Gerry is only 60 and is at the top of his game. So why is he doing this?

The catalyst for Gerry’s surprising decision was actually a sad event, the death of a close friend. But his reasoning is more elegant and applicable to all of us who are 50+.

We want to take the working life off-ramp. We know there are more paths to take and more things to do at the end of that ramp.

Most younger folks haven’t realized this. They are too busy raising kids, working for the money, and thinking about the here and now. That’s not so bad except that they tend to believe the “nows” will always be here.

We – the members of the over-50 generation – know different. We know things the younger folks haven’t yet figured out.

We know that there won’t always be a “tomorrow.”

We know that money his nice but time is better.

We know that accomplishments at the office will not sustain our spirit or assure us that our life has meant something.

We know that we don’t know everything.

This list could go on. I don’t want to brag about baby boomers, because we’ve made plenty of mistakes. Let’s just say that life after 50 comes packaged with important accessories: experience and wisdom, earned the hard way.

Although I’m still working hard, I’ve mentally turned toward the working life off ramp. I’m loving it. I’ll give you three reasons.

I’ve shed myself of work I don’t like to do. People on the off-ramp can do that. We’re not trying to impress the boss and get promoted. What does getting promoted gain you except more responsibility and less time? You could say that my job and some of my former clients have been demoted on the “life-importance scale.”

I’ve simplified my life. People with experience realize that much of our “stuff” contributes very little to the pleasures of life. For example, my style test for clothes has migrated from “is it still cool?” to “does it have obvious stains?”

I can see a different future. Younger folks tend to work for the weekends and periodic vacations. I was one of them. Now that our kids are mostly educated, off the payroll, and not in jail, we can say “first mission accomplished.” New interests (and some long deferred) are there to be pursued, on our schedule.

I intend to stay on this working life off-ramp for a while and enjoy the ride. How about you?

FYI: I’m trying to blog my way to the AARP Orlando@50 conference. This blog post is an entry in their competition to find the official blogger to travel to and cover the event. Find out more about the conference here.

This is an article from Go To Retirement
Copyright 2010 Go To Retirement. All Rights Reserved.

Related posts:

1. Life Downsizing and Simplifying the Boomer Way I’m making tangible progress on my attempts to simplify and...
2. A Vacation as a Mini-Retirement I have been quiet on the blogs for over a...
3. Squandering the Kids’ Inheritance Are you planning on leaving an estate to your children?...

The focus is on baby boomers because we are the folks for whom the data is most valid. Here is what the EBRI said:

The baseline 2010 Retirement Readiness Rating™ finds that nearly one-half (47.2 percent) of the oldest cohort (Early Baby Boomers) are simulated to be “at risk” of not having sufficient retirement resources to pay for “basic” retirement expenditures and uninsured health care costs.

Households in the lowest one-third when ranked by preretirement income are simulated to be “at risk” 70.3 percent of the time, while the middle-income group has an “at-risk” level of 41.6 percent. This figure drops to 23.3 percent for the highest-income group.

I found it interesting that almost a quarter of even the high earners are in trouble.

You should read the entire report (available here) because it discusses the effects of different policy changes (Social Security and Medicare for example) on the retirement readiness outcomes.

On to some other reading:

Emily Brandon reports about another trend in retirement neglect: parents tapping retirement funds to pay for their kids’ college education. I have a 3 word comment: Don’t do that.

As I predicted earlier, the Social Security “do over” strategy is about to disappear. (The “do over” allowed a retiree to claim Social Security early and later pay back the benefits (without interest) and then claim a higher benefit.) According to a proposed new rule, a retiree can change his or her mind once, but only within the first 12 months of receiving benefits.

I am reading a newly published book by Ray Levitre, CFP® called “20 Retirement Decisions You Need to Make Right Now.” This book is unique in that it focuses on financial decisions that people should make when you are on the actual threshold of retirement, not years away. I know that I will agree with some of what he has written, including the chapter titled “Fire Your Broker.”

The Personal Finance Advice blog published a guest post on “Saving Our Savings” discussing the measures undertaken by a couple trying to survive unemployment without using up their savings. This could easily apply to someone trying to retire on minimal savings.

The Smarter Wallet blog published a round-up of posts on decluttering and simplifying your life. That has been a major push of mine over the past year. You should try it – very liberating.

I wrote a post for the On Retirement blog summarizing 5 Life Insurance Strategies for Retirement Planning.

Finally, there is always good stuff to read at the weekly Carnival of Personal Finance.

