and our professional adviser's feel this is an invaluable tool. Emergency Preparedness and  peace of mind for the future are gifts I want to share with you.