As baby boomers, we have always gone through life knowing that countless other Americans were sharing experiences very similar to our own. We felt this way when we stepped onto college campuses in the 1970s, when we had children in the 1980s, and when we sent those children away to college in the last decade. Now, boomers have a new shared experience looming on the horizon: retirement.

Most of us have been planning for retirement for years. We have savings accounts, a sense of our post-career plans, and a person with whom we want to spend those twilight years. But even the most well-planned of us are still faced with one key decision, a decision that we hesitate to make: should we retire in our hometowns, where we have lived and worked for years, or should we somewhere distant, warmer, and more senior-friendly?

Destination retirements have been popular for decades, but contrary to common perception, just as many retirees choose to stay in New York and Chicago as those who flock to Palm Springs, San Diego, and Boca Raton. What, then, is the right path for you and your spouse?

If you have been asking yourself this question recently, here are a few considerations you may want to keep in mind:

Affordability

Due to the economic climate and the decline in the stock market, many of us are approaching retirement with less money saved than we had originally planned. Consequently, price and affordability should certainly factor into your decision. But this does not mean that a destination retirement is the more expensive option, especially if you currently live in a major metropolitan area. So before you decide to stay put and seek out title loans in AZ, MD, or NJ, consider this: while a retirement community in California may be more expensive than one in Ohio, there are numerous college towns across the South that offer affordable living, pleasant climates, and excellent access to healthcare and cultural events. If you’re looking to be more frugal in your retirement, leaving the big city and eschewing the popular senior destinations may help you drastically reduce your costs – and can do so while still providing you with a destination retirement.

Family

Beside inertia and financial concerns, family is the element that most often keeps retirees in their hometowns. Even despite today’s highly mobile society, a large percentage of Americans still live in close proximity to family members, whether they be children, cousins, siblings, or elderly parents. If you have a strong family grounding it’s hard to leave all this behind. In light of this, your retirement decision should certainly take family into account. Ask yourself: Do I still have strong familial ties to the place I live? Would I be able to regularly see loved ones, even if I choose a destination retirement? How important is family proximity compared to other factors, such as weather, cultural opportunities, and affordability?

Interests

As we approach retirement, we simultaneously approach the point in our lives where we are no longer defined by our jobs and our careers. Similarly, we will now have time on our hands to pursue other interests – interests that will surely come to define us. The unique interests you hold, personal plans you have, and activities you plan to pursue should fundamentally factor into your retirement decision. If you enjoy big city culture, a retirement community may not be your best bet, even if the climate there is better. If you seek a social scene that is highly senior-friendly in focus and in nature, urban anonymity and small town life are probably options to avoid. And if want to partake in outdoor activities, make sure that you retire somewhere close to nature. Your place of residence is no longer burdened by your career; consequently, it’s time to pursue your interests.

Keep these considerations in mind when you go about making that decision – the decision of where to retire and spend the rest of your life. While every place has its own pros and cons, it’s important to arrive at a decision – and to live somewhere – that will ultimately make you happy.

If you are planning a retirement party, whether for a family member, boss or other coworker it doesn’t have to be a stressful task. There is such an array of what you can do and so many options that it can be fun and exciting, the creative options are limitless. You will need to decide where to have the party, what food to serve, who to invite, whether or not there will be entertainment and so much more. Read on for some great ideas to get your party underway.

Determine What The Guest Of Honor Wants

First and foremost you should let the guest of honor help you decide where the party will be. It is a big day and they very well could have an opinion of whether they want the party in a fancy restaurant or if they prefer a more casual venue. You should additionally seek their input on the menu and they should also be able to help in creating the guest list.

Create A Theme

Next, you may want to consider a theme for the party. Does the guest of honor have a hobby or anything of particular interest that you could use as a party theme? For example, are they a big sports fan, do they love a certain type of music, are they a wine connoisseur, etc. Having a theme can help create great ambiance and make it easy for you to decorate, decide on entertainment and more.

A Trip Down Memory Lane

For the party you may want to consider surprising your guest with a trip down memory lane. You can do this in a variety of ways depending on your time and available resources. You can have co workers send pictures from the work place, ask them to write out their favorite work memory they have of the retiree or even create a video of people the guest of honor has worked with throughout the years reminiscing about work times.

