Retirement Income Thoughts in 2011
Through the magic of social marketing I see I have a lot of new followers here … thanks for shoring up, folks. Since someone is reading, I guess I better get writing.
Perhaps it would be smart to give a brief explanation as to why I am here, firing electrons slanted toward Retirement Income Issues off into the universe. This would be a good summary, rather than driving the length of this article out of sight: Predicting More Retired Pay for Retirees
Retirement Income Planning Theory
Now there’s a buzzword (heavy-duty keyword too, are you watching, Google?). Now I could write a book on retirement planning, retirement income calculators, planning for your retirement income and many other important issues,. But fortunately, there are thousands smarter than I who have already done so.
What I will say, though, is that retirement planning seems pretty easy to do. All the complex retirement calculations and such boil down to one simple math problem … making sure there is money left over at the end of your month.
Retirement Income Planning Reality
Most of you reading this are either heavily involved with one or more of the three major traditional retirement planning “pillars”, or you will soon be thinking about them. Believe it or not, we’ll all grow old … or at least the lucky ones will.
Most of us have had this drummed into our heads since grade school days. Save early and save often for your retirement. It’s good advice. It’s not very easy, though, for many people. And it’s also entirely unrealistic unless coupled with one of the other “pillars”.
Assume a person works 40 years. Assume, also, s/he lives another 40 years. This is optimistic, but certainly not impossible in today’s world.
Twenty years from now, when I am 85, the chances are the possibility of my living another 20 years to 105 will be much higher than they are today. You can’t possibly save enough money during 40 or 50 productive years to last you through 40 or more retirement years. So…
This, then, is the next pillar. Instead of just saving every penny you can in low, or even zero income bank type savings, invest instead. Again, very good advice. I highly recommend it. So how is that going for you?
401K: How’s your rate of return on that over the past few years? Yep, thought so. One good thing is, when you reach the age that you are required to take money out and pay taxes on it, you won’t be required to take out near as much … or pay nearly as much tax … as you originally planed, now will you?
Real Estate: Remember years ago when you were raising your family and didn’t have much money to spare? You lived in that little three-bedroom rancher, crowded, but happy with the low mortgage payments. As your family grew up and possibly your income increased, you listened to the real estate schlock peddlers and moved up and up and up, buy ever more expensive homes … because “Real estate in the US always Goes Up.”. How’s that looking these days? Umm, yeah, better move on, hadn’t we?
Pensions or Annuities: This, of course, is the “biggy” in most people’s retirement plans. With a good enough pension plan or retirement program, you’ll be fine until the end, whenever that may come. All you need to do is plan early, be lucky enough to land a job with a generous retirement plan, and endure long enough to squeeze through the retirement gate.
Well, let’s look at me as just one real world example, and you can be your own judge of how things are going here.
Forty-plus years ago I joined the US military. I put in enough time to earn a tidy little retirement annuity from them. (hint .. although the US military is still a ‘good deal’ retirement-wise, the system has bene changed to reduce benefits and increase the amount of time needed to qualify for them, so you can’t start today at 20 years old as I did and expect as much as I got … but still, it’s a good plan).
I also moved to the Federal Civil Service and completed 28 years with them. because of my age and the timing of events, I was able to enter Civil Service under the ‘old’ system, known as CSRS (Civil Service Retirement System). This pays me a very generous annuity compared with what I would have as income under the present-day retirement system, known as FERS (Federal Employee Retirement System). But even FERS provides very nice annuities in comparison to most commercial corporate retirement pans … if you can get into it and stay long enough to vest.
By far the attraction of these two common federal retirement plans, aside from initial benefits, is the fact that they are tied to a COLA (Cost Of Living Formula), which for years provided at least some annual increase in retirement income to offset the ravages of inflation.
Anyone care to guess how much my COLA has been over the past two years, and is almost guaranteed to be for the next calendar years as well?
Don’t strain your brain … it’s zero. That’s right, nothing. According to the government regulators of this program, there hasn’t been any inflation in the USA for two years, so we annuitants get nothing.
How’s that tally with you experience? Still paying the same costs you were just two years ago? A bit more, I’ll wager.
And you may have noticed that Congress and the President are bound and determined to get the budget balances on the backs of Federal employees and annuitants. So far in the past couple months, I’ve seen proposals, strongly backed, to limit any pay raises for Federal employees for as long as the next five years.
Don’t think that is only a present day inconvenience. It impacts future retirement income directly for years to come. Federal retirement income under either FERS or CSRS is primarily governed by the employee’s “high three”.
If your close to retirement, and they implement a five-year pay freeze, no need to bother with future retirement income calculations, your “high three” is already behind you.
Also (the phrase that made me select the title of this article), my retirement annuity isn’t staying the same … it’s going down. Fifty buck per month at a time. First they were correcting some error allegedly made 10 years ago. After weeks of effort and no tiny amount of stress, I got that back. Now, fifty bucks disappeared again … what’s that about.
Sorry, the President and Congress say we have to withhold more income tax. You’ll get it back next April, if you’re lucky.
Hmm, let’s see. I’m on the ultimate fixed income plan, and guaranteed no raises for years, and now I suddenly owe more? I didn’t hear about any tax increase.
Of course not, neither Party is going to a=ctually step out and raise taxes .. it would be political suicide in these troubled times.
Bit they are sure as hell going to find ways to whittle away at Federal annuitants, every chance they get.
Pretty soon that comfortable margin you had between your money and the end of the month is going to turn into a retirement income gap, instead.
And those of you in common corporate plans, the few ehich are left and haven’t gone bankrupt? You’r eundoubtedly even owrse off.
In the coming year even some major State Employee retirement plans will go bankrupt as well. The Congress is already working on the enabling legislation for states themselves to call out “Banko”. And then where will you be?
Ah, there’s the old standby. Lats but certainly not least in most people’s retirement income plans. A lifetime income sources with no more requirement to ‘get in’ than to have worked a total of 10 years under some job, or self-employed, and to live until you are 65.
Piece of cake. Not a generous income, but an income, and also, very important to future retirement income calculations, it’s indexed. Comes with a nice COLA?
Oh, yeah, that COLA. Umm, that’s gone for at least the past two years ago. But Medicare Part B premiums? yep, you guessed it, went up.
So even the old standby for your retirment income, Social Security, is trending down … not up … while your costs to keep your head above water are the only sure thing rising, it seems.
So what is a guy or gay to do about their retirement income … especially us Baby Boomers who are already at retirement’s door?
Well some of you will just moan and bitch down at the senior citizen center, or suffer in silence, or talk endlessly and depressingly to you children about your problems.
Me, I’m living a totally different retirement.
Everything I have mentioned, and more affects me and annoys me, but I don’t lay awake at night worrying, and I am increasing my retirement income and net worth day by day … government cutbacks and retirement income plan cheating be damned.
Alternative Retirement Income Plans
This article about Retirement Income is already long enough. So let me cut to the chase.
here are just a few of the things you could work on, starting today, to be able to stand on your own two feet, as I am working toward. Stay turned, and enjoy an increase in your Retirement Income.
10 Ways To Make Money In Retirement — Online Updated
How To Recession-Proof Yourself — Part 5
Make Money in Retirement — As These Ladies Do
Thinking About Online Profits?