Related posts:

1. Boomer and Retirement Weekly Reader – VoIP Edition It’s been many weeks since I posted a round-up of...
2. Boomer and Retirement Weekly Reader – Home Repair Edition This past week contractors finished several projects on the exterior...
3. Boomer and Retirement Weekly Reader – Renewed Optimism Edition This has been a week for renewed optimism in the...

When I spoke to the trading desk yesterday about our order, he warned that everyone expected the 10-year TIPS to be auctioned at a slight premium. This turned out to be the case but not enough to discourage me from buying. We intend to hold these until maturity, as these are part of our plan to provide a guaranteed, baseline retirement income. The nominal interest rate (not including inflation adjustments) of these bonds is 1.25%.

Right now the Treasury Auction Calendar projects sales of 5-Year TIPS in October and 10-year TIPS again in November. We will probably be buying some of the 5-year TIPS although I am eager to see what the interest rate will be.  We have been accumulating 401(k) money in a Stable Value Asset Account to make TIPS purchases. This fund is only yielding 1.5%-2% so getting a risk-free 1.25% over the rate of inflation with TIPS is not bad for the guaranteed part of our retirement portfolio.

The bulk of our 401(k) assets remain in a “five way” couch potato portfolio.

Related posts:

1. Buying I-Bonds Online I just completed an online I-Bond purchase. The transaction will...
2. Should You Buy I-Bonds Now? It’s decision time again for those considering the purchase of...
3. More Inflation Fighting Weapons All long term investors need core holdings that will protect...

I will by purchasing some of these ten year TIPS inside my 401(k) plan. Buying TIPS at auction is the best way to obtain a more predictable and fair price, compared to the secondary market.

For more on why I am doing this, go back and read my post on creating a plan for guaranteed retirement income.

Here is the link to the Treasury Auction announcement page.

Do any of you own or plan to buy TIPS at auction or on the secondary market?

Related posts:

1. Creating a Plan for Guaranteed Retirement Income Regular readers of this blog may recall that I have...

First up is stuff that I’ve posted elsewhere. On my ToughMoneyLove blog, I wrote about how we are able to save money on phone costs using Gmail. I have to compliment my father (85+ and counting) for giving it a try and liking it. VoIP (voice-over-internet-protocol) free and for the masses.

I also wrote a post on ways to jump-start your retirement planning that was published by the On Retirement blog at U.S. News and World Report.

If you are looking for a unique way to boost your IRA earnings, consider social lending. PT Money writes all about a Lending Club IRA. I think there are opportunities for good returns using this strategy. However, it does take time to select and monitor your loan portfolio.

The Dough Roller published an excellent summary of currently available personal finance software products. As I’ve mentioned recently, I’m migrating our finances from Quicken to a comprehensive Google Docs spreadsheet that I’ve been developing and expanding. The reason is that I need to safely and quickly access our information from multiple computers from multiple locations.

The My Money Blog wrote about a book called “Getting Organized in the Google Era.” I’m on the “organize to simplify” path myself and found the summary interesting.

Also, pay a visit to this week’s Carnival of Personal Finance for some helpful articles.

Have a great weekend!

Related posts:

1. Boomer and Retirement Weekly Reader – Super Commercials Edition I’m writing this while watching the “Big Game.” In reality,...
2. Boomer and Retirement Weekly Reader – Micro-Reunion Edition I have returned from an excellent weekend in Atlanta catching...
3. Boomer and Retirement Weekly Reader – Variable Annuity Edition Baby boomers are understandably fearful of another market meltdown. They...

The “magic number” of course is a lump sum size of your retirement nest egg that is necessary to provide a lifetime of adequate retirement income. To start with a lump sum and work backwards toward income requires some serious assumptions. The 4% rule is based on those assumptions.

I have written about the 4% rule in the past. It is based in large part on statistical analysis of historical market returns and asset allocation theory. Then we had a “Black Swan” event in 2008-2009 where correlations converged on 1:1, meaning that every asset category- stocks, bonds, real estate, commodities, etc. fell at once. Even some money market funds “broke the buck.” No 4% rule can survive such an event. Moreover, we can’t assume that the recent Black Swan event is over and/or will not recur in our retirement lifetime.

As further evidence of the refocus on income planning instead of the “number”, have a read of this recent article from CNN/Money: Retirement: Whats your magic number?

Note the reference in the article to “wealth illusion” whereby individuals tend to overestimate the amount of sustained retirement income they can expect to derive from a pile of money.