Well Wishes For The Future

Another great idea is to have guests at the party offer their well wishes to the retiree. This can be done in a number of ways either having them write out their wishes or doing a video diary. Putting together a scrap book after the event for the guest of honor which includes everyone’s well wishes and photos of the event is a great gift idea that the retiree will most likely treasure for years to come.

All The Other Details

Of course there are a numerous other details that you will need to attend to and it is always advisable to get some assistance. Here is a quick check list to help you plan the big day.

• Secure a location for the party.
• Determine what food and beverage will be served.
• Create a guest list and send out invitations in a timely fashion with and RSVP date.
• Determine the theme, decoration needed, entertainment, other supplies, etc.
• If the party is a surprise have a plan to get the guest of honor there.
• A few days ahead determine a final head count.
• Finally, remember to take some time at the party to enjoy yourself.

photo credit: stevendepolo

Saving for retirement shouldn’t be difficult, and with the Roth IRA, it’s not. In 1998 the Roth IRA was developed with the middle class in mind. It was designed as a way for people to be able to start saving for retirement as part of the Tax Relief Act of 1997. The Roth IRA gets it’s name from it’s legislative sponsor, Mr. William V. Roth, Jr. Here’s what you need to know about the Roth IRA qualifications.

Qualifications

There are two areas that impact your ability to open and contribute to a Roth IRA. These are age and income level. Because the Roth IRA was developed for the middle class, there are income restrictions. If you are a single person making a six-figure salary, the Roth IRA is not for you, and you should be looking at employee sponsored retirement programs or another form of savings.

Income:

To be eligible for a Roth IRA you modified adjusted gross income must be below the limit allowed for your filing status. (based on reported 2009 figures)

• For those filing single or head of household: $105,000
• For those filing jointly as married: $166,000
• For those filing single but married: $0

These figures are adjusted annually to give consideration of cost of living increase. There are also some exceptions allowed for reduced contributions if your income is only slightly over the income limits. You must also have taxable income in order to be able to contribute, and are only allowed to contribute the maximum amount allowed for your age or income, whichever is less. For example if your taxable income for the year is only $2000, the maximum amount you can contribute is $2000.

Age:

As long as you do not exceed the income requirements, you are allowed to start contributing to a Roth IRA at any age. However there are limits on how much you can contribute each year. These figures are based on maximum allowed 2011 contributions. The amount allowed increases by $500 each year to take into consideration cost of living increases.

• For those who are under age 50: maximum contribution is $5000
• For those who are over age 50: maximum contribution is $6000

Unlike a traditional IRA, the money can be left in a Roth IRA account indefinitely. However, it can not be withdrawn until 6 months prior to your 60th birthday without a 10% penalty. There are some exceptions to this rule, such as if there are medical expenses, or disabling conditions that would require the use of the money. Some people never need the money in their Roth IRA and leave it for their heirs.

Considerations

Roth IRA’s were designed for people who do not have other ways to contribute to their retirement savings. If your employer offers a 401(k) or a 403(b) those options should be used first. Free contributions from an employer should never be passed up. However, if you are looking for an easy way to save for retirement and get the most of your IRA interest rates, the Roth IRA is the way to go.

If you are nearing retirement age you may be wondering, how will I know when the time is right to retire? The answer is really not a simple one, and each decision is unique. While many people may think that you will be ready at a certain age or when you have a certain amount of money saved, there are other factors to consider. Here are some items you will need to look at closely to see if you are ready for retirement.

Money

Yes, money will matter and you will need to make sure you have enough of a nest egg set aside to retire comfortably. It is a good idea to look at what you think your retirement budget will be. While you won’t have the cost of work expenses, additional expenses for travel and hobbies may increase your current budget.

Look at all the sources of income you will have once you do retire. Factor in any pension plans, social security, investments, part time income and wherever else you may be drawing funds from. Weigh that against your budget and see where you come out.

Social Security can be collected at age 62, but some find it better to wait. This is something you will want to consider. If you wait to collect, for each year you wait, the larger your monthly check will be. You can delay collecting Security benefits until the age of 70. Many people who are able to wait do in order to collect a higher monthly income once they are older and are more likely to need it.

