There's a Right Way to Retire from Your Job

Many Boomers don't have the luxury of retiring from their job. Others are forced out because of age discrimination. Still others decide that it really is time to retire.

There's a right way to retire from your job. In the best of all scenarios, leaving a job will be on your timeframe and will cause no ill will between you and your employer. A truly enlightened employer might even work with you on a phased retirement or a creative arrangement, such as rehiring you as a part-time contractor after you leave your full-time position.

Writing for The Balance, retirement book author and financial writer Melissa Phipps offers ten valuable tips for retiring from your job, among them, "Be sure you really want to retire," "Check out alternative careers," and "Consider phasing in retirement." Phipps points out that some early retirees make the decision to retire because they face an undesirable job situation. This may not be the best reason to retire; instead, you may want to try to work with your employer to improve your job or change it within the same organization. Or, if that doesn't work, maybe it's time to consider pursuing an alternative career instead of retiring.

Before you decide to retire, advises Phipps, make sure you are financially secure and that you have health insurance. It also makes sense to consult with a financial adviser. In addition, anticipate the fact that, even if you retire now, you may want to (or have to) return to the workforce. That means you should get references when you retire and be sure to leave your position on a positive note. Another interesting idea is to "test drive" retirement: If you have the type of job that allows you to take some time off, experiment with the kinds of things you would like to do in retirement and see if it's a lifestyle you would enjoy.

"Phased Retirement" is a National Dilemma

It sounds like a credible solution for older workers: Why not allow them to phase out of their jobs into retirement? The reality, of course, is it is easier said than done. The Government Accounting Office (GAO) reported on phased retirement programs and found that, while the number of older workers in the labor market has increased in the last decade, "most individuals ages 61 to 66 who were still working maintained a full-time work schedule." A quarter (25 percent) of them had planned to reduce their hours as they transitioned to retirement, but less than 15 percent actually reported being partly retired or gradually retiring from their career jobs.

According to a review by the GAO, "formal phased retirement programs are relatively uncommon." They appear to be more common among employers with larger technical and professional workforces. Industries with skilled workers or with labor shortages have a higher motivation to offer phased retirement to older workers because these employees are more difficult to replace.

In addition, formal phased retirement programs are challenging for companies to institute. One of the reasons for this is compliance with existing laws. The GAO reviewed a particular study that indicated 71 percent of large employers "agreed that regulatory complexities and ambiguities involving federal tax and age discrimination laws impact their ability to offer phased retirement programs." Still, the GAO found that those employers who did institute phased retirement programs found them beneficial because of factors such as worker retention, knowledge transfer, and workplace planning.

The sad truth is phased retirement is something of a national dilemma. Boomers want to, and in many cases, have to work. Those individuals who are in professional careers or are highly skilled at their jobs are valuable employees, but more and more companies seem to throw them onto a scrap heap and opt to replace them with younger, less expensive (but less knowledgeable) workers. Only when it directly benefits the company, or the company's senior management is enlightened enough to see the value, will that company consider implementing any kind of phased retirement. Obviously, laws and regulations that make phased retirement unattractive are not helping the situation.

There is no easy solution to the phased retirement dilemma. It is simply not a national trend or, it seems, a national priority. It may actually be up to you, the individual worker, to impress upon your employer the value of allowing you to phase into retirement.

What You Need to Know About Social Security in 2019

Whether or not you have filed for Social Security benefits, every Boomer should be aware of how Social Security operates. The best source of information is the SSA, the Social Security Administration (www.ssa.gov). There you will find everything you need to know about how and when to apply for benefits.

Boomers tend to have a lengthy work history, which generally means monthly benefit amounts will be higher. According to the SSA, to qualify for benefits in general, an individual must work for at least ten years while earning at least $5,280 per year. However, benefit amounts are also affected by the age at which you start to draw Social Security.

You should be aware of the three most important ages as far as Social Security is concerned:

1. Age 62 - This is the earliest you can draw Social Security, but the benefit amount will be reduced.
2. "Full retirement age" - This is the age at which you receive full Social Security benefits. If you were born between 1943 and 1954, that age is 66. After 1954, that age is 67.
3. Age 70 - This is the age at which Social Security benefits reach the maximum amount. Between your "full retirement age" and age 70, your monthly benefit may increase the longer you wait to draw Social Security.

