The War Between the Now & the Tomorrow You

Retirement now or tomorrow is more than a matter of instant gratification. Retirement is a delicate balance of financial, lifestyle and relationship considerations. What motivates you now may not be what motivates you in the future. Tomorrow your priorities will look a lot different than they do today. Once the lines are drawn, can you make a clear and intentional decision on these battlefronts?

Battlefront: How Much to Save

There will always be more demands on your money than there are funds to go around. At the mid-point in your career, the Now You faces a range of responsibilities, often having to provide for the needs of three generations. Do you invest in your retirement account or make strides to pay off your home mortgage? Do you forgo saving in order to pay for a child’s college education? Are you saddled with another sizable financial commitment like caring for an aging parent?  The Now You is highly influenced by your obligations to those around you.  The Tomorrow You is asking, What about your financial commitment to yourself?

The Tomorrow You understands the realities of living in retirement…particularly on a fixed level of income. That fixed income defines your lifestyle, your housing and your ability to pursue the activities you want to throughout retirement. The Tomorrow You argues that it’s better to downsize now and live below your means in order to allow for more comfort later.

The Tomorrow You also knows that your children may likely have higher earning potential than you do. There’s an opportunity cost when paying for their education versus saving your own nest egg.

Saving for retirement is an on-going tug of war; for every few steps you’re pulled to take care of others, be sure you take a few steps back to take care of yourself.

Battlefront: When to Retire

The Now You is a steadfast professional, working tirelessly to reach the finish line called Retirement. The finish line appears as a finite point, be it in the near horizon or the distant future. The Now You equates retirement with an arbitrary goal:  When I save $X, I can retire…. When I am X years old, it will be the right time.  The Tomorrow You understands the decision to retire deserves far more consideration.

Amassing an adequate financial portfolio and reaching full retirement age are just two retirement factors. The Now You delays retirement in order to maximize your benefits. Yet, only in the future do you know how your quality of life, health and life expectancy play out. If you’re given limited time in retirement, the Tomorrow You asks, Should I have retired sooner?

In the end, the Now You needs to develop a plan for how the Tomorrow You wants to live in retirement. Let your dreams and expectations for your retirement lifestyle shape your planning and saving strategies. Then, take specific actions to help you reach your retirement goals faster. Knowing exactly where you want to go is essential. Ancient military strategist Sun Tzu said this of war, but he was probably talking about retirement: “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”

 Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance

This material is intended to potentially assist you in planning for your future. Guardian and its affiliates, subsidiaries, employees, agents, and outside contractors, including but not limited to Dr. Daniel Crosby, are not authorized to provide legal, tax, or investment advice in the materials of this website including but not limited to any blogs. The information provided does not constitute a solicitation of an offer to buy or an offer to sell financial or insurance products. Please note that individual situations can vary, and you should consult your tax, investment or legal advisor for guidance and information specific to your situation. Guardian is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this material. To learn more about Guardian, visit GuardianLife.com. 2013-8888

Pros & Cons of Early Retirement

Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance

Are you ready to take the dive into an early retirement? Depending on your profession, early retirement may be as young as age 55. A healthy savings portfolio and debt-free living can potentially give you a solid retirement platform. And, the opportunity to spend decades of your life in leisure pushes you even closer to taking the plunge. Like any choice in life, early retirement involves trade-offs. For what you gain in rest and relaxation, you pay in opportunity costs. As you evaluate your financial stance for an early retirement, how will these pros and cons weigh in on your final decision?

Pro: The Opportunity for a Fresh Start

Putting the brakes on your full-time career doesn’t mean slowing down completely. More retirees than ever are working throughout their retirement. Many take on part-time jobs in a completely new field while others stay sharp with consulting roles in their native industry. Early retirement affords you the opportunity to work becauseyou want to work, not because of financial obligations. Your fresh start may lie in a new industry or with a new educational degree. In either case, personal accomplishment becomes the motivator; not compensation.

Pro: The Opportunity to Invest in Family & Personal Relationships

If you’re in the position for an early retirement, chances are your hard work cost you time away from loved ones and family. Retiring in your early fifties may allow you to spend more time with your family and better parent children throughout their teens and early adulthood. You can reconnect with a spouse who ran the household while you pulled long hours at the office. Investing extra time in loved ones pays dividends for the entire household.

Pro: The Opportunity to Travel…Actively

Whose retirement plan doesn’t include at least some form of travel? Whether your vacation style involves calming beaches or active adventure, both time and opportunity abound. An early retirement often comes with good health, agility and stamina. Adventure-based vacations and bucket list experiences such as rock climbing, extended hiking, white water rafting and more are approachable – and potentially safer – at an earlier age.

It’s easy to dream about the opportunities an early retirement offers. But, have you considered these costs?

