An Unretirement to Look Forward To

Unretirement. Now there's a word to chill the soul.

Selena Maranjian, writing in the United States financial publication The Motley Fool, says there are several reasons why people would come out of retirement.

One is purely the boredom of not having much to do with the day.

She cites the case of 80-year-old Florida woman Vinita Weaver.

Ms. Weaver worked in the retail clothing industry for 43 years before retiring at age 78. At first she caught up with all those little jobs she'd been meaning to do. That took two or three months. Then she sat. And fidgeted. And got bored. And the cashflow generated by sitting isn't great.

Then she decided that not only did she enjoy retail, and meeting new people, she also liked learning new things.

So, at age 80, she began pursuing a real estate license and preparing for a new career.

She's not alone in the United States. There are more older workers toiling away now than ever (more than twice as many as in 1984), with 36 per cent of people 56 or older still working. That's the highest level recorded since 1972.

However some people are un-retiring, but not by choice. Sadly, some retirees want to stay retired, but find they can't. One reason is that, in general, people are entering the workforce later than in past generations (because of schooling) and are living longer. That results in longer retirements, which cost much more to support. On top of this, at least in the United States, healthcare is costly, and it's getting more so each year.

The figures tell the story. Imagine that you're 50 and have saved $200,000 for your retirement. That might make you feel pretty smug -- and it is much more than many people have saved.

But let's look more closely. If you're planning to retire in 15 years, at age 65, and you expect your money to grow at an average annual rate of 12 percent (which is ambitious, as the stock market's average annual growth rate is closer to 10 percent), then you'll end up with $1.1 million.

To make your nest egg last, you should conservatively plan to withdraw about 4 percent of it per year in retirement. So, 4 percent of $1,100,000 is nearly $44,000, or roughly $3,650 per month. Will that be enough? For many people, the answer is a resounding "yes." For many others, it's "No, not at all."

Meanwhile, remember that most people aren't at $200,000 by age 50. In fact, in the United States, more than half of workers 45 to 54 have saved less than $50,000 for retirement. If you're 50 and your $50,000 earns the market average of 10 percent over the coming 20 years (let's say you retire at 70), it will become just $336,375, enough to provide just $13,000 or so in annual income, if you're withdrawing 4 percent.

Fortunately, all is not lost. If you're biting your fingernails now, stop. You have ways to improve the rest of your life.

• Simply save and invest more, regularly. It's not rocket science, but worth repeating.

• Remember that the earliest dollars you invest have the greatest chance of significant growth.

• Invest more effectively.

• Hope to high heaven that baby boomers vote for governments that grant whopping great superannuation payments.

• Consider retiring a little later than you initially planned. Giving your money a few more years to grow can make a huge difference.

• Start thinking now about how you might want to live in retirement. Prepare yourself for the possibility of holding at least a part-time job, and think about what kinds of jobs appeal to you.

If all future financial predictions look a bit bleak, it may pay to put aside a very large, waterproof cardboard box for emergency accommodation.

Source: Dominion Post. Provided by ProQuest Information and Learning. Powered by Yellowbrix.