Also, you can still draw Social Security while you are working if you are age 62 or older.

As you can see, drawing Social Security is a financial decision that should be carefully considered, ideally with the help of a financial advisor.

Most Boomers know that Social Security is completely different from Medicare, a government-funded health insurance program that covers individuals age 65 and over. The inter-relationship with Social Security is simply that Medicare payments can be automatically deducted from Social Security benefits.

There are some important changes to Social Security coming in 2019.

1. The good news is that there will be Cost of Living Adjustment (often called "COLA") to the monthly benefit payment of 2.8 percent beginning in January 2019. That may not sound like much, but the COLA has been next to nothing for many years, so it is a marked improvement.
2. If you are still working between the ages of 62 and your full retirement age, you can still draw Social Security benefits; however, if you earn more than $17,640 per year during that time, the SSA will deduct $1 for every $2 you earn from your monthly benefit. The year that you reach full retirement age, the SSA will deduct $1 for every $3 you earn from your monthly benefit if you earn $46,920 in that year. Once you reach your full retirement age, you can earn any amount without reducing your Social Security benefit.
3. During your earning years, Social Security tax was deducted from your paycheck on earnings up to $128,400 annually. If you made more than that per year, you were only taxed for Social Security purposes on that amount. In 2019, Social Security tax will apply on earnings up to $132,900.
4. Supplemental Security Income (SSI), which is available to those with special conditions (blind and disabilities, for example) will also see a modest increase.

The SSA now offers anyone the ability to set up a personal online account with two-factor security authentication. Once you set it up, you can get personalized information about your potential or actual Social Security benefit and interact with SSA as necessary. Check it out here: https://www.ssa.gov/myaccount/

What the CVS-Aetna Merger Could Mean for Retirees

The federal government's approval of the CVS-Aetna merger has vast implications for health care in the U.S. It could also have a direct impact on retirees, the most immediate being that Aetna must sell its Medicare Part D prescription drug plans to WellCare Health Plans. CVS already has the largest market share of Medicare Part D prescription drug plans through SilverScript, which is operated by CVS Caremark.

So what does this really mean for retirees? In the short term, if you have a Medicare Part D plan through SilverScript, nothing changes, but if you have a Medicare Part D plan through Aetna, it will be transferred to WellCare Health. Longer term, the merger of the nation's leading retail pharmacy with one of the nation's largest health insurers is a major development in the health insurance industry. According to Washington Post journalist Brian Fung, “The tie-up will allow CVS -- whose retail pharmacy business serves 5 million customers a day -- to turn more of its brick-and-mortar locations into front-line clinics for basic medical services and patient monitoring. By deepening its knowledge of and relationships with patients, CVS has said the combination could help Americans stick with medication regimens and stay out of the hospital."

The advocacy group Consumers Union, a division of Consumer Reports, is skeptical about the merger. A statement issued by its senior policy counsel, George, Slover, reads in part, "This type of consolidation in a market already dominated by a few, powerful players, presents the very real possibility of reduced competition that harms consumer choice and quality. We are concerned that the limited conditions the Department of Justice put on this deal simply are not enough to ensure that CVS-Aetna doesn’t use its outsized resources in ways that stifle true competition and reduce choice at all levels up and down the chain – ultimately leaving consumers with fewer options and higher costs.”

The merger sheds light on the connection between prescription drug providers and insurance companies. OptumRx, for example, is owned by UnitedHealth Group, and Anthem, a Blue Cross operator with a presence in a number of states, plans to open its own pharmacy. Industry watchers are also keeping an eye on the e-commerce giant, Amazon, which has acquired prescription drug provider PillPack.

The CVS-Aetna merger is expected to be finalized before the end of 2018.

The Transition to Retirement

Thanks to Boomers, the definition of "retirement" has changed dramatically and completely. Many Boomers fully expect to keep working well beyond the traditional retirement age, and others look at retirement as not any kind of termination point, but rather as another phase of life. An article appearing on the excellent website, NextAvenue.org, puts retirement into perspective by discussing 7 tips for transitioning into retirement. The article is sponsored by Acts Retirement-Life Communities.

