By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, firstname.lastname@example.org
June 6-8, 2017, the eXtension Military Families Learning Network personal finance team provided a three-day series of webinars about various aspects of retirement planning (a.k.a., a Virtual Learning Event). The first webinar, by Kimberly Blanton from the Center for Retirement Research at Boston College, focused on statistics and research findings about retirement planning.
The overall message was twofold:
- Increasing numbers of American workers are at risk for falling short of the amount that they need to maintain their lifestyle in retirement.
- There are effective action steps that people can take to better their financial security in later life.
Some specific actions mentioned by Ms. Blanton were working longer and using home equity as a retirement income resource by trading down to a smaller home with lower expenses (downsizing) and/or using a reverse mortgage. She also mentioned the concept of a work years to retirement years ratio (the higher, the better):
- 1:1 if you work 30 years and have a 30 year retirement
- 2:1 if you work 40 years and have a 20 year retirement
- 3:1 if you work 45 years and have a 15 year retirement
A key take-away was that women gain more than men, on average, by claiming Social Security at age 70 versus age 62. This is partly because women are more likely than men to have gaps in their earning history due to child-rearing and care of aged parents. Working longer replaces “0” and low earning years with higher numbers.
The second webinar was by Mitch Anthony, author of the book, The New Retirementality. His overall message was that retirement, as we know it, is an “artificial finish line” and does not fit 2017 lifestyles well. When the concept of retirement was developed, people did not live very long afterwards. Today, people can live 2-3 decades after stepping away from a full-time career. The new “badge of honor” will be working in later life.
Mr. Anthony defined “work” as “an engagement that brings value to others and meaning to you.” It does not have to be for pay. He cited a study that found that “staying healthy” was the #1 reason given for continuing work. He also stressed that older adults bring valuable resources to jobs or volunteer activities: “intellectual, relational, and experiential capital.” In other words, skills, knowledge, and contacts honed over their careers.
Saving money was mentioned as the means to an end rather than an end in and of itself. Mr. Anthony mentioned that saving money gives people freedom to do what they want with their time. Another key point was that “old” is an attitude- not an age. People decide themselves, by their thoughts and actions, if and when they are “old.”
I taught the third webinar about strategies to catch up when you are behind on retirement savings. According to the 2017 Retirement Confidence Survey, only 61% of U.S. workers have saved money for retirement and 47% of those with savings have less than $25,000 saved including 24% with less than $1,000.
The key message from the webinar was that “all hope is not lost.” Time is still on the side of late savers in their 40s and 50s who may live another 40 to 50 years to earn compound interest. There are two general categories of catch-up strategies: 1. Spend less/save more NOW to increase savings (e.g., do freelance work for additional income) and 2. Spend less LATER to reduce the amount of savings needed (e.g., trade down to a smaller home).
The two categories of retirement catch-up strategies can also be combined. An especially effective strategy is retiring just a few years later than planned. By delaying retirement, people can continue to save in tax-deferred accounts, earn higher Social Security and/or pension benefits, and delay withdrawals from their savings.
The webinars are available for free viewing any time and each session is approved for 1.5 CEUs for AFCs through AFCPE and CPFCs through FinCert.Simply watch the recorded webinar and take a 10-question quiz. Pass with 80% or higher to receive a certificate of completion by email which you can exchange for CEUs through your accrediting agency. Find out more about these sessions here.