REPOST: Seven Ways To Pay For Retirement

The golden years ought to be just that, memorable and without financial worry. With growing concerns about the future of retirement, Mitch Tuchman writes about ways people can make their retirement more financially secure. The article can be found at Forbes.com

Image source: Forbes.com

Getting by in retirement should be about more than just “getting by.” Yet lots of people arrive at that moment unsure of just how they will pay for retirement after leaving work behind.

Paying for retirement is no mystery, however. It’s really just a judicious combination of tools you already (mostly) understand. Here are the main ways Americans pay for their retirement years:

1. By working. The number of persons over the age of 65 and working has been rising steadily for years, most recently reaching 7.6 million, according to government data. As the baby boomers hit that mark, expect more and more of them to either stay on the job or seek alternative work, possibly competing with younger people for service jobs.

2. Cash savings. Nobody likes to think about cash in the bank as a reasonable investment. It isn’t when interest rates are so low. But having a few months of income stashed away, even at a low rate of return, can make a big difference in your peace of mind.

3. Social Security. Truthfully, Social Security is going to be a major slice of most people’s retirement income pie. As of 2012, 56.7 million Americans were collecting, of which nearly 40 million were retired workers and dependents. (The rest are survivors or disabled workers and dependents.)

4.Retirement accounts. Participation rates among 401k plans is at about 76%, even though many corporate plans have begun to voluntarily auto-enroll new hires. The hope is that corporate matching plans and other incentives will increase those numbers, but until enrollment is mandatory that may be as good as it gets.

5. Pensions and annuities. Increasingly rare, pension plans (and their private counterparts, annuities) can provide a relatively peaceful retirement, free from the stress of managing investments over the long term. But they have become rare for a reason — corporations don’t want to take on those market risks, either.

6. Home equity. One of the most important things you can do as retirement nears is expunge any and all debts: credit cards, cars and your home mortgage. These are the real retirement derailers. If push comes to shove, you can sell a house and downsize to raise cash or, possibly, find a favorable reverse mortgage plan that pays an income while you stay put.

7. Cut costs. Two can live as cheaply as one, as they say. Part of the reason so many retirees move to distant states later in life is to find a lower cost of living, lower taxes or both. Once you know your retirement income flow, it’s important to consider all of your options.

You can retire, on time, with a minimum of drama. But you have to plan, not hope, when it comes to retirement.

Dana Ray Reynolds here, an independent financial planner. For more of my updates and advice, follow me on Twitter.

REPOST: Retirement Living: Dreams are just a plan away

USA Today’s Rodney Brooks notes that "living out your dream retirement takes planning, especially financial planning." In this article, Brooks discusses some of the common financial mistakes people make when planning for their retirement.

Image source: usatoday.com

Tom and Anne Barker had a retirement dream: to travel the world. And to say they have lived that dream would be an understatement. They have been on more than a dozen international trips since they retired in 2005, including Iceland, New Zealand, Morocco, India, Zambia, Tuscany, Argentina and Vietnam. And they aren't done yet.

Van McKellar, 74, of Aurora, Co., had a very different dream. He quit school in the 10th grade. Then there was marriage and supporting his family with hard jobs that never left him enough time to go back for that diploma, or that sometimes paid so little he had to have two jobs. Last year he graduated from the Metropolitan State College of Denver cum laude with a Bachelor of Arts degree in African-American studies and a minor in history.

"It felt good," he says. "But it was more than saying it felt good. I felt something very important had transpired. I had reached a milestone that was more important than other things I achieved in my life."

Then there's Jerry Leener, of Chevy Chase, Md. After 30 years at the accounting firm PricewaterhouseCoopers, he wanted to do something different, and he wanted to give something back to the community. So, at 65 he is a volunteer Montgomery County (Md.) EMS technician and ambulance driver, working with men and women half his age.

"You have to like this kind of crap," he says. "Blood and guts is not for everybody."

Despite surveys showing that many of us have not saved enough money to live comfortably in retirement, there are the many who have done things right, and are living out their dreams. The key, financial planners say, is to have a plan to pay for that dream.

"Today we have Boomers crossing that bridge, and they have different ideas of what retirement looks like," says Jennifer Landon, president of Journey Financial Services in Idaho Falls, Idaho. "We're seeing a lot of people who are doing a lot of different things, and they have different (financial) planning needs."

