18 August 2008

Choosing a Retirement Year

Boomer investments not booming. While not necessarily the best year to retire (market wise), some boomers "on the cusp" will make the move in 2008 or 2009, anyway. That's because they are 62-ish. The first of the baby boomers were born in 1946 and this is their year to qualify for early Social Security benefits. Depending on how you like to "do the math," you may decide that the best pay-out comes with early retirement. But here's an assumption: you have some investments to draw from. (If you retire with only Social Security benefits as income, you are likely to do some serious budgeting in order to survive.) But what if your investments are not in great shape?

Bearing with bear markets: You may decide to continue working for another year or two (until the bad times pass). This means pushing off Social Security, too. It is the safest strategy. It may also be the most frustrating. To make bearing with bear markets more bearable, you re-frame the delay as an "adjustment period" during which you intentionally change your pace, days off, travel, and spending/saving to approximate what you expect to do after you retire.

Risk outliving your investments: Or you may decide to bite the bullet and start drawing from investments, anyway (in addition to starting Social Security benefits). This is the risky strategy, of course. You start drawing from your 401K when it can least support that. The eventual consequence (20 or 30 years hence) is that the money is gone before you are.

Rely on younger spouse: The middle ground is the cusp boomer who takes early Social at 62 and relies on a younger spouse for income, pushing off the day to start drawing from investments. For the couple, this scenario means lower income, of course, and the household budget must adjust. The goal becomes to delay drawing on 401K/IRA as long as possible.

On a personal note: Oh, that's us. Does anyone see the inherent risk of my retiring this summer at the same time my cusp-boomer husband retires? Only a woman of the boomer generation would just assume that things will work out. Tomorrow: what our investment adviser said to us. ~ Lida

© 2008 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

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