CFP Board eNewsletter
August 2007
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CFP Board eNewsletter |
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| Getting Ready for Retirement IV: The Rise of Unretirement |
“Retirement is fine for about a month,” says David Strege, CFP®, a senior wealth coach and principal at financial planning firm Syverson Strege & Company in West Des Moines, Iowa. “After about a month, a lot of people start asking themselves, ‘Now what am I supposed to do?’” explains Strege, who is also CFP Board’s 2007 Chair-Elect. “Many people start to get antsy and begin to feel that they are not being as productive as they could be.” If the prospect (or the reality!) of retirement has you feeling antsy, then “unretirement” — remaining active in your later years by continuing education, starting a business, or rejoining the workforce through either paid or volunteer employment — might be the career path for you. Many people decide to keep working after reaching traditional retirement age because they have to. Often, income from post-retirement employment is crucial to maintaining an individual’s pre-retirement standard of living. Others decide to keep working because they want to. They are still physically and mentally vibrant and they want the challenge and the satisfaction that only continued engagement can bring. Either way, unretirement is gaining in popularity among seniors who are discovering that staying active enhances their quality of life. “Our parents and grandparents were mostly focused on how to retire from something — their jobs,” writes John E. Nelson in his book What Color Is Your Parachute? For Retirement: Planning Now for the Life You Want. “For you, though, retirement planning can focus on retiring to something — your next stage of life.” For many, that next stage of life involves a job of one sort or another. In “Back to Work: Expectations and Realizations of Work After Retirement,” available on the Web site of the University of Michigan Retirement Research Center, Nicole Maestas found that almost half of retirees followed a non-traditional path that involved either partial retirement or unretirement. Maestas also found that unretirement was more often a planned decision rather than a knee-jerk reaction to inadequate retirement resources. Most people regarded unretirement as a way to gradually transition out of a full-time career and into a job with less responsibility. Individuals “may seek post-retirement employment in order to achieve a broader social network, keep active, and engage the mind,” Maestas concluded. “Others may take on work they perceive as fun compared to their career jobs, or treat retirement as an opportunity to change.” Says Strege: “When you retire, you may be burnt out from your previous job, but you’re not burnt out from the things that you enjoy doing. The key is to do something you like and to keep a certain amount of freedom in your schedule. That way you feel like you’re retired, but you’re still working.” In a review of aging studies, Esteban Calvo of the Center for Retirement Research at Boston College found that working to an older age could have a wide range of positive physical and psychological effects. One of the biggest boons was social. The workplace is one of the main sources of social engagement and friendships in our adult lives, and opportunities to engage with others in this kind of setting decline in retirement. People who keep working, though, also keep their old friends — and gain the opportunity to meet new ones. “The workplace appears as an important source of friends, confidants, and social support,” Calvo wrote in the research paper “Does Working Longer Make People Healthier and Happier?” Calvo also found that older employees who work in low-stress jobs at hours of their own choosing experience better health. The research suggests, Calvo concluded, that “working longer appears to be helpful in maintaining meaning and a sense of purpose in life, as well as adapting to aging … Longer working lives will help most people maintain their overall well-being.” Of course, having a bit of extra income can enhance your sense of well-being, too. But Strege urges unretirees to be careful about how much extra money they bring in. “If you have started taking Social Security benefits before reaching your full retirement age,” he says, “you could lose some of those benefits if you exceed the earned income test limit. If your wages and other income are greater than $12,090 a year, you will start losing Social Security benefits. For every $2 you earn above that limit, you will lose $1 in Social Security benefits.” Money is certainly important in retirement, but it’s not the only important thing. That’s why Strege’s firm encourages clients to develop personal life goals for retirement, and why Strege’s colleague Michael Audino has come up with a tool to help them do that. “The first key issue is to understand that there is so much more to retirement than just the financial piece,” says Audino, a retirement lifestyle coach with Syverson Strege & Company. “These days, employees can easily spend as long in retirement as they did in their jobs. If you spent 30 years with a company and retired at 65, you could easily spend another 30 years in retirement. You need to connect with the dreams and aspirations you want to accomplish in retirement. Having a structured process for defining those dreams and aspirations is just as important as having a structured process to create a financial plan.” Audino uses the “retirement success profile” to help clients identify their retirement goals. The profile is a questionnaire exploring 15 different factors — ranging from “attitude towards retirement” and “leisure interests” to “perception of age” and “replacement of work” — that are crucial to making a successful transition to retirement. “There are no right or wrong answers,” Audino explains. “The responses are simply indications of how you feel about retirement in general, and your own retirement transition in particular. The results can indicate which success factors are strengths and which may need a little work.” Audino has seen far too many people who may have sufficient financial resources in place, but haven’t thought through what they are going to do — or who they are going to become — in retirement. “A large part of the retirement coaching process is giving people the confidence and the clarity to re-connect with long-lost dreams,” he says. “A retirement success profile can help identify those dreams. A financial plan can then quantify the cost of making those dreams a reality. I provide encouragement, guidance and, occasionally, a kick in the backside.” As more and more people opt for unretirement, thereby kick-starting a new era of growth and discovery in their lives, the right financial plan becomes even more important. “Money is worthless until it is translated into something you value,” says Strege. “Retirement can — and should — be a stage in life when you have the freedom and the time to follow your passions and interests. Money is a tool to make that happen.” This is the last in a series of four articles on retirement. Online Resources Center on Aging, Health and Humanities Elderhostel Go60.com Seven Steps to A Successful Unretirement
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| Survey: How Much Work Will Fill Your Retirement? |
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Earlier this summer, we asked people to share whether they felt they’d adequately planned for retirement. While more than 36% of those who responded were confident that their plans to retire are on track, 7.6% believed they’ll need to delay their retirement plans, and more than 16% admitted they’ll need to work longer. Nearly 40% were not especially confident one way or the other. Whether you’re confident your savings will last throughout your retirement years, or you’re looking at an “unretirement” that will require you to earn regular income, let us know how long you expect (or want) your workweek to be after you reach retirement age.
