August 2008 Archives

August 31, 2008

For Women Only: Plan for the Long Haul

In 2006, USA TODAY highlighted some of the ways that single women preparing for retirement are -- unlike their male counterparts -- hit with a double whammy: not only do they typically have smaller retirement savings than men, they also live longer. Here are some of the ways this plays out:

  • Women often quit working earlier than men. The average woman retires at age 62, the average man at 63. Married women tend to stop working once their husbands retire, even though the average woman is younger than her husband and will outlive him and have a longer retirement. But by working longer, women could contribute more to retirement savings plans and significantly boost their Social Security benefits.
  • Divorced women too commonly give up shares in their husband's pension plan. Some women's number one priority in a divorce is keeping the family house -- but they often give up more valuable shares of their ex-spouse's pension or retirement savings in exchange. So before signing off on the divorce decree, obtain as much information as possible from your husband's employer about the pension plan's long-term value to make sure it's a fair trade. You have a right to this information, but many pension plans won't provide it without a letter from your lawyer, according to Women's Institute for a Secure Retirement. (You should also tell the pension plan administrator that you're in the process of getting a divorce. That will prevent the plan from paying out your share to your husband before the divorce is final.) Bottom line: In some cases, the financial benefits of the pension may outweigh the home equity. If you do choose the pension, you'll need a separate court order -- called a qualified domestic relations order -- which recognizes your right to part of your ex-husband's pension.
  • Women invest timidly. Because women tend to have less money to invest, they're often more fearful of taking losses. But they live longer than men, which means they have longer retirements -- and more time to ride out the market and take full advantage of riskier investments, which typically return more over the long term. Because most women can expect at least 20 years in retirement, at least half their assets should typically be in stocks.
  • Women rent instead of own. Women approaching retirement age are more likely than male counterparts to rent housing. But there's a good reason to aim toward owning your own home in retirement: it's cheaper. For women, who typically have less retirement income and live longer, that's essential. Housing eats up 33.6% of the income of seniors who rent and are in the lowerst 25% income bracket, according to the Joint Center for Housing Studies at Harvard University. But those who own their own homes use an average of only 18.3% of income to pay housing costs. The reasons are fairly simple: If you rent, your rent is likely to rise year after year, and you have no chance of recovering any of that money; if you own, mortgage will probably be a fixed amount, and, over time, you could pay it off entirely. Even if you're buying just a small condo, you'll build up equity which you may eventually tap by using loans or a reverse mortgage. The trick is finding a house or condo you can afford. To do that, you might have to move to a part of the country where housing prices are lower, or settle for a smaller living space.
August 28, 2008

Fulfilling Retirement Activities

Broadly speaking, there are four or five main ways to spend your time after your early to mid-sixties that are likely to provide you with an interesting life: working (especially part-time), volunteering, learning new things, and engaging in personal interests and family activities. Let's take a look at each.

Working Part-Time

According to one poll, 24% of retirees said they retired too soon, while only 8% wished they had retired earlier. This neatly dovetails with my own experience that many people who enjoy the bustle and creativity of the workplace find that continuing to work at least part-time after reaching retirement age offers the best opportunity to stay busy in life. And, of course, planning to work a few extra years beyond retirement age (assuming you are pretty sure you can pull it off) can also go a long way toward helping solve any money problems you run into. The extra income will probably eliminate or greatly reduce your need to tap your investments until you cease working altogether. This, in turn, means that they will be busy earning additional interest or dividends.


An active -- maybe even passionate -- involvement with an altruistic activity can be a hugely positive way for people to approach their later years. At a time when many surveys find that one-third of retired people feel bored or alienated, doing valuable work in the nonprofit sector can be a powerful antidote. Among the benefits are:
  • staying busy
  • feeling needed and valued
  • making new friends, espcially younger ones, and
  • the personal satisfaction inherent in doing something you believe in.
It's almost a cliché that Americans will organize to support almost any good cause -- and more than a few slightly wacky ones. As a result, about 11% of the nation's entire economic activity takes place in the nonprofit sector, much of it dependent, at least in part, on the unpaid work of volunteers. Oddly, it seems to be something of a secret that "senior power" is a powerful reason why so many nonprofit groups achieve so much. If you doubt this, take a look at any local educational, religious, environmental or health care group -- even the volunteer fire department. You'll probably see that much of the behind-the-scenes leadership, as well as the bulk of volunteer help, is provided by retired people.