One of the key points made in the article is that it takes time -- probably more time than you realize -- to move into retirement: "It could take months or it could take a few years for you to finally feel comfortable in your new skin. It’s completely natural and understandable for this transition to take a long time. After all, you were involved in the world of work for decades and those habits won’t melt away instantly." Another good point is to view retirement as the beginning of something new, fresh and exciting: "People live much longer than they used to. That means retirement is longer, too. Make the most it by finding a new purpose, setting new goals and generally broadening your horizons in every way you can imagine possible."

I can attest to the accuracy of this advice. I "rewired" in my mid-fifties by leaving a professional career and needed time to transition away from commuting and working in a traditional business setting. My wife and I relocated to a smaller city with a more temperate climate. We decided to start a small service business together and run it for a period of time, which turned out to be about seven years. (We wrote a book about our experience, Let's Make Money, Honey: The Couple's Guide to Starting a Service Business) We always intended to operate it as a transitional business until we were ready to stop working full-time. I then became a part-time independent writer and sometime marketing consultant, in combination with nonprofit volunteering. This transition has been a good one for me. I am very happy working when I want and managing my own schedule. My wife stays busy with nonprofit volunteering and as her mother's primary caretaker.

Obviously, your way of handling this transition may be different from mine, but I do agree it generally takes longer than you think to feel comfortable with this new phase of life. I am fortunate in that I can write both for fun (this blog, for example) and for income, and I know not every Boomer has this luxury. Read the 7 tips in the article -- it will help you gain some insight into transitioning to retirement.

Excellent Resources for Seniors

Periodically, I like to make Happily Rewired readers aware of free resources that are available to seniors. There is a lot of information on the Internet and, as you well know, not all of it is authoritative. Thankfully, some organizations do careful research so the information they provide is accurate and of high quality. Here are three resources I think you will find helpful:

Retirement Planning Guide for Seniors

This comprehensive online guide from Lexington Law, a law firm, offers helpful information and advice for navigating your finances as you age and will help you organize, plan and prepare for the future. The guide includes the following sections: Organizing your finances, Managing your retirement, Maximizing your senior status, Managing your credit and debt, Avoiding financial fraud, Preparing your estate, Helping the next generation.

Retirement Living Information Center

RetirementLiving.com is a national resource for consumer information related to retirement. The website provides access to an array of resource materials, including where to retire, personal finance, a newsletter, books and online publications, and buyers guides about special products and services. Some of the information on this website includes: Buyers Guides for reverse mortgage lenders, gold IRA accounts, medical alert systems, hearing aids, Medicare supplement insurance and more; retirement planning resources, such as investing for retirement and retirement income; and information about senior living, including retirement communities, assisted living and memory care.

100+ Ways to Save Money on Healthcare Costs

This comprehensive guide for seniors on Dealspotr.com covers basic information about Medicare, but it also has helpful tips about dental care, eye care, savings on prescription drugs, home assistance discounts, and even grocery store and restaurant discounts.

 

Does Money Make You Happy in Retirement?

All the talk Boomers hear about having enough money for retirement raises an intriguing question: Does money make you happy in retirement?

Financial advisor Wes Moss, writing for The Balance, studied happy and unhappy retirees and came up with some interesting answers to that question. He found, for example, that retirees who own a BMW, long regarded as a luxury car associated with wealth, are actually pretty unhappy. Similarly, retirees who trade in stocks on their own, which you might associate with having enough money to put some at risk, are generally unhappy.

This led Moss to create something he calls the "Rich Ratio," which is basically "the amount of money you have in relation to the amount of money you need." In his interesting article, Moss offers two examples to demonstrate "how someone with less money saved can actually have a higher Rich Ratio and is probably living happier." His point is that money for money's sake doesn't buy you happiness; money has to have a purpose. Happy retirees, writes Moss, understand that money is not the end goal, it is simply a means for living a happy life.

This is a sensible way to put one's monetary needs into perspective. Wise retirees who have lived a relatively comfortable life during full employment years, not worrying about money, may have a more challenging time maintaining their lifestyle in retirement. Typically, income is reduced during retirement years, so even with substantial savings, it is advisable to reduce expenses as much as possible and preserve a certain amount of capital. This may mean that one's lifestyle expectations need to be adjusted in retirement. Retirees with realistic expectations may find that they don't need as much money as they think to be happy -- and that the key to happiness is not money.

Food for thought.

