Boomer Numbers

Boomer numbers for 2010:

The first boomers were born in 1946. This year, they turn 64.

The last boomers were born in 1964. This year, they turn 46.

OK. Maybe not the most earth shattering set of numbers you'll ever know. Earth shattering was supposed to be 2011. That's the year the leading boomers will reach age 65, a classic age for various qualifying events. The Great Recession may make age 70 more pertinent for Social Security retirement, taking the edge off 2011.

Another view is this: starting in 2011, every year will bring new boomer numbers in terms of retirement, Social Security, Medicare, exemptions or reductions in property tax (in some locales). Every year, a new wave of boomers will qualify for those events. And that annual wave will occur 18 times.

© 2010 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (http://www.marybold.com/, http://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.

Short & Long Term Retirement Solution

I've been tracking the strategies being recommended to boomers regarding their retirement monies and the #1 choice is work longer. Specifically, add 2 to 3 years to your career in order to increase savings and, especially important in the current economic conditions, to delay drawing from your 401K. If your intended retirement year happens to fall in bad times, previous projections of your retirement income may not hold up. It's a sequence risk, referring to the sequence of ups and downs in the market that can wreck your plans if you have to go through a catch-up phase at the wrong time. (And any time close to the retirement year is the wrong time.)

Further study took me to an executive summary on Social Security published by the Brookings Institution. Interestingly, the expert there also pointed to the work longer strategy, and he's talking about people who will retire decades from now. Specifically, the policy brief summary identifies mid-60s as the target age for requirement for the next generation. The brief also outlines the likeliest changes America will need to make in Social Security and retirement savings in the coming years. A reform package is possible with compromises by both conservatives and liberals. And a smart reform package will take a few lessons from other aging populations around the globe.

© 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.

Insurance Gap: Retirement to Medicare

Complexity of reading material that the Bolds tackled this week to understand an option for health insurance. For more detail, see bottom of this entry.

Early retirement need for health insurance: For most of us, leaving employment means leaving affordable group health insurance and searching for a replacement policy to span the years to Medicare eligibility (age 65). With Americans favoring early retirement of 62 or even 55, that leaves a big gap in years for health coverage.

Continued employer insurance: The best deal has always been thought to extend coverage with the employer's group policy. So, we were pretty darn excited to receive news that Tom's employer, a large semiconductor company, would start offering "retiree insurance" for those not yet Medicare age. With a start date of October 1, Tom's prospect for affordable coverage looked bright. Even shining.

Groups change, premiums change: For Tom, the best deal may not come with this new offer. With numbers rounded up, his monthly premium would be $1000/month (with $500 annual deductible) or $800/month (with $3700 deductible). Cost for a spouse: additional $750/month.

Comparison shopping: The one plus from learning the figures is that Tom finally has a starting point for comparison shopping. He's still using COBRA from the employer, so there's a window of some months for comparison shopping and final decisions. Cost of understanding this baseline for comparison:
Reading time = 1+ hour
Complexity level = 4
(on scale of 1 to 10, with 10 being mind-boggling).

© 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.

Personalized Social Security Statement

In yesterday's mail, I received my annual "Your Social Security Statement" from the Social Security Administration (SSA). I decided it would be the year to understand the formula by which our Social benefits are figured. Of course, I was not able to achieve that. On a positive note, our government does not hide the formula—you can track it down on SSA websites. The important conclusion is that the formula protects citizens with lowest incomes and progressively decreases the benefit reward for citizens with highest incomes. (That's proportionate, of course. Maximum contributors to the system still have higher benefits in dollars.)

What I was able to achieve was a comparison of projected benefits according to different income levels. In other words, I was able to estimate benefits in case my income drops, stays the same, or increases over the next few years. (The estimate in my Paper Statement is based on my "current earnings rate" and does not consider other possibilities.) I also made age comparisons using 62 for early retirement, 65 for retirement in my Medicare eligibility year, 66 for "full" retirement, and 70 for delayed retirement. I did all this through the website that my Paper Statement directed me to (www.socialsecurity.gov/mystatement). I had used the online calculators before but today I took time to record all the steps.

Go to http://www.socialsecurity.gov/estimator
Look for the page titles alongside the SSA logo.

Page title: About the Retirement Estimator
Click red button, Estimate Your Retirement Benefits, or at bottom of page, click Continue button.

Page title: Acknowledgement For Online Services
Click on the I Agree button.

Page title: Information We Need
Enter identification factoids (including your Social Security Number).
Click Continue button.

Page title: Verify Your Information
Click Confirm button.

Page title: Create Your Retirement Benefit Estimator
Enter a number for last year's income. (Don't fret about an exact figure—this page just gets you into the estimator. Suggestion: round your current salary to a user-friendly figure such as 40,000.)
Click Create Estimate button.

Page title: Your Retirement Benefit Estimate
The information probably looks a lot like the usual estimate in your Paper Statement from SSA. Now, for the powerful part of this online tool, look to bottom right of screen for the next step.
Click Create Additional Scenarios button.

Page title: Retirement Estimator
Step One: Select an age (to get started, use 62 or 66).
Step Two: Enter an average salary; to get started, use the same salary as before (such as 40,000).
Click the Create Scenarios button.

Page title: Your Additional Retirement Scenarios
Finally, you reach the best of the estimator! Mid-page, enter figures for additional scenarios—change the age, change the average salary.
To get started, add a lot of contrast:
.....Age 62 at average salary $20,000
.....Age 62 at average salary $40,000
Click Create Scenarios button.

You will then see all 3 scenarios listed at bottom of page. You may need to scroll down, depending on the width of your screen.

You can continue entering new figures in the mid-page section called Create Additional Scenarios. Each time you make a change, click Create Scenarios button.

(You can also back up to the Scenario 1 page by clicking on the Previous button at bottom of page and re-setting the first estimate. Then proceed as before with Create Scenarios.)

© 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.

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.

SSA Offering: Retirement Estimator

Retirement calculators litter the web. The newest (quite possibly!) is published by Social Security Online. Called the Retirement Estimator, this tool estimates Social Security (SS) benefits only for people who are not yet collecting SS. The calculation is based on your data already in the system plus your entry of your last year's income or what you think your "last year" will be at the time you stop working. If you are a very young boomer (in your 40s), you may have difficulty projecting your salary 20 years out. If you are closer to the typical retirement ages (62 and 66), you can probably make a good guess and thereby produce a realistic estimate of future benefits.

Multiple scenarios. What I like best about the calculator is the ability to produce several different estimates. So, I entered stats for age 55, age 62, and age 66. Scenario building requires that you name a salary for each "stop" year, so precision is not the goal here. Making comparisons is.

Extra boomer woman issue: Playing around with the Retirement Estimator invites consideration of an issue for women who may end up drawing on a spouse's or ex-spouse's figure. (Complex enough for its own blog entry. On another day.) That information is not incorporated, so the Estimator provides just part of the picture for women.

One more issue: Using the Estimator requires that you enter your Social Security number in addition to name, birth year, and last year's salary. If you have a concern about entering such data, this benefit calculator is not for you. (You can find more generic versions around the web.)

Imagining the research potential: On the topic of data, I found myself imagining what the Retirement Estimator produces for the Social Security Administration. I doubt that SSA is tracking my personal "what if" scenarios, but I do wonder if a more general data set is being generated. Wouldn't it be neat to know if Americans are seeking estimates for 5 years from now? Or maybe 10 years? Or even more?

© 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.