Learning More Things

Continue reading "Fulfilling Retirement Activities" »

August 26, 2008

Plan for Retirement Early

Okay, so let's assume for a moment that I'm right when I say that lots of retirees have trouble filling up their days with fulfilling activities. But how come? If you have never had trouble finding interesting things to do earlier in life, why should it be different after you retire?

My talks with retirees suggest that it's often some combination of the following:

  • A lack of practical knowledge about how to get involved in new activities.
  • Shyness -- often the result of a dip in self-esteem that can accompany no longer having a job. Shy people often become isolated people
  • Increasing insecurity about your self-worth as you age ("Who would want me?").
  • Declining physical ability. People who have relied on their participation in sports both to feel good about themselves and as a way to make friends are particularly vulnerable to becoming depressed and isolated should physical limitations mean they can no longer play.
  • The inability to find a job that really makes use of their skills -- most retired engineers don't want to take tickets at the local amusement park.
  • Unexpected boredom with planned activities. Many people report that by the time they finish their third cruise, they never want to see another margarita again.
  • The (sometimes unwelcome) childcare expectations of your children. If you must care for your grandchildren many hours a day, you won't have much time to do anything else. This can be great if caring for kids is what you love to do, but tough to cope with if it isn't.

Do I have your attention? Great, so tell me -- exactly what will you do when you retire? Yes, that's right -- I'm challenging you to come up with a detailed list. Take a few minutes to write down the things you anticipate being actively involved in. And don't include solo activities such as reading, watching TV, or walking. While fine in themselves, none of these is likely to keep you energized and interested for long.

How long, detailed, and specific is your list? In my experience, too many people list a few vague activities, such as travel, adult education, or spending more time with family -- and then get stuck. Sorry, that's not good enough. Unless you can answer this all-important question with a list of things you are excited to do, learn, or try, you are at risk of being one of the millions of older people whom my friend Stan Jacobsen describes as being at high risk of "spending lots of hours in their favorite chairs contemplating their bodies falling apart."

If you're having trouble coming up with a detailed plan, don't panic, but be sure to read the next entry on this blog.
August 20, 2008

For Men Only: Look Beyond Your Paycheck

Many men work hard to fulfill their traditional roles as providers, but less of a good job at being family members. Even in an era when the majority of women work outside the home, too many men absent themselves when it's time to pitch in with day-to-day chores or take care of the kids.

What does this have to do with retirement? Sadly, for many men, a great deal -- and it's mostly negative. That's because a man who works long hours and then spends much of his free time watching sports on TV, bonding with male buddies, or participating in other activities that exclude his family, is at high risk of being lonely, isolated and depressed in later years.
The reason is easy to grasp: When work stops and physical limitations make it more difficult to participate in sports, many men have few family relationships to fall back on. Indeed, one reason why women typically outlive men is that men are typically such social misfits -- in some cases unable to call the kids or invite over the neighbors without asking their spouses to do it for them.

Perhaps the single best way for men to increase their chances of enjoying a fulfilling retirement is to spend more time becoming close to their families during mid-life. Start by becoming more significantly involved in lots of day-to-day family activities. Yes, this includes changing diapers and getting up with a sick child in the middle of the night, but it also means being sure you have a close personal relationship with each child at each stage of his or her life.

