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About AARP

Making Financial Decisions for Retirement September 11, 2009 Jean Setzfand Director, Financial Security AARP. About AARP. Nonprofit, nonpartisan membership organization for people 50+ 40 million members (1 in 4 voters in 2008 were AARP members)

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About AARP

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  1. Making Financial Decisions for RetirementSeptember 11, 2009Jean SetzfandDirector, Financial SecurityAARP

  2. About AARP • Nonprofit, nonpartisan membership organization for people 50+ • 40 million members (1 in 4 voters in 2008 were AARP members) • Offices in all 50 states and the District of Columbia, Puerto Rico, and the U.S. Virgin Islands • Vision: A society in which everyone ages with dignity and purpose, and in which AARP helps people fulfill their goals and dreams.

  3. Background • Given the new retirement realities, change is needed to improve income management in retirement • AARP applauds the new policy ideas generated • Consumer messaging and education is also needed • AARP commissioned Center for Retirement Research at Boston College to research consumer financial decision making in retirement

  4. Key Financial Decisions in Retirement • When should I claim Social Security? • Should I annuitize my retirement assets? • How should I allocate my assets? • What should my rate of withdrawal be? • What should I do with my home?

  5. Claiming Social Security • What Most People Do: • Claim as soon as they’re eligible (39% claim at age 62) • Conventional Wisdom: • Delaying retirement may be risky • Suggested Guidance: • Delay retirement and claim Social Security benefits until your normal retirement age

  6. Annuitizing Retirement Assets • What Most People Do: • Avoid annuities • Conventional Wisdom: • Little attention paid to annuities • Suggested Guidance: • Including Social Security and pension income, annuitize enough to cover your recurring living expenses. Consider inflation-protected annuities

  7. Asset Allocation • What Most People Do: • Place large portion of assets in short-term deposits • Conventional Wisdom: • Rebalance in favor of bonds as you near retirement • Suggested Guidance: • Depends on your individual risk tolerance. In general, moderate your risk as you near retirement to protect your retirement savings

  8. Rate of Withdrawal • What Most People Do: • Not yet obvious • Conventional Wisdom: • Don’t withdrawal more than 4% • Suggested Guidance: • Withdrawal rates should respond to realized returns

  9. Home Decision • What Most People Do: • Payoff mortgage by retirement. Retain ownership and sell at ill health or death of a spouse • Conventional Wisdom: • Conflicting guidance around mortgages • Suggested Guidance: • Payoff mortgage by retirement. Reverse mortgage may be appropriate for some, but consider the product’s significant fees

  10. Research Discussion Event • “Providing Income for a Lifetime: Bridging the Gap between Academic Research and Practical Advice” – Anthony Webb, Center for Retirement Research at Boston College • AARP Solutions Forum September 14, 20099:30 to 11:30 am AARP Brickfield Center (601 E Street NW, Washington, DC)To register: www.aarp.org (search “Solutions Forum”)

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