Is It Too Late to Start Retirement Planning? Never!

It’s possible that—like many Americans approaching retirement— you feel there’s no way you can save enough money this late in the game, so why bother? Here are three answers:

Money is only one aspect of retirement happiness. With or without money, it’s not too late to set the stage for a healthy, active, socially satisfying retirement. And with your health and happiness on an even keel, you may even cut your spending on doctors and therapists. So please keep reading no matter your current financial condition.

Many financial situations are reversible. Even if you’re drowning in debt, there are approaches that may help to pull you out. We discuss some of these in Chapter 7. What we’ve learned from interviewing retirees is that financial discipline—the ability to constrict your budget when times are lean and expand it when times are good—is the key to weathering financial storms.

Work it through. For a lot of people, retirement will include some sort of part-time or full-time employment. In addition, many people are delaying their retirement from full-time jobs in order to build up a proper retirement nest egg. An analysis by the Center for Retirement Research at Boston College found that workers who had no retirement savings needed to work only about 3½ years longer to avoid a steep drop in their standard of living in retirement.

What’s Your Retirement Age?

A few decades ago, the answer was 65. That’s when people left their full-time job, began accepting "full retirement age" Social Security benefits, and applied for Medicare. But now the age at which people "officially" retire is not so clear.

With so many people contemplating working into their 70s— estimates range from 30% to 80% of baby boomers—many now claim that the actual median age of retiring (that is, leaving full-time employment) will soon move to 67 or 68. Whether this is a good idea depends on how much you like your job, how long you expect to live, and the size of your savings.

In addition, full retirement age for Social Security benefits for baby boomers—those born between 1943 and 1954—has been raised to 66. You can still retire at age 65 (in fact, as early as age 62), but the amount of your benefit check will be permanently lower than if you’d waited. And if you delay claiming benefits until you’re 70, your benefit amount will increase by almost 30% over what you would have received at full retirement age.

Of course, not everyone is excited about working into their late 60s and 70s. At the other end of the spectrum are members of the "early retirement" movement, which encourages semi-retirement for people in their 50s. The general principle is that you can retire from full-time work by combining solid investing, a 4% limit on withdrawals from your savings, part-time work, and sensible spending.

The table below looks at the ages that normally (or legally) trigger various retirement events.

Ernest’s Retirement Tips: Connect, Create Space, and Stay Healthy

Coauthor Jake Warner’s interview with Ernest Callenbach demonstrates why you should begin your planning well before retirement.

Ernest retired at age 62. Before that he worked as editor of a respected film magazine and the Natural History Guide series, and also authored books, including the best-seller Ecotopia. Jake asked Ernest to imagine that he was to give a lecture entitled "What I’ve Learned About Retirement." Ernest listed three things:

Stay connected. "The truth is," says Ernest, "even if you love fishing or golf, you are likely to become quickly bored if those are the only activities on your plate. The key is to find useful ways to connect to the world—otherwise you’ll drive your spouse or anyone else you are close to nuts. Men, especially, often suffer a big dip in their feelings of self-worth once they are no longer working and don’t get all those strokes from colleagues or subordinates. Often this means having to start from scratch to reconstruct one’s self esteem. Fortunately, there are a number of ways to do it—for example, turning an occasional hobby into a small business. Providing service through a nonprofit organization is another good approach. Getting involved in local politics to try and improve the way your community works is a third."

Create a space for yourself. "When you retire, assuming you’re married or live with someone else, you must share space in a way you never have before. And I mean all types of space, including even using the telephone. Especially for men, who have typically seen the home as being more a woman’s environment, this can be a huge problem. Whether it’s in the basement, attic, spare room, or out of the house altogether, everyone needs their own defensible space. And I would add that once a domestic partner retires, a spouse who mostly managed the home also feels his or her space has been invaded, so by creating a space for the recently retired person, the spouse also minimizes conflicts created by the change."

Stay healthy. As with all of his retirement tips, Ernest recommends starting now. "If you don’t, you may not even live that long. Not only will paying attention to your physical well-being likely result in your living longer and feeling better, it will also save you a pile of money in expensive medical care. But in addition to eating better—less salt, fats, and sugar—you need to be active, to exercise every day. Whether you join a gym, ride a bike regularly, or just walk briskly doesn’t make a big difference as long as you really do it. Also, look at your life and find ways to accomplish your daily rounds more actively. For example, instead of getting in the car to drive to the neighborhood market or a friend’s house, walk or bicycle."