Health Insurance

If you are over the age of 65 you can go on Medicare and you will want to make sure that you sign up as soon as you are eligible in order to avoid additional costs. If you are not 65 however, you will need to get health coverage elsewhere. If you have a spouse that is still working can you get coverage through their employer? Can you receive COBRA benefits or will you have to take out a personal policy? No matter what option works out best, you will need to factor the cost into your retirement budget.

Social Needs

Some people completely overlook how they will meet their social needs once they retire. If you are someone who thrives on the everyday interaction at your place of employment, you will want to weigh that into your decision. It can be a difficult transition for some to leave their place of employment from a social stand point.

Consider Part Time Employment

Many people, even if they have the money may benefit from part time employment. It is a great way to supplement your income, especially in the early years of retirement. For those who need the social connection with others, it allows for that with a lot less working hours.

Finally, keep in mind as you are making the decision to retire or not to retire, that only you alone can decide if the time is right for you.

photo credit: Mait Jüriado

Every year the Social Security Administration sends out a summary of projected Social Security benefits to every American citizen who works, or has ever worked. This summation is an estimation of the amount of money you will receive from Social Security based on the age you might retire and how much you have earned by working thus far in your life.

This figure is calculated by using the PIA, or Primary Insurance Amount. This is the basis for all benefits that will ultimately be paid to every individual and / or their beneficiaries. And, like so many numbers in the world of finances, it is variable. It depends on the age when you choose to retire and your AIME, or Average Indexed Monthly Earnings.

First a few definitions:

AIME – Average Indexed Monthly Earnings. To determine the Social Security retirement or disability benefits of an insured worker, that worker’s earnings are adjusted to take into consideration the changes in wages during his or her employment history. This is done so that Social Security benefits take into account the rise in the cost of living. The years in which the most money was earned are the years utilized to calculate the average. The number of years used can be up to thirty-five.

FRA – Full Retirement Age, also known as the normal retirement age, regulates when you can receive your whole retirement benefit. If you choose to retire earlier than the normal retirement age, you will receive a lesser portion of your benefits. Of course you can also increase the amount of benefits you will receive by waiting to retire until after normal retirement age. But how exactly do you figure out your Full Retirement Age?

Fortunately, this answer is a simple one. If you were born…

• in1960 or later, your FRA is 67.
• between the years of 1955 and 1959, your FRA is 66 plus 2 months for each subsequent year.
• between the years of 1943 and 1954, your FRA is 66.
• between the years of 1938 and 1942, your FRA is 65 plus 2 months for each subsequent year.
• in 1937 or earlier, your FRA is 65.

Now you are ready for a few calculations. In 2010, the following formula applied for determining your Primary Insurance Amount:

• Ninety percent of the first $749 of your Average Indexed Monthly Earnings
• Thirty-two percent of the next $749-$4,517 of your AIME
• Fifteen percent of any amount above $4,517

These figures are called bend points and, as mentioned earlier, are changeable year after year. If you add the sum of these three percentages together (and round down to the next lowest multiple of $0.10), you will have your Primary Insurance Amount.

Your Primary Insurance Amount will also change based on a cost of living adjustment, future years where you may make higher wages, and the age that you begin receiving retirement benefits.

Although calculating the benefits you will eventually receive from the Social Security Administration is a somewhat arduous task, it is comforting to know that there is a plan in place for all of us when we unavoidably reach the age when it will be of need.

photo credit: freestone

What happens if the company you worked for goes “belly up’?  Can the company you worked for terminate your plan?  What can a Boomer plan on?

photo credit: patrick h. lauke

Employers can end a pension plan through a process called” Plan Termination”.  There are two ways an employer can terminate a pension plan.  The employer can end the plan in a “standard termination” but only after showing the Pension Benefit Guaranty Corporation (here after referred to as “PBGC “) that the plan has enough money to pay all benefits owed to the participants.  The plan must either purchase an annuity from an insurance company (which will provide you with lifetime benefits when you retire) or if your plan allows, issue a one lump sum payment that covers your entire benefit.

What if the plan is not fully funded?

If the plan is not fully funded, the employer may apply for a distress termination if the employer is in financial distress.  To do so however, the employer must prove to a bankruptcy court or to the PBGC that the employer cannot remain in business unless the plan is terminated.  If the application is granted, the PBGC will take over the plan and pay the plan benefits, up to the legal limits, using plan assets and PBGC guarantee funds.  (Under certain circumstances, the PBGC may take action on its own to end a pension plan without an application if it determines that there is not enough money to pay benefits currently due.)