The Dirty Little (Encouraging) Secret About Entrepreneurs

It is often assumed that the most successful entrepreneurs in American society are young go-getters willing to take the ultimate risk and start a new business. Well you can substitute the word "youthful" for "young," because it turns out that middle-aged entrepreneurs are more successful than those who are young. Startling to some (perhaps including Boomers), this was demonstrated in a research study conducted this year. "Age and High-Growth Entrepreneurship," a paper written by Pierre Azoulay (MIT), Benjamin F. Jones (Northwestern University), J. Daniel Kim (MIT), and Javier Miranda (U.S. Census Bureau) arrives at the following conclusion:

"Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0. The findings are broadly similar when considering high-technology sectors, entrepreneurial hubs, and successful firm exits. Prior experience in the specific industry predicts much greater rates of entrepreneurial success. These findings strongly reject common hypotheses that emphasize youth as a key trait of successful entrepreneurs."

This conclusion is based on Census Bureau data used to study the ages of founders of growth-oriented start-ups in the past decade.

The authors of the paper write that "all evidence points to founders being especially successful when starting businesses in middle age or beyond, while young founders appear disadvantaged." They go on to say, quite specifically, that "Conditional on starting a firm, a 50-year-old founder is 1.8 times more likely to achieve uppertail growth than a 30-year-old founder. Founders in their early 20s have the lowest likelihood of successful exit or creating a 1 in 1,000 top growth firm."

There can be no doubt about what the research discovered: "We find that age indeed predicts success, and sharply, but in the opposite way that many observers and investors propose. The highest success rates in entrepreneurship come from founders in middle age and beyond."

When you think about it, of course, this makes perfect sense. Why wouldn't someone with greater maturity and deeper business experience be more successful as an entrepreneur?

Still, the research paper, which you can access via the link above, might be useful to you in convincing friends, family, and financial lenders that you can succeed at doing your own thing! This research should be very encouraging to any Boomer who wants to start a business. Not only is it possible for you to do so, the evidence points to the fact that you are likely to be more successful than younger entrepreneurs, despite the typical perception. 

What if You Haven't Saved Enough for Retirement?

If you are in your fifties or even sixties and you haven't saved enough for retirement, you are in good company. More than 25 percent of Americans 55 years of age and older have saved less than $25,000, according to the Retirement Confidence Survey by EBRI (Employee Benefit Research Institute).

Writing for CNN Money, Walter Updegrave offers "3 ways to recover from a late start on retirement planning." The three ways are not a silver bullet, by any means, but they make a lot of sense: Very simply, (1) start saving right now, (2) stay employed longer, and (3) "be flexible and resourceful." Updegrave goes into detail about each of the three ways, offering sound advice. It is an article every under-funded Boomer should read.

Obviously, the later you started saving, the more you'll have to make up. Examining sources of income (including anticipated Social Security payments), understanding how to leverage your assets (such as your home), and reducing expenses will all be important in helping you cope.

Updegrave's conclusion is fair warning, but still hopeful. He writes: "I'm not saying it will be easy or that you can put yourself in the same position for retirement you would have been in had you saved throughout your career. But if you combine several of the steps I've outlined here — and keep an eye out for even more ways to generate more post-career income or lower your future expenses — you can still improve your chances of achieving a secure retirement."

 

Identifying Your Ideal Second Act

My colleague Nancy Collamer specializes in helping Boomers figure out their "second act." I like this concept because it implies Boomers are far from washed up; they have plenty left to be fulfilled and to give to the world. That's one of the reasons I named my blog "Happily Rewired," instead of "Retired."

I highly recommend that you visit Nancy's website, https://www.mylifestylecareer.com/, read her blog posts, check out her book Second-Act Careers, and sign up for her free email newsletter.

When you request the newsletter, you'll also receive a free gift, a workbook entitled "25 Questions to Help You Identify Your Second Act." In it, Nancy makes the point that you should always think about the "why" when you are considering "what" to do next. She gives these examples:

Which of my jobs did I enjoy the most? change the question to: Which of my jobs did I enjoy most - and why?

What were my greatest successes at work? change the question to: What were my greatest successes at work - and why?

What type of people do I like working with? change the question to: What type of people do I like working with - and why?

The workbook covers:

• Values
• Skills and Experiences
• Strengths, Gifts and Talents
• Hopes, Dreams and (Im)Possibilities

You'll find the workbook very helpful in guiding you toward the future you want.