Con: The Cost of Healthcare

Medicare coverage doesn’t kick in until age 65. If you’re approaching retirement age in good health, you’re fortunate. However, you can’t forgo health insurance coverage without assuming serious risk to your nest egg. Today, few employers are providing post-retirement health plans. The Small Business Council of America reports for businesses that offer health insurance for retirees, all retirees must be included. The employer pays a hefty percentage (often 50% or greater) of the annual premium. While the Early Retiree Reinsurance Program defined by the Affordable Care Act provides assistance for employers who cover retirees aged 55-64, the cost-prohibitive nature of offering benefits limits their availability. Even if you’ve been promised retirement coverage, continued coverage is not guaranteed.

Con: The Cost of Accessing Your Own Money

Using tax-sheltered accounts to save for retirement is a smart move, but tapping into those funds early can cost you. A 401(k) typically carries a 10% penalty for early withdrawals before the age of 59 ½. However if you leave your company at age 55 or older, the IRS will allow you to make withdrawals penalty-free. Those with traditional IRAs face a 10% withdrawal tax on distributions taken before the age of 59 ½ unless they agree to adjusted periodic payments based upon life expectancy. Similar 10% early withdrawal penalties may be applied to funds converted into a Roth IRA depending on the composition of the account. Know the costs associated with accessing your own money and how they affect your early retirement budget.

Con: The Opportunity Cost of Your Benefits Packages

Be aware that the earlier you access benefits packages the less benefit you’ll receive. The Social Security Administration will reduce your benefit for drawing benefits prior to the full retirement age of 67. Drawing early means you’ll forgo up to as much as about 30% of your benefits (or more if you’re drawing as a spouse). Employer-paid pensions aren’t immune either. Civil servants face a 2% reduction per year for any retirement annuity payments (Civil Service Retirement System Annuity) drawn under the age of 55. Private pensions are typically designed to make full payments at the age of 65; earlier payment typically means a reduction in retirement payments.

Sources:

www.opm.gov

http://www.sbca.net/familyhealth.htm

This material is intended to potentially assist you in planning for your future. Guardian and its affiliates, subsidiaries, employees, agents, and outside contractors, including but not limited to Dr. Daniel Crosby, are not authorized to provide legal, tax, or investment advice in the materials of this website including but not limited to any blogs. The information provided does not constitute a solicitation of an offer to buy or an offer to sell financial or insurance products. The above information is not intended to be tax, legal, or investment advice. Tax laws and regulations are complex and subject to change. Please note that individual situations can vary, and you should consult your tax, investment or legal advisor for guidance and information specific to your situation. Guardian is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this material. To learn more about Guardian, visit GuardianLife.com.

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What I Wish I Had Known Before Retirement

Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance

If you reflect on your high school and college years, chances are you wish you had dedicated more time and attention to your studies. Whether it’s your education, family life or professional career, such wisdom only comes with time and distance from the experience itself. There’s no crystal ball that can predict exactly how your retirement will be. Here’s some insight into what most retirees wish they knew before retirement.

There’s more to retirement planning than money…

You’ll spend ten, twenty or thirty years (if you’re lucky) saving for your retirement. You’ll calculate a budget, a replacement ratio and target savings goals to allow you to retire comfortably. It’s likely one of the largest financial endeavors of your life. But, don’t let your financial planning overshadow the personal planning that needs to take place as well. How will you spend your time in retirement? Do you have goals for traveling or for mastering a new skill?
It’s equally important to plan for managing your relationships with others. If you’re married, you’ll have more time than ever before with your spouse. If you’re leaving a career with high levels of personal interaction, you’ll want avenues for new relationships in retirement, such as volunteering or mentoring. Your savings may outline your retirement plan, but you decide how to fill your time.

There are different ways to retire…

Retirement isn’t an all-or-nothing game. You don’t have to trade your career for 24/7 rest and relaxation. All too often, retirement is defined solely by which category you meet: Working or Not Working. If you choose to continue working in some form throughout your retirement, you’re not alone. According to the National Council on Aging, nearly 20% of adults aged 65+ are working or seeking work, which is nearly double the rate in 1999 (12%). Many retirees work for social interaction, the opportunity to pursue a new interest or simply for additional compensation. Full time, part time and consulting roles are all options.

There’s always something to spend money on…

It’s easy to assume that you’ll have the diligence to live within a budget by the time you enter your golden years. The truth is there will be just as many interests competing for your attention and spending power. It’s a recognized fact that most first-year retirees overspend during their first twelve months in retirement – generally on extended vacations. Travel pursuits aside, you’ll face many more trade-offs on how to spend your money. Will you dole out generous birthday gifts to grandchildren each year, or will you leave a larger financial legacy after your passing? If you’re still supporting adult children, it’s time to push them into complete financial independence.