The article also mentions Putnam’s new “Lifetime Income Analysis Tool.” I have not tried this tool, as it is apparently available only to Putnam customers or at least serious prospects. There is also a link to the T.Rowe Price Retirement Income Calculator which is available online to anyone. I tried it and found its output useful. The problem is that it doesn’t adequately explain the assumptions that are used.

In general, I am pleased to see this increased emphasis on income over the magic retirement number. As I have in the past, I encourage you to run a theoretical retirement spending budget of your own as a first planning step.

Related posts:

1. Common Mistakes in Using Retirement Planning Tools Online retirement planning tools are all over the Internet. Many...
2. Forecasting Retirement Income Success One of the retirement planning tools I use comes from...
3. National Save for Retirement Week I hesitate to even mention “National Save for Retirement Week”...

The expected tax increases arise from expiration of the so-called “Bush tax cuts.”  Unless the November elections create a seismic shift in political power, most or all of those tax cuts will disappear. This will result in the following tax increases:

1. The lowest personal income tax bracket will increase from 10 percent to 15 percent. This is one increase that even the Democrats will probably stop.

2. The second lowest tax bracket will increase from 25% to 28%. Because this is considered a “middle class” bracket, action may be taken to stop this increase.

3. The 28 percent tax bracket will increase to 31 percent. Since this bracket includes income in the $84,872 – $177,006 range for single filers, and because President Obama promised no tax increases for those making less than $250,000, this increase may be stopped as well.

4. The 33 percent tax bracket will increase to 36 percent. If you are a high-earning baby boomer, expect your paycheck to shrink unless the Republicans prevail.

5. The 35 percent tax bracket will increase to 39.6 percent. See number 4.

6. The death tax will return after a brief moratorium. Estates of $1 million or more are going to be taxed at a rate of 55 percent instead of 0%.

7.  The long term capital gains tax will increase from 15 percent to 20 percent. This of course will make investing in equities and real estate less attractive for retirement savers.

8.  The tax on dividends will increase from 15 percent to 39.6 percent. This is huge for retirement planning. It will substantially reduce net dividend income to retirees. It will also make stocks with high dividend yields less attractive, lowering their per share value relative to other stocks.

9. The marriage penalty tax will be reinstated. The “marriage penalty” arises when a married couple filing jointly pays more in taxes than two separate earners filing separately, but with the same combined income. The law that treated married couples fairly is scheduled to expire. If it does, plan for a larger tax bill and maybe adjust your withholding accordingly.

Another quasi-tax increase you can plan on is increased health care insurance premiums. Most health care economists expect health insurers to increase premiums more than usual to compensate for increased costs associated with “reform” legislation passed in 2010.

It is not too soon to look at your spending and income budget for 2011 so that you can make adjustments that may minimize the impact of these tax increases on your retirement planning.

Related posts:

1. How to Plan for Tax Free Retirement Income Many experts tell us that when we retire, it can...
2. Income Tax Refunds and Your Retirement Plan Federal income tax refunds present two problems for the retirement...
3. Taxes on Annuity Income to Increase Many boomers are considering buying immediate annuities to provide a...

We made another visit to Long Branch Lakes yesterday to assess the progress of our condo under construction. Much has been done. The walls were painted, trim installed and stained, doors hung, wood ceilings installed and stained, and master-bath shower tiled. Everything looks great. The size – 1500 sq. ft. – still looks perfect for our needs.

We met more recent buyers during a visit. One couple is preparing to build a house in Long Branch Lakes. They are renting in a nearby town during construction. They sold their home in New Jersey. Even though that home was paid for, the taxes were so high that their rental costs are lower than their NJ tax bill. This is a perfect example of why and how downsizing can be such a benefit to a retiree. This couple had done their pre-downsizing homework, including speaking to the county tax assessor and visiting area health care facilities.

I recently wrote a post for the On Retirement blog at U.S. News and World Report, summarizing some reasons why downsizing can be an excellent strategy for the baby boomer.

You may have thought of other reasons why downsizing would make sense for you (or not). If so, please leave a comment for the rest of us.

Thanks for reading.

Related posts:

1. Downsizing Compared to Upscaling in Retirement Living We drove to Long Branch Lakes yesterday to check on...
2. Downsizing and Mortgage Refinance Strategies For the past year or so we have been openly...
3. The Emotional Side of Home Downsizing I write regularly here on the topic of downsizing your...

