Archive for April 2009
Will Retirement communities turn into working communities?
Okay baby boomers, the road to retirement will be working longer. Here’s one more change in our retirement plans. The economy is changing the way we think about where we want to live as we age, according to new research on housing trends.
While most 55+ consumers prefer to stay in their current homes as they age, an increasing number are moving to age-restricted communities – and not in the normal “retirement zones” but in places that are close to work and family and friends, according to research from the MetLife Mature Market Institute (MMI) and the National Association of Home Builders (NAHB).
This is a trend that can have a big impact on families and their ability to provide support in times of need. It is also recognition that while many of us will be working longer; we want to keep some of the aspirations of retirement like a new one-floor home and no grass to mow.
So if you or family members or friends are thinking about moving in retirement (or buying now because prices are low), here are some things to consider along with buying into the “retirement life-style”:
1. What type of access will you have to medical care – especially hospital services?
2. If you need care or help due to a medical issue who will you call on locally for help?
3. If you move to an age-restricted community, how will you feel about it as the community ages?
4. If you move away from family to a less expensive area, will you be able to afford to buy back near family in the future if your circumstances change?
5. Is the home suited to “aging at home”—wide doorways, no steps.
As more retirement communities become working communities it’s a good idea to plan ahead and think about how it will work for you and your family as you age.
Economy hits Gen Y harder than Baby Boomers
There is a lot of talk about how the current economy is hurting baby boomers and older generations. And it is. But, the younger generation is being hit hard too – maybe even harder– because they have had no time to build up a financial safety net.
A new study from MetLife says that more than 50% of Gen Y employees (ages 21-32) are living paycheck to paycheck. About 73% are very concerned about having enough money to make ends meet compared to 56% of Generation X employees and 62% of baby boomers.
And, they often don’t understand or take advantage of benefits they have available through work. When I think back to my first jobs, I can’t remember ever thinking about retirement plans (of course there weren’t 401 k’s then) and only vaguely aware of other benefits offered. While there is more awareness these days of the importance of benefits like health insurance and retirement, this is also a time when people feel invulnerable to what “could” happen.
Yet, the research also found that almost half (49%) of the Gen Y surveyed employees were married and 46% had children. So the gaps in their financial safety net are now more critical…and you can begin to see how their financial problems flow to older family members.
So maybe it’s time for baby boomer generation to stop complaining about their fate and the mistakes they have made and help the younger generation take steps now to avoid future problems.
It is a good opportunity for employers too to educate younger employees about benefits and basics of financial planning. If you’ve got a GenYer in your household, offer them some guidance on taking advantage of benefits with their employer, including savings and insurance coverage. It might be that some of those dollars spent on Internet and mobile phone plans need to be diverted to shore up family finances. They may not even know what they need in insurance coverage. It’s an opportunity to stop the cycle and get smarter about personal finances.
Credit Card Relief Ahead?
There might be releif ahead for those struggling under mountains of credit card debt that grows with each new fee and penalty.
“The days of any time, any reason rate hikes and late fee traps have to end,” President Obama said today in a meeting with credit card executives.
That would be good news for not baby boomers caught in the middle – with their own credit card issues, or trying to help older and younger generations with their credit card headaches.
There’s no doubt that some have used credit cards irresponsibly and gotten themselves in trouble with too much debt. But that has been compounded with the frequent rate increases and new fees the credit card issuers have been piling on.
New rules are schedules to put a stop to much of this next July (2010). But the call today from Congress and the President was that the practices have to stop now!. Especially as the taxpayers are funneling billions into the banks.
So, if you’ve got credit card troubles, continue to watch that change of term statement that comes in the mail. And pay attention to what is changing and if you can, switch your balance to a less onerous card or stop using it if that will stop the fee increase. If you’re working on a plan to get your credit card bills under control, keep at it. Steps to stop the fee increases will help, but you need to keep paying down that debt, too.
We all have a tendency to toss those envelopes aside when they come. Open the envelope and understand what changes are coming your way. And let’s hope that action comes soon from Congress to put a stop the many of these outrageous fees.
This is an issue that has impacted one out of four families. It could save a lot of money for lots of people. Let’s hope the Federal Reserve steps in and puts the new rules in effect right away.
Boomers See a Longer Road to Retirement: Retirement Reset Takes Hold
The last couple weeks may have boosted our spirits about the economy, but we’re not feeling very good about the road to retirement.