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| Financial Alerts |
Owning a home is a big part of the American Dream, but with the news featuring stories of bursting housing bubbles, sub-prime mortgage meltdowns and growing foreclosure rates, getting to homeownership may seem like a nightmare. The Federal Deposit Insurance Corporation (FDIC) and National Association of Insurance Commissioners (NAIC) are doing their part to help new home-buyers get a good night’s sleep by providing information to help people avoid some of the bogeymen lurking in the real estate industry and understand important parts of the home-buying process. Deceptive Mortgage Offers FDIC warns people shopping for mortgage loans to be aware of bogus lending practices that claim to award money under a loan program tied to the federal Community Reinvestment Act (CRA) and that purport to be supported by FDIC. FDIC does not endorse or sponsor mortgage loan programs, and the CRA does not entitle people to grants or loans. FDIC provides more information about this deceptive practice, as well as useful information for to help people find the right mortgage loan for them, at: www.fdic.gov/consumers/consumer/news/cnspr07/briefs.html#deceptive Title Insurance: Protecting Your Home Investment Against Unknown Title Defects If you’re a first-time home buyer, you’ll want to read up on title insurance before closing on your new home. If you take out a loan to purchase your home, a lending institution will most likely require you to buy title insurance for an amount equal to the loan. Before purchasing a title insurance policy, you should know what title insurance is, how it works and who needs it, and why you should shop for it yourself versus having a lender or real estate professional do it for you. Learn more at: www.naic.org/documents/consumer_alert_title_insurance.htm Read more financial alerts.
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| What A Daily Money Manager Can Do For You |
Sometimes, managing your financial paperwork can seem like an overwhelming task. At any given time, you can have bills to pay, a loan to take out, a mortgage to renegotiate, and health insurance forms to fill out. Keeping track of all this is difficult enough during the best of times. But imagine you are elderly, maybe a physical disability prevents you from getting to the bank, and perhaps your eyesight and even your concentration are failing. According to AARP, the membership organization for individuals 50 years of age and older, about a half million older people in the United States need help with their financial affairs. A new field is evolving to provide just this type of assistance: daily money managers (DMMs). Daily money managers provide personal assistance to individuals who have difficulty managing their financial records on their own. The service covers everything from organizing financial and medical insurance documents to balancing checkbooks and keeping track of bank accounts. Older people might seek the assistance of a DMM due to physical ailments, like arthritis, that make it difficult or painful to write, or because of mental impairments, like dementia or Alzheimer’s, that make it difficult to concentrate. The adult children of elderly parents sometimes enlist the help of a DMM if they live far away and feel they can’t undertake the daily management of their parents’ financial affairs. The financial information site Bankrate.com has a concise overview of the DMM field as a whole. A DMM is not an accountant, lawyer or financial planner, or the type of investment manager traditionally called a “money manager,” and a DMM should not be consulted in place of these or any other financial professionals. A DMM is, however, someone who can help maintain accurate tax and other types of records, ensure that bills are paid on time, and explain complex medical and insurance billing statements. Some DMMs may also offer additional services, such as authenticating documents or providing transport to and from appointments. A good DMM will be able to spot when additional expertise is required, and will then provide references to the appropriate professionals. The best way to find a DMM is to get a referral from someone you know and trust, such as a friend, a family member, a lawyer or accountant, or your financial planner. You can also ask your local senior center, church or government social service agency for referrals. DMMs normally charge hourly rates for their services, with fees ranging anywhere between $35 and $100 an hour, but the Money Management Program on the AARP site has information on free and reduced fee DMM services for low-income individuals. As with any other service provider, you want to make certain you feel comfortable with the person you hire for DMM services. The Web site of the American Association of Daily Money Managers (AADMM) has a list of “Questions to Ask” before hiring a DMM. Make sure you ask for and follow up on references before you agree to have a DMM start work, and always clearly define the scope of the services to be provided. And remember that the DMM’s job is to help you keep on top of your financial affairs. The AADMM warns that it’s a sign of trouble if at any time you feel you’re being kept in the dark.
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| CFP Board’s 2007 Financial Planning Clinic: Workshop Presentations Now Available Online |
CFP Board’s 2007 Financial Planning Clinic took place August 4, 2007 at the Sheraton Boston Hotel, and hundreds of attendees made the most of this opportunity to ask their financial questions to CERTIFIED FINANCIAL PLANNER™ professionals for no charge. CFP Board expects to bring similar events to different areas across the country. Stay tuned to It’s Your Turn for announcements of future event dates and locations. Those attending the 2007 Financial Planning Clinic were able to participate in workshops on debt management, estate planning, and college funding and planning: How to Live Beyond Paycheck to Paycheck: What You Need To Know About Estate Planning, and What You Need To Do More than Making the Grade: College Funding and Planning The presentations that accompanied these workshops are now available on CFP Board’s Web site. View the presentations and read more about the 2007 Financial Planning Clinic.
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| About This eNewsletter |
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CFP Board's "It's Your Turn" eNewsletter is sent monthly to those who have subscribed through CFP Board's Web site, www.CFP.net/learn. CFP Board exists to make people aware of the benefits of financial planning and to encourage people to seek out individuals who can help them apply the financial planning process to improve their financial lives. This eNewsletter is designed to provide information about financial planning, financial planning tools and resources, consumer alerts and more. Suggestions and feedback are welcome at mail@CFPBoard.org.
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