about aarp
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Making Financial Decisions for Retirement September 11, 2009 Jean Setzfand Director, Financial Security AARP. About AARP. Nonprofit, nonpartisan membership organization for people 50+ 40 million members (1 in 4 voters in 2008 were AARP members) - PowerPoint PPT PresentationTRANSCRIPT
Making Financial Decisions for Retirement
September 11, 2009
Jean SetzfandDirector, Financial Security
AARP
About AARP
• Nonprofit, nonpartisan membership organization for people 50+
• 40 million members (1 in 4 voters in 2008 were AARP members)
• Offices in all 50 states and the District of Columbia, Puerto Rico, and the U.S. Virgin Islands
• Vision: A society in which everyone ages with dignity and purpose, and in which AARP helps people fulfill their goals and dreams.
Background
• Given the new retirement realities, change is needed to improve income management in retirement
• AARP applauds the new policy ideas generated
• Consumer messaging and education is also needed
• AARP commissioned Center for Retirement Research at Boston College to research consumer financial decision making in retirement
Key Financial Decisions in Retirement
• When should I claim Social Security?
• Should I annuitize my retirement assets?
• How should I allocate my assets?
• What should my rate of withdrawal be?
• What should I do with my home?
Claiming Social Security
• What Most People Do:– Claim as soon as they’re eligible (39% claim at age 62)
• Conventional Wisdom:– Delaying retirement may be risky
• Suggested Guidance:– Delay retirement and claim Social Security benefits
until your normal retirement age
Annuitizing Retirement Assets
• What Most People Do:– Avoid annuities
• Conventional Wisdom:– Little attention paid to annuities
• Suggested Guidance:– Including Social Security and pension income,
annuitize enough to cover your recurring living expenses. Consider inflation-protected annuities
Asset Allocation
• What Most People Do:– Place large portion of assets in short-term deposits
• Conventional Wisdom:– Rebalance in favor of bonds as you near retirement
• Suggested Guidance:– Depends on your individual risk tolerance. In general,
moderate your risk as you near retirement to protect your retirement savings
Rate of Withdrawal
• What Most People Do:– Not yet obvious
• Conventional Wisdom:– Don’t withdrawal more than 4%
• Suggested Guidance:– Withdrawal rates should respond to realized returns
Home Decision
• What Most People Do:– Payoff mortgage by retirement. Retain ownership and
sell at ill health or death of a spouse
• Conventional Wisdom:– Conflicting guidance around mortgages
• Suggested Guidance:– Payoff mortgage by retirement. Reverse mortgage
may be appropriate for some, but consider the product’s significant fees
Research Discussion Event
• “Providing Income for a Lifetime: Bridging the Gap between Academic Research and Practical Advice” – Anthony Webb, Center for Retirement Research at Boston College
• AARP Solutions Forum September 14, 20099:30 to 11:30 am AARP Brickfield Center (601 E Street NW, Washington, DC)To register: www.aarp.org (search “Solutions Forum”)