If a single employer pension plan terminates without enough money to pay all the benefits, the PBGC will take over the plan and pay benefits through its insurance program.  Most participants and beneficiaries receive all of the pension benefits they would have received under the plan, but some people may lose certain benefits that are not guaranteed.   

Guaranty “Limits” of the Pension Benefit Guaranty Corporation

The PBGC pays pension benefits up to certain maximum limits.  The maximum guaranteed benefit is $4,500 per month, or $54,000 per year, payable in the form of straight life annuity, for a 65 year old person in a plan that terminates in 2010.  The maximum benefit may be reduced for an individual who is younger than 65.  The maximum benefit will also be reduced when a benefit is provided to a survivor of a plan participant.

PBGC Maximum Monthly Guarantees (see: PBGC Tables)

What is Guaranteed by the PBGC?

The PBGC does guarantees “basic benefits” earned before a plan is teminated, which includes:

• Pension benefits at normal retirement age
• Most early retirement benefits
• Annuity benefits for survivors of plan participants
• Disability benefits for a disability that occurred before the date the plan terminated

What is not Guaranteed?

The PBGC does not guarantee certain types of benefits.

The PBGC does not guarantee:

• Benefits for for which you do not have a vested right when the plan terminates, usually because you have not worked enough years with the company.
• Benefits for which you have not met all age, service, or other requirements at the time the plan terminates.
• Benefit increases and new benefits that have been in place for less than one year.
• Benefits in place for less than five years are only partly guaranteed.
• Early retirement benefits that are greater than payments at normal retirement age.
• Health and welfare benefits.
• Vacation pay.
• Severance benefits.
• Lump sum death benefits for a death that occurs after the date the plan ends.
• Disability benefits for a disability that occurs after the plan’s termination date.
• Lump sum payments exceeding $5,000 are generally not paid.

Even if certain benefits are not guaranteed, participants and beneficiaries still may receive some of those benefits from the PBGC depending on how much money the terminated plan has and how much the PBGC collects from the employer.

In Summary

In summary, your pension benefits are guaranteed to legal limits by the PBGC, other benefits not considered part of the actual pension plan such as health care insurance, life insurance, vacation benefits, and severance payments are not considered part of a pension plan and may not necessarily be covered.  So, …When they say nothing in life is guaranteed! … They are wrong!  PB.

What happens if 70 becomes the new 65?  How does it affect you, the workplace, and your plans for retirement? Are Boomers re-shaping the economy, or is the economy re-shaping them?

photo credit: Squid!

Could 70 be the new 65?  It may have to be for some!  One effect of the recent volatility of the financial markets is that many Americans are electing to postpone their retirement.  If 70 becomes the new 65, it will result in many changes to the workplace.  These trends could affect you, your employer, and your financial future.

Retirement will no longer be an event.  It will become a process.  If 70 becomes the new 65, more people will probably leave the workplace gradually instead of automatically at age 65.  This may not be that bad for baby boomers that want to stay active and engaged.   A manager or VP who was used to working 50 hours a week may become a consultant or a coach working less than 8 hours a day or maybe three days a week.  He/she might simply want to work less, for less pay, but not be ready to call it quits.  He/she may wish to make a lateral move within a company that would allow an exit on his/her terms.

Will more Boomers have the opportunity to shape their exit?

More and more expect “mature” employees to negotiate the terms of their retirement.  As gradual retirement becomes more common, so will the options and alternatives.

• How many hours they will work on their way out?
• How accessible they will be?
• Will they work from home or the office?
• Who will take the reins from their hands someday?
• If a boomer offers a personal exit plan that will help a business to cut labor costs without losing a valued employee, isn’t that a favor to management?

Tough Decisions For Businesses and Government Organizations.

In June 2009, the Bureau of Labor Statistics estimated that 23% of Americans employed or seeking work were age 55-64.  The 2009 Retirement Survey from the Employee Benefit Research Institute found that 51% of Americans age 25 and older now think they will retire at age 66 or older. 