Check out Chapter 10, Listen to What Retirees Have to Say, for more interviews.

For Women Only

In 2006, USA TODAY highlighted some of the ways that women preparing for retirement are—unlike their male counterparts—hit with a double whammy: Not only do they typically have smaller retirement savings than men, they also live longer. Here are some of the ways this plays out:

Women quit working earlier than men. The average woman retires at age 62, the average man at 63. Married women tend to stop working once their husbands retire, even though the average woman is younger than her husband and will outlive him and have a longer retirement. But by working longer, women could contribute more to retirement savings plans and boost their Social Security benefits.

Divorcing women too easily give up shares in their husband’s pension plan. Some women’s number one priority in a divorce is keeping the family house—but they often give up valuable shares of their ex-spouse’s pension or retirement savings in exchange. If done wisely, there’s nothing wrong with that decision. But before signing off on the divorce decree, obtain as much information as possible from your husband’s employer about the pension plan, to make sure it’s a fair trade. You have a right to this information, but many pension plans won’t provide it without a letter from your lawyer, according to the Women’s Institute for a Secure Retirement. (You should also tell the pension plan administrator that you’re in the process of getting a divorce. That will prevent the plan from paying out your share to your husband before the divorce is final.) Bottom line: In some cases, the financial benefits of the pension may outweigh the home equity. If you do choose the pension, you’ll need a separate court order—called a qualified domestic relations order—which recognizes your right to part of your ex-husband’s pension.

Women invest timidly. Because women tend to have less money to invest, they’re often more fearful of taking losses. But they live longer than men, which means they have longer retirements—and more time to ride out the market and take full advantage of riskier investments, which typically return more over the long term. Because most women can expect at least 20 years in retirement, at least some of their assets should be in stocks.

Women rent instead of own. Women approaching retirement are more likely than male counterparts to rent housing. But there’s a good reason to aim toward owning your own home in retirement: It’s cheaper. For women, who typically have less retirement income and live longer, that’s essential. Housing eats up 33.6% of the income of the seniors who rent and are in the lowest 25% income bracket, according to the Joint Center for Housing Studies at Harvard University. But those who own their own homes use an average of only 18.3% of income to pay housing costs. The reasons are fairly simple. If you rent, your rent is likely to rise year after year, and you have no chance of recovering any of that money. If you own, your mortgage will probably be a fixed amount, and, over time, you could pay it off entirely. Even if you’re buying just a small condo, you’ll build up equity over time, which you may eventually tap using loans or a reverse mortgage. The trick is finding a house or condo you can afford. To do that, you might have to move to a part of the country where housing prices are lower, or settle for a smaller living space.

For Men Only

Why do so many more men than women seem to have a tough time dealing with retirement? Easy. When work stops and physical limitations make it more difficult to participate in recreational sports, many men do not have good family relationships to fall back on. We know men whose careers were highly successful and who are nevertheless lonely and isolated, in significant part because children to whom they paid little attention earlier in life are now returning the favor.

One reason why women, on average, may live substantially longer than men is that so many men—in addition to being members of the more violent and accident-prone sex—are social misfits after they retire. By contrast, women, who have typically developed better social and family skills earlier in life, adjust far better. Many older women seem too engaged in life to be ready to quit it early.

One of the best ways for men to increase their chances of enjoying a fulfilling retirement is to spend more time becoming close to their families during midlife. If there is one key to a man’s ability to really be part of his family, it’s to get involved in day-to-day activities. Intimacy must be earned by reading bedtime stories, helping with homework, driving carpools, volunteering in the classroom, coaching Little League, and even helping a seven-year-old make a new dress for her favorite doll. Children, of course, aren’t the only family members who need your caring involvement. Taking the time to be truly part of the lives of parents, siblings, nieces and nephews, and cousins will benefit all of you, both now and after you retire.

Finally, don’t disregard (or take for granted) the power of a spouse. A married man has 2-1 odds of outliving a never-married man and 3-1 odds of outliving a divorced man, according to the National Center for Health Statistics (NCHS).

USA TODAY’S Retirement Corner

Start your retirement planning by bookmarking USA TODAY’s helpful "retirement" Web page at www.money.usatoday.com. Under the "Managing Your Money" drop-down menu, click "Retirement." You’ll find timely investing advice, planning tips, and many relevant retirement articles.