There’s no magic pill for health…

Are you waiting for retirement to finally have the time to devote to exercise and dietary planning? If you haven’t made a commitment to wellness throughout your life, don’t expect retirement to provide an instant boost to your health. Your health will be the primary determinant of how much – and how long – you’ll enjoy your retirement years. Start preparing for a healthy retirement now- both in terms of fitness and savings. Fidelity estimated that couples who retired in 2013 will need $220,000 to pay medical expenses throughout retirement. Medicare coverage kicks in at age 65. But, on average, it will pay less than half of your medical bills.

There’s no way to know if you’ve saved enough….

The average retiree can expect to spend twenty years or more in retirement. Savvy retirees are aware of their savings adequacy – their level of confidence in their savings lasting throughout their entire retirement, plus some to spare. Adequacy is important for everyday cost-of-living and for emergency expenditures as well. Your relationship with your financial advisor should extend well beyond your target retirement date. He or she will continue to work with you throughout your retirement years, giving you advice and recommendations for maintaining healthy spending habits as you age. Your financial advisor will continue to evaluate and rebalance your investments to ensure they’re the best fit for your individual situation.

There’s still never enough time…

Throughout your working years, you struggled with balancing your time between family, work and relationships. Most likely, there was never enough time to completely satisfy each. Time is equally valuable in retirement. While there are fewer formal demands on your time, now more than ever you should ask yourself the question: How will I seize the day?

Sources:
Mature Workers: Fact Sheet. National Council on Aging.

Fidelity Estimates Couples Retiring in 2013 Will Need $220,000 to Pay Medical Expenses Throughout Retirement. Fidelity.com, May 2013.

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This material is intended to potentially assist you in planning for your future. Guardian and its affiliates, subsidiaries, employees, agents, and outside contractors, including but not limited to Dr. Daniel Crosby, are not authorized to provide legal, tax, or investment advice in the materials of this website including but not limited to any blogs. The information provided does not constitute a solicitation of an offer to buy or an offer to sell financial or insurance products. Please note that individual situations can vary, and you should consult your tax, investment or legal advisor for guidance and information specific to your situation. Guardian is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this material. To learn more about Guardian, visit GuardianLife.com.

7 Business Ideas for Retirees

Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance

Retirement is the perfect time to pursue your passions. You have the luxury of spending time on the projects that you love, and you can work because of choice rather than necessity. Matching your passions with a small business venture puts you on the path towards a fulfilling retirement experience. But, it takes careful consideration to launch a business that yields success…rather than stress.

It’s essential for retirees to follow the same steps that a younger entrepreneur would, plus a few more. Your business venture should enhance your retirement experience, not put it at risk. Keep these considerations in mind as you choose the concept and business model that’s the best for you.

• Work Income & Social Security: Understand how your income will affect your Social Security benefits. If you begin claiming benefits prior to your full retirement age, you’ll face hefty deductions on your income above a minimum threshold. In 2013, $1 is deducted from every $2 earned above $15,120.
• Tax Incentives & Burdens: Is your state or city small business-friendly? The Small Business & Entrepreneurship Council issued the “Business Tax Index 2013” and ranked the following 10 states as those with the best tax systems: 1) Texas, 2) South Dakota, 3) Nevada, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Colorado, 9) Ohio, and 10) Alaska.
• Start-Up Capital: Every business will require resources for start-up expenses associated with business licenses, contracts and accounting. A business model with significant up-front capital expenditures likely isn’t the best choice for a retiree. Your goal is to supplement your nest egg, not tap into it.
• Small Business Resources: Savvy entrepreneurs take advantage of expert resources. Does your community have a Small Business Development Center or is there a SCORE chapter near you? Both provide access to free one-on-one business counseling from retired executives or subject matter experts in your industry.

Begin with a solid understanding of the financial implications of your business venture. Then, feel free to explore the opportunities available to you. Look for a business model that fits your lifestyle and desired activity level. Does it require full-time attention, or can you choose projects and clients as you see fit? Will you work within your area of expertise, or expand your horizons to a new industry altogether? Here are seven small business ideas for retirees:

1. Consulting: Your depth of experience has value, and consulting is a great way to monetize it. You may work on an advisory basis only, or with hands-on technical projects. Consulting can be a great platform for pursuing the aspects of the industry that you love the most while staying sharp on emerging trends.

2. Tutoring: Take advantage of schedule flexibility and seasonal work throughout the school year (or the summer). Tutoring can be particularly fulfilling for retirees who love to help others master tricky concepts or problems. Online providers offer fiercely competitive rates, but you’ll build your client base using specialized experience and personal relationships.

3. Home Health Care Aid: Combine medical care with your ability to provide companionship to clients who require assistance with everyday tasks or who are shut-ins.

