Retirement Planning Over the Life Cycle

By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, oneill@aesop.rutgers.edu

The Military Families Learning Network will host Retirement Ready? Effective Strategies for Military Families webinar on November 1. This 90-minute webinar will Include a segment about personal finances and how people at different stages of the life cycle view retirement planning.

Join Retirement Ready? Effective Strategies for Military Families on Nov. 1 at 11 a.m. ET
Join Retirement Ready? Effective Strategies for Military Families on Nov. 1 at 11 a.m. ET. Image created by Bari Sobelson

As described in a presentation by Professor William Klinger of Raritan Valley (NJ) Community College to the New Jersey Coalition for Financial Education, these generational reactions can be summarized as follows:

  • Age 20-35– What, me, worry? I’ve got plenty of time.
  • Age 35-55– Too many expenses. I’ll save later versus now.
  • Age 55-70- Yikes! I have no savings. It’s catch-up time.
  • Age 70+- How can I make my retirement savings last?

At age 20-35, the key thing to remember is that time is on your side. For example, college students graduating at age 22 have 45 years of compound interest on their savings before they’re eligible for full Social Security benefits at age 67. In addition to saving early, it is also important to keep spending in check so that savings can get an early start. Some young adults, unfortunately, procrastinate by thinking “I’ll start saving later when I pay off student loans” or “I’ll save when I make more money.”

In the “middle years,” age 35 to 55, emphasis should be on continued savings, especially in tax-deferred retirement savings accounts such as 401(k) and 403(b) plans. Be sure to take full advantage of the maximum available employer matching, such as 6% of your pay if you invest 6%, and track your annual progress by preparing a net worth statement that takes a “snapshot” of your current assets and debts.

In later adulthood, age 55 to 70, people are (hopefully!) empty nesters and can accelerate their savings even further. According to research by Fidelity investments, people should have 5 times their salary saved at age 55, 6 times at age 60, 7 times at age 65, and 8 times at age 67 to be considered “on track” for a comfortable retirement. Unfortunately, the 2016 Retirement Confidence Survey by the Employee Benefit Research Institute indicates that only 14% of workers have more than $250,000 saved for retirement and 54% have less than $25,000 in savings, including 26% that have less than 1,000.

A primary retirement planning concern of people age 70+ is having their savings last throughout their lifetime. High health care and long-term care costs in later life are also major concerns. A body of research suggests that initially withdrawing 4% of savings (whatever the dollar amount) and increasing it annually for inflation has about an 85% success rate (i.e., chance of not running out of money) over a 30-year period based on past investment performance data. New research findings with “floor and ceiling” withdrawal strategies and “decision rules” (e.g., freezing income during periods of negative investment returns) have been shown to increase success rates even further.

To summarize, retirement planning is important throughout adult life and can span a period lasting seven, or even eight, decades. Key messages for people of all generations are as follows:

  • Start saving for retirement as early in life as possible. If it’s too late for you to get an early start, save as much as you can today and encourage your children and/or grandchildren to start saving early.
  • Increase savings as income rises and/or expenses (e.g., child care) and/or debts (e.g., student loans) are reduced or end.
  • Develop an adequate savings nest egg and a strategy for sustainable retirement savings withdrawals in later life. To plan your retirement savings, use the Ballpark Estimate; http://www.choosetosave.org/ballpark/.
  • Enjoy the fruits of your labor in retirement and the journey of life along the way.

Register today to join the November 1 webinar Retirement Ready? Strategies for Military Families. CEUs for accredited financial counselors, certified personal finance counselors, marriage and family counselors, social workers and counselors are available.

Beware of Holiday Frauds

Photo by karenwarfel via Pixabay.com CC0 Public Domain
Photo by karenwarfel via Pixabay.com CC0 Public Domain

By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, oneill@aesop.rutgers.edu

Military families are a frequent target for holiday scams. With the holiday season in full swing, so are various frauds associated with it. Frauds tend to follow current events whether they are natural disasters like hurricanes, floods, and tornados or seasonal events like income taxes and end-of-year holidays. Unfortunately, the holidays can bring out the worst, as well as the best, in people as thieves, both in person and online, steal victims’ money and/or identity.

Below are some common holiday scams to caution service members about:

Online Scams

  • Beware of e-mails asking you to provide personal information to receive a package. These are often phishing schemes to obtain personal identification information (PII) to commit identity theft. Don’t click on links from unknown sources.
  • Beware of “too good to be true” sales offers for relatively inexpensive high-end goods and electronics that request personal identification information. Fake retailer websites, may send shoddy merchandise or nothing at all and steal victims’ PII.
  • Beware of phony web sites with “off” logos and spelling and grammar mistakes and sales offers that require wire payment.
  • Use an application like Norton SafeWeb to warn you about unsafe websites.
  • Look for contact information on retail websites. For example, a phone number and physical location rather than a PO box or sole e-mail address. Another indicator of a reputable retailer is a “Terms and Conditions” link for return policies.
  • Beware of offers for “too good to be true” holiday season travel. The accommodations that are offered may be substandard or non-existent. Always deal with reputable travel agents and tour package providers.
  • Make sure that online orders are secure by looking for https:// in the website URL of an online merchant.

Postal Scam

  • Beware of postcards for “undeliverable” packages. Some of these scams request PII or are a ploy to make expensive phone calls. For example, callers may be directed to the “hotbed” fraudulent area codes of 284, 809, and 876 in the Caribbean.

Shopping

  • Use a credit, instead of a debit card, for large purchases. Not only can you receive rewards, but the credit card company may be able to reverse charges for shoddy or damaged goods. With a debit card, check, or cash, your money is gone.
  • Carry a minimum amount of cash, plastic, and personal information when shopping or traveling during the holidays and make sure that your wallet or purse is secure at all times and not left unattended (e.g., on the back of a chair).

Charitable Donations

  • Never provide donations and/or credit card information to telephone charitable solicitations. Some are outright scams and many have such high administrative expenses that very little money actually goes to the charitable cause.
  • Donate money only to charities you know that are registered with the IRS. Check their 990 form at guidestar.com.
  • Beware of phony charities that sound like legitimate ones (e.g., National Cancer Society instead of American Cancer Society).
  • Beware of phony charities that make highly emotional appeals for disabled police, firefighters, and military veterans.

Package Delivery

  • Avoid having unattended packages left for delivery on your doorstep. Some criminals actually follow delivery trucks to steal victims’ holiday packages.
  • Require a signature for package delivery. If no one is at home, request that the package be given to a trusted neighbor or held at the nearest package pick-up depot.

Gift Cards

  • Inspect gift cards before you buy them to make sure that they have not been tampered with (e.g., having the activation code scratched off). Thieves who steal these codes can often use a gift card before the rightful owner.
  • Buy gift cards that are kept behind a store counter or near the cash register so clerks can keep an eye on them to discourage tampering.
  • Get a gift card receipt for each gift card that you buy and include the receipt with gift cards as proof of activation and payment so recipients can obtain a replacement, if necessary.