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February 20 - You’ve heard it before, Americans don’t save enough. Unfortunately, failure to follow this sage advice is going to mean a bleak retirement for many baby boomers, unless they get very busy. The Motley Fool’s recent article, “Prepare for a Gruesome Retirement”, shows just how pathetic those savings are. Of boomers aged 55+, 42% have saved less than $25,000, and only 50% have saved more than $50,000. Those aged 45-54 aren’t doing any better - 44% haven’t saved more than $25,000. With very few years left to for heir savings to compound and grow, these boomers are going to be forced to accept a very low standard of living, or continue working long into the future. As a point of reference, a nest egg of $50,000 that doesn’t raid the principle will usually give you a whopping $2500 a year to live on (plus social security, and a pension if you one of the fortunates to get one).

The article goes on to list some dire scenarios that will happen if people don’t start saving and investing right away. They are definitely worth reading. Fortunately it ends on a high note: “You needn’t end up with a nightmarish retirement. Here’s the “tough love” part. If you take action now, you can set yourself up for a more comfortable retirement. So get going!” We echo that thought, particularly if you want to have a lot of options for your retirement lifestyle.

December 16 — It’s a very exciting day for John Brady, owner of Topretirements.com: his Op-Ed feature on the need for Property Tax Reform, Time to Retire the Property Tax, was featured as an Op-Ed in the Connecticut section of today’s Times.
The thesis in his Op-Ed is that archaic property tax laws are not only unfair, but that they also hurt education budgets.

As many retiring baby boomers have already figured out, property taxes bear no relation to a person’s income or financial assets. In retirement this tax becomes a much larger percentage of a person’s new, reduced income (and you can usually assume there will be big annual increases). Many states have passed laws to protect full-time residents and retirees against unreasonable increases. Florida’s Save our Homes law is one of the most successful - it caps annual increases in assessed value at 3%. One of the most frequent questions asked in retirement forums is: “what are the most tax-friendly states?”

Increases in assessed value that occur in volatile real estate markets cause the most mayhem with property taxes. After a new assessment some homeowners see their taxes increase dramatically, severely affecting their ability to pay. Other homeowners, however, actually see their tax bills decline. Brady’s argument that the property tax hurts education is centered around that phenomenon - that the property tax is not as efficient as an income tax in collecting revenue from everyone who has the ability to pay.

Every state has property taxes. A relatively small number have municipal income taxes. The challenge Brady proposed to a very tradition bound CT legislature is to permit municipal income taxes as a way to accomplish 2 purposes: achieve better tax equity, and generate more revenue. Stay tuned!

November 18 — You guessed it: The most popular question asked at the Social Security Administration is “How much can I earn and still receive Social Security benefits”. Fortunately the SSA has the answers to this question and many others at www.ssa.gov.

This question is an important one because many people living in retirement communities either need to or want to work in retirement. This question pertains to what is called the earning test. If you are under normal (or full) retirement age (FRA) when you start getting your Social Security payments (for example, you start taking benefits at 62), $1 in benefits will be deducted for each $2 you earn above the annual limit. For 2008 that limit is $13,560 and for 2007, the limit is $12,960. In the year you reach your full retirement age (66 for the oldest baby boomers) $1 in benefits will be deducted for each $3 you earn above a different limit, but only counting earnings before the month you reach FRA. For 2008, this limit is $36,120; for 2007, this limit is $34,440. There is NO limit on your earnings starting with the month you reach full retirement age.

Some people seem to think that it’s not worth working under these circumstances, but most experts disagree. You will pay a fairly steep tax on your earnings, but only on those over the limit - and you are still making money anyway. Andrew Biggs, a deputy commission for Social Security, points out in this weekend’s Wall Street Journal another often overlooked benefit of working: the Agency recalculates your benefits at full retirement to make up for any benefits that might have been lost because of the earning test.

The Journal’s Guide to Social Security has many other useful facts to help you understand what is ahead. The Social Security website is one of the best government websites, it’s FAQ’s are very helpful.

Here is some helpful information about what age to start taking your social security benefits.

September 19 — The Federal Reserve reports that almost 19% of families headed by someone 75 or older have a mortgage - up sharply from 10% in 2001. Today’s Wall Street Journal article provides some practical tips if you are in the situation of retiring before your mortgage does.

One of the common dilemmas that many people have is what to do if you have more savings than mortgage - should you pay it off quickly and forgo the home mortgage interest deduction? Jonathan Clements suggests that you take the plunge and use some of your savings in that case to reduce your mortgage. You will lose the deduction, but paying off is a better option because your loan rate is higher than your savings rate, and most interest you earn is taxable anyway. Clements cautioned about using 401k savings for this purpose, since you will have a tax penalty for taking out the money.

He also went through various scenarios including buying an annuity with money from your 401k to insure you will be able to make payments in future years. To do this properly you need to pay for the annuity directly from the 401k. Lastly, he laid out the situation where you still have a big mortgage and a long way to go to pay it off. Often the best strategy there is to sell your home and move to a smaller one to lower your monthly payments and insure your fiscal health. Of course your ability to sell your home in the current weak market comes into play, but assuming you purchase a new home quickly you will probably make up for whatever downside the market has now with a better deal on the new house. Wall Street Journal article on Retiring with a Mortgage.
When You Should Start Taking Social Security

July 20 - The embedded knowledge base and skills that baby boomers have accumulated over decades of experience are key to the successful running of America’s corporations and institutions. Yet a recent survey by Manpower revealed that only 21 percent have implemented retention strategies to keep them participating in the workforce.