4. Financial Planner: Fewer than half of all Americans have a retirement plan in place. That leaves a broad market for a financial advising. Research licensures and compensation structures carefully so that you can offer the right expertise and credibility for the market.

5. Home Services: From cleaning to handyman services, opportunities abound for providing in-home services to busy households. Consider your options carefully; while a franchise offers a set structure and turn-key marketing, the operating hours may be more than you initially wanted. Working independently offers significantly more flexibility.

6. Tax Preparation: You don’t have to be a CPA to work as a tax professional. Over one-third of tax preparation offices are run by a single person. Complete the IRS proficiency exam and register as a tax preparer. Take advantage of seasonal work peaks and then enjoy the rest of the calendar year in leisure. Keep in mind that some continuing education is required to maintain your registration status.

7. Bed & Breakfast Operator: For those who want to be fully immersed in the hospitality industry, operating a B&B offers the opportunity to put your culinary, project management and business skills to work. The Professional Association of Innkeepers International monitors the $3.4 billion industry and the 17,000 inns located across the United States. A B&B venture likely requires buy-in and partnership on behalf of your spouse; 72% of innkeepers are couples.

Sources:

The Small Business & Entrepreneurship Council “Business Tax Index 2013” Ranks State Tax Systems for Small Business and Entrepreneurship” – April 17, 2013.

The Urban Institute. Johnson, Richard W. and Park, Janice S. “Labor Force Statistics on Older Americans, 2012”

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This material is intended to potentially assist you in planning for your future. Guardian and its affiliates, subsidiaries, employees, agents, and outside contractors, including but not limited to Dr. Daniel Crosby, are not authorized to provide legal, tax, or investment advice in the materials of this website including but not limited to any blogs. The information provided does not constitute a solicitation of an offer to buy or an offer to sell financial or insurance products. Please note that individual situations can vary, and you should consult your tax, investment or legal advisor for guidance and information specific to your situation. Guardian is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this material. To learn more about Guardian, visit GuardianLife.com.

Best Jobs for Retirees

Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance

If the thought of complete retirement leaves you restless, you’re not alone. More retirees are working now than ever before. As of the Second Quarter 2013, 25.0% of adults aged 62+ participated in the labor force, an increase from 17.2% in 2000.

While some retirees use that money as discretionary income, others are concerned about their ability to afford retirement over the long run. They work to cover health care costs, to make up for lack of savings or to recoup losses in retirement accounts. Yet, many retirees simply work for social interaction and to remain engaged in the world around them. While retirement may close the door on your traditional career, these three job categories open far more opportunities in your golden years.

Jobs with Variable Hours

Retirees schedule their days as they please. Thus, jobs that require non-traditional hours or fast response times are a great fit for those with few structured demands on their time. Many retired nurses adopt new roles as home health care providers, often with their choice of days and shifts. Non-medical professionals can also find roles assisting clients with daily living activities including meal preparation, cleanliness, errands and more.

Jobs That Provide Housing

Chances are your retirement plan addresses cost of living, housing…and even some travel plans. Many retirees are finding jobs that combine all three! Seasonal and tourism-based jobs with national parks, resorts and leisure destinations offer unique opportunities to travel and to become immersed in the operations of the tourism industry. Roles vary from retail to food service, customer service, maintenance and more. Compensation may be a combination of hourly pay and/or accommodations. While the lodging may be meager, the experience is often energizing and unique to the individual attraction. The National Park Service offers jobs in 397 national parks, and private businesses offer even more opportunities.

Jobs That Cultivate Your Passions

If your traditional career didn’t allow for you to pursue your true passions, now is the time. As a retiree, you bring to the table a valuable combination of knowledge, education and experience working with people. Parlay these skills into a job with an organization that is aligned with your personal interests. Consider serving as a theater attendant, a museum archivist or a curator. Explore opportunities to work as an animal trainer, either on your own or through a veterinarian practice. Don’t write off retail roles either. Working in your favorite store, bakery or boutique allows you to embrace your interests and net additional perks such as employee discounts.

Sources:

The Urban Institute: www.urban.org/retirees; “Johnson, Richard W. and Southgate, Benjamin G.  “Labor Force Statistics on Older Americans, Second Quarter 2013”

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This material is intended to potentially assist you in planning for your future. Guardian and its affiliates, subsidiaries, employees, agents, and outside contractors, including but not limited to Dr. Daniel Crosby, are not authorized to provide legal, tax, or investment advice in the materials of this website including but not limited to any blogs. The information provided does not constitute a solicitation of an offer to buy or an offer to sell financial or insurance products. Please note that individual situations can vary, and you should consult your tax, investment or legal advisor for guidance and information specific to your situation. Guardian is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by this material. To learn more about Guardian, visit GuardianLife.com.