Monthly Archives: May 2016

Retirement Analysis

The Four Stages of Retirement Leisure

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The tens of millions of baby boomers retiring over the next 20 years are changing the meaning of leisure in retirement. A recent study by AgeWave and Bank of America Merrill Lynch has determined that retirees move through four distinct stages of retirement leisure.

Stage 1. Winding down & Gearing Up: 5 years or less before retirement:

Many in this stage feel highly stressed because they are so busy and 74% identify work as the biggest barrier to them having more fulfilling leisure time. At this stage leisure travel is about escape and recharging one’s batteries. And in the 2 years before retirement most soon-to-be retirees don’t travel as much and spend less also. They feel optimistic about retirement leisure and are focusing on gearing up for the next stage.

Stage 2. Liberation & Self-Discovery: 0-2 years into retirement:

Once people do retire, they finally feel they have enough free time to do all the things they want. There’s an enormous sense of liberation and relief as nearly all say retirement provides them the freedom to finally do what they want on their own terms.

In this stage, many retirees seek personal growth and adventure, including biking, hiking, and enjoying trips that offer learning and even home sharing. 72% want to try new leisure activities. Leisure is clearly a priority for retirees at this stage, but 24% continue to work with 68% of those retirees working part time. Also 22% of retirees in this stage of retirement leisure enjoy regularly volunteering their time.

Some early retirees feel unsettled, anxious and even bored after spending most of their life in a work-centered identity. Over a third of them say it’s harder to structure their time than before they retired and almost half feel guilty about not using leisure productively.

Stage 3. Greater Freedom & New Choices: 3-15 years into retirement:

Once retirees settle into retirement and successfully move through the transition away from work they appreciate and enjoy their leisure even more. As retirees embrace their new leisure identity, feelings of happiness, contentment and confidence are high, spontaneity peaks; anxiety wanes.  They find comfort with their post-work identity. Guilt dissipates and the structuring of free time improves significantly. Retirees are now most likely to exercise, shop, read for pleasure, volunteer, take classes and socialize with friends.

Spending on leisure travel and frequency of travel both increase. Travelers seek to see, feel, and learn new things. They want to make special new memories – particularly ones shared with loved ones. ‘Voluntourism’, cruises, adventure travel, international sightseeing, RV travel and overnight spa trips are common. Only 9% continue working at this stage.

Stage 4. Contentment & Accommodation: More than 15 years into retirement:

Maintaining health and independence is even more important to these retirees. Most of their leisure time is spent relaxing or connecting with family and friends. Life becomes even more simplified. Instead of discovering new activities, familiar ones are enjoyed. Retirees at this stage can be less energetic, more financially constrained and more physically limited than earlier in retirement. They seek to connect with family and friends in all types of leisure including multi-generational travel with grandchildren and heritage trips.

At this stage health conditions are more pervasive and can limit leisure experiences. Also the majority of retirees are dealing with an increase in doctor visits and medical care. Some are involved with care-giving for a spouse or partner.

A Note to Young Entrepreneurs:

“As the age wave grows, this leisure economy will diversify and multiply, reaching a cumulative total of $4.6 trillion which will likely create an unprecedented opportunity for the leisure industry.” This sector of business will boom over the next 20 years and will offer prime opportunities for employment and investment.

The full article in the Huffington Post by Ken Dychtwald can be found here.

Best Practices, Social Security

Maximizing Social Security as a Married Couple

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NOTE: You receive about 8 percent less for every year you file early (starting at age 62), and the same increase for every year you wait until age 70 — the last year for which additional credits are available.

Higher-income people tend to live longer, so they stand to benefit from delayed filing.

Most often, couples will benefit if the higher-benefit spouse delays filing to earn delayed credits.

According to Jim Blankenship, a financial planner based in New Berlin, Ill., and author of “A Social Security Owner’s Manual.” “The idea is to get some income coming in early but also look at the cumulative lifetime cash flow,”

In situations where one spouse’s income is much lower — less than half of his or her mate’s — Blankenship suggests that the lower earner file at 62 (the earliest claiming age). At a later point, when the higher-benefit spouse files, the lower earner could be entitled to an increase from a spousal credit.

The Social Security Administration typically would bump up his or her payments automatically when the spouse files, although Blankenship advises contacting the SSA to make sure it happens.

Blankenship also advises couples to think about maximizing monthly benefits for the spouse most likely to live longest.

See Mark Miller’s full article here for more information.

Best Places to Retire, Pensions - A Dying Breed

Companies That Still Offer Traditional Pension Plans

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If you’re in the precarious position of determining where you want to make or continue your career, one of your primary considerations has to be what retirement offering the company has for its employees. Of the large U.S. companies only 17% still offer defined benefit plans to their employees. A Towers Watson study found that from 1998 to 2013, the number of Fortune 500 companies offering traditional defined benefit plans dropped 86 percent, from 251 to 34. As stated numerous times on this site most companies have transitioned to 401(k) or hybrid plans to defer the significant cost of defined benefit plans. Below is a non-comprehensive list of companies that still offer traditional pension plans:

  1. Exxon Mobil
  2. United Parcel Service (UPS)
  3. Johnson & Johnson
  4. 3M
  5. Bank of America
  6. Coca Cola
  7. Accenture
  8. Nestle
  9. Chesapeake Energy
  10. Devon Energy
  11. Genentech
  12. Aflac
  13. USAA
  14. Colgate-Palmolive

Of course many federal and state government agencies as well as municipalities still offer defined benefit pension plans however; there is major controversy in this space due to what is estimated to be over a $1 Trillion dollar state pension fund shortfall. Simply put it means that state employees promised retirement benefits could be left holding the bag. If you’re a state employee, once again, don’t wait, INVESTIGATE.

For more information on the transition of defined benefit plans to employee managed investments read this U.S. News and World Report article by Lou Carlozo.