If you are nearing retirement but want to keep on working - either because you want to or because of economic necessity - this phenomenon is something you might be able to capitalize on.

“Older workers have different needs than younger workers, and in order to meet those needs, their job preferences, personal interests and preferred work-styles must be assessed,” said Sharon Birkman-Fink, President and CEO of Birkman International.

Baby boomers are a significant percentage of the current workforce, and are nearly ready for retirement. Experts expect tremendous gaps in competencies and know-how as a result of this demographic wave. By the time many businesses wake up to this loss, it may be too late.Several industries, including electric utilities, oil and gas production, healthcare and the public sector, are already feeling the effects of baby boomer retirements.

“This could be catastrophic, considering that those best able to train replacements will be those that are leaving,” said Birkman-Fink.

How you can use this trend to your advantage
If you would like to continue working past normal retirement age with your current employer, the first thing you should do is open up a dialogue with your manager (or perhaps human resources). Let them know that you might be interested in continuing on, but perhaps under different circumstances. Perhaps you might want to work remotely, on a reduced schedule, or in a different position or location. Negotiations like this need to be thought out carefully. First you need to think through what it is that you want, and in what priority. You also want to make sure that your employer realizes what you bring to the party in terms of attitude, experience, and institutional memory. If your record is strong and your skills are difficult to replace, you just might have some very good leverage to get a situation that is favorable to you and your interests.

Related articles:
Greenspan to Baby Boomers - Deal Now with Financial Uncertainty
When to Start Taking Social Security
Boomj and Social Networking for Boomers

July 5, 2007 — Most older baby boomers remember John Beresford Tipton, the “Millionaire” who discreetly awarded a million dollar check to some worthy individual every week on TV during the late 1950’s. While people old enough to remember the show (over 55) would still be thrilled at such a gift, being a millionaire just ain’t what it used to be.

One problem is that Inflation has deflated the significance of a million dollars, which has only 54% of the purchasing power it had in 1987 (source: Wall Street Journal). There are a whole lot more millionaires today thanks to inflation and prosperity. Another issue is that real estate prices have soared and become a significant source of illiquid wealth - for boomers fortunate enough to have significant home equity in hot real estate markets. For example, an existing single family home in San Francisco goes for $748,000 and $521,000 in New York. Just owning a home in one of these markets alone gets you close to millionaire status. Problem: You can sell your home, but you still have to live somewhere.

How rich are you?
Let’s say that your millionaire status includes about $300,000 in home equity (the median price of a home is about $220,000 nationally) and $700,000 in retirement savings. You definitely are one of the richest American baby boomers, who typically have about $50,000 in household retirement savings included in a total net worth of about $250,000. You are in the top 2% of Americans - not bad!

What kind of income can you expect?
Presumably if you have this kind of net worth you had some high paying jobs to get to this position, so you are probably used to having more than $100,000 in annual income. Let’s say you invest your $700,000 in 10 year Treasury notes that yield about 5%, before inflation. That will give you about $35,000 per year for the rest of your life, assuming rates stay about the same. Every year inflation will make that $35,000 worth a little less, but that is OK because you won’t live forever (you could draw down the principal), and as you age your expenses will presumably decline. If you tack on a much better than average social security benefit of $24000 for you and your spouse (the average payout is $9360 annually for a single person), that gives you $59,000 in yearly income. A nice living and well above average, but a far cry from being a luxurious income.

The value of a defined benefit pension
Other than government and some non-profit workers, baby boomers are probably the last group who have a chance at getting significant defined benefit pensions (a defined benefit means you are promised a specific annual retirement payment as a pension, rather than guaranteed payments into your future retirement fund). If you are fortunate to have such a pension you can see what a difference these pensions can make, even at some minimum payment like $10,000 a year. Your pension could propel you into the ranks of the comfortably retired.

Strategy for frugal millionaires: Trade in Your home equity
One effective strategy that many active adults over 50 are taking is to trade in their home equity. If you could trade in your $300,000 home in a hot market for an equal or better home worth $200,000 in a less expensive state like South Carolina, you could maintain your current lifestyle while adding $5000 per year in income. As a bonus, this extra income would come in a market where the overall cost of living is less than where you live now. Certainly a strategy worth considering, now that you might have to become the “frugal millionaire”.

Comparing the Retirement Savings of Baby Boomers

When to begin drawing Social Security Benefits

A Surprising Answer: When to Take Social Security Benefits

New York - April 27. Former Fed Chairman Alan Greenspan made headlines again this week - this time at a conference on the coming baby boomer retirement crisis. Greenspan warned that the government is going to find it “difficult” to keep all of its financial promises in coming years. He urged baby boomers to deal now with that, and a new complication - their increased longevity.

“We have to recognize that what we’re going through is unique in world history,” said Dr. Greenspan. “Retirement is a relatively new phenomenon. As a society we’ve dealt with it successfully in the past few decades but we’ve never had such a huge group of individuals going into the system at once and then living so long in their retirement years.”

As life expectancy continues to increase, Greenspan believes that Baby Boomers will likely look for additional ways to remove the financial uncertainties that will come from a longer retirement. Those include analyzing their lifestyle, determining the resources at their disposal, and ultimately making decisions to best prepare for their future.

Greenspan encouraged Baby Boomers to take more responsibility to prepare for their retirement. Dr. Greenspan was the keynote speaker at the MDRT BoomertirementTM Industry Summit.

Read this article to find the 10 worst mistakes one investment advisor has seen

Or, read here for advice on when to social security benefits - early or late?