Unfortunately, many men never seem to understand that intimacy doesn't just somehow happen as a result of sharing genes, but must be earned by reading or telling bedtime stories, helping with homework, driving carpools, volunteering in the classroom, coaching Little League (for daughters' teams as well as sons') and even helping a seven-year old make a new dress for a favorite doll. Of course, you should be doing these things because you want to, not just because they'll pay dividends later on when your adult children will want you to be a part of their lives, but it's definitely a side benefit you can consider money in the retirement bank.
August 16, 2008

Create a Strong Friendship Network

Whether you retire rich, poor, or somewhere in the middle, you will almost surely be poor in spirit during your retirement years, unless you have both good friends and the skill to make more. And this is likely to be true even if after an over-busy life your dream is to avoid the chattering masses while looking for happiness in splendid isolation.

The reason we all need friends later in life is simple -- retirement can last a long time, and as we age, our old friends tend to die or disappear, just as we ourselves tend to get increasingly shy and intolerant. Thus, while at 25 we probably included all sorts of people in our broad friendship network, by 75. chances are we have become less trusting, less open, and more likely to give up on the possibility of making new friends.

And don't just assume that your old friends will see you through. Especially if you live a long time, your friends will move away and die. And friends who are closely linked to work, sports, or some other activity are likely to disappear when you change your routine. Add to this the possibility that, should your spouse die before you, many of your "couple friends" are likely to drift away, and it's easy to see why it's so important to be able to renew your friendship networks.

So ask yourself, when is the last time you made a real friend -- someone not connected with work or your raising kids? If the answer is "it's been a while," you have some work to do. That's because if you're already losing the knack of social networking in mid-life, you are highly unlikely to rediscover it when you are older and less sure of yourself.

To counter the real threat of spending a lonely retirement, commit yourself to making new friends now. And make sure that at least some of these friends are younger than you are. Think of it this way: If most of your friends are about your age or older, and you live into your eighties, many, if not most, will die or become mentally incapacitated before you do. Not only will this deprive you of their companionship and increase the likelihood that you will spend many hours and days alone, but losing a friend is always a painful event. This is true even though you still have other friends or the ability to make new ones.

Here is how my friends Michael Phillips and Catherine Campbell, authors of Simple Living Investments for Old Age (Clear Glass Publishing) -- a small book I highly recommend -- put it:

The death of friends, including lovers and family, will be a powerful and debilitating force. As we age, the names listed in our personal phone books will slowly be crossed out. To sense the extent of the problem, we can imagine a party to which a large number of long-time friends are invited. Now picture the same guest list when we are 65: One out of four, 25% of our male friends, will have died, and 15% of the females will be dead. By the time we are 85, only one out of five men who were our friends at age 35 will still be alive, and only two out of five women.

When we travel to a city where we once had many friends, it will be painful to try to reconnect with them. Too often the person on the other end of the phone will say, 'He died in March, didn't you hear?'

To clearly understand how death will rob us of our friends as we age, consider that a person who had 200 friends, close associates, and relatives in his/her life-circle at age 35 will -- at age 75 -- be losing to death one male friend every two months and one female friend every four months. Ten years later, when that person is 85, the rate of loss will have doubled, with a male friend dying every month and a female friend dying every other month. The death rate difference between males and females means that those of us still alive at age 85 will have twice as many women friends as men, assuming we started with an equal number of each in our earlier days.
August 11, 2008

Invest in Good Health

We all know people in their seventies and older who are in excellent physical condition. Many still jog, swim, ski, dance, hike, or golf with much the same verve and stamina they displayed twenty years ago. We know other retired people -- unfortunately, far too many -- who are so sedentary they become tired going to the grocery store. We find it odd that although most people currently in midlife say that after retirement they hope to count themselves among the active, energized group, a great many follow a lifestyle that almost guarantees they will be in such poor physical condition they will spend most of their retirement on a couch. Even odder is the fact that may sedentary middle-aged people whose health and stamina are already in obvious decline nevertheless quickly and cheerfully agree that staying physically active is a key factor to enjoying retirement.

One thing is sure: Owning all the right mutual funds, or even a mansion on the California coast won't do you much good if at age seventy you have trouble walking across the room, lifting your tiny grandchild, or having sex.

