No more Lazy Acres: trends send warnings about retirement to CPAs, clients.

AuthorEnglish, Damien B.M.
PositionRETIREMENT PLANNING

Seventy--or even 75-is the new 65, at least when it comes to retirement. In fact, some people never stop working. As more people are working longer or opting for second careers to help fund their later years, the face of retirement is changing.

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According to Bruce Tulgan, co-author (with Carolyn Martin) of the 2006 book Managing the Generation Mix, more than 1 million Americans over the age of 75 are still in the workforce, with more possibly on the way as one in three workers will be at least 50 by 2010.

"More people are looking to do something during retirement--part-time work or consulting--and some are simply staying at their current job into their late 60s--and sometimes early 70s," says CalCPA member Bruce Kajiwara, CPA/PFS, CFP with Financial Network Investment Corporation in Sacramento.

The reasons behind this trend are varied and many, and convoluted by factors like inflation, increased costs of health care, longer life spans and dwindling Social Security funds.

The Urban Institute is mapping the evolution of retirement in an ongoing research effort dubbed "The Retirement Project," and has released numerous reports on the topic. One publication, based on Urban Institute, U.S. Bureau of Labor Statistics and Census Bureau numbers, says possible explanations for the recent increase in work at older ages include Social Security reforms, changes in employer-sponsored benefits, improvements in health and declines in physical job demands.

The report also points out that "Congress raised the eligibility age for full Social Security benefits (from 65 for those born before 1938 to 67 for those born after 1959), increased the rate at which monthly payments rise with delayed benefits and eliminated the benefit reduction for those working beyond the full retirement age.

Also, many employers have replaced traditional pensions with 401 (k)-type plans, which (unlike most traditional plans) tend to increase in value when older workers remain on the job. Many employers are also dropping retiree health plans, discouraging retirement before Medicare begins."

The idea of "Lazy Acres" is changing into "Part-Time Work Acres," "Telecommuting Acres" or some variation thereof.

OVERLOOKING THE BASICS: TIME AND SPENDING

While there are some general social and economic reasons why people are working longer, in some cases it's as simple as people not saving enough money or planning for their retirement early enough.

"People always--always--say the same thing: I should have started sooner," says Kajiwara. "Whether they meet their retirement goals or not, they always say that."

According to a 2005 Putnam Investments study, 70 percent of retirees said they wish they had saved more during their working years; 59 percent said they should have started saving earlier.

CalCPA member Lynette Atchley, CPA/PFS CFP sees this sort of thing all the time. "I have had experience with clients who have made these types of mistakes throughout their lifetime," she says. "For instance, when they change jobs, instead of rolling over their 401 (k) because they are more focused on other aspects of their finances, such as reducing debt."

She says she often finds that people don't work with budgets and consult an adviser early enough to plan for retirement, and generally don't save enough, leaving them with...

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