It Can't Always Be Great--A Not So Good Article On Retiring Rich

Pretty much the same old stuff from this article about retiring rich--your expenses will stay about the same in retirement, inflation eats away at your money, Medicare doesn't cover all medical expenses, and so on.  But read it anyway, mainly for the last sentence.

Retire Rich: Learn From Someone Who Did

by Walter Updegrave/Money Magazine

When Henry "Bud" Hebeler was winding down his career at Boeing nearly 20 years ago, he was appalled at the advice he got from retirement planning software.

"The assumptions about returns, inflation, longevity and expenses were highly simplistic," says the 74-year-old Hebeler. With his engineering degrees from MIT and his experience - first as Boeing's chief forecaster and planner and later as president of Boeing Aerospace - Hebeler figured he could do better.

He has. His Web site, AnalyzeNow.com, is a compendium of advice and tools (mostly free) that can help you tackle topics ranging from how to create a retirement budget to whether to buy an annuity.

What distinguishes Hebeler from the typical retirement "expert" is that he combines a strong quantitative background with real-life retirement experience - his own and that of fellow retirees.

Hebeler took time out from his hectic schedule of skiing, golf, travel and running a site to share his thoughts.

Q. What's the most popular misconception about retirement planning?

A. That your spending will drop as you age and you become less active. My father played golf until he was 95. My wife and I are in our seventies and we ski the expert slopes at Park City, Utah.

My friends who have reduced their spending didn't do so because of lack of energy or physical ability. It doesn't take much effort to get into a taxi and go to the theater. They're cutting back because they know they're going to live longer than they thought they would. They spent too much too early and now they're worried about running out.

Q. So what can you do to assure that your money will last?

A. If you have enough savings to live on, consider delaying taking Social Security until full retirement age or even later. Holding off can be especially worthwhile if you have a spouse who didn't work or had a low income, since the higher payment you get by waiting can be passed on to your spouse when you die.

I also think retirees should consider putting some, but not all, of their money in an immediate annuity. Look at inflation-adjusted immediate annuities, since they provide a lifetime income that, like Social Security, goes up with inflation.

Q. How did your work at Boeing influence the advice you give?

A. It made me more conservative. In business you see how often things don't work out as you planned. Projects cost more to complete than you estimated.

The same is true of retirement, but retirement plans seldom call for setting aside reserves for unforeseen events. There are a lot of surprises, usually more bad ones than good.

Q. What kinds of surprises?

A. For one thing, your expenses are likely to be very different in retirement than during your career. Things that were probably covered by your company insurance - dental work, vision care, a variety of medical tests - typically aren't paid for by Medicare. My hearing aids alone cost $6,000, which wasn't covered at all.

People also don't anticipate the impact of inflation. In the first 10 years of my retirement, the purchasing power of my company pension declined by 30%. And then there are obligations people rarely plan for, such as having to help parents or adult children who are struggling financially.

Q. If you could advise people to do just one thing to improve their retirement prospects, what would it be?

A. People who aren't retired need to know how much to save. My father used to tell me that you should always save at least 10% of your income.

That's more like 15% to 20% today because you're less likely to have a pension.

Comments

[grill]

Hi, If you have any questions or would more information, please advise me and we can go from there.

[WiseFinish.com]

Classic case of engineer outsmarts finance software :)

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[Chris R]

I get the feeling I'll be working for a very long time.

[PennySeeds.com]

I see no reason to believe spending will drop as you retire. It probably will be more, because you will have less to do!

With no job you have more time to take expensive trips, shopping adventures, dining out, and other things to entertain you.

If anything you might need more money unless you plan to have no debt by then.

[Trevor]

Thanks for your post. We ought to listen to those old MIT vets! Good information and very informative. I like what he has to say about how life's expenses don't slow. I know that when I retire, my wife and I will be seeing Europe, traveling to see our families, and doing a lot of those things that we couldn't when we were younger. That stuff costs!

http://www.financialnut.com

[Andrew Knight]

Hi Bill,

I'm emailing you in regards to a followup email I sent you a month ago in response to a partnership, have you had a chance to think about it?

If you have any questions or would more information, please advise me and we can go from there.

Kind Regards,
Andrew Knight

[Jesse W.]

Making money last, that seems to be the ongoing theme of life!

Jesse W.
http://www.subprimeblogger.com

[Get Out of Debt]

I like it and I do think that inflation will be a problem in the next 5 years.

[bildekor]

Quite nicely written actually, i like it. :)

[http://www.stocks-simplified.com]

I don't see inflation as much of a problem because it is only about 3% a year. It is pretty darn easy to earn more then 3% a year wherever you look.

[Pamela Grundy]

At 55 and 57 we are no longer sure if we will ever get to retire, and this with two pensions, two 401ks, and both of us working our butts off. It's very depressing if I think about it too long, so I try not to, and I also try to do as much work I actually care about as possible and as little of what I hate as I can. That helps.

[Megastar]

it takes some diligence to plan effectively for retirment. Inflation can always throw you a curve ball.

[Retirement Plan]

That article was better than you implied...the author was right, INFLATION is the trouble with a solid retirement plan. I have done a few studies on the subject entitled "Retirement Income Studies" on my site.

[Anita Burnett]

You are never too young to start planning for retirement, however, most people simply have no idea how much they are going to need. With lifespans getting longer it is possible that within a few years people could spend more time retired than they do working. This will have a big economic impact!

[Roman]

No everyone can retire early a lot of people want to keep on working in one form or another. One of my close friends is 85 and still works. He doesn't like being home.

[www.TheTradingInstitute.com]

Too true! Retiring early is not impossible but it does take work. The Forex is a great way to go for those willing to be actively involved in their investment/trading.

All it takes is a little knowledge.

[tracy ho]

Great post ,

Tracy ho
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