In May, Ferguson gave a lecture entitled “Fiscal Crises and Imperial Collapses: Historical Perspectives on Current Predicaments.” If you have 45 minutes to learn something about how historical economic events might predict your retirement future, watch the video embedded below. (If you are reading this by email or feed reader, you may have to click through to my site.)

For a printed summary, here is a link to his presentation that accompanied the lecture.

If this information scares you into action, have a look at 7 Investment Ideas for a Worst Case Scenario.

Farming anyone?

No related posts.

First, I have concluded that there are no rigid rules or formulas to apply in deciding how much long term care insurance to obtain. Every baby boomer is unique in two important respects: (1) The financial assets they would have available to pay for long term care without insurance; and (2) How much risk they are willing to take.

Let’s quickly review the risks.

The first risk is that you or a spouse will require long term care but cannot afford it. In that case, Medicare won’t help much but Medicaid might. But if you need Medicaid benefits for long term care, most of your other financial assets will be used up first. That’s the law.

That brings us to the second risk:  Can you and your spouse survive in retirement (i.e., meet your basic living expenses) if a long term care event exhausts all or most of your retirement nest egg? In other words, if you self-insure or rely on Medicaid to pay for long term care, what will happen to your or your spouse afterward? Will you become part of the retired but poor class? Will you become dependent on your children?

A third risk if you are uninsured (or under-insured) is that your options for long term care will be limited. With insurance, you may have more options for in-home care and/or in-patient care at a facility that is better than a basic-needs nursing home. If you are completely dependent on Medicaid, the bureaucrats will be deciding what you can and cannot afford. You may not be happy with the result.

Perhaps at this point you are thinking that you and your spouse are too healthy to worry about needing long term care. If so, I recommend you read my earlier post on why we bought long term care insurance.

Here is a list of the criteria we considered in deciding how much long term care insurance we should have:

1. The Costs of Long Term Care. Long term care is more expensive than you might think. It can also vary dramatically depending on where you live. For more information, read my earlier post on predicting the costs of long term care. More cost information is available at this government long term care site.

2. Ability to Self-Insure. Many retirement planning experts believe that there are two groups of people for whom deciding whether to purchase long term care insurance is easy: The very wealthy and those with few or no retirement assets. The very wealthy can afford to pay for their own care. Those with little or nothing have nothing to lose before Medicaid steps in. Those in the middle (like us) have to strike a balance.

Let’s assume that a long term care event lasts for three years.  Three years in a nursing home can easily cost $225,000. Can you afford to pay that from your own assets, then live on what remains?

If the long term care event is less severe, perhaps requiring a home health aide three days each week for three years, that can cost $18,000/year for three years = $54,000. That is a much easier financial hit to absorb using personal resources.

3. Income Security. A related factor is the stability of your retirement income if a long term care event depletes your retirement nest egg and/or takes away the ability to work. If you are able to survive on Social Security and/or pension benefits, the need to buy a large amount of long term care insurance is decreased.

4. Cash Flow and Affordability. Unfortunately, for many people the number one factor in deciding whether and how much long term care insurance to buy is the cost. Some of this thinking is short-sighted. If you own a home, you definitely must insure it against loss due to fire. Your mortgage lender will insist on it. Did you know that you are more likely to need long term care than experience a destructive house fire? This suggests that you should make room in your budget for some level of long term care protection. One option for basic coverage is the new public long term care plan that will be available.

5. Availability of Alternative Care Resources. Perhaps you have a lot of family members nearby. Perhaps some of them like you enough to help with your care if you need it. Do you really want to depend on that? Do you really want to burden family members with ling term care – something that you can insure against?

We decided to purchase enough long term care insurance to cover a five year event, with a $150/day benefit. Thus, the lifetime benefit is approximately $275,000. This benefit is inflation-adjusted. If one of us has a significant long-term care need, this probably won’t cover all of the costs but it will be enough that our personal assets can handle the rest. (For more on our policy: Long Term Care Insurance – Key Policy Provisions.)

A decision on whether to purchase long term care insurance and how much coverage to buy should not be procrastinated away. You may decide not buy any coverage but at least it should be an informed decision.

Related posts:

1. The New Public Plan for Affordable Long Term Care Insurance Baby boomers should be paying close attention to the long...
2. Predicting the Costs of Long Term Care Imminent health care reform may include a long term care...
3. Annuities with Long Term Care Benefits A frequent objection to the purchase of long term care...