MyRetirementPaycheck is worth a visit for anyone grappling with retirement issues. It was developed by the National Endowment for Financial Education (NEFE) in partnership with many leading retirement experts. The site divides retirement issues into eight topics that can have a major impact on how much money is available for retirement -- debt, fraud, home and mortgage, insurance, pensions, retirement assets, Social Security, and work. It then explains the major issues in each category and adds some valuable insights about the linkages among the eight categories.
[ See America's Best Affordable Places to Retire.] One simple example would be the possible effects of delaying retirement and continuing to work for two or three more years. This decision could permit someone to delay taking Social Security, and each year of delay between the ages of 62 and 70 raises benefits by about 8 percent a year. It also might continue health insurance, add to retirement plan assets, increase the size of any retirement pension, and reduce the number of years that a person's retirement assets would need to help fund their retirement.
The foundation developed MyRetirementPaycheck to help provide basic retirement facts, not to permit sophisticated retirement modeling scenarios. "The intention of this site is to have a place to begin an enhanced conversation about how people might manage the retirement income process," says Brent Neiser, NEFE's director of strategic planning and alliances. "It is designed to get spouses and loved ones together" to think about these issues. "It might even be a good thing to [use the site] to work with a financial adviser," he says, "or to check out some of the advise you would get from an adviser."
The theme of MyRetirementPaycheck is to help people think about putting together a retirement approach that can generates regular payments to them that will cover their expenses and provide a stable and secure flow of income in retirement. "It helps people to think about the right questions to ask," Neiser says, and to understand the linkages between most retirement decisions.
But while thinking about building a retirement paycheck is a main focus of the site, it does not try to generate specific retirement income numbers. "We purposefully did not design this to come up with a number," Neiser says. Providing such interactive tools might be available in the future. But NEFE's expert advisers were concerned that consumers who have not saved enough or built solid retirement plans -- and that describes most Americans -- would be discouraged if a quantitative tool told them they needed to build nest eggs that seemed unrealistically large.
NEFE and other experts have noted that most of the advice and emphasis in retirement planning is devoted to asset accumulation -- saving and building a nest egg. There is relatively little attention paid to what's called decumulation -- the process of spending down assets to generate retirement income. In fact, the NEFE site was until recently called Decumulation.org. While that may have been a factually accurate title, it generates no consumer awareness, and the site has received very modest traffic. Neiser says the organization hopes MyRetirementPaycheck will draw much more consumer attention.
Here is NEFE's top level advice for the eight retirement topics:
Debt. To maintain a predictable cash flow in your retirement years, make every effort to pay off your consumer and credit card debt before you retire, and don’t borrow money during retirement unless you know precisely how you’ll pay it back. Consider the 10 years before retirement as your “debt‐reduction” decade.
Fraud. You’ve worked hard building up retirement assets. Now you need to protect them. Older Americans -- even those who are experienced with investing and are financially literate -- are highly targeted by scammers, misleading advertising, and fraud, so be especially on guard. Make no money decisions quickly, and never without getting a second or third opinion from people you trust. If it sounds too good to be true, it almost always is.
Home and Mortgage. A house may be your biggest asset, but be careful about viewing the value of your house as it were a retirement plan. Housing prices fluctuate and you need other forms of savings. It’s best to plan that a home’s equity is one of the last assets you use in your retirement
Insurance. Your retirement spending plan is not complete until you know how you will pay for medical and long‐term care needs. Insurance companies also sell many forms of annuities. Putting at least part of your retirement savings into an immediate fixed annuity that will give you a monthly payment for the rest of your life creates a regular source of income.
Pensions. Your employer pension is an annuity that gives you a steady “paycheck” for your retirement. Even when you’re retired, saving some of your pension benefits is a good way to protect yourself from inflation and ensure you have enough money for your later years.
Retirement Assets. You do not know whether your retirement will last less than 10 years or more than 40 years. To be prepared for reaching advanced age, continue saving and making wise investments even during your retirement. At retirement, most retirees still need to invest in diversified assets that may need to last decades or help weather investment market turmoil.
Social Security. Taking Social Security payments too early means receiving less money each month than you would receive if you waited for even a few years. If at all possible, do not begin taking Social Security until you are at least your full retirement age [66 for most nearing retirement]. If you take Social Security benefits at age 62, your benefit will be approximately 25 to 30 percent less than if you have waited until your full retirement age. For an even bigger benefit, wait until age 70, when your payment will be at least 75 percent higher than if you started taking benefits at 62.
Work. If you are healthy, aim to work at least until your full retirement age. It produces many benefits, including prolonging any health care coverage you have, building your retirement assets, and increasing your ability to reduce debt.