If you polled my friends you would find that many of them have sat through one of my rants about the importance of planning for retirement early. Being a 29-year-old retirement nerd, I am deemed a bit of an oddball by my peers. But working in the industry and watching my Baby Boomer parents deal with their pending life changes has given me a perspective on what challenges today’s retiree’s face and how that changes my personal retirement plan.
A Lesson from My Mom
My mom has been semi-retired for about a year now. Her work situation was one in which her employer was facing some financial problems and more or less decided to part ways with some long-term employees that were earning higher salaries than the newbies. In short, my mom was forced out of her job due to no fault of her own. This certainly is not an isolated incident. As I travel through Colorado as a Field Education Representative for Colorado PERA, I have spoken with countless others who will be leaving their jobs earlier than they had planned, and due to a number of different reasons including: illness, employer cutbacks, and to take care of aging parents.
How Boomer Retirement Challenges Impact My Plans
As I have observed the retirement challenges that my mom has faced, as well as those of other Boomers, I have re-examined the way I think about planning for my own retirement.
According to the Employee Benefit Research Institute’s 2013 Retirement Confidence Survey, only about half of people express some confidence in their ability to retire. I would imagine that of those people, most of their confidence about retirement exists only if there isn’t a change in their plan. They are only confident if they can remain healthy and work until 65, or if only they received an 8% pay increase each year, or some other variable. The thing about the future is no one knows what it holds. Just like how my mom’s plans abruptly changed, so can mine. Within the last year I increased my savings into my employer 401(k) in order to try and offset some of the uncertainty. I can make sacrifices now in order to accommodate for an unknown future.
One of the most difficult things Boomers (and my mom) are dealing with is finding quality healthcare coverage. Medicare coverage does not begin until 65 for most people, and so when my mom left her job before the age of 65, finding affordable coverage was an issue. Luckily for her, her former employer offered to cover her until age 65.
If you are a PERA member, the option to obtain PERACare coverage is invaluable. The problem that many Millennial’s may face when it comes to healthcare coverage at retirement is the rising cost for quality coverage. If our parents are having trouble paying for coverage now, what is it going to look like for us? This is just another reason why I increased my 401(k) contributions is to help cover the variable expense of health care in retirement.
The New Retirement
I consider my mom to be semi-retired because she still does work some -- partly, I believe, because of boredom. Since she was forced to enter into retirement, she didn't have the time to prepare for the lifestyle change. When I speak to those nearing retirement I encourage them to figure out what it is that they will actually do in this next phase of their life.
In the New Retirement people are retiring from full time employment and transitioning into a job that is more in line with their passions. When a person retires it can be difficult to fill the void of a 40-hour work week with something else. And, if I know myself, I will probably struggle with filling the void of 40-hours. Currently my passions are education, my family, and exercise. I would imagine that these may still be passions when I would retire, so I may consider teaching classes at a community center, or volunteer my time to work with children. From my observations of the Boomer generation I feel that I need to be able to fill my time with activities that keep my body in shape, and my mind sharp.
Retirement Income and Things to Consider
The last time I talked to my mom about retirement, we had a discussion on when she was going to take Social Security. She is eligible to take it now, however the longer she waits to take the benefit, the more she will earn. At this point she has decided to wait to take her benefit since my dad still works.
Looking at my Social Security situation, I will need to also factor in the Windfall Elimination Provision (WEP). As it currently stands I have just enough time under Social Security to qualify for my benefit, but since I will be subject to the WEP I may need to consider other sources in which to beef up my retirement security. For me that plan currently includes working longer.
I know what age I will be benefits eligible with my employer pension, however, I would need to work far beyond that in order to obtain a benefit to maintain my lifestyle. If I wanted a retirement filled with travel I may need to work even longer. So in order to determine how much income I need at retirement from my various sources, I need also to determine the lifestyle I would like to enjoy in retirement.
My background in the study of history has shown me that it is important to learn from prior generations. For me I hope that by trying to plan for my retirement early, will help me to avoid some of the pitfalls of the Baby Boome's retirement.
Have you been able to avoid any retirement pitfalls by observing your parents?
This post was written by Chris Kamp from Colorado PERA. Would you like to write a guest post for The Dime? Email us at firstname.lastname@example.org.