Leener is a great example. After 30 years at the giant accounting firm, he needed something else. "I got to the point where I really wanted to retire," he said. "I thought there was something more in life."

He didn't know exactly how he wanted to give back. He sought professional help, and his retirement goals went up on a white board: giving back, being outdoors, not wearing a coat and tie, freedom of time, and developing a new community of people.

Still, he wasn't sure until one day a battalion chief from Montgomery County Fire and Rescue ended up doing some work in his neighborhood. The two started talking, and the chief suggested he join the fire department as a volunteer.

That was eight years ago. The training was so grueling he actually quit — twice. But he persevered, and now besides being the only volunteer EMS technician among a group of paid professionals, he's also been trained to drive an ambulance. He's proud of the fact that he doesn't need the help of his much younger colleagues to do the very physical work.

And he's going to do it "as long as I can bench press 190 pounds."

McKellar, meanwhile, paid his tuition with scholarships and grants, and paid his living expenses with his Social Security. "I did not use student loans or have any Veterans assistance," he says. "In essence, I was like a very studious person that only took room and board from his parents."

And what did his four daughters think? "They were more proud than I thought they would be," he says. "It was a big deal to them."

Jeffrey Bastable, a retired hospital and health care executive, found a use for his skills when his wife, Susan, a professor at Le Moyne College in Syracuse, N.Y., was planning to take a dozen of her nursing students to a remote village in Ghana to do hands-on health care. This was not her first foreign trip, but this was the first time he went along to help. The group worked at a 100-bed hospital that served a population of 800,000. Bastable used his experience to help with funding and equipment donations.

"People say you are retired, but I say I am retooling," says Bastable, 66. "I say I no longer work for organizations, I work for myself. I've never felt comfortable with the term retirement when you went home and kicked your feet up. That did not work for me."

"Isn't it wonderful that with the experience we have we can apply to other settings that desperately need it," he says. "There is no pay. The pay is the faces of the people. The value that can accrue to yourself personally by extending yourself in unfamiliar settings can be extraordinary."

Tom and Anne Barker, of Webster, N.Y., are both retired from the Rochester Institute of Technology, where they were both statistics professors. They have done most of their travels through Classic Journeys, which offers vacation packages and tours worldwide, including walking, hiking and adventure tours.

"We did two things when we retired," says Anne Barker, 68. "One was we bought an RV. And two, we went to Iceland before the retirement party. I've always wanted to go to a place like Iceland. That's how it started."

When they got back from Iceland they drove the RV to Alaska. Now they do at least two trips a year, and the trips generally last three weeks to three months.

Tom Barker, 72, credits two things for their ability to travel the world. One was an inheritance. But he gives most of the credit to his wife, who gets all the information and plans out each trip. "Anne has been the best financial planner I've ever run into," he says. "She has managed finances in such a way that we can afford it."

He also says the couple have always had a "slush fund" for travel. That is key, according to financial planners.

Matt Rettick, author of author of All the Rules Have Changed — What You Must Do to Succeed in the New Financial Reality and host of the Internet TV show Checks and Balances TV, says first you must eliminate debt. "To achieve retirement dreams you have to reduce and then eliminate all debt," he says. "We really have to become debt-free as soon as possible — that's number one."

"Number two is a regular savings plan," he says. "I believe you pay yourself first. We need to save 10% to 15% of at least our net, or gross, and put it into savings pockets." Those pockets include an emergency fund with six months' of living expenses; an auto fund, so you don't have a car note in retirement; a travel fund, "so they are not using credit cards to go to Hawaii"; college funds for children; and a retirement fund.

"Once these accounts are funded, I'd like to see the majority go into retirement funds," he says.

People often make a big mistake in planning for their retirement dreams, Landon says: They want to spend too much too early.

"Make sure you are not sacrificing your long-term plan for what you want today," she says. "Do you have enough money? Do you have a well-thought-out plan for inflation and health care? After those things are taken care of, we can look at other things. But don't do it at the expense of a long-term plan."

Financial planner Dana Ray Reynolds helps clients work on their finances and search for the best opportunities in which they can grow their money in the healthiest way possible. For more pointers on financial planning and security, follow this Twitter account.