Questions about retiring early lie thick on the ground. But for boomers with children, so do tuition bills. Even with a fat 401(k) in hand, you have to wonder if you’re going to have enough.
In real life, we’re actually growing more inclined to stay at work, says Joseph Quinn, economics professor at Boston College and fellow of the Employee Benefit Research Institute (EBRI) in Washington, D.C. Until the mid-1980s, people retired at ever-younger ages. Then that trend came to a sudden halt.
Today it’s financially appealing to hold a job, Quinn says. Older people have more retirement options than they used to. Congress has just decided to pay you your full Social Security benefits at 65, on top of whatever else you earn. Fewer private retirement plans encourage an early out. The new cash-value pensions actually force you to work extra years for comparable retirement pay.
If you’ve had a huge stock-market windfall, you may be ready for life on the outside. But according to a 1999 EBRI survey, 68 percent of the people now at work plan to hold paying jobs after they “retire.” Of these, only 37 percent said they’d need the money. Nearly two thirds said they liked work and wanted to stay involved.
After all, who wants to be on the beach when–as everyone knows–you’re still a kid? At 55, men, on average, have 27 years more to live. Women are looking at 31 years. Half will live even longer than that. If I were to quit, I might have 40 years to fill, based on my health and family history. No garden has enough weeds to keep me busy that long.
Still, the “enoughness” questions nag: What will I need, and how will I pay? Here are some answers from planners around the United States:
This rule of thumb might not work, however, if stock prices bomb for two or three years right after you retire, says planner Karl Graf of Graf Financial Advisors in Wayne, N.J. The value of your remaining investments might not cover you for life.
For a better grasp of your retirement chances, run your finances through T. Rowe Price’s Retirement Income Manager (RIM). You answer some questions about what you want from your money. RIM then suggests an asset al- location plus an appropriate monthly income. It also gives you the odds that your plan will actually work. Cost: $500 (call 800-566-5611).
Here’s another idea: ask an insurance agent how much you’d get per month if you used all your liquid assets to buy an annuity that paid you a monthly income for life. I’m not suggesting that you buy the annuity. But you’ll get a ballpark feel for what your current savings might produce.
For your back-of-the-envelope calculation, two other items come to mind: health insurance (if you can’t get retiree coverage, you may be chained to your job) and the 10 percent penalty for tapping retirement money too soon. There’s no penalty for taking funds from a 401(k) if you’re at least 55 when you leave your job. But you normally can’t touch IRAs penalty-free until 59i.
Remember, most retirees already have their stuff. They don’t buy new furniture, they often live in a mortgage-free home and they keep their cars longer than they did when they drove to work. You’ll spend more on health care, but your living expenses will drop by much more than your medical bills will rise.
If you have to retire, your income will drop and your kids may get extra college aid. Families below the $50,000 mark almost always get help, except from very low-cost schools, says Ray Loewe of College Money in Marlton, N.J. By contrast, colleges rarely help families earning $100,000 or more.
In general, older parents are reasonably well prepared, says planner Denise Leish of Money Plans in Silver Spring, Md. They usually have fewer children, higher salaries and more savings than couples who had children young. They’re also more likely to receive an inheritance just when their kids are ready for school.
In other words, you’re still too young. Aren’t you glad you read this column to the very end?
