CONSIDERATIONS IN PROGRAMME PLANNING FOR PRE RETIREMENT

INTRODUCTION

Preretirement is the stage of life before retirement and offers an opportunity to plan and save solely for retirement years. In determining ones retirement income needs when retirement is still in the future is not an exact science. One needs to spend some time thinking about what sources of income he will have. After that, he'll need to estimate his retirement income needs.

Retirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours.
Many people choose to retire when they are eligible for private or public pension benefits, although some are forced to retire when physical conditions no longer allow the person to work any more (by illness or accident) or as a result of legislation concerning their position. In most countries, the idea of retirement is of recent origin, being introduced during the late 19th and early 20th centuries. Previously, low life expectancy and the absence of pension arrangements meant that most workers continued to work until death. Germany was the first country to introduce retirement, in 1880.
Nowadays most developed countries have systems to provide pensions on retirement in old age, which may be sponsored by employers and/or the state. In many poorer countries, support for the old is still mainly provided through the family. Today, retirement with a pension is considered a right of the worker in many societies, and hard ideological, social, cultural and political battles have been fought over whether this is a right. In many western countries this right is mentioned in national constitutions.

Pre-Retirement Planning

Most of us want the option to retire when we are ready.  Unfortunately, for many individuals the choice of when to retire will be made for them as a result of a lack of planning.  We believe that having a comfortable retirement needs some thought as to what retirement means and what are the resources we’ll need when we are ready to retire.

Pre-retirement planning is defined as examining the possible contingencies, deciding which ones to plan for, and developing a plan that you “own” and one that reflects what’s important in your life.  Our belief is that our job is to help you make your life better.  We know that one of the ways we can do this best is by helping you plan for the possible contingencies that could come your way, and developing goals that are flexible and from your point of view.

CONSIDERATIONS IN PROGRAMME PLANNING FOR PRE RETIREMENT

In planning for pre- retirement, there are certain things to consider including:

LONGEVITY

In planning for pre – retirement, assuming you will have an average life expectancy, you will need your assets to produce income for a longer period of time. This means you need to have an accurate idea of what you spend each year, and a steady source of retirement income that is sufficient to meet your expenses.
Social security won’t start until age sixty-two, at the earliest, and there are penalties and restrictions on accessing retirement account money prior to age fifty-nine and a half. This means if you retire, you will need to have other sources of income, at least for a few years.

Retirement Planning Steps

1. Increase Cash Reserves

Applying for pensions and social security, as well as setting up withdrawals from IRA’s and 401(k) plans, takes time. Retirement planning means expect a glitch or two along the way. Prepare for delays by having extra money tucked away in safe investments; things like savings, checking and money market accounts.

2. Estimate How Much Money You Need To Retire

Develop an accurate estimate of the amount of money you spend, and the amount of income you will have each month. Although boring, this is the most important retirement planning step you can take.

3. Evaluate Tax Consequences

Will you be in a lower tax bracket in a few years? Then be sure to maximize tax deductible contributions now.
Do you have company stock that needs to be diversified? Plan for the amount of tax that will be owed the year you sell the stock, or spread the sale over several calendar years.

4. Diversify Your Investments

Watching your portfolio go up and then back down again is never enjoyable, but in the end, as long as you end up with a big enough pot of money, it doesn’t really matter how you got there.
Once you are retired, however, it’s a different story. When you are taking regular withdrawals from a portfolio, volatility has a much greater impact. Reducing the up’s and down’s can significantly increase the odds that your money will last through your life expectancy.
Spend time figuring out what mix of investments will achieve the rate of return you need while having a level or risk that is reasonable for you. The risk/return characteristics of your portfolio will determine how much income you will have, and how long it will last.

5. Educate Yourself

Although it is advisable to seek professional guidance, the truth is no one will ever care about your money as much as you do. Take the time to learn about retirement planning and investing.
Some suggestions: attend an investment class at the local community college, take an online investment class, read a book – or two or three, and use the internet to learn. You spent a significant amount of your life earning this money; now it’s time to learn how it will earn for you.

PLANNING DECISIONS AFFECTED BY LIFE EXPECTANCY

An insurance company does underwriting before issuing products affected by life expectancy; it's only logical you should do your own research - essentially your own form of underwriting - before before buying such products or making financial decisions such as the five outlined below.

1. When To Take Social Security

Social security doesn’t know your health history. If you live to your life expectancy based on standard tables, whether you take social security early or late, you’ll get the same amount. Knowing your personal life expectancy can help you play the system and make the best choice considering your individual circumstances.

2. What Pension Option to Take

When pension plans pay out as an annuity they offer you choices as to how to take your income such as life only or term certain. If you expect to live longer than average you’re best off taking a guaranteed lifetime payout. If your life expectancy is shorter, a lump sum or term certain option may make more sense. In these situations you also want to evaluate the impact and life expectancy of a spouse, and make sure you choose the option most likely to maximize your joint lifetime family income.

3. Whether To Buy an Immediate Annuity

When you buy an immediate annuity, the payout is based on average life expectancy, not your personal health history. If you lead a healthy lifestyle and come from a long-lived family, insurance products like immediate annuities or longevity insurance may make more sense for you.

4. How Much Inflation Protection You May Need

The longer you live, the more you’ll feel the effects of inflation at the gas station, grocery store and at the doctor’s office. People who are healthy when they retire are the ones in greatest need of long term care insurance, particularly policies with built in inflation riders. Creating inflation adjusted retirement income is also of the utmost importance. With a shorter life expectancy, it may not make as much sense to pay for these additional features.

