Retirement and Wills

paulag01 — Fri, 28 Mar 2008 08:19:20 -0500

So may people treat retirement like it is some sort of nirvana. I know for so many years all I heard from the people around me (mainly in the corporate cube) was them yearning for and dreaming about retirement. And these weren't only people who were a few years away from it. No. People who were "only 10 years away" or "only 15 years away" and they would pine and weep and wish away the years so they could get to retirement. I never understood that. Not when I entered the full time workforce at the age of 21 and not now. Why would anyone want to wish their life away for a "someday"? As I've seen the nature of employment and retirement make a radical shift over the last 17 years it seems to me that this pie in the sky retirement vision is a thing of the past. That doesn't mean retirement planning goes away, it just means that it looks a lot different than it did a few decades ago.

We've shifted from a system where you worked for one (maybe two if you were a rebel!) employer for life and they basically gave you a cushy pension on which you were able to live comfortably with a little social security thrown in for good measure. Today, traditional pensions are an endangered species and people no longer work for one employer for an extended period either by career choice or the simple fact that downsizing, rightsizing, and mergers have made it almost an impossibility. The Financial Insider shares:

Traditional pensions. With these, most of the saving and investing is done by employers, which also bear the risk that retirement assets will fall short of promised benefits. As of 2005, only 37% of workers were covered by a traditional pension, according to the Employee Benefit Research Institute. And a growing number of company pensions are winding up in the hands of the Pension Benefit Guaranty Corp., a government agency and payer of last resort that is under funded to the tune of $14 billion...

Social security benefits are not inspiring and probably also on their way out in terms of being anything meaningful. Timing of benefits is also a losing proposition. If you were born after 1960 you now have to wait until the age of 67 or later to collect full benefits up from approximately age 65 for those born in 1942 or earlier (like my parent's generation). You can and should check out your social security statement annually.

So, like it or not, the onus is on you to ensure your ability to retire. You can do so by investing in a number of different tax advantaged accounts: 401Ks, Traditional IRAs, Roth IRAs, 403b, SEP IRA, SIMPLE IRA, and Roth 401Ks. While they all differ depending on whether they are available to individuals or only employers/small businesses, their premise is the same. Earnings on these accounts range from tax deferred to tax free and contributions can be before or after-tax depending on the vehicle. As with all things there are a myriad of eligibility requirements in terms of who can contribute, how much, and when/how distributions can be taken, but for the most part they are ideal options for people who are ready and willing to take the responsibility for funding their own retirement.

So how much money do you need to retire? That is the booby prize question. There are a million calculators out there and figures range from 70%-90% of pre-retirement income depending on your situation and desired lifestyle in retirement. This article from Trent at The Simple Dollar is a nice walk through of the thought process you need to go through for yourself. Bottom line -- it is a darn lot of money, but don't let overwhelm paralyze you. You have the power of compounding interest on your side.

The other factor that has changed radically over the last few decades is what retirement looks like. The old visions of ending your professional life (and earning potential) completely and never turning back are not as prevalent as they once were. More and more people retire from one career and move into another phase of their life - becoming an entrepreneur, working part-time, becoming a consultant, or becoming actively involved in nonprofit and volunteer activities. Dr. Susan L. Reid asks the question "Is Retirement Even Relevant for Midlife Entrepreneurs?":

People turning 50 today have about half their lives ahead of them, and each year more than four million men and women join their ranks. So, what is retirement, then? Is it the time when you stop work completely or is it the time when you retire from one job and begin another? Does it begin at a certain age or depend on the number of years you have served in a specific capacity? Is it based on your physical condition or your personal choice?

Today retirement is what you make it. The Baby Boomer generation is redefining retirement, shunning the conventional traditions of stopping, ceasing, and leaving in favor of staying involved, continuing to contribute, and following their passion. That’s why it makes sense to be a midlife entrepreneur.

I see it as a time of personal and professional reinvention that can look however you want it to look. You only get that freedom, though if you make a commitment early and often to give your retirement savings attention. Otherwise that time in your life can look more like desperation than inspiration.

What About a Will?

It almost seems like a downer to throw in the topic of wills right after proclaiming that retirement is the new prime of your life, yet the reality is always present - we never know when our time is up and we will pass on. Whether you are 18 or 88 a will is still important. It is just that as you get older you tend to have even more assets with which to content and of course the probability of dying increases. If you are gay or lesbian you need a will and need it now no matter what your age is especially if you are in a relationship because as you may have already guessed, your chosen relationships hold no weight in a legal sense.

If you're not familiar with a will, what it essentially does is specify your wishes about who gets what (in terms of your assets) when you die. If you die without one you die "intestate" and the laws of your state will determine who gets what which is not what you want. A will really is a matter of life and death as the recent Heath Ledger public fiasco illustrates.

Wills do not have to be complicated or expensive. A good lawyer can create one for you for several hundred dollars. A DIY will is just as legally valid and you can find a variety of resources online at places like NOLO or the Suze Orman Will and Trust Kit.

I personally see retirement planning as an ongoing crap shoot. What is the right balance between saving for the future and living today? It is a question each person needs to answer for herself and there is no magic bullet. The most important thing you can do is devote some time, money, and attention to it (alone or with the help of a professional) regularly to make sure you are living today while also ensuring a well-funded future.

Paula Gregorowicz, owner of The Paula G. Company, works with women who are ready to create their lives and businesses the way the want rather than how they were told they "should". Get the free 12 part eCourse "How to Be Comfortable in Your Own Skin" http://www.coaching4lesbians.com and start taking charge of your own success.

To get the latest word on personal finances from an LGBT perspective and Paula's practical coach approach to the topic check out Queercents http://www.queercents.com.

Are you a small or solo business owner who wants to be comfortable in their own skin online via a website that is a true reflection of who you are and what your business is about? Paula's signature down to earth and "plain English" approach to website design and consulting can help. Visit http://www.paulagwebdesign.com to download the free successful website planner which will make your web project a breeze.

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Retirement and Wills