A little retirement advice (but not from me)

I do not remember signing up for a retirement newsletter via email, since I am not retiring any time
soon. I was about to hit the spam button but decided at least to look at the story index first. As it turns out, it's not bad.

As I am told that at least two dozen of my colleagues will retire this summer, here are three retirement-related links that may be of interest - not only to my ministerial colleagues, but to every other working stiff.

First, for those like me who are still saving for retirement, some good news: It’s going to get easier for some Americans to save for retirement, although the "some Americans" concerned are those working for small businesses. Still, a pretty good deal for them.

Second, for those trying to figure out what financial goal to set for retirement, there are 8 Levels Of Financial Freedom you can choose from both in retirement and en route. I would say that getting to level 4 is the minimum to achieve while still working.

Level 4: Freedom of Time

What many people desire is more flexibility with their schedules. Freedom of time and financial independence go hand in hand. Together, they are about leaving the rat race to follow your passion, or spend more time with family, and not going completely broke doing it. It could come in the form of more paid time off, flex time or perhaps working remotely on occasion. Not having to take a day off from work just so you can visit the dentist or take your kid to the doctor could be a huge benefit for some.

In retirement? Get at least to level 6. (Frankly, Level 8: More Money Than You Could Ever Spend, does not really appeal to me because, what's the point?)

Finally, Here Are the Top Risks to Your Retirement Savings. Here's the bullet list, read the explanations at the link.

• Longevity, 
• Healthcare costs and 
• Expenses/inflation.

By actuarial tables, my life expectancy is to age 92, and my wife's is to age 100! So in my retirement planning, I have to plan for her expectancy, not mine. Furthermore:

• As you age, your actuarial life expectancy rises because the tables "life expectancy" for a man or woman of any given age simply means that half the men or women who are, say, 63 years old, will die before they reach age 92. But that means that half live longer - and as years pass, you are steadily sliding into the half that lives longer as others, but not you, die.
   
• Ignore the old canard that retired people can live on 70 percent or so of their last working-year income. Expenses do not magically drop simply because you retire, especially if you still have to pay rent or mortgage, and as the article explains, medical costs rise, probably sharply. Plan to match or exceed your working income in retirement.
   
• Along the same line, married couples should structure their retirement income so that the surviving spouse continues to receive income equal to that received while the deceased spouse was still living. In retirement-account parlance, this is known as "Life Plus 100" retirement, meaning that your personal retirement account will continue to pay 100 percent of your retirement pay to your spouse after you die. If both spouses are covered by a pension, they should each select this when they retire. (Other typical options are Life Plus 70, which pays more while you are living but only 70 percent after you die, or Life Only, which means your spouse receives nothing after you die.) It will not be cheaper for a surviving spouse to live than both of you because fixed expenses stay fixed, and at about age 85 or older, fixed expenses dominate retirees' expenditures. 

A word about inflation. Let us suppose that you retire this year with a retirement income of, say, $75,000. Since 1913, inflation, which simply means the rate at which a dollar decreases in value over time, has had a yearly average of 3.22 percent. As Inflation Data points out, "That doesn't sound too bad until we realize that at that rate prices will double every 20 years."

Here is the chart by decade.

So if you retire comfortably this year on a level income of $75,000 per year, in 2039 it will be worth just under $39,000. Pension fund managers know this risk, of course, so typically, pension funds offer a payout plan that annually accounts for inflation, at least to some degree.

But overspending is just as damaging as inflation or recessive returns on your funds.

The next risk identified by the panel was the expense risk, or the risk of a change in value caused by the fact that the amount of expenses incurred over the course of retirement outpace expectations.

"If you have expenses early on in retirement, large expenses, then your portfolio balance goes down just as fast as if you had a really bad sequence of returns," Dirk Cotton, a retired executive, and a retirement adviser and author of The Retirement Cafe blog.

That is why it is imperative to have a plan for retirement. When I was a student pilot, my flight instructor told me, "Plan your flight and fly your plan." Of course it is unreasonable to think you can plan expenditures all the way from, say, age 66 or 68 or so to your mid-90s. But if you have a plan to start, then you will assess the necessity of changes much better, the extent of needed changes more comprehensively, and the recovery from changes more thoroughly.

So, here are Don's Official Retirement Planning Tips:

• Plan for a specified constant-dollar income all the way to the end of your life, or if married, to the end of the surviving spouse's life. 
• Save as much as possible as early as possible. Playing catch-up is a poor way to retirement security. 
• Trying to get rich quick will result in getting poor even quicker. 
• Follow Jesus and tithe and you will almost automatically stop worrying about money. 

And finally, from day one, get as much of your retirement investments and savings into tax-free accounts. Here is why:

One more note: Motley Fool offers 3 Ways to Calculate How Much to Save for Retirement, which includes a handy inflation calculator link that lets you compute the effects of different inflatiuons rates.

Final note: It might be good to remember that the finances of the United States are basically just a house of cards, and the GAO has said that the Current Federal Fiscal Situation Is 'Unsustainable'.

America will face "serious economic, security, and social challenges" if the national debt keeps growing at this rate. ...

Just hours after Congress postponed a budget vote because lawmakers wanted even more spending, the Government Accountability Office (GAO) published a 67-page report warning of the "serious economic, security, and social challenges" that will face this country unless immediate action is taken to bring the national debt under control.

The share of debt held by the public currently stands at about 78 percent of gross domestic product (GDP), a shorthand measure of a country's economic output in a single year. The GAO estimates that it is on track to surpass the all-time high of 106 percent of GDP within the next 13 to 20 years. (The numbers are actually worse than that, because "debt held by the public" accounts for only $15.8 trillion of the $21 trillion national debt. The rest is held by parts of the federal government, such as the Social Security trust fund.)

How long can this continue? No one knows. But as Herbert Stein, chairman of the Council of Economic Advisers under Richard Nixon and Gerald Ford and economics professor at the University of Virginia, put it, "When something can't go on forever, it won't."