Universities, state and local governments and public agencies will probably not see the same kind of retirement turnover they did in the past.  For businesses, who want to pay older workers to retire so that they can stay profitable in this economy, this could become a problem.  Organizationally, what is the economic value of retaining wisdom and experience?  Should they stop or slow down the recruiting of new managers, new faculty, or new administrators for the near future?

Will There Be A Wave Of “Re-hirement”?

In the EBRI survey, of the roughly 1,200 respondents 20% felt they would never retire.  This compares to 11% in the 2007 poll.  Part of that increase reflects what happened in the stock market, but it also may represent a perception shift in progress.  Baby boomers, as a group are doers, proud contributors to society who are re-shaping the old retirement template.

Changes Boomers Can Believe In!

Two distinct phases of American life seem to be emerging.  The first phase is one in which you work for a “living”.  That is followed by the second in which you work for “meaning”.  A wave of mature employees, professionals and entrepreneurs may be one result, but is another possibly return to the past?

Is this a real change to the culture of the recent past where people continue to retire at an earlier age?  Could it result in a cultural change unlike any this country has never seen?  … Or maybe it is simply a return to a work ethic that this country had at one time, …by a large group of  people, who had it, … but for a while seem to have lost it?

Boomers are back and the work ethic taught to us by our fathers is really starting to show.

As for Papa Boomer, I gave it up at 54.  Didn’t have the option of three days a week,  just a lot less money.  Given some of the options above, I might go back in a flash.  In the mean time, … I’ll just spend seven days a week … b%#&ching …blogging about it!  PB.

If your company goes bankrupt what happens to your Pension?  Will you be left out in the cold?  Will the money you have been counting on for your retirement be gone?  Will you be forced into continuing to work, or even worse, be forced into returning to work after you have already retired?

Safeguards Against Losing Your Pension Plan

Fortunately, it is not as bad as most people think!  There are safeguards in the United States to prevent you from losing your pension plan.  In the United States every defined-benefit retirement plan is insured, at least to a point.  Most will receive all or at least most of their company pension even if your company goes bankrupt.  However, in some cases,  it may not be every penny you expected.   

What Happens When a Company Goes Bankrupt?

When a company goes bankrupt they have two choices.  They can reorganize and try to stay in business by reducing costs and attracting new investors, or they can liquidate.  The pension plan is usually terminated in reorganization and always terminated in liquidation.  So, then what happens?  A federal insurance agency called the Pension Benefit Guaranty Corporation (pbgc.gov), takes over the pension payments.  Only employees with the largest pensions actually take a hit.  The Pension Benefit Guaranty Corporation maximum annual payment, which rises with inflation, is $54,000 this year for workers who retire at age 65.  As with any insurer, the PBGC has some restrictions.  For example, it prorates recent pension increases.  However, in all, 84 percent of retirees get their full pension even after bankruptcy.

A Few Rare Cases Under Reorganization

In a few rare cases of a company bankruptcy reorganization, the employer maintains the its pension plan.  That normally only happens for one of three reasons.

1. The benefit is low
2. Employee turnover is high
3. The pension plan is new

Avoiding Bankruptcy is Better For The Company.

In most cases, however, it is always better for the company to avoid bankruptcy altogether.  In December of last year, Congress gave some help in this direction by relaxing the 2006 Pension Protection Act‘s strict rules governing pension funding.  As counter intuitive as it may seem, this is one move that endangered workers should embrace.  As a result of this move, according to Dallas Salisbury, president of the non-partisan Employee Benefit Research Institute, ” Given the economic downturn, employees are better off than if the company was forced to make a large pension contribution”.  “It’s better to stay in business than make a pension contribution”.

How Does This Affect Me?

I am actually receiving a pension from a large company that is not bankrupt.  I have been asked by many of my friends what will happen if the company I retired from goes under during these difficult times.  Thankfully, as a result of the above protections, I can answer them …  as far as my pension goes … not much!

Protection For Health Care Benefits Are Not The Same!

I wish I could say the same for the medical benefits.  They are not nearly as well protected.   In my last few years of employment, the cost of  health care benefits for retirees, which at one time were an excellent value were increased to the point where it was not affordable to maintain.  I was forced to purchase a private plan to hang in there until age 65 when Medicare kicks in!  It is my single largest monthly expense.  It’s not often you wish you were older but when it comes to health care insurance I can’t wait until I’m 65.  Papa B.