Interesting chart here from the Employee Benefits Research Institute analyzing the frequency at which people are able to retire on their own terms compared to those who have been forced to retire earlier or later than planned.
Twenty years of survey data suggests that people retire about when they plan to 48% of the time. More than 42% of retirees on average over the past two decades have retired earlier than planned. And only 5% of those retiring early offered positive reasons for their decision, indicating that they could afford to do it. Over half of early retirees were forced to due to health or disability. It’s not always their own health. Many cases include children who retire in order to provide full-time care for a parent who does not have long-term care insurance or adequate retirement income.
MetLife’s Mature Market Institute indicates that the percentage of adults providing care to a parent has tripled since 1994.
“Nearly 10 million adult children over the age of 50 care for their aging parents,” said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. “Assessing the long-term financial impact of caregiving for aging parents on caregivers themselves, especially those who must curtail their working careers to do so, is especially important, since it can jeopardize their future financial security.”
Research suggests that the cost impact on the individual female caregiver in terms of lost wages and Social Security benefits equals $324,044. Leaving the labor force early because of caregiving responsibilities equated to $142,693 of lost wages. The estimated impact of caregiving on lost Social Security benefits is $131,351. A very conservative estimated impact on pensions is approximately $50,000. Men forced to retire early to become caregivers forgo approximately $283,176 of earnings and retirement income.
What financial planning and life planning decisions are you making to increase the probability that you’ll be able to retire on your terms?
~ Brooks, Hughes & Jones, Partners in Wealth Management, Tacoma, WA
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U.S. debt fuels flames of the “ring of fire”
The economy was front and center Wednesday night as President Obama and challenger Mitt Romney took the stage in Denver for the first debate of this election season. No doubt subsequent debates will center on other issues, but I suspect that the economy will be incorporated into every event because “it” is the subject of this election.
Yesterday a copy of this month’s Investment Outlook written by Bill Gross crossed my desk. Bill Gross, as many of you know, is the Founder (1971) and Managing Director of PIMCO mutual funds. He could be called a “bond guru” as he manages hundreds of billions of dollars that are invested in an assortment of bond instruments. His opinions are backed up by performance and experience. When he says, “I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them”… well this gets my attention.
Gross has been studying the annual reports of the International Monetary Fund (IMF), the nonpartisan Congressional Budget Office (CBO) and the Bank of International Settlements (BIS), which describe the financial balance sheets and prospective budgets of many nations. He compiled all three studies into one “ring of fire” illustration to show relative financial health of the various countries. In the relative healthy ring are Brazil, China, Mexico, Canada and Russia. In the unsustainable “ring of fire” are Spain, Greece, Great Britain, and…you guessed it, the United States. We are second only to Japan in the developed world.
To close this “fiscal gap” would require a combination of increased revenue and decreased spending amounting to $1.6 trillion per year. “We need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to ten years.” So far the President and Congress haven’t even been able to agree on a solution that arrived at one-fourth that amount. And if one were to add in the unfunded future liabilities posed by Social Security, Medicare and Medicaid, the actual debt of the U.S. is a whopping four times higher than the $16 trillion we hear on the news.
To quote Gross, “the U.S … has been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult … If the fiscal gap isn’t closed even ever so gradually over the next few years … the damage would likely be beyond repair.”
The complete Investment Outlook including the graphic “ring of fire” is available here.
I sense we as a culture are facing a time of mutual sacrifice on the order of World War II. Every citizen is going to feel the pain for us to get out of this fiscal mess. It can be done. I’m listening to see if any of the candidates has the “nerve” to speak this truth. Our future depends on honest leadership. We as a people are up to it, but we don’t have the leisure of waiting. It is our turn at bat.
~ Nancy Jones, CFP® – Brooks, Hughes & Jones – Partners in Wealth Management, Tacoma, WA
www.BHJadvisors.com
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