Careful planning for the years ahead is essential, says retirement expert Marian G. Broome, who believes that people should calculate their future while still at work in their present jobs.
Broome, who has instructed UCLA Extension classes on pre-retirement planning, is the founding director of UCLA's Emeriti Center and heads up the university's retirement relations program. She strongly advises workers to garner all relevant information and then prepare a before-and-after balance sheet to test the reality of their retirement expectations.
"Early retirement is a fast-growing option in this country, with many people in their fifties choosing to leave the workplace," she says. "The 'Golden Handshake' policy--whereby the company is saying to the employee: 'Here's an offer you just can't refuse'--has contributed greatly to what is becoming a national phenomenon."
Broome feels that before accepting such an offer, you should take responsibility for your own future and meticulously research just what is involved and how it applies to you as an individual.
To do this accurately, you should enlist the professional help of your company's personnel or benefits representative, focusing on the following subjects:
1) First comes the pension. How much is it and how long will it last? Most benefits specialists will calculate your projected income based on a formula that consists of age, length of service credit and salary averaging. Be sure and ask for a projected comparison of what the sum would be if you decided to retire within five or 10 years.
If you have the option of taking a lump sum, investigate how much income it would yield once invested on the outside. Spend some time learning about alternate investment possibilities, looking for the highest possible interest and the lowest possible risk.
2) Examine your health benefits. How much coverage can you retain, and how much must be converted from group to individual coverage? This conversion can be costly, so follow through and find out everything there is to know. One serious illness without proper coverage can mean disaster. If there is no coverage when you retire, remember that at age 65 Medicare will cover about 40% of your medical bills, and you can supplement that with Medigap insurance. (For information call the Medicare Advocacy Project (MAP) at (213) 741-0566. Also find out about dental insurance, accidental death and indemnity insurance and life insurance.
3) Inquire about Social Security, how it figures now and in the future. Although your company rep can help you initially with this, it is a good idea to call Social Security for answers to specific questions, or to visit your local Social Security office and choose from a wide selection the brochures that suit your particular needs. You will also find brochures on Medicare and Medicaid benefits.
In addition, a good publication to look at is "A Guide to Social Security," 1986 edition, published by Mercer-Meidinger Inc.
Once you have plowed thorugh the facts and figures of this momentous life decision, Broome suggests that you take a good hard look at what you plan to do with the rest of your life--once retired.
"Ask yourself what you're going to retire to," she says, adding: "You have years of your life ahead of you. According to the insurance actuarial tables, women have an average of 26.8 years and men 21.4 years left after retirement, and you need to plan how to maximize the potential of those years."
Many people, whose sense of identity is tied to their work, fall into depression once the initial exhilaration of freedom has passed, Broome notes. It usually takes about a year for this to happen, and the depression and sense of isolation can be devastating when it hits, she says.
"So the next thing to plan is the quality of your time. I believe in practicing for this by taking a long vacation or leave of absence while you are still holding a job. Find out if you are suited to leisure, how little or how much of it can you take."
Supplement the Structure
Broome says retirees must learn to supplement the structure of their lives to take the place of the lost structure of the workplace.
"It's a differnt kind of structure, though," she explains, "because you're imposing it on yourself. You are in charge of your own life, and that's a big difference from when someone else is pulling the strings."
To create structure, the retirement planner suggests the following methods to be used singly or in individualized combinations:
1) Continuing Education. "We have people here at UCLA in their 50s and 60s going back to square one for a bachelor's degree, or to get an MA or Ph.D.," Broome says. "For a less formalized situation, try UCLA Extension or the Plato Society. The University of Redlands and Pepperdine University offer alternative educational options, a whole curriculum for the returning student, at both on-campus and off-campus sites. The Emeritus College in Santa Monica is another possibility."