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Retirement Planning at Any Age

Retirement Planning at Any Age. Marsha Goetting Extension Family Economics Specialist. Revised May 2009. Retirement has different meanings. 20s. 30s. 50s. 60s. 40s. Generations. Greatest Generation-- already retired Baby Boomers-- retiring Generation X-- anticipating

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Retirement Planning at Any Age

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  1. Retirement Planning at Any Age Marsha Goetting Extension Family Economics Specialist Revised May 2009

  2. Retirement has different meanings 20s 30s 50s 60s 40s

  3. Generations • Greatest Generation--already retired • Baby Boomers--retiring • Generation X--anticipating • Millennials- Generation Y—?????

  4. Retirement Confidence Survey • January 2008 • Only 18% of workers are very confident they’ll have enough for retirement • Compared to 27% in 2007

  5. 2009 ?????? “The American People have no confidence at all ” 5

  6. Most Pressing Financial Issue 6

  7. Question How do I plan for retirement? 7

  8. Question How much should I save for retirement? 8

  9. Retirement = Money 9

  10. Finding Answers Financial Planners Investment Advisors Life Planners 10

  11. Resources to Help You Find Answers “Do it yourselfers” Financial calculators via the Web 11

  12. Choose to Save.org Employee Benefit Research Foundation Institute (EBRI) Gazillion “Saving & Retirement Planning” Web Based Financial Calculators 12

  13. Web Resources Ballpark Estimate American Savings Education Council (ASEC): www.asec.org 13

  14. AARP Web Based Financial Calculators Retirement Nest Egg Retirement Shortfall Retirement Income Required Minimum Distribution 401(K) Savings Reverse Mortgage 14

  15. Web Calculators Investment firms TIAA - CREF T. Rowe Price 15

  16. Different Results Complexity Number & type of questions asked Underlying assumptions 16

  17. Wall Street Journal Five Sites Questions 10 to 63 Amount needed: $669,714 to $1.1 million shortfall 17

  18. 2008 Retirement Confidence Survey 51% of workers who calculated retirement needs changed behaviors 59% saved/invested more 18

  19. 2008 Retirement Confidence Survey 44% changed other aspects of their retirement planning Changed investment mix 20% Reduced debt/spending 7% Enrolled retire/savings plan 5% Decided to work longer 3% Researched ways save for retirement 3% 19

  20. 7 Key Financial Planning Decisions

  21. Decision # 1 • Age at retirement? • How many more years to work?

  22. People are retiring later • Age 62 in 1996 • Age 65 in 2006 - 2008

  23. Today’s Workers 32% expect to be retired prior to reaching age 65 23

  24. Gap: Expectations vs. Reality • 72% of today’s retirees retired by age 65

  25. Current Retirees • Half retired early than planned (51%) • Health reasons 54% • Downsizing 33% • Caregiving 25%

  26. You—Retire At Age? 55? 60? 62? 65? 70? 26

  27. Decision #2 • Years in retirement?

  28. How long are you ‘gonna’live?

  29. Life Expectancy

  30. Years in Retirement • Workers Expect: • 20 – 24 years (27%) • 25 – 29 years (10%) • 30 + years (17%)

  31. What about you? Your anticipated years in retirement? 31

  32. Decision #3 • Amount of “designated” retirement savings?

  33. 22% of workerssay they have no savings of any kind Retirement Confidence Survey

  34. Workers’ Saving & Investments • 49% have saved less than $25,000

  35. IRA Contributions • 2009 • $5,000 under age 50* • $6,000 age 50 & older* * indexed to inflation

  36. Tax-Deferred Plans 2009 [401(k) , 403(b), 457] Under age 50 $15,500* Age 50 & $20,500* older * indexed to inflation 36

  37. What about you? Value of your current “designated” retirement savings 37

  38. Decision #4 • Income needed during retirement?

  39. Financial Planners • Income sources should provide 60% to 80% of pre-retirement income

  40. Other Financial Planners • 100% + of pre-retirement income

  41. Others Say • 130% + of pre- retirement income

  42. Marsha Goetting • “It depends!” • Lifestyle • Health • Caregiving for parents

  43. TIAA-CREF • 55% of retirees expected expenses to decline • But, only 30% of found that to be true

  44. TIAA-CREF • 20% of retirees said their spending ROSE during retirement

  45. Prosperous Retirement: Guide to the New Reality -Michael Stein • Go-go years • Slow-go years • No-go years

  46. Consumer Expenditures--2006Bureau of Labor Statistics Age Monthly Yearly 55 – 64 $4,232 $50,789 65 – 74 $3,413 $40,960 75 + $2,409 $28,904

  47. Can You? Live on 50%, 60%, 70%, or 80% of current income?

  48. Practice Take income cut now Put difference in retirement savings 48

  49. Decision #5 Income sources & amounts during retirement? 49

  50. Income Sources “Stool” Pension Savings Social Security

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