But if being old and affluent won't make up for neglecting your health in mid-life, maintaining good health will be even more important if you have saved little. Because of a poor education, low pay, bad luck, or expensive family responsibilities, many people -- especially single women -- need every penny they earn during their middle years just to live from day to day. When they retire, people in this group typically have little more than Social Security to live on.

Not surprisingly, good health is particularly important for these low-income retirees. Not only does it reduce out-of-pocket costs for health care and drugs not covered by Medicare, but more importantly, it makes it far easier to work at least part-time for five or ten years, thus producing a much-needed financial cushion.
August 6, 2008

Plan to Keep Busy

Many retirees report experiencing a paradoxical situation: On the one hand, they have the sense that time is short and their life is running out; on the other, they don't have anything interesting to do after lunch. Even the most avid fisherman, gardener, traveler, or dog lover is likely to find plenty of time to both follow their passion and do many other things -- including, if she isn't careful -- becoming bored, depressed, and prematurely dependent on others.

As my late friend Babette Marks put it:

The ability to maintain an active involvement in life in a number of different ways is one key to leading a decent life when you're older. Face it, what else have you got? Your health probably isn't great, half your old friends are dead, and you don't recognize yourself in the mirror. If you don't keep interested and involved with lots of activities and interests, you'll end up a depressed old vegetable.
Babette was as right as she was blunt. In my observation, most people -- especially those who have been busy earlier in life -- make a successful transition to a reasonably fulfilling retirement if, and only if, they stay busy doing things that reinforce their sense of self-worth. Typically, this means being involved with others in activities they feel are meaningful. Everything from volunteering for a worthy cause to having sex can work. But it can also mean participating in highly absorbing solitary endeavors, such as skiing, playing music, or reading a wonderful book.

We can't find anyone in their sixties or seventies who tells us it's fun to spend most of their time watching TV, sitting on a park bench, or sleeping late. And even many people who are more active -- jogging, walking, bike riding, or swimming -- report that continually doing these routine things alone can quickly become joyless. Although we can point to no study that proves it, we're convinced that people whose lives revolve almost exclusively around solo activities seem to be sicklier and more depressed, and tend to die sooner than those who are more actively involved with life.

Why should you worry about planning your post-retirement activities long before you retire? After all, depending on how old you are, your retirement may be years, or even decades from now. Unfortunately, waiting until after retirement to figure out what you will do seldom works well. People who count on developing new interests, activities, and involvement after 65 often don't.

Ruth Cohen, a Beaverton, Oregon, geriatric specialist, puts it like this: "For the first time in history, older people have a plethora of choices. But unless you have a plan, you're not likely to get what you want." Or, as Fred Astaire remarked, "Old age is like everything else. To make a success of it, you've got to start young."

Continue reading "Plan to Keep Busy" »

August 1, 2008

Retire Happy: It Ain't Only Money

Welcome to Retire Happy, Nolo's retirement planning blog. In this blog, we'll discuss the best strategies people in mid-life can adopt to prepare for a fulfilling retirement. We do this in large part by drawing on the lessons of highly successful retirees who almost universally agree that many factors -- in addition to a large financial nest egg -- are predictive of a successful retirement.

The premise of this blog is simple: popular advice that says you'll need to save mega bucks to avoid spending your retirement eating cat food is hugely exaggerated. Indeed, for most Americans, solvency will not be the biggest problem of their retirement years. Instead of spending your middle years working long hours to accumulate a huge nest egg, you would do better to focus on the things that will truly make your later years more enjoyable and fulfilling: your health, spiritual life, relationships with friends and family, and creating a full plate of interesting things to do.

No question, putting aside an adequate financial reserve is also important. But, in contrast to most retirement advice you'll receive elsewhere, we firmly believe that it's not all-important. Indeed, it is the thesis of this blog that over-concentrating on working and saving in the decades before you retire -- as opposed to living a full life -- will actually be counterproductive to achieving a fulfilling retirement. So stay with us and learn more about how to Retire Happy.