Amy Pierce, George Grenchik and Margaret Gordon live in different parts of the country, hold different jobs and make different incomes.
Their common bond? Each turns 65 in 2011, placing them in the first wave of the baby boom generation as it hits the age most associated with retirement. An estimated 10,000 baby boomers will turn 65 every day for the next 19 years, according to the Pew Research Center.
Counter to trends in the previous generation, many boomers are planning to work longer than their parents did, and fewer have guaranteed pensions. Many, too, have significant fears about whether they’ll have enough to live on in retirement.
To mitigate some of those fears, Grenchik, a Catholic-school teacher, plans to retire at the end of the academic year but continue to work part time, either as a substitute or as a tutor. Pierce and Gordon both plan to continue working at least for now. None has started taking Social Security benefits, which also runs counter to previous generations, which typically started benefits around age 62.
“All of a sudden, the years have gone by and here you are,” Pierce said of hitting the age 65 milestone, which she’ll do this summer with some trepidation about meeting expenses for things like Medicare. After years of receiving health insurance as a Maryland police retiree, she has worked in a clerical job for about 17 years with Towson University, near Baltimore, that doesn’t include health benefits, so she’ll need to sign up for Medicare.
She’s also still digesting the biggest expense of her life — a $145,000 home she bought out of foreclosure in 2009, spending another $40,000 on renovations. Pierce, who is single, lived in rental housing until moving in with her mother, now deceased, about a decade ago.
In 2009, with her mother in an assisted living facility and a reverse mortgage on the home where they lived, Pierce cashed in her IRA to put a down payment down on a home in foreclosure.
The home recently was appraised during refinancing at $217,000, which would represent a hefty profit if she could sell for that price now, pointed out Jonathan Guyton, a principal with Cornerstone Wealth Advisors in Edina, Minn.
Banking that profit by selling the home and then buying a smaller place for cash or close to it would alleviate a huge debt burden for Pierce in retirement, Guyton said.
He urged her, if she can’t swallow such a drastic move, to take the inheritance from her mother’s estate and virtually all her other savings to buy down the mortgage and reset the loan. That may sound like a dramatic step, but when retirement is close at hand, eliminating future expenses can make more of a difference than investing, he said.
The loan reset would lower her monthly payment, but while she’s working, she should continue making her current payments to pay down the debt even sooner, he said. The goal is to have it nearly paid off by retirement, which she plans in a few years.
Another major item on her to-do list before leaving the workforce is to get a much better handle on her monthly expenses so she can live on her pension from a former job as a police officer and Social Security, said Craig Adamson, president of Adamson Financial Planning in Marion, Iowa.
“Accountability can be difficult when you’re single and don’t have a partner looking over your shoulder,” said Adamson. “She should be thinking about working until 67 or even 70, because she may have 15 years or more of life left to finance after that.”
A lot of older baby boomers are beginning to receive inheritances and wondering how to best use those resources to help with retirement.
Gordon’s windfall came in the form of a $100,000 Purpose Prize, given by Civic Ventures, a California non-profit that promotes second careers that benefit society. The group awarded Gordon the prize in December for her work founding the West Oakland Environmental Indicators Project, which works to counter the effects of pollution on urban communities in the Oakland, Calif., area.
A former housekeeper, Gordon has worked on a number of social causes. With grants for her project now expiring, Gordon said she is living on speaking fees and income from boards where she serves while she tries to keep the nonprofit going. She wants to use the prize money to take some classes, pay for Medicare and supplement her Social Security income in retirement.
“I know one thing, that I’ll continue to work on boards and committees and stay involved making speeches and presentations,” she said. “I want to stay engaged.”
More Top Picks Why Screens Trigger Headaches After A Head Injury
One of the guiding principles around sudden money is to pause and not do anything with it right away, said Guyton, and Gordon did stash most of the money in a certificate of deposit.
“I’m not usually a fan of annuities, but this may be one case where they are warranted,” Guyton said. He suggested Gordon look carefully at variable annuities with a feature that guarantees the annuity amount will be no less than indicated upon making the initial investment and has growth potential if financial markets perform well.
Grenchik and his wife have a different set of challenges.
After 41 years teaching English in junior high and social studies at Catholic schools, Grenchik has given notice he’ll retire at the end of this academic year.
His pension will cover about a third of his current salary. With Social Security, he says he’ll “come close” to replacing his income. His wife, Marie, 57, still works as an occupational therapist and is not planning to retire anytime soon. The couple’s home is paid off, and they have about two years’ income saved in retirement and other accounts.
The couple has two young adult sons, one who has graduated college and another nearly finished. They worry that if their sons need their financial help as they establish careers, they could jeopardize their retirement.
“This is one of those tough-love situations,” Adamson said. Even though the couple may feel like they have the resources to help their sons, the unknowns of retirement can be daunting, he said. For example, if George were to pass away, Marie would get just half his pension, and the household Social Security income would drop.
The couple should consider a long-term care policy on George to help preserve their savings if he needs nursing care later in life, Adamson said. Buying coverage for both of them could be a budget buster, he said, so it’s important to focus the dollars on keeping money intact for Marie, because her life expectancy is much longer.
Also, Adamson said, George should consider delaying Social Security until age 70 to qualify for even higher benefits than those he would receive at full retirement age, relying on Marie’s income and his pension and part-time work until then. Because of their age difference, as a couple they will likely maximize their lifetime benefits by having Marie draw the highest possible benefit over her longer life expectancy. They should also explore withdrawal strategies for the benefits on Marie’s work record as she nears age 62, the adviser said.
Finally, Adamson lauded all three boomers’ plans to continue working beyond age 65, a move that isn’t only about money, particularly for Grenchik.
“I don’t want to become irrelevant,” he said, discussing plans to volunteer and do part-time substitute teaching and tutoring. He is also looking into private learning centers that employ tutors.
Meanwhile, all three said they are taking steps to exercise and eat right, not only to feel better but also to help ward off costly medical care down the road.
Grenchik quit smoking many years ago and still plays in a softball league. Gordon is working more vegetables into her diet. Pierce walks around her office building three times each day on her lunch hour.
“You hear about people having to choose between food or medicine, and I don’t want to get to that point,” Pierce said. “I don’t smoke and never have. I try to eat healthy and my blood pressure is good.”
Have a retirement question? Write to [email protected]
Boomers at 65
Amy Pierce
Career: Police officer, clerical worker
Resources: Continued work, pension, Social Security
Challenge: Spent IRA on a new home
George Grenchik
Career: Teacher
Resources: About two years’ salary; pension; Social Security, part-time work
Challenge: Unsure he’ll have enough
Margaret Gordon
Career: Social activist
Resources: About $100,000 in prize money and other savings, Social Security
More Top Picks Best Folding Beds
Challenge: Stretching the windfall