Essential Retirement Planning for Solo Agers. Sara Geber

following questions:

       What is your net worth?

       What is your current rate of consumption? (What are you currently spending?)

       How much have you saved and what is the rate of return on those investments?

       What are your current sources of income?

       What income streams, including Social Security, will be available to you in retirement?

       If you are still working, how much longer do you plan to do so?

       If you haven’t started Social Security, when should you start taking benefits?

       Based on your health and family history, what is your life expectancy?

      The answers to these questions are rarely straightforward. Reliable data about when you can safely quit working and rely on your savings and Social Security to fund your lifestyle requires a complicated formula and a bit of educated guesswork. Many variables must be factored in to determine the point at which your nest egg will be sufficient to provide what you need for the rest of your life. Even though you may plan to work into your sixties, seventies, or even eighties, things can happen. Life can change in a moment, and you want to be as prepared as possible. Because sorting out these twists and turns is challenging, I favor working with a financial advisor or other financial professional.

      “Cessation of work is not accompanied by cessation of expenses.”

      —Cato

      There are hundreds of financial advisors and certified financial planners in almost every community in the United States today. Some are private, some are affiliated with banks, and others are with brokerage houses. One way to locate a private financial advisor practicing near you is to go to the Financial Planning Association (FPA) website (fpanet.org). Half of the FPA’s website is devoted to consumers. You will find a pull-down menu with guidelines for finding a planner near you, choosing a planner, and understanding the various ways planners charge for their services. You can also use the FPA site to better understand financial planning and how to prepare for a financial planning meeting.

      Your local bank may also have a financial planning office. Many of the large nationwide banks have financial services available these days, some with whole offices devoted to retirement planning.

      A referral from a friend, relative, or colleague is another excellent way to locate a financial planner. Ask around and get a few names. I encourage you to talk to several financial advisors and decide with whom you feel most comfortable. Finding a financial advisor is much like choosing a physician, a dentist, or a hairdresser. Once you have found some candidates, you may also want to cross-reference your list with your local Better Business Bureau as well as online reviews.

      Make sure the person you select has relevant experience. Someone who works with clients whose net worth is over five million dollars will not be a good fit for a person who has saved $150,000. A financial advisor with a solid base of clients who are similar in profile to you is a good indicator of relevant experience. Ask how much money is under their management and ask for some examples of clients they are working with (clients can be described without giving away their identity).

      Finally, assess the level of comfort and trust you feel in your gut when you are with them. Do they listen to your concerns? Do they disclose their own values and strategy around investing? What experts do they rely on? These are the important criteria for a long-term relationship, or even a few meetings.

      If you need to seek low-cost or free advice, most regional FPA chapters perform sporadic pro bono work in partnership with a community service agency or college in their area. You can inquire about those services and special events through the local FPA organization or find a workshop led by a financial advisor through your local community college or adult school.

      When you speak with a financial advisor, be sure to mention you don’t have children or nearby family. These professionals are seeing more and more people who do not have local support, and they are becoming more adept at recommending good options and safety nets.

      A key decision you will have to make, if you haven’t already, is when to start collecting Social Security benefits. From the time of its inception until recently, conventional wisdom dictated you should “start taking benefits as early as possible (age sixty-two).” Why? In past years, with a life expectancy of around sixty-eight, the actuaries calculated that the average person would ultimately collect more total dollars by taking benefits early than if they waited until full retirement age or later, even though the monthly payout would have been much larger had they waited.

      However, what made sense in 1980 doesn’t make as much sense today. Life expectancy has risen sharply and many people can expect to live well into their eighties and beyond, which makes the larger monthly payout a carrot worth the wait. I encourage healthy people to wait as long as possible, continuing to earn an income as long as they can, need to, or want to. For every year beyond full retirement age (sixty-six or sixty-seven for baby boomers) your benefits will grow by approximately 8 percent per year until you turn seventy. For many people, the monthly payout at age seventy is almost double what they would have gotten at age sixty-two.

      If you are married or divorced, when you are of full retirement age, you may be able to draw a spousal benefit from your current or previous spouse’s Social Security account. Depending on your income history, those spousal benefits might exceed the money you would collect from your own account, even at age seventy. If so, there is no need to wait beyond full retirement age, because spousal benefits do not grow over time. Even if your former spouse has remarried or passed away, if the two of you were married for ten years or more, you are entitled to spousal benefits. Spousal benefits are half of what the spouse collects (or would collect) at full retirement age, regardless of when they filed for their own benefits.

      Social Security is complicated and changes have been made to the system in recent years. There are many ways of drawing the benefits to which you are entitled, and I encourage you to talk to a specialist in this area so you can file in the most advantageous way possible. You can do this by making an appointment with a representative in the Social Security office near you or with a financial advisor who has Social Security expertise. For a look at your account, go to the Social Security Administration (SSA) website (ssa.gov). You will discover the amount of money you can expect each month, depending on when you file and start collecting. The SSA website also has a record of every penny you have made, starting with your first paper route or summer internship.

      Another element of this equation is how much income you need at this point in your life. Choosing the best time to retire from your midlife profession is not always easy. Many employers will allow you to work part-time, which can be a great first step toward leaving for good. You may also discover you can live on less income than you could as a younger person. Maybe you’ve paid off your mortgage or maybe you have grown tired of some of the expensive hobbies and “toys” (e.g., motorcycles, ski boats, etc.) you acquired during your younger days. You may also be expecting an inheritance at some point in the next few years. Financial advisors have formulas and calculators to help factor in all of this, and more, to provide you with a solid understanding of your personal financial condition.

      You may find you are looking forward to leaving your job of thirty years, but you still need an income. Do you have a hobby you can turn into a business? What might you teach at a trade school or junior college? What side interests might have prepared you for a different kind of job? These pursuits rarely pay what you were making in midlife, but what they pay may be enough to bridge the gap between Social Security and the money you need to maintain your standard of living.

      As someone who is child-free, no matter your need for income at this point in your life, the social and community aspects of working may be even more important than the money. Chandra’s story illustrates why people often choose to continue working, even when they don’t need the income.

      When Chandra turned sixty-two, her financial advisor told her she could retire from her job in marketing. Thanks to some solid early investments and a small inheritance from her parents,