The boomers won’t be beggars in retirement. They’ll tap their savings, use their home equity
Retire? Not So Fast
By Saghir A. Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
They saved and put away money for years with the goal of retiring at 62. But when he at last hit 62, they found he wasn't quite ready to quit. Finally, at 64, he sold his share of a Northern Virginia ad agency. Now, at 66, he still spends 20 hours a week advising clients on multicultural marketing and new business development. He's earning just 40% of what he did before and not drawing on Social Security yet.
What's more, they're not dipping into his retirement, either. They earn enough part-time that he doesn't have to. “I could never really officially retire. I would drive my wife crazy if I wasn't busy.
Financial reality and the realization that they might not really enjoy 30 years of leisure are leading many Americans to rethink when—and how fully—to stop working. A 2004 survey by Gallup for UBS found that 57% of workers planned to retire at 63 or older and only 11% by age 55. Back in 1998, just 36% planned to wait until 63 or older and 23% still harbored the retire-by-55 dream.
That doesn't necessarily mean staying forever in your current job. People 55 and older, while just 16% of the total workforce, account for 30% of self-employed consultants and entrepreneurs, But self-employment is also a good way to make the shift from full-time employment to part-time work that's becoming a component of retirement.
In the Gallup-UBS survey, 89% of current workers said they expected to work part-time after "retirement." Okay, a life on the beach it ain't. Still, if you want to live happily into your late 80s or even 90s, it's best to avoid too much sun and keep your mind occupied, anyway.
Prospects for future retirees, including the much-discussed baby boomers, aren't as grim as the headlines suggest. One reason is all the people like Owens who will keep working. Another is that they can tap the equity of their homes. And chiefly, Americans aren't doing as bad a job of accumulating wealth as Chicken Little has been saying.
Last year the value of household financial assets-retirement accounts, money market funds, bank accounts, and mutual funds grew by $590 billion, to $34.2 trillion (including capital gains). Because of the weird way the government computes savings, though, households have "saved" only $100 billion. This ignores capital gains and payments from pensions. Neither view on savings includes rising home values.
"The media become obsessed with telling everyone they need to go on a financial diet," using data from the federally sponsored Health & Retirement Study (which has tracked individual households for decades), found that counting home values, 81% of those aged 51 to 61 had reached or exceeded their "optimal wealth," defined as the amount they should have accumulated by that age to maintain their customary standard of living in retirement.
Those falling short were concentrated at the bottom of the income spectrum. A third of those in the lowest 10% for lifetime earnings, but just one-fifteenth of those in the highest-earning, 10% bracket, had less than the economists' target. The top 10% of earners had a median net worth that was a comfortable six times their preretirement income.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale. Saghir Aslam has dedicated himself to social welfare activities since 1965 and serves as the founding chairman of Saba Homes, honoring and empowering orphans.)