A Longer Road to Retirement
To borrow from the Beatles — It’s going to be a long and winding roadMore of us plan to work longer and to supplement our income in retirement by working –for pay.
That’s the word from the Annual Retirement Confidence Survey released by the Employee Benefit Research Institute (EBRI).
The only surprise in the news is how many of us admit that we are changing what retirement will look like. Retirement Reset, which I’ve written about before, is taking hold, especially among baby boomers. Forget Plan B and Plan C — We’re putting New Plan A in place.
Here are the highlights of the survey so you can see how you stack up:
- Delaying Retirement: 28% of workers say that in the last year they have changed the age at which they expect to retire. Of those, 89% postponed retirement to increase their financial security. The mid-point for retirement is now 65, with 21% planning to push on into their 70s.
- Working in Retirement: 72% plan on continuing to work after they retire; that’s up from 66% in 2007. But planning and reality often clash. Among retirees, only 34% surveyed report they worked for pay. I suspect job availability and health conditions contribute to that disparity. Even the best laid plans are often derailed for reasons out of our control.
- Cutting Back, Working More: workers who have lost confidence in their ability to have a secure retirement are reducing their expenses (81%), changing the way they invest their money (43%), working more hours or a second job (38%), saving more money (25%) and seeking advice of a financial professional (25%)
- Little planning for retirement: Many still don’t know how much they need to save for retirement. Only 44% report they have tried to calculate how much they need to save; 44% simply guess.
- Retirement contribution/savings: Most have not changed their retirement savings plan (72%). Eighteen percent say they increased their contribution and 11% decreased it.
The good news is that more people are facing the reality of the situation and preparing to take the action to build a secure retirement. True, it’s not where we hoped to be – or maybe even want to be, but it is a good sign that we are setting aside the highly-inflated plans of past – and facing retirement reality.
Do you have a new Plan A?
Is Helping Mom and Dad Increasing Your Retirement Risk?
Emotionally and financially, helping parents pay for housing is much different than helping your children buy a first home. If Mom and Dad need help covering housing costs at this point in their life, something has not gone as planned.
It may be investments gone wrong. It may be retirement costs are higher than expected. Loss of retiree benefits. Or there has been a medical condition that has eroded savings. Or they simply need to move closer to relatives but can’t sell now. A recent survey by the Pew Internet project found that of those aged 65+, almost 10% owed more on their mortgage than their house was currently worth; for those 50-64 – the percentage was 30%.
Some speak of this as a time of “negative inheritance.” You thought you’d be getting a small inheritance from them someday, yet it has turned out that your money is flowing to help support them as they age.
So what’s the right thing to do? It all depends. Here are some tips.
1. Have a frank discussion about money. Not just the housing crisis, but an overall look at their financial position – debt, health insurance coverage, available assets so you can get a true sense –together – of the current and future needs. If you have a financial advisor, you might ask them to help with this discussion since it will likely impact your financial future as well as theirs. And having a third party can help. It’s embarrassing for your parent and probably uncomfortable for you.
2. Be honest with yourself about what you can do to help. This is where the friction between emotion and money sparks. If helping them jeopardizes your own financial position, it’s not a solution. Funds to help them should not be coming out of your retirement funds, but rather out of current income or other savings. Otherwise you are putting your future at risk and potentially perpetuating the cycle. And if they are in the position they are in because of financially irresponsible behavior and show no signs of changing, your dollars won’t really make a difference.
3. Structuring housing support. Are you helping pay their mortgage, are you helping pay their rent, are you purchasing a home that they will be living in (paying some costs or none at all). How you structure the financial assistance can make a big difference for your financial situation. If you are purchasing the property, you have a financial asset. If you are paying their mortgage, they own the asset. If you are paying rent, that’s money that won’t be recouped. Also look into what your assistance does to their ability to tap into government assistance programs. Speak with a tax advisor or elder law attorney about the right way to structure financial assistance that is beneficial for both of you.
Providing assistance to your parent can be a real treasure – a way to give back when it counts most. Or it can be another strain on your already beleaguered finances putting both you and your parents at risk and leading to anger and resentment.
If you make the decision to help pay for housing, then understand this is not a decision you can easily turn away from in the future. Take the time to get the information you need to make the right decision for you and your parents and your family.