5. Whether To Keep Your Life Insurance

If you’re making a decision with big consequences, such as whether to cancel a life insurance policy, you may want to consider running a customized life expectancy report first. A lot of dollars are at stake, so just as an insurance company would do underwriting before insuring you, you should consider doing underwriting on yourself before making these types of decisions.

CONSIDERING  HEALTH INSURANCE BENEFITS BEFORE RETIREMENT

Keep in mind, Medicare coverage won’t start until age sixty-five. If you are planning to retire, make sure you will have a secure source of health insurance coverage that will provide for you until you become eligible for Medicare.
If you’ve held a stable job for most of your career, it’s likely you haven’t had to give much thought to your health insurance plan. Instead, it’s been a benefit consistently offered through your employer.

1. Learn About Your Group Health Insurance Benefits In Retirement

The first thing to do is learn all about your existing health insurance benefits and how they change in retirement. Do you have the option to continue in your group plan? Have you worked there for enough years, or reached an age where you become vested in certain health insurance benefits? Attend workshops and read all the literature your employer provides on health insurance in retirement.

2. Explore Your Choices For Health Insurance In Retirement

Next, explore your options. When you’re age 65, most of you will become eligible for Medicare, but you’ll still have choices to make. The most accurate information you can find is on Medicare.gov, but if you’re like the rest of us, you’ll still want professional help in making such an important decision, which means you’ll want to move on to Step 3.

3. Talk To An Agent Contracted With Most Major Carriers To Compare Health Insurance Retirement Choices

Your best choice will be to talk to a health insurance agent who is contracted with most major health plans in your area. Particularly, look for a health insurance agency that specializes in health insurance in retirement; they can conduct a complete analysis of your options by asking you about your existing doctors and medications and then tell you which plans will provide the most cost-effective benefits based on your personal medical situation.
I found such a health insurance agency with Strategic Growth Insurance Associates. Licensed in over twenty states, they provide a spreadsheet of your options, helping you objectively evaluate your health insurance choices.

4. Once You Have Health Insurance In Retirement, Then What?

Whether over or under age 65, once you have secured health insurance in retirement you should be proactive about evaluating it by conducting an annual review of your coverage options. Benefits and costs change, and it is possible a new plan may offer you better coverage at a lower price; you won’t know unless you look. Once again, you’ll want to talk with an agent who is contracted with all major carries to get an objective analysis.

 

CONSIDERING OCCUPATION AFTER RETIREMENT

An extended vacation sounds nice, but some find the experience is not as fulfilling as they thought it would be. When thinking about early retirement, give careful thought as to what you want to do with your time, and your money.
For example, if you have expensive hobbies, you will want to consider that extra cost when you determine how much money you will need to retire.
If you’re not the leisurely sort, and you do decide to retire, you might consider starting a small business, a consulting business, or finding some alternative way to earn extra money.

CONCLUSION

Retirement might coincide with important life changes; a retired worker might move to a new location, for example a retirement community, thereby having less frequent contact with their previous social context and adopting a new lifestyle. Often retirees volunteer for charities and other community organizations. Tourism is a common marker of retirement and for some becomes a way of life, such as for so called grey nomads.
Often retirees are called upon to care for grandchildren and occasionally aged parents. For many it gives them more time to devote to a hobby or sport such as golf or sailing. On the other hand, many retirees feel restless and suffer from depression as a result of their new situation. Although it is not scientifically possible to directly show that retirement either causes or contributes to depression, the newly retired are one of the most vulnerable societal groups when it comes to depression most likely due to confluence of increasing age and deteriorating health status. Retirement coincides with deterioration of one's health that correlates with increasing age and this likely plays a major role in increased rates of depression in retirees. Longitudinal and cross-sectional studies have shown that healthy elderly and retired people are as happy or happier and have an equal quality of life as they age as compared to younger employed adults, therefore retirement in and of itself is not likely to contribute to development of depression.
Many people in the later years of their lives, due to failing health, require assistance, sometimes in extremely expensive treatments – in some countries – being provided in a nursing home. Those who need care, but are not in need of constant assistance, may choose to live in a retirement home.

REFERENCES

·  Retire: To withdraw from one's occupation, business, or office; stop working." American Heritage Dictionary

·  ^ "Retire: Leave one's job and cease to work, especially because one has reached a particular age. Compact Oxford Dictionary

·  ^ For example, in the United States, a person holding the rank of general or admiral must retire after 40 years of service unless he or she is reappointed to serve longer. (10 USC 636 Retirement for years of service: regular officers in grades above brigadier general and rear admiral (lower half))

·  Gruber, Jonathan and David Wise, eds. (1999). Social Security and Retirement around the World. University of Chicago Press.

·  ^ Gustman, Alan and Thomas Steinmeier (2003). "Retirement Effects of Proposals by the President's Commission to Strengthen Social Security." NBER Working Paper No. 10030

·  ^ Feldstein, Martin and Jeffrey B. Liebman (2002). "Social Security," in Handbook of Public Economics, Vol. 4, Elsevier Press

·  ^ Friedberg, Leora (2000). "The Labor Supply Effects of the Social Security Earnings Test." Review of Economics and Statistics, Vol. 82, No. 1, pp. 48–63

·  ^ Liebman, Jeffrey B., Erzo F.P. Luttmer and David G. Seif (2008). "Labor Supply Responses to Marginal Social Security Benefits: Evidence from Discontinuities." NBER Working Paper No. 14540